The European Trade Agreement, TTIP, Is Also Struggling

Above Photo: From ttip2016.eu.

Ding, Ding! Round 12 of TTIP Negotiations

The EU and US step back into the ring on Monday- but all bets are off on whether either side can deliver in 2016.

US negotiators arrive in Brussels on Monday to begin the 1st round of TTIP talks this year, or the 12th since the talks began in 2013. Despite two and half years of negotiations, many controversial issues were put on the long finger up to this point, which now leaves negotiators in a tight spot; can they seal a deal by the end of the Obama administration, when thorny issues like investor rights, agricultural market access, regulatory cooperation, remain unresolved?

Big issues for Round 12

1. Showdown on Investor Protection

Early public outcry over ISDS investor-protection in 2013 led the Commission to launch a new proposal to update the reviled mechanism last autumn. The ‘Investor Court System’- or ICS– would see some procedural changes to ISDS, including an appeals mechanism, a set of publicly appointed arbitrators, greater transparency, and of course, a new acronym.

But it has been met with huge criticism from all sides, not least from US negotiators. They don’t see the need to change ISDS, and prefer to stick to the model they’ve used in the past. This stance is based primarily on the fact that, according to US Trade Representative Michael Froman, “there have been very few cases against the US, and to date, the government has never lost.”

The fact that the USA has never lost a case is more of an indictment of how unjust the system is, rather than how marvellous- a point backed up by UN lawyers, German judges, and showcased by the hundreds of cases against developing countries taken by the US and Europe.

However- the 12th round is expected to be the first time the US will formally react to the ICS proposal, despite it being publicly available for several months. That doesn’t mean that they are likely to agree on anything. Already the EU side has downplayed the chances of the 12th round delivering anything significant on ICS/ISDS.

2. A peculiar procurement predicament

A key strategic interest of EU negotiators is to get the US to agree to open up procurement at sub-federal level in the US. In practice that means European companies would be able to bid for state government tenders on the same grounds as US companies. While in principle this sounds fair, it has been received coolly by the US side, who don’t have much authority to demand that US states change their public procurement requirements. It could also undo entirely the popular “Buy America” Act, that supports local job creation and favours home-grown enterprise. When a French minister suggested renaming Buy America to “Buy Transatlantic” in 2013, it was met with collective grimaces from the American side.

To sweeten the deal, the Commission has asked European governments to cough up procurement offers for national and EU agencies to give the Americans, in the hope that they would reciprocate. But there’s a problem. European governments are reluctantly doing so without any access to what the US side are giving, due to the prohibition on access to US documents, leading to a lot of frustration. Effectively, they’re going in blind, making offers without knowing what they’re getting in return.

Yet, without some deal on public procurement, it is unlikely TTIP will be worth the effort for the Europeans. Offers are likely to be exchanged next week, but once again the Commission has tried to temper member state expectations, with no real negotiations on procurement envisioned until after the 12th round.

3. Regulatory Cooperation- reuse, reduce, recycle

Disquiet amongst European governments over the scope of a proposal to setup a bureaucracy in TTIP to reign in regulatory divergences, has led to recent downsizing of the regulatory cooperation plans. Originally conceived as a new over-arching institution that would screen would-be troublesome laws before they were even brought to national parliaments, the plans have (thankfully) been somewhat reduced.

That’s not to say that it doesn’t remain one of the most threatening aspects of the TTIP deal. Through regulatory cooperation, the US are pushing American-style changes to how laws and implementation rules are made in the EU. The Juncker Commission’s own “Better Regulation” package has allowed EU negotiators to claim that many of the requested changes have already been addressed- throughburdening the passage of any progressive regulation with more impact assessments, cost-benefit analyses, and US-style notice and comment periods for business lobbies to water-down proposed laws and rules.

It now appears that the EU are recycling aspects of the original plan into two new chapters, which layout how to streamline laws and rules on both sides, and what instruments to use to do this. The US will also make its first offer on what it considers important regulatory cooperation principles. But it seems there is no formal agreement on how best to institutionalise any of these elements as it stands, and both sides are at odds with where the emphasis should be. This is despite the claim that regulatory cooperation will reap the biggest benefits for business in a finalised deal.

4. ‘TTIP-lite’ re-emerges from the dark

White House Press Secretary Josh Earnest got in a spot of bother last week for saying “I do not believe that we’re going to reach a TTIP agreement before the President leaves office…” which raised many a European eyebrow.

EU Agriculture Commissioner Phil Hogan responded by saying the United States needs to “step up to the plate” and ruled out any acceptance of a ‘TTIP-lite’ agreement, “which would be just market access and trade regulation issues.”

But US Trade Rep Froman has also hit back, saying the EU must step up to the plate as well, claiming that “we need political will on both sides to step up the pace and bring a pragmatic, problem-solving approach to the negotiations.”

The fact that ‘TTIP-lite’ has made its way back on the agenda is not by accident. Although the idea was quickly quashed by the majority of European governments when first floated by the Italian presidency in 2014, it could still be the perfect get-out card. Now that Obama faces his final year in office, the US side may be willing to dispense with some of the more controversial elements in order to come to a political agreement on TTIP before a new president is sworn in next January. That EU officials are in a flap and suddenly making noises about TTIP-lite, may indicate just that.

And although European governments still maintain their support for a bells-and-whistles comprehensive deal- German and French elections in 2017 are fast approaching, and neither want TTIP to cloud re-election chances.

The 12th round marks the start of an intensified period for the talks. 2016 will tell us who will leave the ring with a bloody nose, or if we need to go another 12 rounds. Speaking of a bloody nose, the US Senate recently deliberated on allowing the administration to end a 2009 memorandum of understanding on the import of hormone-free beef to Europe, which ended decades of retaliatory tariff measures on European products. Ending this deal would allow the US to push up tariff rates on everything from French cheese to Italian salami. If that isn’t an athlete gearing up to take down an opponent with a secret weapon, then what is?

The 12th Round of TTIP talks runs from February 22-26.