Transatlantic Trade and Investment Partnership

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This article is about the regulation and trade agreement. For the chemical compound abbreviated as TTIP, see Titanium isopropoxide.
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The Transatlantic Trade and Investment Partnership (TTIP; also known as the Transatlantic Free Trade Area, abbreviated as TAFTA) is a proposed free trade agreement between the European Union and the United States. Proponents say the agreement would result in multilateral economic growth,[1] while critics say it would increase corporate power and make it more difficult for governments to regulate markets for public benefit.[2] The U.S. government considers the TTIP a companion agreement to the Trans-Pacific Partnership.[3] After a proposed draft was leaked, in March 2014 the European Commission launched a public consultation on a limited set of clauses.

A previous proposed treaty was Multilateral Agreement on Investment. The TTIP free trade agreement could be finalised by the end of 2014.[4][5]

Background[edit]

Economic barriers between the EU and the US are relatively low, not just due to long-standing membership in the World Trade Organization but recent agreements such as the EU–US Open Skies Agreement and work by the Transatlantic Economic Council. The European Commission claims that passage of a trans-Atlantic trade pact could boost overall trade between the respective blocs by as much as 50%.[6] However, economic relations are tense and there are frequent trade disputes between the two economies, many of which end up before the World Trade Organization. Economic gains of TTIP were predicted in the joint report issued by the White House and the European Commission.[7]

Some form of Transatlantic Free Trade Area had been proposed in the 1990s and later in 2006 by German Chancellor Angela Merkel in reaction to the collapse of the Doha world trade talks. However, protectionism on both sides may be a barrier to any future agreement.[8][9] It was first initiated in 1990, when, shortly after the end of the Cold War, with the world no longer divided into two blocs, the European Community (12 countries) and the US signed a "Transatlantic Declaration". This called for the continued existence of the North Atlantic Treaty Organization, as well as for yearly summits, biennial meetings between ministers of State, and more frequent encounters between political figures and senior officials.

Subsequent initiatives taken by the European deciders and the US government included: in 1995, the creation of a pressure group of business people, the Transatlantic Business Dialogue (TABD) by public authorities on both sides of the Atlantic; in 1998, the creation of an advisory committee, the Transatlantic Economic Partnership; in 2007, the creation of the Transatlantic Economic Council, in which representatives from firms operating on both sides of the Atlantic meet to advise the European Commission and the US government – and finally, in 2011, the creation of a group of high-level experts whose conclusions, submitted on February 11, 2013, recommended the launching of negotiations for a wide-ranging free-trade agreement. On February 12, 2013, President Barack Obama called in his annual State of the Union address for such an agreement.[10] The following day, EU Commission President Jose Manuel Barroso announced that talks would take place to negotiate the agreement.[11][12]

The US and European Union together represent 60% of global GDP, 33% of world trade in goods and 42% of world trade in services. There are a number of trade conflicts between the two powers; although both are dependent upon the other's economic market and disputes affect only 2% of trade. A free trade area between the two would represent potentially the largest regional free-trade agreement in history, covering 46% of world GDP.[13] See below for details of trade flows;[14]

Direction of trade Goods Services Investment Total
EU to US €260 billion €139.0 billion €112.6 billion €511.6 billion
US to EU €127.9 billion €180 billion €144.5 billion €452.4 billion

US investment in the EU is 3 times greater than US investment in the whole of Asia and EU investment in the US is eight times that of EU investment in India and China combined. Intra-company transfers are estimated to constitute a third of all transatlantic trade. The US and EU are the largest trading partners of most other countries in the world and account for a third of world trade flows. Given the already low tariff barriers (under 3%), to make the deal a success the aim is to remove non-tariff barriers.[15]

Proposed contents[edit]

Documents released by the European Commission in July 2014 group the topics under discussion into three broad areas: Market access; Specific regulation; and broader rules and principles and modes of co-operation.[16][17]

The EU negotiating mandate as of June 2013 gave a fuller view of what the Council of the European Union (Foreign Affairs) has told its negotiators to try to achieve for each section.[18] No corresponding U.S. text is available, but the American side has released a public statement setting out its objectives and the potential benefits it foresees.[19]

Market Access[edit]

"Removing custom duties on goods and restrictions on services, gaining better access to public markets, and making it easier to invest".[20]

Specific topics include:[16][17]

Industry-specific regulation[edit]

"Improved regulatory coherence and cooperation by dismantling unnecessary regulatory barriers such as bureaucratic duplication of effort." [20]

Specific heads for discussion include:[16][17]

Broader rules and principles and modes of co-operation[edit]

"Improved cooperation when it comes to setting international standards". [20]

Specific heads for discussion include:[16][17]

Implementation[edit]

  • Dispute settlement (between the parties -- not ISDS)

Earlier leak[edit]

A leaked copy of the EU negotiating text for the "Services and Investment" strand of the Market Access part of the proposed treaty, dated July 2013, was made available in March 2014. The leaked text contains seven chapters. In chapter I, article 1 states the overall objective of "a better climate for the development of trade and investment", particularly the "liberalisation of investment and cooperation on e-commerce."

