TTIP Negotiators Reiterate 2016 Goal, While Noting Market Access Gaps
US and EU officials reaffirmed last week that they still aim to clinch a bilateral trade and investment pact this year, while acknowledging that much work remains in areas such as market access following the latest round of negotiations in Brussels, Belgium.
The Transatlantic Trade and Investment Partnership (TTIP) negotiations have been underway for three years, having been launched in July 2013. Including last week’s meetings in Brussels, the two sides have held 14 formal negotiating rounds to date, along with ministerial-level stocktakings and intersessional discussions. (See Bridges Weekly, 4 July 2016)
Over that time, the geopolitical context has evolved significantly, as has the domestic political climate on trade. The US is now in the middle of an election year, which will see a new president installed in the White House in January. Meanwhile, the EU is facing its own challenges in light of the recent “Brexit” vote in the UK, as well as heavy public scrutiny of trade deals within a larger debate on the merits of globalisation. (See Bridges Weekly, 7 July 2016)
Chief negotiators from both sides referred to these dynamics in their closing press conference on Friday, particularly the “Brexit” situation, while stating that these challenges are indeed a reaffirmation of the need for an ambitious, comprehensive bilateral accord.
“We know this is a challenging year for Europe, in the midst of several challenging years. Brexit affects anew the calculations of everyone, but we are convinced that the strategic and economic rationale for TTIP remains strong,” said US chief negotiator Dan Mullaney.
EU chief negotiator Ignacio García Bercero similarly affirmed that the Brexit vote “in no way would delay the TTIP negotiations” nor harm the determination behind them.
TTIP light “not an option”
The two officials confirmed on Friday that some key elements of what a final TTIP will look like are beginning to become clearer, even with much work remaining. For example, they indicated that the deal will have approximately 30 chapters in total, with negotiators now working off of “consolidated texts” in many chapters.
The efforts at consolidating these texts further will continue throughout the summer, they added. Examples of areas under the overall heading of “regulatory cooperation” where the two sides are now using consolidated texts are technical barriers to trade (TBT) and sanitary and phytosanitary measures (SPS), among others.
Responding to questions on whether the pace of the talks could mean that they miss their 2016 target for completing the deal, both officials said that they have the support of their respective leaders to keep pressing for an outcome this year. They qualified that statement, however, by insisting that meeting this goal would not come at the expense of the substance, and that a “TTIP-light” is not an option they would consider.
Should they be unable to conclude TTIP in 2016, the US and EU would aim to reach a deal within a “reasonable timeframe,” said García Bercero.
Concurring with his European counterpart, Mullaney said that while 2016 remains the “prime objective,” the impending political transitions over the coming years both in the US and in some EU member states could mean that it would be “quite a while before you pick up the negotiations again.”
The TTIP talks are divided into three overarching areas: market access, regulatory cooperation, and rules on certain trade topics. Within market access, those talks address goods, services, and public procurement.
On goods, the US and EU have already exchanged two offers to date, and confirmed after the second exchange that their respective market access offers each covered 97 percent of tariff lines. Officials lauded the achievement at the time as a significant milestone in the negotiations. (See Bridges Weekly, 29 October 2015)
Statements by the two chief negotiators last week indicated that while there has been some progress in their talks on goods since then, there is still more work to be done to reach their desired levels of ambition.
Tariffs between the two sides are already low, averaging at around three percent; however, estimates have suggested that getting rid of them entirely could still yield significant gains, given the high “tariff peaks” in some key products.
“It is urgent that we start discussions on the remaining three percent of tariff lines,” said Mullaney on Friday, noting that the two sides had set tariff elimination as their original TTIP goal. “As with every issue in this negotiation, the US has been actively seeking engagement.”
Meanwhile, García Bercero said that the remaining three percent are part of the “end game” of talks – in other words, at the time when the toughest political decisions are made – and that the two sides are currently looking at the tariff lines already covered in the existing offers in order to speed up the timing of phasing out those tariffs.
The EU official also raised agriculture as a specific area where his side is seeking more progress. “We… have yet to find balance within the agricultural silo between the progress on tariffs and the progress on other issues important to the EU, such as geographical indications and wines.”
Geographical indications are an EU priority, he added, telling reporters that Washington and Brussels still remain “far apart.”
Mullaney, in response to questions on the subject, commented that the US’ system for protecting geographical indications is “fairly robust,” and one that is already working in favour of European producers who export goods such as cheese or sparkling wine to the US.
“Exports of agricultural products from the United States to the world keep increasing, but to Europe are flat or declining. That’s the context in which we’re having this conversation,” said the US official.
Mullaney and García Bercero both indicated that making advances in services market access remains a key objective for their respective sides, but that these talks also have room for improvement. The two sides have exchanged offers on services market access twice over the past three years. (See Bridges Weekly, 23 July 2015)
“We both agree on the importance of the ambitious outcome, which goes beyond what we have achieved so far in our existing agreements, in particular as regards improvements on market access,” said García Bercero.
His US counterpart went into additional detail, calling for more progress in both services and investment and warning that the talks so far have been “noticeably and painfully slow.”
