Matthias Goldmann is Junior Professor of International Public Law and Financial Law at the Goethe University in Frankfurt. This guest post is Part 1 of a special series on TTIP that we’ll be running in the coming weeks.
The ongoing debate about the Transatlantic Trade and Investment Partnership (TTIP) has shed new light on the effects of trade on economic and social equality. While it is well understood in theory that free trade is likely to generate aggregate welfare benefits, in practice the allocation of these benefits seems to be highly unequal. In developed economies, free trade might lead to the outsourcing of jobs of low-skilled workers to places with lower labor costs. In developing economies, trade might generate low-skilled jobs, but with international competition preventing wages from rising. Entrepreneurs and trading companies rather than workers seem to collect a large share of the benefits of international trade. As I will argue, this threatens the economic, social and cultural rights (ESC rights) of low-skilled workers. Free trade agreements (FTAs) are therefore only acceptable to the extent that participating governments take measures to mitigate their impact on low-skilled workers. To generate revenue for such measures, states should devise strategies to combat international tax evasion and tax competition.