TTIP tries to weather the mid-way squalls

Negotiators are trying hard to maintain momentum, but can they make a truly ambitious and comprehensive agreement?

Negotiators from the European Commission and the United States on Friday (18 July) completed another gruelling round of negotiations on
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the transatlantic trade and investment partnership (TTIP), the sixth so far.

Inside the European Commission’s meeting rooms and in a spillover facility, a specially hired conference hall near Châtelain, the two teams of 100-plus officials sat in opposing lines, poring over technical documents. It was granular stuff, what “some might consider mind-numbingly boring work”, as one official said. But for the US’s chief negotiator, Dan Mullaney, these are the “hard, detailed, fact-based negotiations” needed “[to lay] the foundations for a successful and job-creating agreement”.

That is just the start of each round’s work. On the EU side, the Commission within days draws up a report, of around 60 pages, for the EU’s member states and the European Parliament. The member states then pore over issues, topic by topic, twice a week; and the Parliament’s committees inject their comments. This is the grinding technical work that cumulatively helps to give trade talks an ingredient that officials say is always vital: momentum.
Momentum is particularly crucial now, 12 months into negotiations, as there is concern that institutional changes in the EU – a newly installed European Parliament and a new European Commission pending – plus the prospect of mid-term elections in the US, could sap energy.

Negotiators, though, have more to worry about than momentum: they need to maintain the original ambition. At the start, both the EU and the US stressed the economic and geopolitical importance of a deal. They attached big figures (the benefits for the EU could amount to €119 billion per year) and suggested the deal could set the benchmark for other trade deals. It was crucial, negotiators said, that nothing had been taken off the table (and they struggled hard to ensure that a French concern – about an audio-visual chapter – remained nominally up for debate at a later stage).

It has proved difficult to manage the expectations created by such ambitions. Negotiators say they never liked the notion of the TTIP as an ‘economic NATO’. The Commission has spent months on the back foot, dealing with many specific ‘myths’ about the TTIP, organising an additional consultation (on how to settle disputes between corporations and governments), and countering perceptions that the whole system of EU regulation is under debate. The notion that nothing should be ‘off the table’ has not eased that challenge. In any case, it swiftly became apparent that important areas of business were
indeed off the table, such as financial-services regulation and US rules on services in ports.

The declarations that TTIP could set the agenda for future trade deals worldwide also encouraged a view that these would be trade talks like no other. European diplomats suggested that friendly talks between similar economies anxious to inject momentum into a deal of unprecedented scale could translate into an “early harvest” of agreements. In reality, the TTIP talks have become much like any other negotiation, abiding by the traditional mantra that ‘nothing is agreed until everything is agreed’.

The belief that a template for future deals might emerge has been undermined by US resistance to including separate chapters on sectors of systemic importance, such as financial services and energy, and the European public’s concern about how to resolve challenges to European states by corporations from the US, a traditionally more litigious culture.

If TTIP has become rather like any other trade negotiation, that is perhaps because it is vying for US attention with the 12-country Trans-Pacific Partnership (TPP), an agreement that has long seemed close to conclusion. The chief of US trade, Michael Froman, acknowledges that TPP is his current focus. If you have two children who want to go to college, you focus on the older child. The same logic suggests TTIP may get more attention in the future, as the TTIP talks moves into their second half. But will that extra attention make the deal more or less ambitious and comprehensive than it is now?

The stakeholders

Business and workers
European trade unions have traditionally supported trade deals. Trade liberalisation was seen as a way to import growth, and therefore create jobs – but also as a way to export labour standards to poorer countries. The United States, though, is a very different partner: as Markus Beyrer, director-general of the business lobby BusinessEurope, puts it, TTIP is an agreement between “equals who are normally able to impose their wills”. While business is almost unequivocally for the deal (if not always vocal), trade unions have been guarded.  

The European Trade Union Confederation has struck a positive note, arguing that TTIP could have “positive impacts on jobs and investment flows”, provided some of its demands are met.

Concern about the impact on public services has, however, animated trade unions in some countries, with the result that the European Commission has had to try to douse German fears that water utilities could be privatised and British trade unionists’ concerns about the impact on the health service. For the most part, though, national trade unions have refrained from campaigning in either direction. TTIP’s negotiators will hope that more will follow the example of Denmark’s unions, which have united with business to voice their support.

Consumers
A two-year-old ghost stalks the TTIP talks. In 2012, online campaigners persuaded the European Parliament to reject the Anti-Counterfeiting Trade Agreement (ACTA) that had already been partially approved by the EU’s member states; the fear now is that campaigning groups, however small, could scupper TTIP. The European Commission’s response has been to push member states to accept more transparency, arguing that its negotiating mandate should be made public. But member states are worried that this might set an unwelcome precedent. There are also doubts about transparency as a medicine. As one diplomat says: “During ACTA, the Commission thought that publication would help, but it didn’t.”