Mullaney indicated that the services discussions were continuing into this week, partly due to the fact that a separate negotiating round with various other WTO members for a plurilateral Trade in Services Agreement (TISA) was also underway. Both the EU and the US are participants in the TISA talks, along with 21 other countries, with the group aiming to conclude a deal this year.
Notably, this TTIP round saw the EU put forward its market access offer on financial services, an area where Brussels had earlier said it could not make an offer without seeing the US agree to including language on financial services regulatory cooperation.
García Bercero stressed on Friday that the decision to table this offer did not mean that Brussels was abandoning this objective. The ambition for “anchoring” regulatory cooperation on financial services in TTIP “remains exactly as it was.”
“The reason we have taken this step is the recognition of the fact that there has been very good discussion” between EU and US officials that would soon see some advances in this area outside of TTIP, he explained to reporters.
The US’ view on the addressing financial services regulatory cooperation in forums outside of TTIP also remains unchanged, Mullaney confirmed, citing the “excellent cooperation” between the US Treasury Department and the EU’s Directorate-General for Financial Stability, Financial Services, and Capital Markets Union (DG FISMA).
A few days later, the EU and US announced that they have agreed on various “improvements” to their Financial Markets Regulatory Dialogue, a bilateral forum that has been in place for well over a decade. The discussions on this subject were held outside the TTIP framework, though are focused specifically on regulatory cooperation in financial services between the two trading partners.
The planned changes to this “dialogue” are not legally binding in any way, the document notes, while stressing that the US and EU must undertake “even more purposeful bilateral regulatory cooperation” in order to keep rebuilding confidence and ensure financial stability.
The talks on this subject were held between the European Commission and the US Treasury Department, with the dialogue now operating under the new name of “Joint EU-US Financial Regulatory Forum” and including among its participants “all relevant regulatory and supervisory bodies” – including when needed those from individual EU member states.
This would serve as a “platform for enabling regulatory cooperation as early as practicable in our respective law-making and rule-making processes,” helping to increase transparency and make their standards more compatible where appropriate, among other goals.
The document outlines various other possible activities for the forum, such as information sharing, and stresses that these talks will not limit Washington nor Brussels from putting in place legal or regulatory steps “that it considers appropriate.”
The US Treasury Secretary and the European Commissioner for Financial Stability, Financial Services, and the Capital Markets Union are also due to meet annually under this agreement.
The agreement included an exchange of letters between US Treasury Secretary Jack Lew and Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services, and Capital Markets Union. In their respective letters, both officials stated that these developments were not linked to the ongoing TTIP talks.
The third pillar on market access – government procurement – has only seen one exchange of offers so far, which was done earlier this year. (See Bridges Weekly, 3 March 2016). On this subject as well, negotiators indicated that more work is needed.
Specifically, García Bercero told reporters that the EU is pushing the US to table a more ambitious offer, in order for TTIP to see “substantial improvements in market access at all levels of government.”
“Indeed, the gap between the level of ambition on tariffs and procurement remains a serious cause for concern,” said the EU official.
However, Mullaney characterised the US offer as being “the most ambitious procurement offer it has ever made in any trade agreement, including in TPP,” referring to the 12-country Trans-Pacific Partnership Agreement that was signed earlier this year.
E-commerce talks, climate and energy
The European Commission’s adoption earlier this month of an “adequacy decision” for a final Data Privacy Shield to replace the Safe Harbour Framework – which governed the transfer of data between US and EU companies – was welcomed by the US as opening the door for deeper talks on digital trade. (See Bridges Weekly, 14 July 2016)
“Now that Privacy Shield is coming into force, we look forward to having a full discussion of electronic commerce obligations on data flows and the location of computing facilities. Our inability even to discuss these obligations, which are vital to digital trade, has been unfortunate,” said Mullaney.
In addition, whether the EU and US will include a separate TTIP chapter on energy and raw materials also remains undecided, officials confirmed on Friday.
While Brussels has now put forward a proposed text for such a chapter, Mullaney told reporters that the US is still examining whether the issues tabled in that document are already addressed in other TTIP chapters – along with whether these should be included in the context of this trade deal and in what form.
“No decision has been taken with respect to the architecture of whether or not there will be an energy chapter,” said Mullaney.
The EU proposal is publicly available online, with García Bercero highlighting to reporters the provisions relating to “green innovations” as well as “trade in green technologies,” along with advocating for the US to remove export licenses on liquefied natural gas.
He also spoke about the criticism raised by some environmental groups earlier this month in response to a purported leak of the EU’s proposal for an energy chapter, suggesting that these interpretations may have been incorrect.
“Contrary to what some claimed this week, it doesn’t undermine EU climate objectives, but on the contrary, it strengthens it. And of course EU governments will retain full right to promote their desired energy mix in the way they see fit,” said the EU official.
García Bercero also cited the sections in the proposal relating to energy efficiency and renewables, and argued that the EU’s suggestions are in line with both its international commitments under the Paris Agreement as well as the bloc’s own legislation.
The EU also put forward last week a proposed text on trade and climate change, which it has suggested adding to the planned chapter on sustainable development.