Chapter II contains general principles for investment.[37]

Chapter IV, Articles 24 to 28 would allow free movement of business managers, and other employees of a corporation, for temporary work purposes among all countries party to the agreement.[38] Article 1(2) makes it clear, however, that no more general free movement of workers and citizens is allowed.

Chapter V contains a series of sections with particular rules for different economic sectors. Articles 29 to 31 set out principles which states must follow in licensing private corporations, and state that requirements that are not proportionate to a reviewable public policy objective are contrary to the treaty.

Articles 35 to 39 cover liberalisation of postal services.[39]

Articles 40 to 50 apply to electronic communications networks and services (including telecommunications) and mandate competitive markets, absence of cross-subsidies, subject to defined exceptions including in article 46 a right (but not a requirement) for countries to provide universal service.

It is proposed to allow corporations to bring actions against governments for breach of its rights.[40]

The EU Commission launched a public consultation after the draft text was leaked to the public by the German newspaper, Die Zeit.

Negotiations[edit]

Negotiations are held in week-long cycles alternating between Brussels and Washington. The negotiators hope to conclude their work in 2014 or 2015.

The 28 governments will then have to approve the negotiated agreement in the EU Council of Ministers. At this point, the European Parliament will be asked for its decision. It is empowered to approve or reject it. A controversy has arisen on the issue of whether the national Parliaments should also ratify this agreement. In France, Article 53 of the Constitution states that trade treaties can only be ratified by a law. In the US, the Congress will have to ratify the text.

The texts are being developed by 24 joint EU-US working groups, each considering a separate aspect of the agreement. Development typically progresses through a number of phases. Broad position papers are first exchanged, introducing each side's aims and ambitions for each aspect. These are followed by textual proposals from each side, accompanied (in areas such as tariffs, and market access) by each side's "initial offer". These may evolve through various stages of development. When both sides are ready, a consolidated text is prepared, with remaining differences for discussion expressed in square brackets. These texts are then provisionally closed topic by topic as a working consensus is reached. However the agreement is negotiated as a whole, so no topic is closed definitively until consensus on the agreement as a whole is reached.[41]

Proposed benefits[edit]

TTIP's proponents aims to liberalise one-third of global trade which is argued to generate millions of new jobs.[42] "With tariffs between the United States and the EU already low, the United Kingdom's Centre for Economic Policy Research estimates that 80 percent of the potential economic gains from the TTIP agreement depend on reducing the conflicts of duplication between EU and US rules on those and other regulatory issues, ranging from food safety to automobile parts."[42] A successful strategy, according to Thomas Bollyky at the Council on Foreign Relations and Anu Bradford of Columbia Law School, will focus on sectors where transatlantic goals of trade and regulation overlap: pharmaceuticals, agricultural products, and financial services.[42] This will ensure that the United States and Europe remain "standard makers, rather than standard takers," in the global economy, subsequently ensuring that producers worldwide continue to gravitate toward joint US-EU standards.[42]

An economic assessment prepared by the Centre for Economic Policy Research in March 2013, estimates that a comprehensive agreement will result in annual GDP growth in the EU of 68-119 billion euros by 2027 and annual GDP growth of 50-95 billion euros in the US. The same report estimates that a limited agreement, focused only on tariffs, will result in annual GDP growth in the EU of 24 billion euros by 2027 and annual growth of 9 billion euros in the US. The most optimistic GDP growth estimates, if shared equally among the populace, would translate into additional annual disposable income of 545 euros for a family of four in the EU and 655 euros for a family of four in the US.[43]

The CEO of Siemens, which has 70% of its workforce in Europe and the US, has indicated that the TTIP would strengthen the global competitiveness of the US and EU by reducing trade barriers, improving intellectual property protections, and setting international "rules of the road".[44]

The European Commission's staff have argued that the TTIP would boost the EU's economy by €120 billion, the US economy by €90 billion and the rest of the world by €100 billion.[45] Talks began in July 2013 and reached the third round of negotiations by the end of that year.[45]

Sensitivities[edit]

