There are many misconceptions about the Transatlantic Trade and Investment Partnership (TTIP) that is being negotiated between the United States and the European Union, says Charles Ries, vice president of the Rand Corporation.
Charles Ries

In an interview to the Lithuania Tribune, Mr Ries, who visited Vilnius recently to take part in a seminar on the TTIP, explains the opportunities in liberalizing Transatlantic trade as well as challenges to smooth negotiations.

Mr Ries also discusses the situation in Ukraine, Russia's propaganda offensive against the West and how current tensions differ from the Cold War.

If you had to write a book called “The transatlantic trade and investment partnership for dummies”, where would you start and finish?

I would say that the transatlantic trade and investment partnership is a critical part of building the Atlantic community that has security, political and economic aspects in order to put it on a firm grounding for the next generation.

I think Lithuania has a very big stake in this agreement. Its success is very important to Lithuania’s own economic prosperity, but also its security interests.

Recall that we began to talk about a transatlantic free trade agreement in the mid-1990s in the same context that we talked about creating a Europe whole, free and at peace. But we didn’t do it then because we had just finished the Uruguay round, there were a lot of other trade-specific concerns. So it was put aside. And now it is important to complete that vision in order to complement NATO, to put the Atlantic community on a firm and broad special relationship basis.

I think that the significance of what’s called the TTIP is that it will democratize trade between the United States and the European Union. It will allow small companies to effectively take orders for things, services, goods that they might be willing to offer over the web and deliver the products. That can’t be done now. And so transatlantic trade is in the hands of big corporations because they can establish investment, they can have a subsidiary across the Atlantic and supply the markets.

But once we have this agreement, we eliminate the customs formalities. A little company here in Vilnius can put up a website and sell products in California. And they’ll be able to sell products in the United States just as easily as they can do so now to France.

What are the main problems of the negotiations at the moment? Who is the stumbling block?

We are still in the early stages. This is a big agreement. It covers a wide variety of economic areas of commerce - not only trade in goods, trade in services, agriculture, investment, government procurement. And for the first year or so, negotiators have been working out the structure of the agreement and trying to figure out how to approach some of the difficult problems that will be in the end-game. Such as how to manage regulatory differences, how to manage the investment chapter.

And so we are pretty much through, as I understand, the opening phase of negotiations, in which you sketch out all the chapters, you establish the negotiating groups, the principles. The phase which I call “on the table-off the table phase”.

And then, as you come to the end-game in the trade negotiations, you need to set up an overall balance of opportunities. There is not going to be an agreement unless it is demonstrably fair to both sides. And so there is a balance of opportunities and that requires a lot of economic analysis, that requires a lot of drafting so that we know what is it that we are all talking about. So I think in 2015 there will be much of that very detailed work to create an overall balance.

Talking about the time-frame, when can we expect the agreement to be signed and go into force?

I don’t speak for the United States government. My own view is, this could be done in 2015. Probably not until the fall. There is still a lot of work that I am talking about. I don’t think the US administration has set a timetable for completion. When they started the negotiations in 2013, they talked about the so-called “single tanker gas”, that was to finish the agreement during the Commission, the term of Commission that just ended this month. That obviously wasn’t possible.

The negotiations with the Canadians on a similar agreement took five years. It won’t take five years. Some say: “Oh well, this agreement can’t be done in a presidential election year.” So 2016 in the United States is a presidential election year. I think that’s wrong. People forget that the North American Free Trade Agreement (NAFTA) with Canada and Mexico was actually concluded and signed in 1992, which was a presidential election year.

So we could do this in 2016. I would prefer that we do it sooner. I think it is possible to do it sooner. But I think whether we do it in 2015 or 2016 largely depends on the positions adopted by the European Union which has wanted to go slow, particularly on investment.

Recently our President Dalia Grybauskaitė called Russia a terrorist state. Do you think that she is too harsh on Russia or she has some grounds?

She obviously has evidence to support her judgement. I wouldn’t comment specifically on what your president has said. Obviously, she represents strong views that she has about Russia. Obviously, situation in Ukraine, beginning with seizure of Crimea and its incorporation into Russia, is very worrisome to all of us.

Famous US-Polish politician Zbigniew Brzezinski has said that Russia cannot be an empire without Ukraine. Do you think Russia is losing Ukraine, has lost Ukraine or it is going to take it back in the long term?

No, I think Ukraine has been a sovereign independent country ever since the early 1990s and will remain so. I think that the result of the loss of Crimea and the current struggle in Donbass has actually increased the national sentiment in the rest of Ukraine. There always was Ukrainian nationalism, even in the Soviet Union days. But this has reinforced the commitment of most Ukrainians - not all, but most Ukrainians - to the idea of Ukrainian flag, Ukrainian national sovereignty. So, I think, that part is irreversible. No matter what happens on the ground.

It has been one year since the Euro Maidan. What are the main lessons we've learnt?

That trade negotiations are not just trade negotiations, they are strategic negotiations. And one of the things that I think the West failed to appreciate as the deep and comprehensive trade agreement was advanced between the European Union and the government of Ukraine, was how much that was a strategic choice. How much it mattered to the Russians. And, for that matter, how much it mattered as a strategic choice to the people of Ukraine.

