TTIP edges forward, buoyed by votes in U.S. Congress and EU Parliament (7/17)     Print Email

By Brian Beary, European Affairs


Wrapping up the tenth round of Transatlantic Trade and Investment Partnership (TTIP) talks in Brussels on July 17, the lead EU and US negotiators confirmed that their goal was to conclude a deal under the Obama administration i.e. by January 2017. “The negotiators of TTIP on both sides have clear guidance on how to get things done,” said Dan Mullaney, the Assistant US Trade Representative, in a nod to how two big stumbling blocks to its passage have recently been cleared.

The first of these blocks was Trade Promote Authority (TPA), a mechanism that allows the US president to submit to Congress a trade agreement for approval by a simple up-or-down vote. Without TPA, Congress can vote on trade deals article-by-article, an impossible scenario for negotiators who painstakingly piece agreements together. TPA has been bestowed sporadically to US presidents since the 1970s but President Obama has never enjoyed it as it last expired in 2007.

In an atypical alliance, Obama teamed up with Republican House and Senate leaders to enact a new TPA that will last for six years, giving him – and his successor – ample time to conclude TTIP. Because a minority of Republicans refused to give Obama TPA, he needed to get some Democrats on board given the arithmetic on Capitol Hill. Initially, it was doubtful he would secure enough votes and TPA bills stumbled in the House and Senate in May and June. However, after some deft procedural manoeuvering, a bill squeaked through and got signed into law on June 29.

During the process, the leading Democrat in the Senate, Harry Reid, and in the House, Nancy Pelosi, defied Obama by siding with the anti-TPA camp. Such opposition was, however, in line with the Democrats' historic suspicion of free trade pacts and their sympathies with the labour unions' claims that these agreements lead to American jobs being outsourced to lower-wage economies. Massachusetts Senator Elizabeth Warren emerged as a leader of the anti-trade camp, causing President Obama to fire back that she was “dead wrong” in her views.

With a sliver of Democrats and the bulk of Republicans behind TPA, Obama prevailed. A key ally was Senator Ron Wyden (Oregon), who previously criticized the secretive nature of trade negotiations. Wyden inserted transparency provisions into the TPA bill, such as requiring deals to be sent to Congress for a 60-day review before they are signed. The final votes were 60-37 in the Senate and 218-211 in the House.

Meanwhile, the European Parliament weighed in on TTIP for the first time in a year. The MEPs only have the power to vote yes or no to a trade agreement - not to pick it apart article-by-article - so no TPA-style legislation was necessary. Instead, it adopted a recommendation which, despite being non-binding, will be studied closely by the European Commission that is leading the talks, mindful that a future deal can only take effect if Parliament ratifies it.

The hot button issue of the day for MEPs was whether or not TTIP should have a so-called investor-state-dispute-settlement (ISDS) clause. This provision foresees arbitration-style panels that foreign investors could go to if they felt a host government had violated their investor rights. First conceived in the 1960s, these panels can oblige governments to fork out tens of millions of dollars in compensation if found to be at fault.

There is a growing chorus of opposition to ISDS, with claims that it is opaque, biased towards big business, and threatening to the court system and regulations adopted to protect the public health and environment. Responding to these concerns, EU trade commissioner Cecilia Malmstrom, who took office in November 2014, is crafting a revised ISDS that is more court-like in essence, with judges to be appointed that have a specialist knowledge on investment protection issues, more open hearings, and the ability to appeal against decisions.

The debate among MEPs was over whether ISDS should be excluded entirely – many on the left of the political aisle urged this – or whether to support Malmstrom's strategy of improving it. The Parlament vote on the TTIP recommendation was postponed for a couple of weeks over the issue. Finally, a consensus emerged around calling for a reformed ISDS and the recommendation passed on July 8 by 436 votes to 241. EU trade officials are expected to present a new ISDS blueprint to their US counterparts in the fall.

Meanwhile, talks on another mega-regional trade agreement, the Trans-Pacific Partnership (TPP), which covers twelve Asian and Pacific countries, may be edging towards a successful conclusion. From July 28-31 in Maui, Hawaii, the ministers from the TPP-12 will push for a final agreement. Support for TPP in Congress is weaker than for TTIP because the Pacific deal includes low-wage nations like Vietnam (China is not part of it). From TTIP's perspective, however, what matters more than whether Congress approves TPP is whether the negotiators finalize a deal. If and when the latter happens, the Obama administration can turn its sights more exclusively to TTIP.

After two years and ten rounds of negotiations on TTIP, here is where some of the major battle-lines lie:
   • Financial services: the EU is pushing to have provisions that promote a convergence in banking sector regulations. The US is resisting, largely because the US Treasury opposes covering this issue in a trade agreement. The US side can also use the argument that inclusion may risk unraveling the consumer protections enshrined in the 2010 Dodd-Frank Act.
   • Genetically-modified Organisms (GMOs): the US demands that the EU speed up approvals of US-made genetically-modified food and feed products. The EU is resisting, keenly aware that much of the European public opposes GM foods. The Commission is sending mixed messages, proposing in April that EU member states be allowed to ban GMOs for non-scientific reasons, at the same time it approved applications for 19 US GMO products to enter the EU market.
   • Energy: The Commission would like to have a chapter on energy in which the US restriction on exporting gas and crude oil, which date from the 1970s, are removed. The US has been on the fence about this, partly because US heavy industry likes these restrictions as they keep electricity prices low in the US, giving them a competitive advantage.
   • Geographical Indications: The EU will aggressively seek to prevent products like feta cheese and champagne that are produced outside the region from where they originate using of 'feta' or 'champagne' label. The US dislikes the EU's protectionism as it hurts many US producers who make products like feta cheese but are not allowed to label them as such in foreign markets.
   • Agricultural Tariffs: While import tariffs on industrial goods are mostly low or non-existent, the food sector is still heavily protected, including products like pork and sugar. But the horse-trading over tariffs is likely to be left toward the end of talks.
   • Procurement: This is more of an offensive issue for the EU, which wants to strip away the 'Buy America' laws that requiring US procurement authorities to purchase US products and services.
   • Regulatory Transparency: In their talks on 'regulatory coherence', the US is urging the EU to have a more a US-like rule-making process where draft proposals are published for public comment. The Commission opposes this, believing its proposals should only be published when transmitted to the co-legislators, the Council of Ministers and European Parliament.
   • Data privacy: Though not directly part of TTIP, Parliament wants the US to tighten its data protection regime as a precondition for it approving TTIP. Some progress was made with the enactment in June of the USA Freedom Act - triggered by the 2013 National Security Agency-Snowden disclosures – that ends the NSA's bulk collection of phone records. Two other EU-US agreements on protection of personal data in the private and public sectors still need to be concluded.

A noteworthy difference to have emerged in recent months is over the EU and US policies on the transparency of the negotiations. The US continues to refuse to publish its negotiating texts, whereas Commissioner Malmstrom since January 2015 has been publishing some of the EU's negotiating papers.

TTIP has been the flagship economic project for the transatlantic relationship for several years already. It has also attracted a lot of attention from outside: both from the EU and US' closest trade partners like Switzerland and Turkey, and from major global economies like China and Russia who wonder how a trade deal that encompasses almost half of the world's economy will impact them. With mega-regional free trade deals in the ascendency and the World Trade Organization suffering from an existential crisis, eyes will be fixed closely on what turn the talks take in the coming year.