EU, US Officials Renew T-TIP Push Ahead of Fifth Negotiating Round
Top officials from the US and EU have continued to make a strong public push in favour of their planned bilateral trade pact, highlighting the critical nature of such a deal for advancing global trade rule-making and for lowering the EU’s dependence on Russian energy. The political support comes ahead of the fifth round of formal trade negotiations, which is scheduled to take place in the US city of Arlington, Virginia from 19-23 May.
Earlier this week, US Trade Representative Michael Froman and EU Trade Commissioner Karel De Gucht held a series of meetings in Berlin on the proposed agreement – known formally as the Trans-Atlantic Trade and Investment Partnership, or T-TIP – which included participation in a public forum hosted by the German Federal Ministry for Economic Affairs and Energy.
The two officials sought to assuage concerns from the public that the deal could lead to the watering down of regulatory norms, given the negotiation’s focus on harmonising regulations and standards where possible. They also highlighted its potential gains for both sides and the world economy as a whole.
Their meeting came just days after German Chancellor Angela Merkel met with her American counterpart, US President Barack Obama, in Washington, where the two leaders publicly reaffirmed their commitment to the “mega-regional” pact.
The two sides already exchanged their initial tariff offers earlier this year, with revised ones expected shortly. While tariffs on both sides are already low – at approximately 5.2 percent on the EU’s part and 3.5 percent for the US – the high volume of goods traded between them means that any tariff reductions are expected to generate significant gains. (See Bridges Weekly, 20 March 2014)
At the time of the previous offer submission, the EU criticised the US offer as not being sufficiently ambitious, urging Washington to go further in its next version. The US, meanwhile, has said that it does indeed intend to pursue full tariff elimination in the deal.
“When we launched these negotiations, we agreed that the goal was the full elimination of tariffs – on industrial products and on agricultural products,” Froman said in Berlin on Monday. “We remain committed to that goal today.”
For the EU’s part, De Gucht stressed that the 28-nation bloc wishes “to eliminate as many tariffs as possible,” while also highlighting the importance of improved market access in services and public procurement in order to boost growth and jobs.
The US is currently in the process of preparing its services offer, which Froman confirmed would be based on a negative list approach; in other words, all services sectors except those explicitly excluded will be covered in Washington’s offer.
The US trade official said that he hopes the EU to demonstrate “the same level of ambition” in this area.
Investor-state dispute settlement
Another thorny topic in the trade talks remains the subject of investor protections, including investor-state dispute settlement (ISDS), which essentially allows foreign companies to bring claims against a host company in front of an international tribunal, if it finds that one of its key protections has been violated.
Detractors have warned against including ISDS provisions in the pact, fearing that doing so could allow foreign companies to challenge hard-won public policies, such as those involving public health and the environment. Proponents, however, note that these protections can also ensure that a company’s investments are safe abroad – thus increasing investor confidence in the business climate – while preventing companies from exploiting loopholes in domestic laws.
In light of the controversy on the subject, the EU launched a public consultation in March on the investment part of the talks, which is currently ongoing. Meanwhile, the EU has continued to highlight the importance of including ISDS in the pact – despite reports that some member states, such as Germany, may be less certain. The US, for its part, has made clear that this provision is essential. (See Bridges Weekly, 3 April 2014)
“We both have strong rule of law. We have strong legal traditions against discrimination against foreign investors,” Froman acknowledged on Monday, noting that the ISDS concept was actually invented in Europe and is used there more than anywhere else.
“But many of the other countries don’t,” he continued, noting that the US hopes that “investment protection will be one of several areas in which T-TIP is able to set a new global standard.”
However, Sigmar Gabriel, who hosted Monday’s event and is Germany’s Federal Minister for Economic Affairs and Energy, took a different tone on the ISDS subject.
“I believe our [legal] systems offer enough protection,” he said. “I don’t believe we need a special investment tribunal for this and the experience… is very double-edged. I think there’s rightly a lot of reservations,” he added, while welcoming the EU public consultations on ISDS.
Changing global landscape
The US Trade Representative was in Berlin on Monday for a series of meetings with high-level officials on the trans-Atlantic pact, before heading to Paris for the Ministerial Council meeting of the Organisation for Economic Co-operation and Development (OECD) and a WTO “mini-ministerial” being hosted by Australia.
The WTO mini-ministerial focused primarily on the Doha Round of trade talks, given that the global trade body’s members are in the process of preparing a work programme aimed at resolving the stalled negotiations. Last year’s WTO agreement in Bali on trade facilitation and a few other elements was the first concrete deliverable from the multilateral talks since they were launched in 2001.
While trade officials have continued to reiterate the value of finalising the WTO negotiations, many countries have in recent years been pursuing their own regional and bilateral initiatives in parallel, such as T-TIP, in the hopes of making advances in areas where the global trade talks have not.
Furthermore, proponents of these initiatives say, advances in these areas could help spur rule-making at the global level.
“The World Trade Organization already provides many of the rules we need. But there are gaps,” De Gucht said on Monday, citing the treatment of state-owned enterprises, energy, and raw materials exports as just a few examples.
“Good multilateral rules on these kind of issues take a lot of time to achieve, if at all, because they are complicated,” he noted. “Working bilaterally within the T-TIP to begin with is therefore much easier than working with the 159 members of the WTO. And if the agreement covers 40 percent of the world economy, [then] that will be a basis for future work with more partners.”
The rise of new powers around the world – and the resulting change in balance of the global economy – is yet another reason for the two partners to consolidate their relationship, the EU trade chief said.
“Both the EU and the US will have less weight in the future than we do today,” De Gucht warned. “So if we still want to champion the values that we share – an open rules-based trading system or global rules based on high standards of health, the environment, labour, and consumer protection – then we better work together.”
The ongoing crisis in Ukraine – and the resulting fall-out that the EU, US, and various other Western powers have experienced with Russia – is yet one more reason for strengthening the EU-US relationship, officials have stressed in recent weeks.
“[T-TIP is] about establishing an economic relationship commensurate with the strongest alliance on earth,” Froman said on Monday. “As I’m sure I don’t have to remind people in light of recent events, the economic and strategic imperative of T-TIP has never been stronger.”
US President Barack Obama has publicly said that the deal could help reduce the dependence that some EU member states have on Russian energy products, such as by making it easier for the US to approve licenses to export gas to Europe.
Currently, six of the EU’s members rely entirely on Russia for gas supplies, making it difficult for the bloc to pursue hard-hitting sanctions on Moscow for fear of retaliation.
German Chancellor Angela Merkel told reporters in Washington last Friday that the EU is discussing a series of short- and long-term measures to improve reverse flow and the grade of its pipelines, and thus limit the bloc’s reliance on Russian energy. “The free trade agreement, T-TIP, is also gaining more prominence in this respect,” she said.