Last Update - 14-06-2015 What is TTIP and why would we need it? Since July 2013, the European Union and the United States of America are negotiating about a trade agreement called the Trans-Atlantic Trade and Investment Partnership, or TTIP. The aim of such an agreement is to improve the economic cooperation between the world’s two largest, most open, democratic economies in order to strengthen our position on the global stage. Of course, the EU and the US already work together in many areas and bilateral trade ties are already very strong. Precisely because of this, a trade agreement would be beneficial. Already, an estimated 2 billion in goods and services goes across the Atlantic every day, so small changes can have large effects. What are the interests? For both sides, a bilateral trade agreement could bring economic benefits. There are different studies and the precise effects are difficult to state at this point, because negotiations are still ongoing. However, past trade agreements have shown that the effects can be very positive. After the trade agreement between the EU and the Republic of Korea, European exports of goods to that country grew by 35 per cent. For the EU, there are a number of key interests in the TTIP negotiations. Public procurement European companies have very limited access to public procurement in the United States. Buy America(n) clauses exclude EU companies from tendering. The US also maintains a preferential regime for national SMEs. In contrast, the European procurement market is very open for American companies. More access to public procurement will be crucial for the EU and it would be hard to envisage a positive outcome for TTIP if this is not achieved. Small and Medium-sized Enterprises Negotiators have agreed that SMEs must be prioritised under TTIP. On both sides of the Atlantic, 99 per cent of companies are SMEs. Smaller companies often do not have the expertise and capacity to make the step across the Atlantic. That is why TTIP should be used to make it easier for them to do so. The agreement will contain a specific chapter on SMEs, which is the first time that this is being done. It should make it easier for SMEs to find out what rules and regulations they have to adhere to in another market. It should also make it easier for companies to get access to capital and to find new trading partners on the other side of the Atlantic. Many SMEs are also integrated into the supply chains of larger companies, so they will also benefit from increased activity even if they do not trade directly across the Atlantic. Air and Maritime Services European aviation and shipping companies are blocked from operating on the US market. When you take a domestic flight within the US, you will always fly with an American carrier. The transport of goods by water within the US must always be done by American built, owned, crewed and flagged vessels. For other maritime services, such as dredging, heavy lifting or servicing oil rigs, the same restrictions apply. This unfair situation must be addressed in TTIP. It would not only be beneficial for EU companies, it could create more choice for American citizens and improve the quality of services. Automotive sector The EU and the US automotive sector are very large industries which employ a huge number of people, are closely linked to other industries and incorporate many SMEs into their production chains. The automotive sector looks to make large gains from a trade agreement if regulations and procedures on both sides can be broght closer together. Energy Currently, the US has restrictions on the amount of gas it exports. This measure is supposed to lower the energy prices in the US itself. The EU would like to see these restrictions lifted. The EU is heavily dependent on undemocratic and unpredictable regimes for its energy needs, such as those in Russia or Saudi Arabia. Diversifying energy imports could reduce this. At the same time however, TTIP should contribute to sustainable energy use. Future cooperation on standards between the EU and the US should make it easier to roll out sustainable goods and technologies, such as electric cars and smart grids, in both economies at the same time. Agriculture Agriculture is an important and sensitive sector on both sides of the Atlantic. While both sides are ambitious, it is clear that it will not be possible to lift all tariffs. There are sensitive products and sectors in the EU and the US which will need to be protected. This is also the approach that Canada and the EU took in their bilateral trade agreement. Nor will it be possible to harmonise all legislation, the EU and the US approaches are too different in some areas. For example, the EU’s precautionary principle and the US ‘science based approach’, these differing approaches will be upheld. On the EU side, it has already been made clear that hormone beef and poultry meat washed with chlorine, the infamous chlorine chicken, will not enter our markets and that our approach to genetically modified organisms will not be changed through a trade agreement. While there are definitely sensitivities on both sides, the EU also has a very important offensive interest in the form of geographical indications, such as Parma Ham or Feta Cheese. Again, the agreement with Canada could provide a good basis as it has attained recognition of almost 150 European geographical indications in Canada. What are the global implications of TTIP? An agreement between the two largest economic blocs of the world would be able to set a new standard in many crucial areas. Though our approaches differ, the Eu has more in common with the US than for example China, Russia or the Gulf States. Especially when it comes to issues such as human rights, the environment, labour rights, food safety or animal welfare. Other economies are creating growth at any price, without respect for these values. How China operates in Africa is a good example. Another example: in 2013, the EU removed 2,364 unsafe products from it market, 64 per cent of them came from China. The EU and the US could use TTIP to work together to enforce our values and standards worldwide. Although TTIP would be an important agreement in itself, it would be better to work towards more liberalisation within the context of the World Trade Organisation. As these negotiations are currently stuck, bilateral trade agreements should serve as a stepping stone towards this aim. An agreement like TTIP could set an example for what we hope to achieve in the WTO. Another important issue is how TTIP will affect third countries. If the EU and the US can agree on more harmonisation