European Commission Proposes Future Trade, Investment Strategy

15 October 2015

The European Commission debuted its highly-anticipated proposal for a future trade and investment strategy on Wednesday, outlining a series of steps aimed at building or deepening the 28-nation bloc’s web of trade relationships, as well as plans to address the ongoing public debate over trade.

“We’ve listened to the debate,” said EU Trade Commissioner Cecilia Malmström in a press statement, adding that the document tries to strike a balance between the need for jobs, growth, and investment and concerns over ensuring core principles, such as human rights and sustainable development, are upheld.

“Trade policy must become more effective, more transparent, and more in tune with our values. In short, it must become more responsible. That’s what we’re doing today,” the EU trade chief said.

The news comes after months of consultations with EU member states, parliamentarians, and various trade stakeholders on the subject.

The 40-page document, dubbed “Trade for All,” presents trade as an essential driver of the European economy, one that was key in limiting the ramifications of the global economic recession. Looking to the future, the EU executive argues that trade still has a key role to play in shoring up any recovery in the long-term.

“Approximately 90 percent of global economic growth in the next 10 to 15 years is expected to be generated outside Europe. Economic recovery will need to be consolidated through stronger links with the new centres of global growth,” the report says.

Going forward, the bloc’s trade and investment policy must be in line with a specific set of “values,” the Commission said. This includes greater focus on sustainable development measures, as well as those geared towards ensuring the protection of human rights and fair trade; clarifying the bloc’s commitment to safeguarding regulatory protection and reforming investment policy; and negotiating anti-corruption rules in upcoming trade deals.

TTIP, CETA

The Transatlantic Trade and Investment Partnership (TTIP) currently being negotiated with the US has captivated public attention in the two years since the talks began, amid persistent questions from some stakeholders over what the talks could mean for domestic policy priorities in other areas.

The debate has been particularly pronounced on the EU side of the Atlantic. Participants in an anti-TTIP protest held in Berlin just days ago numbered in the hundreds of thousands, with demonstrators citing concerns over consumer and worker rights, among others.

In light of the controversy, the Commission has taken steps over the last several months to increase the transparency surrounding the deal, publishing all EU negotiating proposals online as well as position papers, the EU executive’s mandate, and factsheets. (See Bridges Weekly, 16 October 2014)

The “Trade for All” report proposes that the transparency provisions that have been applied to TTIP be extended to all other EU trade talks. Furthermore, the Commission would like to publish the text of trade deals as soon as these are completed, given the delay seen otherwise in the legal review process, and ask that the Council publish its negotiating directives for new trade deals as soon as such directives are adopted.

Regarding the content of the TTIP talks themselves, which are undergoing their eleventh round in Miami, Florida, the report also indicated a series of areas where it would like to see results.

“TTIP is the most ambitious and strategic trade negotiation that the EU has ever undertaken,” the Commission said.

On the EU side, such a package should therefore include an “ambitious and balanced” package in market access, along the lines of what Brussels reached in its negotiations with Ottawa; a new regulatory cooperation approach that also respects domestic levels of protection and autonomy; and updates in trade rules, including in sustainable development.

The Commission says it also plans to submit the EU trade agreement with Canada – known also as the Comprehensive Economic and Trade Agreement (CETA) – to both the Council and the European Parliament “for approval as early as possible in 2016.”

The EU-Canada trade negotiations, also controversial for both participants, were completed in August 2014, with the two sides having reached an agreement in principle in October of the year before. (See Bridges Weekly, 24 October 2013)

Investment

The report also features a section on “promoting a new approach to investment,” another area that has drawn significant public scrutiny, particularly in the context of the both the EU-Canada and TTIP negotiations.

Just last month, the Commission released its draft proposal on a possible “investment court” and appellate mechanism, which the EU executive argues could replace the controversial investor-state dispute settlement (ISDS) mechanism. (See Bridges Weekly, 17 September 2015)

The initial model, officials explained at the time, could be in the context of the TTIP talks. The 28-nation bloc would also aim to work with other “like-minded” countries on developing a permanent, international version of such a court system.

The “Trade for All” report builds on this idea, with the Commission suggesting to begin by including in bilateral deals “modern provisions” that make clearer the right of domestic governments to regulate.

“EU bilateral agreements will begin the transformation of the old investor-state dispute settlement into a public Investment Court System composed of a Tribunal of First Instance and an Appeal Tribunal, operating like traditional courts,” the report says.

The EU executive also acknowledges that there is a need for reform, citing reports by the UN Conference on Trade and Development (UNCTAD) on the subject, and stressing the bloc’s responsibility in taking the lead in this area, given its role as “founder and main actor” of the current international investment regime.

How this proposal for a TTIP-specific court – a formal version of which will still need to be submitted to the US in the negotiations – will be received by Washington is an open question. The issue of ISDS was also prominent in the US’ negotiations with 11 other countries for a Trans-Pacific Partnership (TPP) Agreement, which just concluded last week. (See Bridges Weekly, 8 October 2015)

Though the final text of the TPP is not yet public, trade watchers will be looking to see how the ISDS and other features of this comprehensive new deal are structured, and how these compare with those being negotiated in other major forums.

