U.S. spying may cost the U.S. economy billions

Talk about bad timing.

This week marked the start of renewed negotiations for a Transatlantic Trade and Investment Partnership (TTIP) between the European Union and the U.S. And mere days before that, the German federal prosecutor's office confirmed that it is investigating another possible case of U.S. spying in Germany. Imagine being at the TTIP negotiating table with that elephant in the room.

Billions upon billions of dollars in potential economic growth for both Germany and the U.S. are at stake with this free trade agreement. Forbes notes that "one study, done for the EU, concluded that a comprehensive trans-Atlantic trade and investment agreement would add $122 billion annually to the American economy and $150 billion annually to the European economy."

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But now European anger over U.S. spying may put this landmark deal in serious jeopardy.

TTIP is complex and multifaceted, but essentially it is an attempt to reduce trade barriers and streamline regulations. Let's focus on just a couple tiny slivers of it to get a sense of how important it could be to economies on both sides of the Atlantic. Simply standardizing regulatory differences between the EU and the U.S. could yield tremendous gains. For example, Germany mandates that blinker lights on cars must be orange. The U.S. mandates they must be red. This discrepancy creates an artificial and useless barrier to trade. Former congressman and WTO official James Bacchus calculated that streamlining these kinds of regulations by just 25 percent could increase combined GDP by $106 billion.

Another example: The U.S. and EU require different models of crash test dummies for car safety tests, even though the dummies ultimately accomplish the same goal. For carmakers, this means doing the same tests twice, adding significantly to the cost of the cars. Studies have found that differing auto safety standards end up adding about 25 percent to the costs of American cars sold in the EU.

In the midst of a tepid U.S. economic recovery, an agreement like TTIP would provide everyone with a much-needed economic boost. The benefits to eased and increased trade between countries really cannot be overstated.

And that's why now is such a bad time for the world to learn that a German soldier may have been passing information to U.S. military intelligence, acting as an alleged double agent in Germany's BND foreign intelligence service, according to media reports.

No wonder 70 percent of Germans characterize the U.S. as "power-hungry." In addition, majorities of Germans describe the U.S. as arrogant and reckless. Germans are incredibly disappointed in President Obama. Based on Obama's "hope and change" campaign rhetoric and promises of "the most transparent administration in history", millions of people throughout Europe expected a radical departure from the hawkish policies of President Bush. Instead, they have become increasingly disillusioned with Obama over the depth and breadth of NSA spying — including the spying on U.S. allies like Germany revealed by NSA leaker Edward Snowden.

That included recruiting German officials to spy on Germany for the U.S., tapping Chancellor Angela Merkel's phone, and monitoring around half a billion telephone calls, emails, and text messages in the country every month.

And now, many in German politics are using outrage over such snooping revelations to hold TTIP hostage.

Sabine Leutheusser-Schnarrenberger, Merkel's former justice minister and a member of the traditionally pro-American Free Democratic Party, said she wanted free-trade negotiations to be put on ice and Edward Snowden — whose leaks informed Germany of the spying — to be granted the right to stay in Germany.

"We can't go on like this," Leutheusser-Schnarrenberger said. "The Americans know no boundaries. They will only understand a clear message."

But it's Germany’s Green Party that is taking the lead on TTIP opposition. Berlin must "take a more resolute approach to the U.S. government," said Katrin Göring-Eckardt, head of the Green Party's parliamentary group. That has already meant expelling U.S. intelligence operatives from the country. But it could also mean expanding counterespionage against the U.S., and, of course, blocking TTIP.

The White House isn't budging. The Obama administration recently rejected a proposed "no-spy" agreement between Washington and Berlin. And the administration is resisting any potential legal constraints on its foreign intelligence collection, citing worries that other countries would ask for similar treatment.

The diplomatic toll of spying on friendly nations led by friendly leaders is considerable. The German people are now justifiably distrustful and upset with their American allies. And the unwillingness on the part of the U.S. to put any limits on spying or provide any transparency about who is being targeted or why further divides the U.S. from its allies.

However, with TTIP now in the balance, the toll is no longer just diplomatic, but financial as well. Billions of dollars in economic growth are at stake. So far, the Obama administration has offered no satisfactory justification for surreptitious foreign intelligence gathering in Germany. With the costs of spying this high, explanation and justification are the least that we, Americans and Germans alike, deserve.