and standardisation, it would make it easier for developing countries to access both markets at the same time, because they would need to adhere to one set of rules instead of having to use two production lines. At the same time we need to look at the risk that closer EU and US integration may make it harder for others to compete. Lastly, the Commission and the Americans must look at how countries like Canada, Mexico and Turkey could be kept more closely informed of the negotiations, as they will be affected by any final agreement because of the Customs Union agreements with either the US or the EU. What are the concerns? Some critics of TTIP have characterised it as the end of democracy or a way for corporations to destroy legislation which protects the public, workers and the environment. While these fears are an exaggeration, there are legitimate concerns about deregulation, downward harmonisation of standards or a weakening of the protection on either side of the Atlantic. It is clear that this must not be the effect of TTIP. A trade agreement between the EU and the US, should look to uphold standards on consumer protection, the environment, labour rights and animal welfare. Luckily, many key players from both sides have already agreed to this: President Obama, President Jean Claude Juncker, Commissioner Malmström, the European Council, the EU chief negotiator and the American chief negotiator. Of course, we will have to keep them to these promises. On a number of concrete issues, we also have commitments. Chlorine chicken and hormone beef will not enter the EU market. A trade agreement will not change the European approach to Genetically Modified Organisms or cloning. European governments will be responsible for deciding whether natural resources are exploited and how, TTIP cannot allow American companies to start drilling for shale gas. Another concern is public services. We have a clear commitment from both the Americans and the European Commissioner that TTIP will not cover public services like health, education or water supply. For the moment, negotiators should be given room to negotiate, since we have received clear on the record commitments on upholding the standards and values we hold dear. However, we will keep reminding them of the promises made and make sure they are kept once we see the final text. What is being done with regard to transparency? At the end of 2014, the European Commissioner for Trade, Cecilia Malmström, started a transparency initiative to open up the negotiations on TTIP. The European Parliament had repeatedly asked for concrete steps on transparency. In response, the Commission has put a large number of negotiating texts online and many more texts have been made available to Members of Parliament. This has made the TTIP negotiations the most transparent ever conducted by the EU. However, we would like to see more. The Commission could make more meetings open to the public. Most of all, it is important that the Americans also commit to more transparency. Members in the Congress are already asking for this. At the same time, it must be clear that negotiations cannot be conducted in front of the camera and that there will always be some secrecy. On both sides the interests are very real and neither wants to lay out its entire negotiation strategy. What is ISDS and what is the state of play on investment protection? Investor-to-State Dispute Settlement is a mechanism that has been used since the 1960s in investment agreements to solve disputes which emerge between states party to an agreement and investors from the other party. The mechanism has received a lot of criticism, because it lacks transparency and accountability. The fear is that it could be used by companies to put pressure on governments not to adopt legislation which is in the public’s interest. At the same time an agreement does need to contain a way to settle possible disputes and European companies also need some form of protection abroad. Please see a more extensive blog about ISDS here. Currently, negotiations about ISDS have been frozen, after the European Commission launched a public consultation about it. The Commission has now come forward with a more detailed proposal on how the outdated mechanism which exists should be reformed so that it is accountable, transparent and legitimate. She presented this to the European Parliament on 6 May. The crucial issue is that it should not put pressure on governments’ right and room to regulate. Together with the European Parliament and the Member States a legal text will be made on how to move forward. It should be a priority to also push the Americans towards reform of this mechanism. The debate in the US on ISDS has only really started a few months ago. What are the next steps? The European Parliament has been working on a report on TTIP, which sets out its expectations for the agreement. It was voted in the International Trade Committee on 28 May and will be debated and voted in the plenary on 10 June. It is difficult to put an exact timeline on the rest of the negotiating process. Both sides have stated they are committed to keep moving ahead. However, the European Member States aim to finish in 2015 looks rather ambitious. With a Presidential election race starting in July 2016, it would be useful if there was at least a framework agreement before then. A next round of negotiations is planned before the summer break and negotiators are getting more and more into the technical aspects of the various chapters. Much will also depend on the process in the US. The Americans are simultaneously negotiating on the Trans-Pacific Partnership with 11 other countries around the Pacific. This seems to be almost done. For the president to be able to sign trade agreements, he needs to receive so-called Trade Promotion Authority from Congress. With this law, the congress cedes its right to directly amend the text of a trade agreement, but sets the framework which the President should keep to. TPA still has to be adopted, but when it is, it should give the Administration the freedom to negotiate with more ambition. The TPA is facing resistance from the Congress, especially from Democrats. The law was blocked by the House of Representatives in a vote on 12 June. A new vote is expected to take place soon. In any case, the negotiations will be going on for some time yet. That is why this is not the time to say ‘yes’ or ‘no’ to TTIP. We should be asking what kind of TTIP we want, so that we can push the process in the right direction and make sure we get a final text which can deliver for citizens on both sides of the Atlantic.