For both sides, there are issues which are seen as essential if an agreement is to be reached. According to Leif Johan Eliasson of Saarland University, "For the EU these include greater access to the American public procurement market, retained bans on imports of Genetically Modified Organisms (GMO) crops and hormone treated beef, and recognition of geographic trademarks on food products. For the US they include greater access for American dairy and other agricultural products (including scientific studies as the only accepted criteria for SPS policies), tariff-free motor vehicle exports, and retained bans on foreign contractors in several areas, such as domestic shipping." [46]

At French insistence, trade in audio-visual services was excluded from the EU negotiating mandate.[47] The European side has been pressing for the agreement to include a chapter on the regulation of financial services; but this is being resisted by the American side, which has recently passed the Dodd-Frank Act in this field.[48] U.S. Ambassador Anthony L. Gardner has denied any linkage between the two issues.[49]

Criticism[edit]

Digital activists[edit]

In March 2013, a coalition of digital rights organisations and anti-HIV/AIDS groups issued a declaration[50] in which they called on the negotiating partners to have TAFTA "debated in the US Congress, the European Parliament, national parliaments, and other transparent forums" instead of conducting "closed negotiations that give privileged access to corporate insiders", and to leave intellectual property out of the agreement. The Electronic Frontier Foundation and its German counterpart FFII, in particular, compared TAFTA to the Anti-Counterfeiting Trade Agreement (ACTA),[51][52] signed by the United States, the European Union and 22 of its 27 member states.[53]

Transparency[edit]

In December 2013, Martti Koskenniemi, Professor of International Law at the University of Helsinki, criticized the ongoing negotiations for lack of transparency. He warned that the planned foreign investor protection scheme within the treaty, similar to World Bank Group's International Centre for Settlement of Investment Disputes (ICSID), would endanger the sovereignty of the signatory states by allowing for a small circle of legal experts sitting in a foreign court of arbitration an unprecedented power to interpret and void the signatory states' legislation.[54]

In a lecture at the Durham University on 22 May 2014 Noam Chomsky criticized the secrecy of the negotiations. He went on to suggest that "They are not secret to hundreds of corporate lawyers and lobbyists who are rating the detailed regulations. You can guess what they are and why they are secret."[55]

Environment[edit]

In Germany, a petition opposing TTIP gained 460,000 signatures by May 2014.[56] The negotiations, and German ratification, were postponed.[citation needed]

Economic growth[edit]

In a Guardian article of 15 July 2013, Dean Baker of the Center for Economic and Policy Research in the US observed that with conventional trade barriers between the US and the EU already low, the deal would focus on non-conventional barriers such as freeing up regulations regarding fracking, GMOs and finance and tightening laws on copyright. He goes on to assert that with less ambitious projections the economic benefits per household are mediocre "If we apply the projected income gain of 0.21% to the projected median personal income in 2027, it comes to a bit more than $50 a year. That's a little less than 15 cents a day. Don't spend it all in one place."[57]

National sovereignty and Investor State Dispute Settlements (ISDS)[edit]

Investor-state dispute settlement (ISDS) is an instrument that allows an investor to bring a case directly against the country hosting its investment, without the intervention of the government of the investor’s country of origin.[58] In December 2013, a coalition of over 200 environmentalists, labor unions and consumer advocacy organizations on both sides of the Atlantic sent a letter to the USTR and European Commission demanding the investor-state dispute settlement be dropped from the trade talks, claiming that "Investor-state dispute settlement is a one-way street by which corporations can challenge government policies, but neither governments nor individuals are granted any comparable rights to hold corporations accountable."[59][60]

Response to criticism[edit]

Karel De Gucht responded to criticism in a Guardian article in December 2013, saying "The commission has regularly consulted a broad range of civil society organisations in writing and in person, and our most recent meeting had 350 participants from trade unions, NGOs and business".[61]

Effect on third countries[edit]

Proposed TAFTA :
US and EU in dark blue and the other possible members in light blue (NAFTA and EFTA)

Some proposals for a transatlantic free trade area include on the American side, the other members of North American Free Trade Area (Canada and Mexico) and on the European side, the members of the European Free Trade Association (Iceland, Norway, Switzerland and Liechtenstein). Mexico already has a free trade agreement with EFTA and the EU while Canada has one with EFTA and is negotiating one with the EU. These agreements may need to be harmonised with the EU-US agreement and could potentially form a wider free trade area.