Nonetheless, Karel De Gucht, the European commissioner for trade, sees TTIP as an “opportunity to set new standards in trade negotiations’ transparency”. The Commission has broken new ground by starting an additional public consultation on investor-state disputes in response to its prominence in early public debate. This will soak up institutional resources – the Commission is now wading through more than 100,000 responses – but may ease political battles later, it hopes. The same hope applies to the stakeholder meetings held during each round, which are growing to the point that negotiators joke they may eventually need to rent a stadium.

Questions for negotiators

What markets to create?
Trade deals normally lower or remove tariffs and quotas – and TTIP will be no exception. Already, negotiators have exchanged offers. This will not be an easy area. To the European Commission’s dismay, echoes of old transatlantic trade battles – about American chlorinated chicken and hormone-enhanced beef – are echoing around the public arena, despite the Commission’s endless assurances that EU legislation will not be changed. The disputes over tariffs and quotas – plus the EU’s usual battle to secure the rights to the names of geographically specific agricultural products (such as Parmesan cheese) – are, however, of relatively minor financial importance, since virtually all residual tariffs and quotas have already been removed. The real benefits lie in
creating or extending markets by lowering ‘behind-the-border’ – regulatory – barriers in the areas of services and public contracts. Ignacio Garcia Bercero, the EU’s chief negotiator, says that, on public procurement, the EU is aiming “for a level of ambition that is at the level of tariffs”. That is a tough challenge – it would require changes to regulations by US states and the federal government (including ‘Buy American’ rules) – but it is an area where the EU is likely to fight particularly strongly.

What to risk?
For businesses, regulation can easily seem to be red tape. For consumers, regulation is often seen as a protection against the risks posed by untrammelled business. Part of the difficulty for TTIP negotiators is that their efforts to cut red tape are being interpreted as willingness to expose consumers to more risk.

Despite assurances that EU law – on, for example, food safety or genetically modified foods – cannot be changed and that EU law’s precautionary principle (when the science is uncertain, err on the side of caution) cannot be undermined, risk has become one of the defining issues in European public debate about TTIP. The objective definition of risk is simple: risk is the probability times the consequences. But the subjective perception of risk is very different. “People focus on the consequences, not on the probability,” as Charles Yoe of Notre Dame of Maryland University says. The public-relations challenge for negotiators is to prevent public debate becoming dominated by emotive appeals and old clashes – such as over GMs – that are not being discussed. In the negotiating rooms, the principal initial challenge is to satisfy the regulators in the negotiating teams that both sides are, through the different processes, seeking and achieving the same level of risk control. Where they feel they can rely on each other’s control of risks, ‘mutual recognition’ – acceptance – is becoming the main means of addressing regulatory differences.

What to streamline?
What happens when differences either in risk assessment or in risk-management processes are so great that the sides cannot recognise each others’ systems or outcomes? In areas such as chemicals, when levels of protection are not seen as basically the same, producers will not find that TTIP creates a (near-)single market. EU approval will not be a passport to approval in the US. In such areas, negotiators’ focus is not on the regulatory process but on ways to make the bureaucratic process faster – and, therefore, cheaper. Differences in other areas are smaller, but, in sector after sector, there is a belief that efforts to streamline bureau-cratic processes will produce big gains. Small and medium-sized enterprises (SMEs) could in particular benefit, negotiators believe. Sietske de Groot of the UK’s Federation of Small Businesses goes so far as to say that this is the “the first time in history that we have a trade agreement that is about small businesses”. The importance that negotiators attach to small businesses has led them to devote a special ‘chapter’ in TTIP’s emerging draft text to SMEs.

What to add?
While TTIP’s negotiators have given SMEs their own chapter, they have struggled to agree on adding other chapters. In particular, the US has so far rejected EU calls to include financial services in the talks or to create a specific chapter dedicated to energy. The EU argues that TTIP needs to create a means for a structured debate between regulators on both sides of the Atlantic. On energy, Anthony Luzzatto Gardner, the US’s ambassador to the EU, says that “we are not exactly sure what the EU ask in this area is”, arguing that, whenever the US signs a free-trade agreement, the other side – the EU in this case – gains “quasi-automatic approval” for the import of US liquefied natural gas (LNG). But while the crisis in Ukraine has ensured that access to LNG has dominated headlines about TTIP and energy, the EU’s desire for a chapter stretches well beyond LNG. The deal will touch on other energy issues – both sides say that – but the EU believes there are issues (such as transport) that are specific to energy and therefore demand a dedicated energy chapter. There is, though, also a trade-strategy question: if TTIP is to set a standard and benchmark for trade deals globally, can it really view energy as a second-order issue? In the energy area at least, TTIP is currently less ambitious and comprehensive than the ‘deep and comprehensive free-trade agreement’ that the EU and Ukraine signed in June.