President Putin put pressure on President Yanukovych to walk away from the deep and comprehensive trade agreement, despite the fact that it was very advantageous to Ukraine would help in solving Ukraine’s economic crisis. That stimulated spontaneous protests in the Maidan which started unravelling the Yanukovych regime.

So why did Putin care so much about the deep and comprehensive trade agreement? Well, it turns out that Russia had its own concept of a new trade and political relationship between former socialist countries which he called Eurasian Union. Actually, the deep and comprehensive trade agreement itself wouldn’t have actually affected Russia’s trade interests in Ukraine. It didn’t require the Ukrainians to do anything to its trade with Russia.

But Russia’s ambitions for putting a Customs Unions together required that Ukraine have higher tariff barriers towards everyone except Russia. Someone might say it is a neo-colonialist or neo-imperialist kind of re-establishment of the USSR, at least from the economic standpoint.

Back to your questions about lessons learned, I think that we failed to understand the strategic stakes of what was considered in Brussels. We didn’t understand its importance in a strategic sense. And we certainly did not realize how strongly the people of Ukraine felt about that choice.

Many other things came as a surprise. The actions that where taken to seize Crimea were a surprise. I think people are less surprised about the Donbass and Eastern Ukraine. Shocked and upset, yes, but less surprised, having seen Crimea. I think European countries, the United States, other NATO allies are less naïve and, probably, more realistic as the result.

Many are saying we are seeing a new Cold War. Could you compare and contract the real Cold War and the situation now?

The biggest difference is that the traditional Cold War, shall we say, was a bi-polar system. There were basically two competing power systems and the Cold War had an ideological component. That was really quite significant.

The world that we live in today is often called multi-polar. I think that may be an exaggeration, but whatever happens between Eastern and Western Europe is only one dimension of the potential conflict and tensions in the world. The Middle East and, if you will, the religious struggle between Suni and Shia, between Islam and Christianity and Judaism, is another very serious and completely distinct area of potential conflict.

And then you have all the things that are happening in Asia. The rising power of China, tensions with its neighbours, including Japan, over territory, over resources.

In the Cold War, we didn’t have any of those things. It was simple. There is the game theory approach, “two scorpions in a bottle”. The world today, we almost wish for something so simple.

But in the cold war, we had propaganda. Propaganda war was a strong element.

Actually I think it’s much stronger today. There’s much more propaganda today than there was in the Cold War.

But the difference is that it’s privatized. From the viewpoint of the Baltic states, it seems that Russia is winning the propaganda war and that it is much stronger and better-prepared than the Western world. How far behind are we in propaganda war? And what shall we do in order to catch up?

I think we have major, if you will, objections to the idea of propaganda. During the Cold War, we had just emerged from World War II, fighting Nazism and fascism. And the fascism of the 1930s was based on propaganda. Hitler invented modern propaganda. And so the allies, to win the war, had to essentially encounter fascist narrative. And they had heroic state-sponsored movies about reversing the advancing nazism and the Japanese in the Pacific. Major actors, from Humphrey Bogart to Ronald Reagan, all of these good things were made with a good deal of state sponsorship in those days. And that continued during the Cold War were we had our FRL and Voice of America and the BBC and resources were poured into this effort.

Since the 1990s, the fall of the Berlin Wall, the West downplayed the idea of state-sponsored information. And the structures, the instincts, the resources are gone. In many ways I wouldn’t recommend that they be reestablished in the present environment. The present media environment is too diverse and the importance of social media, as we’ve seen in the Arab Spring and elsewhere around the world, is pervasive.

I would think that the Russian Federation has put a lot of resources into sponsoring and encouraging, shall we say, messages that are not necessarily constrained by the need for fact. But the response to that is not to do the same thing. The system of public information, the way that the media works, ultimately gets the word out and in a much more credible way than if there were a big state sponsorship. If we doubled or tripled the size of the Voice of America, people would say “oh that’s just the Voice of America”. It’s not possible to counteract information threat that we are facing with public resources. It has to be through the diversity and the power of private media outlets and social media. And ultimately we will win because the facts are out.

What about the Baltic states? We’re sounding alarm that propaganda hurts our Western allies, especially Western Europe.

We’ve heard you.

But countries like France, Italy and Spain don’t buy that we are in the middle of a propaganda war and that the Baltic states are trying to fight it. Of course, there is no strategy and we are very much behind Russia. We feel a little that we are left alone in this fight. How to explain to our western allies that some of the methods that we are using are not because we are enemies of free speech but because we are in the middle of actual information war and we have to do something about it?

It’s hard for me to speak to your methods and some of the specific problems that media is facing here in the Baltic countries. I do think that since last summer and the tragic loss of the Malaysian airliner, there has been a realization in major European capitals that the facts are different from what you might read or hear from media to the east of us. And I think that opinions have actually changed. Opinions in Berlin in particularly have changed. And so what you need to do is to continue and the fact that it didn’t go well for the first nine months or a year and a half doesn’t mean that it will not go well ultimately. You have to just stick with the approach and the strategy until you succeed.

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