New trade negotiations on the horizon?

The EU’s bilateral and regional trade agenda has grown in prominence in recent years, as the bloc conducts a range of negotiations with both individual countries and with regional groups.

The “Trade for All” report reviews all of the regions where the EU either has trade deals or aims to begin them, giving some indications of new agreements that the bloc aims to pursue or existing ones that it would like to update.

In the Asia-Pacific region, the Commission cites the current talks between the EU and China for a bilateral investment agreement as a “top priority” toward “deepening and rebalancing” the 28-nation bloc’s relationship with Beijing. Those talks were launched just under two years ago. (See Bridges Weekly, 24 October 2013)

However, the report stopped short of recommending the negotiation of a trade deal between the two economic juggernauts.

“China has suggested further deepening the relationship through an FTA, but the EU will only be ready to engage in such a process once the right conditions are met,” the report says, suggesting that these are tied to the implementation of domestic economic reforms in Beijing.

The EU is China’s largest trading partner, while the Asian economy is second only to the US in terms of overall trade with the European Union.

The Commission also plans to request a mandate from the European Council to launch trade negotiations with both Australia and New Zealand, while “taking into account EU agricultural sensitivities.”

Launching trade negotiations with two more members of the Association of Southeast Asian Nations (ASEAN) is another idea being floated by the Commission, specifically with regards to the Philippines and Indonesia.

Notably, the document does not make specific reference to rebooting region-to-region talks between the EU and ASEAN, despite earlier indications this year that the two sides were considering doing so. (See Bridges Weekly, 7 May 2015)

Of the other members of ASEAN, the EU concluded a trade and investment deal with Singapore last year, which now must undergo ratification processes, and an agreement in principle with Vietnam in August. While talks have already been launched with Malaysia and Thailand, these have advanced little in recent years.

Trade deal updates, advances

Over the past several months, the Commission has already indicated an interest in updating some existing trade deals it has with certain countries, given changing economic realities and other new trade agreements that have emerged.

Back in June, leaders from both the EU and Mexico confirmed that they would be launching negotiations this year in order to revise their 15-year-old “Global Agreement,” two years after leaders decided to explore the option of doing so. (See Bridges Weekly, 18 June 2015)

Another possible renegotiation could be the EU’s trade deal with South Korea, which entered into force in 2011. Investment protection was not covered in the agreement with Seoul, given that at the time this did not fall under the exclusive competence of the EU. (See Bridges Weekly, 6 July 2011)

Both this and any implementation issues under the existing FTA could be addressed in an updated version of the trade pact, the report said.

The document also calls for reaching an “ambitious outcome” in trade talks with India, which were launched in 2007 and have since struggled to advance in recent years. The value of EU-India trade last year hit €72.5 billion, according to Commission estimates.

Concluding trade talks with Japan is another “strategic priority” for the Commission, with the Asian archipelago being the EU’s second largest trading partner in Asia after China. The thirteenth round of trade talks between Tokyo and Brussels is scheduled for this month.

WTO negotiations

Pursuing bilateral and regional trade deals, the report says, can be a way of “returning the WTO to the central of global trade negotiating activity,” given the prolonged stalemate in the multilateral Doha Round trade talks.

With just two months to go before the global trade body’s next ministerial conference in Nairobi, Kenya, the report says that the WTO “needs to turn the page on the [Doha Round],” arguing that the 2008 parameters from when the organisation was last close to reaching a deal “did not work.”

“Developments since then make it even clearer that it will not be possible to conclude on that basis. WTO members should acknowledge the need for significant recalibration,” the Commission document says, affirming the stance that the EU has taken in the global trade talks in Geneva over the past several months.

The document then goes on to outline the EU’s post-Nairobi stance for the WTO, namely by three main principles. These involve ensuring that the organisation has a central role in global trade rulemaking and enforcement; taking a “more focused approach” in getting results; and for the EU to propose more plurilateral deals among groups of WTO members on specific topics.

“Implementing these three principles would be in the interests of all WTO members – and, in particular, the smallest and poorest,” the report says, also noting that the organisation’s membership must still address what were the reasons behind the current Doha Round stalemate.

The European Commission also calls for “rebalancing the relative contribution of developed countries and emerging economies to the system,” while acknowledging that that this is a particularly thorny issue politically.

Next steps

While some of the items proposed in the “Trade for All” document can advance quickly, the Commission will have to prepare proposals on others that will then have to face EU decision-making processes.

Coming up on the agenda is a meeting between Malmström and the European Parliament’s International Trade Committee today, followed by a meeting of the Foreign Affairs Council on 27 November. Discussions are also planned with civil society, the Commission confirmed.

ICTSD reporting; “Berlin protest against TTIP trade deal draws thousands,” BBC, 11 October 2015.

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