Canadian media observers have speculated that the launch of US-EU talks puts pressure on Canada to conclude its own three-year long FTA negotiations with the EU by the close of 2013.[62] Countries with customs agreements with the EU, such as Turkey, could face the prospect of opening their markets to American goods, without access for their own goods without a separate agreement with the US.[63]

Reports[edit]

The Atlantic Council and Bertelsmann Foundation have produced reports about the proposed agreement, including:

  • The Transatlantic Trade and Investment Partnership: Ambitious but Achievable - A Stakeholder Survey and Three Scenarios (April 2013) ISBN 978-1-61977-032-4[64]

See also[edit]

References[edit]

  1. ^ This EU-US trade deal is no 'assault on democracy', Ken Clarke, The Guardian, 11 November 2013
  2. ^ This transatlantic trade deal is a full-frontal assault on democracy, George Monbiot, The Guardian, 4 November 2013
  3. ^ Transatlantic Interests In Asia, Russel, Daniel R., United States Department of State, 13 January 2014
  4. ^ Emmott, Robin (2013-02-27). "EU trade chief hopes to clinch U.S. trade deal by late 2014 | Reuters". Uk.reuters.com. Retrieved 2014-02-21. 
  5. ^ "BBC News - EU 'growth boost from US free-trade deal'". Bbc.co.uk. 2013-03-03. Retrieved 2014-02-21. 
  6. ^ "Hope and no change, After Barack Obama’s re-election, it is time to push for transatlantic free trade". Economist.com. 2012-11-10. Retrieved 18 March 2013. 
  7. ^ "Final Report High Level Working Group on Jobs and Growth". European Commission. Retrieved 18 March 2013. 
  8. ^ "Trans-Atlantic Free Trade?: Merkel for EU Agreement with US - SPIEGEL ONLINE". Spiegel.de. 2006-10-02. Retrieved 2014-02-21. 
  9. ^ [1][dead link]
  10. ^ Kanter, James; Ewing, Jack (2013-02-13). "A Running Start for a U.S.-Europe Trade Pact". The New York Times. Retrieved 2014-02-21. 
  11. ^ Andrew Walker (2013-02-13). "BBC News - EU and US free-trade talks launched". Bbc.co.uk. Retrieved 2014-02-21. 
  12. ^ Blenkinsop, Philip (2013-02-13). "EU, U.S. to start free trade talks". Reuters. Retrieved 2014-02-21. 
  13. ^ "Nominal 2012 GDP for the world and the European Union (EU).". World Economic Outlook Database, October 2013. International Monetary Fund. Retrieved 2013-10-08. 
  14. ^ "European Commission". Ec.europa.eu. Retrieved July 25, 2012. 
  15. ^ "United States - Trade - European Commission". Ec.europa.eu. Retrieved 2014-02-21. 
  16. ^ a b c d State of Play of TTIP negotiations ahead of the 6th round of negotiations, European Commission DG Trade, 11 July 2014
  17. ^ a b c d List of lead negotiators for the Transatlantic Trade and Investment Partnership, European Commission DG Trade

    List of lead negotiators for the Transatlantic Trade and Investment Partnership, Office of the Unites States Trade Representative

