Despite EU Efforts, Obstacles Are Slowing TTIP Progress

Analysis: Despite EU Efforts, Obstacles Are Slowing TTIP Progress

Authors: Silvia Amaro
10:41 | January 12, 2015


The European Commission published documents last week on progress in negotiations towards a major transatlantic trade deal to address concerns about a lack of transparency in deliberations, but several other sensitive issues remain and they may yet slow progress, according to observers.Other remaining hurdles for the so-called Transatlantic Trade and Investment Partnership (TTIP), currently being negotiated between Washington and Brussels, centre around the question of investor-state dispute settlement (ISDS) and regulatory cooperation, said Michael Efler, initiator of a European citizens’ initiative called Stop TTIP.Assuming it is inserted, the ISDS would grant investors and companies the right to use trade dispute settlement proceedings against foreign governments. According to Efler, it would allow companies to sue governments "whenever they feel their investments are being threatened."

"This would lead to a problematic special justice system for foreign companies that domestic companies would not have," Efler said, adding, "it's a one-way system because only investors can sue governments, not the other way around."

Germany and France said they do not support the inclusion of the ISDS in the trade agreement, given that investor rights are already safeguarded by national laws. Critics add that the mere threat of possible corporate lawsuits could prevent governments from implementing legislation in fields such as health and safety and sustainability.

However, Fredrik Erixon, an economist and director of the think tank European Centre for International Political Economy, believes that the ISDS is "largely a necessary component in the world of global investment."

Erixon said that political interference in investment issues is increasing on both sides of the Atlantic and the ISDS would add integrity and authority to EU trade policy.

"If ISDS is discharged from TTIP, I am afraid that is the end of TTIP," Erixon told EurActiv last month, adding that "Europe's trade negotiators could take a long holiday, because other countries that the EU are negotiating with would rightly worry about the EU's capacity to command authority in trade policy."

The question of regulatory cooperation between the two sides is another issue adding concern. Thirty three NGOs signed a joint declaration late last year stating their firm opposition to such cooperation, arguing it would lower standards in food safety and financial services.

Efler, of Stop TTIP, said that including a chapter on regulatory corporation would mean "special participation rides for lobbyists when it comes to lawmaking" and that businesses would have the "biggest say when it comes to regulations."

However, members of the Business Alliance for TTIP claim that regulatory cooperation would enable regulators to know what their transatlantic counterparts are doing and overcome differences in laws that increase the costs of trading, mainly to SMEs.

Meantime, the eight texts released by the European Commission on Wednesday were welcomed by the European Ombudsman, which is pushing for greater transparency in the negotiations. However, it called for further openness in the meetings of Commission directors, heads of units and negotiators with lobbyists when devising the rules.

Gundi Gadesmann, deputy head of the European Ombudsman’s communication unit, said that “the public will want to see what is on the table before the negotiations are finalised. The US does not have a veto as regards disclosure of these texts."

Ultimately, the crucial question is around the benefits of the trade agreement to European citizens.

Danae Kyriakopoulou, an economist from the Centre for Economics and Business Research, said that given that tariffs on trade between the EU and the US are already low, the effect would mainly be seen in non-tariff barriers.

"The signing of TTIP will mean that as regulatory standards converge, US products will be automatically eligible for sale in the Single Market. This positively impacts consumers in at least two ways: greater variety of goods and lower prices," Kyriakopoulou said, adding that the latter would stem from removing indirect costs and as companies would only have to design one version of a product to fit both markets.

"These benefits are expected to be greatest in the automotive sector, where there is significant room for convergence of regulations," she said. "To give an example, cars sold in the US have to be safe for passengers not wearing seatbelts as seatbelts are not compulsory in some US states, while in Europe seatbelts are mandatory and so this requirement does not apply."

The Centre for Economic Policy Research last year published a study that showed that the EU's economy could benefit by €119 billion a year, equivalent to €545 for an average household, and the US's by €95 billion a year.

However, the numbers do not convince Stop TTIP. "We are not convinced that the TTIP will lead to positive effects overall on the average citizen," Efler from Stop TTIP said. The projections offer an "unrealistic scenario" because they assume that all tariffs would be put to zero, and "in any case you have to wait to the year 2027 to have the full advantages of that."

Given the existence of political difficulties in both sides of the Atlantic, Erixon, of the European Centre for International Political Economy, believes that the "realistic timetable for political approval of the agreement is 2017 at best."

Erixon added that negotiations have been "ineffective" and have been dragging. "All of this happens because both sides are under different political difficulties, which slows down the pace of negotiations and make the talks a bit more complicated than they should be."

The desire from Brussels to accelerate the talks is undimmed. EU leaders agreed at their last summit in December to make all efforts to finish negotiations by the end of 2015. Last week, however, the EU trade commissioner Cecilia Malmström tempered expectations somewhat. “It is difficult to put a precise timetable on the end of the negotiations,” she said. “We hope to have the skeleton of the agreement ready by the end of the year.”

Bando Benifei, a member of the European Parliament for the Progressive Alliance of Socialists and Democrats, said: "We have to take the interest of our citizens and consumers first" and this is why "we have to be very careful and don't accelerate the pace of negotiations too much."

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