Transatlantic Trade And Investment Partnership: The Questions

By Olaya Alvarez

TTIP is a trade and investment deal between U.S. and the European Union, which is currently being negotiated, and whose purpose is to set up a free trade area cutting red tape[2], setting new coordinated rules and eliminating trade barriers.

In order to understand the agreement’s character, it is important to bear in mind that at present, U.S. and EU average tariffs are already under the 3%[3]. Thus, the core of this agreement is more likely ‘regulatory harmonization’, than the abolition of traditional trade barriers.

Among the main themes tackled by the treaty are the provisions of trade in goods and customs duties, services, culture (although audio-visual and copyright sectors are excluded), public procurement, the rules of origin[4], regulatory co-operation[5], and new rules[6].

Pursuing the explanation given by the European Commission, these are the main principles upon which negotiations are based[7]:

• No decrease of standards; but reinforce them
• Regulatory cooperation
• Domestic regulatory frameworks kept without changes

What appears of general consensus is that the main objective is protectionism to be abolished, as well as treat equally U.S. and EU companies. From this premise, several outcomes could derive in the future, most of them still remain uncertain. To this doubtful state of affairs must be added the secret character of negotiations, which are being performed among stakeholders and EU and U.S. representatives; thus, close to public debate.

When concerns within a sensitive field are manifested, European institutions strongly sustain that in any case standards will not be diminished, but improved. However, it is clear some prerogatives must be conceded by both parties within a negotiation process. Hence, it appears questionable legislative harmonization does not imply, in any sphere, a thresholds’ reduction. Furthermore, what would be the indirect outcomes of such harmonization? Beyond the concretely content ruled in the agreement, European and U.S. systems are significantly different, and important consequences could be derived even if not predicted.

As example, within the field of public contracts. At what point it will not involve any consequence in relation to labour law or environmental protection? Or in relation to the standards, (food safety, people’s rights at work and environmental protection) it is said that are not up for negotiation, and the precautionary principle[8] is upheld. But, to what extent the regulatory harmonization will affect this issues? European institutions have sustained the workers’ protection standards will be in accordance with ILO instruments[9], but this response does not clarify the agreement’s content in that point, if contained.

Referring to energy sector, it appears unclear at what point sustainable sources of energy would be promoted, or it will mean that Europe will import more fossil fuels from U.S. such as oil or natural gas, in detriment of eco-friendly sources. And, in any case, open the market to an energy power such as U.S. in terms of open access and competition will clearly derive in a non-sustainable industry of coal in Europe.

In regard to safety standards, it is said they will not be compromised, but will align technical requirements where possible: What direction the changes will adopt?

With respect to banned substances, as in the cosmetics field, it is affirmed the 1372 European banned substances will be maintained and, simultaneously EU and the U.S. would benefit from the cooperation in new scientific assessments. Nevertheless, what would be the criteria in relation to those? Would the European Union allow new substances would not allow in a previous state of affairs?

The investor-state dispute settlement issue remains still unclear, as of 16 September 2015, the European Commission has proposed a new disputes resolving system in all ongoing and future EU investment negotiations: the Investment Court System[10]. This new Court would reinforce the governments’ regulation, and would have an Appeal Tribunal. For the nonce, more concrete data are needed in order to build up a consistent opinion.

In relation to the potential impact worldwide, it appears clear that, removing customs duties and other barriers to trade, as legislative obstacles, the trade flow between US an EU will be increased. In doing so, it is estimated that countries close to the US and European production networks will increase their incomes, whilst countries within the Asian sphere such as China, Japan or South Korea would be negatively affected. Furthermore, other emerging countries which currently benefit from the trade barriers between EU and US, will be disserved[11]. In addition to that, in terms of world geopolitical balance, this agreement will reinforce the role of the two most powerful economies in the world.

Several questions arise, as the agreement’s sphere results are thundering. In spite of which, public debate is not taking place, and bargaining still remains reserve to the considered as ‘high spheres’. This does not just question the democratic heritage of democracy’s cradle, but could pose legitimation issues associated with bargaining powers. To what point European citizenship supports this agreement, given that information is not being provided?

Concluding, latter consequences will be discovered, in any case, after the agreement’s signing. Nonetheless, citizens must be given the legitimate right to an open debate, with updated information, and access to drafts periodically.

Notes:
[1] From a European Perspective.
[2] Meaning the reduction of bureaucratic obstacles to act.
[3] http://ec.europa.eu/trade/policy/countries-and-regions/countries/united-states/
[4] ‘Criteria needed to determine the national source of a product.’ Source: World Trade Organization.
[5] In fields such as food safety and animal and plant health, chemicals, pesticides, pharmaceuticals, vehicles, etc.
[6] Concerning sustainable development, intellectual property rights, competition, small and médium-sized enterprises, or energy and raw materials, among others.
[7] TTIP round 10. Statement by EU chief negotiator Ignacio Garcia Bercero. Brussels, 17 July 2015.
[8] Consists on a risk management principle within the decision-making phase, by virtue of which if an action or policy could potentially have adverse effects, and if after the scientific data evaluation it leads to scientific uncertainty, the burden of proof is for those who took the action.
[9] http://trade.ec.europa.eu/doclib/docs/2015/january/tradoc_153013.1%20TSD.pdf
[10] http://europa.eu/rapid/press-release_IP-15-5651_en.htm
[11] What should development policy actors do about the Transatlantic Trade and Investment Partnership (TTIP)?. German Development Institute. Briefing Paper 1/2015.