  18. ^ Directives for the negotiation on the Transatlantic Trade and Investment Partnership between the European Union and the United States of America, 14 June 2013; copy
  19. ^ U.S. Objectives, U.S. Benefits In the Transatlantic Trade and Investment Partnership: A Detailed View, Office of the United States Trade Representative, March 2014
  20. ^ a b c The Transatlantic Trade and Investment Partnership (TTIP) explained, European Commission DG Trade, 8 May 2014
  21. ^ Leaked EU negotiating text on trade in services, investment, and e-commerce, July 2013. Leaked March 2014
  22. ^ EU position on financial services, 27 January 2104; Summary
  23. ^ Initial EU position on Cross-cutting & institutional provisions on regulatory issues, 16 July 2013
  24. ^ Subsequent more detailed EU position paper, leaked December 2013
  25. ^ Initial EU position on Technical barriers to trade, 16 July 2013
  26. ^ EU position on textiles and clothing, 14 May 2014
  27. ^ EU position on chemicals, 14 May 2014
  28. ^ EU position on pharmaceutical products, 14 May 2014
  29. ^ EU position on cosmetics, 14 May 2014
  30. ^ EU position on motor vehicles, 14 May 2014
  31. ^ Initial EU position on Sanitary and Phytosanitary measures, 16 July 2013
  32. ^ Initial EU position on raw materials and energy, 16 July 2013
  33. ^ Leaked EU illustrative text, 20 Sept 2013. Leaked 19 May 2014
  34. ^ Initial EU position on trade and sustainable development, 16 July 2013
  35. ^ Initial EU position on public procurement, 16 July 2013
  36. ^ Leaked negotiation summary, KEI, 28 March 2014
  37. ^ TTIP Draft, article 14
  38. ^ TTIP Draft, articles 24-28
  39. ^ TTIP Draft, articles 35-39
  40. ^ TTIP Draft, "Negotiations on Investor-State Dispute Settlement"
  41. ^ Commission publishes state of play of TTIP negotiations ahead of 6th round of talks, European Commission DG Trade, 11 July 2014
  42. ^ a b c d Bollyky, Thomas J. and Anu Bradford (10 July 2013). "Getting to Yes on Transatlantic Trade". Foreign Affairs. Retrieved 22 July 2013. 
  43. ^ "Reducing Transatlantic Barriers to Trade and Investment: An Economic Assessment". Trade.ec.europa.eu. Retrieved 2 February 2014. 
  44. ^ Kaeser, Joe (February 2, 2014). "Why a US-European trade deal is a win-win". The Wall Street Journal. 
  45. ^ a b "Transatlantic Trade and Investment Partnership (TTIP) - Trade - European Commission". Ec.europa.eu. Retrieved 2014-02-21. 
  46. ^ Leif Johan Eliasson, What is at stake in the Transatlantic Trade and Investment Partnership (TTIP)? Assessing challenges and possible compromises, Saarland University, 10 July 2014
  47. ^ TTIP and Culture, European Commission DG Trade, 16 July 2014
  48. ^ EU-US clash over financial services in TTIP, EurActiv, 15 May 2014
  49. ^ US Ambassador: Beyond growth, TTIP must happen for geostrategic reasons, EurActiv, 16 July 2014
  50. ^ "IP out of TAFTA". citizen.org. Retrieved 18 March 2013. 
  51. ^ Maira Sutton (18 March 2013). "Transatlantic Civil Society Declaration: Leave Copyright and Patent Provisions Out of TAFTA". EFF. Retrieved 18 March 2013. 
  52. ^ "Do not turn TAFTA into ACTA v2.0". ACTA Blog, FFII. 18 March 2013. Retrieved 18 March 2013. 
  53. ^ Quinn Norton (21 February 2012). "How the European Internet rose up against ACTA". Wired News. Retrieved 22 February 2012. 
  54. ^ Konttinen, Jussi (15 December 2013). "Professori: Suomen valta säätää lakeja voi vaarantua". Helsingin Sanomat (in Finnish) (Sanoma Oyj). Retrieved 16 December 2013. 
  55. ^ "Surviving the 21st Century" Durham University Channel on YouTube, 28 May 2014 from 27:30-27:50 he says:
    Major current huge trade agreements that are now being negotiated: Trans-Pacific and Trans-Atlantic, are secret, but not completely. They are not secret to hundreds of corporate lawyers and lobbysists who are rating the detailed regulations. You can guess what they are and why they are secret.
  56. ^ Gabriel greift TTIP-Kritiker an (05 May 2014) [2]
  57. ^ The Guardian (15 July 2013). The US-EU trade deal: Don't buy the hype Retrieved 24 August 2013.
  58. ^ European Commission (3 October 2013). "Factsheet on Investor-State Dispute Settlement". Retrieved 2014-02-21. 
  59. ^ Stangler, Cole (2013-12-30). "The Next Corporate-Friendly Trade Pact". In These Times. Retrieved 2014-02-21. 
  60. ^ "Letter". Action.sierraclub.org. Retrieved 2014-02-21. 
  61. ^ The Guardian (18 December 2013) You're wrong, George Monbiot – there is nothing secret about this EU trade deal Retrieved 2 February 2014.
  62. ^ Barrie Mckenna And Bertrand Marotte (2013-02-13). "Potential U.S.-EU free-trade union ‘puts the squeeze’ on Canada". Toronto: The Globe and Mail. Retrieved 2014-02-21. 
  63. ^ "Transatlantic alliance to cost Turkey ‘$20 billion’ - ECONOMICS". Hurriyetdailynews.com. 2011-09-13. Retrieved 2014-02-21. 
  64. ^ "The Transatlantic Trade and Investment Partnership: Ambitious but Achievable - A Stakeholder Survey and Three Scenarios". Atlantic Council, Bertelsmann Foundation. Retrieved 18 May 2014. 
  65. ^ "TTIP and the Fifty States: Jobs and Growth from Coast to Coast". Atlantic Council, Bertelmanns Foundation. Retrieved 18 May 2014. 

External links[edit]

Official sites[edit]

Discussion and analysis[edit]

Websites[edit]