EU-US trade talks still have some distance to travel
Europe wants a trade deal wrapped up by the end of 2014 but US politics may delay any potential pact
Making waves: the EU and US appear keen on reducing trade barriers, such as tariffs, but any trade deal is still a long way off. Photograph: Tim Rue/Bloomberg
Negotiators from the European Union and the United States are meeting in Washington this week for the latest round of negotiations on an economic pact known as the Transatlantic Trade and Investment Partnership (TTIP).
Scores of officials from both sides of the Atlantic are coming together for the third time since July to try to identify further ways of harmonising trade policy between the world’s largest economies, with a view to making it easier to do business with each other.
Both parties appear keen on reducing trade barriers such as tariffs; aligning product standards and regulations; and opening up both markets to greater levels of interaction in the areas of services, investment and public procurement.
Leaders are conscious, however, that previous efforts to forge such policies have failed to deliver.
Should a comprehensive deal be reached, which is far from certain and likely to take years, it would be expected to provide a shot in the arm for the EU and US economies without further straining tight public purses.
The progress of the talks to date has read more like the script of a convoluted espionage film than that of a trade negotiation.
There have been allegations of spying against the US, external fears over the inclusion of a behind closed doors dispute settlement mechanism, concern that GMO and hormone laden foods may be unleashed in Europe, and, of course, the promise of significant riches at the end.
Of the talks, US president Barack Obama said it was “important that we get it right. And that means resisting the temptation to downsize our ambitions or avoid tough issues just for the sake of getting a deal.”
A report by the London Centre for Economic Policy Research, cited by the European Commission, suggests getting it right on an “ambitious agreement” could increase EU GDP by 0.5 per cent, or €120 billion, annually. It sees a deal as benefitting the US economy to the tune of €90 billion per year and third party economies by a further €100 billion.
The European trade commissioner, Belgium’s Karel De Gucht, last month told reporters such an agreement between the parties, which already engage in daily trade valued at €2 billion, could represent the “next step in globalisation”.
In the first instance, TTIP would seek to reduce tariffs on products entering and departing the EU and US, which amount to hundreds of millions of euro annually. But what negotiators appear even more eager to find common ground on is tackling barriers beyond the customs line, such as differences in technical standards and regulations.
At present, a car deemed roadworthy in the EU will have to undergo a separate test if entering the US even though safety standards are broadly similar. Negotiators hope TTIP can eliminate the need for dual testing and make trade more economical.
Some of those looking in on the talks fear regulatory harmony could lead to a race to the bottom, with groups such as the Seattle to Brussels Network and the Corporate Europe Observatory stating the deal could allow major EU and US firms to join forces and remove as many labour, health and environmental standards as possible.
There are fears that standardising rules in areas such as agriculture could open the EU market to products made in the US featuring genetically modified organisms (GMOs) or to beef products that have been treated with hormones.
“Tough EU laws, like those relating to hormones, or those which are there to protect human life and health, animal health and welfare, or environment and consumer interests will not be part of the negotiations,” the commission insists.
Another area which has proved sensitive for those looking in is the notion of Investor State Dispute Settlement (ISDS), which allows an investor to bring a case before an arbitration panel directly against the country in which they have invested for breaching elements of a trade agreement.
The most commonly cited ISDS case involves tobacco firm Philip Morris and Australia, in which the company has used the mechanism in a bilateral treaty between Australia and Hong Kong to challenge Australia’s plain tobacco packaging regulations. Philip Morris deems these to be damaging the value of its investment in Australia, and, if proven to be the case, the company would likely receive significant compensation.
In a position paper on ISDS, the commission says ISDS is “an important tool for protecting investments and therefore for promoting and securing economic growth in the EU”, and De Gucht says it would be “a mistake” not to have it in TTIP, as otherwise an EU company would not have a stance in an American court.
De Gucht says he wants the ISDS process to be as transparent as possible and for decision-makers on arbitration panels to follow a code of conduct so as to avoid potential conflicts of interest.
However, campaign group Friends of the Earth Europe says the inclusion of ISDS in TTIP could “act as a significant regulatory deterrent or obstacle discouraging states that would otherwise have been keen on introducing regulations that prioritise the interests of people and the environment over foreign investors’ rights.”
Another issue that threatened to derail the TTIP process was reported spying by the US National Security Authority on EU officials. The revelation prompted European Parliament president Martin Schulz to say the trade talks should be suspended.
Trade sources in Brussels insist there was no concrete proof of spying on the process but that it had been made clear such activity was not acceptable. “It’s not by leaving a room that you solve a problem,” said one source.
After this week’s talks, the process will move on to the drafting of an agreement. When De Gucht and his US counterpart Michael Froman sit down to take stock of where the process stands early next year a clearer impression of the challenges should emerge.
De Gucht said a deal could be done by the end of 2014 if Europe finds itself with something to ratify but that the absence of a fast-track system in US politics meant it was likely to be a longer process even if common ground is identified.
Asked what an acceptable timeframe for the negotiations was, one EU source said it would be pointless to guess as trade negotiations “have a concept of time like no other area”.
“If you show strong willingness to finish the other side can use it as leverage to get what they want.”
When progress was made on TTIP during Ireland’s EU presidency, Taoiseach Enda Kenny said “we would see several thousand jobs for Ireland at the end of this”.
For now, at least, that end remains some distance away.