The main purpose of the treaty being negotiated is to cut tariffs and regulatory barriers to trade between the EU member states and the US. The tariffs currently in place are already low (around 3%) and are expected to be totally abolished after an agreement is reached. So, the negotiations are focusing especially on harmonising regulations and reducing non-tariff barriers to trade.
The idea of a free trade agreement between the EU and the US is not new. However, it gained a fresh impetus after the EU–US summit of November 2011. Both parts agreed on the importance of overcoming economic stagnation and on the creation of a working group to discuss ways to increase growth. In February 2013, the working group recommended the implementation of a bilateral trade agreement.
Trade between the EU and the US is the biggest in the world, being worth 2 billion euros every day. But the European Commission believes, based on an independent report by the Centre for Economic Policy Research, that the TTIP could increase the EU economy by 120 billion euros and the US economy by 90 billion euros. For an average European household this would mean a gain of 545 euros every year.
However, the TTIP opponents consider that it will have a negative impact on food standards, environment protection and consumer safety. They also oppose the Investor –State Dispute Settlement, which they claim would curtail the power of governments to regulate. The proponents of the European Citizens’ Initiative “Stop TTIP” believe that “the rule of law is undermined by the introduction of a parallel justice system”. “Instead of public courts, private arbitration tribunals meeting in secret make the decision about compensation payments for damages”, they say.
Investor–State Dispute Settlement
In October last year, fourteen member states’ governments (United Kingdom, Czech Republic, Cyprus, Estonia, Denmark, Finland, Croatia, Malta. Lithuania, Ireland, Sweden, Spain, Portugal and Latvia) sent a letter to the European Commission demanding the mandatory inclusion of the Investor to State Dispute Settlement on the TTIP, as it was part of the mandate issued by the member states.
However, the President of the European Commission, Jean-Claude Juncker, disagreed and remembered the member states’ governments that some requirements must be agreed on for the Investor–State Dispute Settlement to be part of the TTIP. According to the factsheets published by the European Commission this month, the investment protection provisions agreed with the US “must also protect governments’ right to regulate and make the system more transparent”.
Why is the Investor–State Dispute Settlement (ISDS) significant? It consists in the existence of a forum for solving disputes between companies and governments. If companies or investors feel that one or more of the investment protection provisions have been breached, they can sue the authorities of a country in front of an international tribunal and ask for compensation.
The basic principles which the European Commission proposes to be at the heart of the investment protection provisions revolve around the prohibition of: “discrimination; expropriation of foreign investments without compensation; denial of justice to foreign investors in domestic courts; abusive or arbitrary treatment of EU and US investors in each other's territory”.
In order for an investor to claim compensation, it is not enough to prove that “his profits have been reduced following a regulatory change by a state (e.g. stricter regulations on a food additive)”. “The investor would need to demonstrate that the investment provisions have been breached (e.g. discrimination, denial of justice…)”, explains the Commission.
Concerns about European standards
Civic organisations have also shown concerns regarding the possible reduction of standards of food, consumer, environment and health protection. The NGOs Friends of Earth Europe, Compassion in World Farming and the Institute for Agriculture and Trade Policy stated that “fair, sustainable and safe food could be permanently damaged by the transatlantic trade deal on the table” and that “we cannot have confidence the draft measures […] will uphold to the highest standards that protect consumers and animals”.
Likewise a group of Portuguese NGOs, including Quercus and Oikos, claims that the TTIP “will substantially reduce the European standards of consumer protection, environmental and nature protection, food security and sovereignty, labour and trade union rights, privacy rights and internet use freedom, among others”.
The European Commission, however, states in a recently published fact sheet on Food Safety and Animal and Plant Health that “it's not true that EU rules are always stricter” than the American ones, in some cases just different means are used. Although the purpose of the TTIP is to “minimise effects of regulations on trade”, the Commission ensures that the “legitimate goals to protect human, animal and plant health” will be respected.
It is also stated in the fact sheet on Trade and Sustainable Development that the Commission aims to attain “high levels of protection for workers in the TTIP, based on International Labour Organization standards” and that the “EU climate legislation is not part of the TTIP negotiations”.
The TTIP will affect some industries and services, while others are excluded. The pharmaceutical, vehicles, energy, finance, chemicals, clothing, and food and drink industries are part of the negotiations between the EU and the US. On the other hand, audiovisual services and data protection standards are not included in the negotiations. The Commission also aims to protect the member states’ option to run publicly funded health, education and social services.
The negotiations are being led by the EU’s trade Commissioner, currently Cecilia Malmström, and by the United States Trade Representative. After the conclusion of the negotiations, the agreement reached will have to be approved by the European Council and the European Parliament. Bernd Lange, chair of the European Parliament’s International Trade Committee and member of the S&D group, remembered in an interview published in the EP’s website that “with the rejection of the Anti-Counterfeiting Trade Agreement we have proved that the Parliament is critical in the assessment of international agreements and that we are able to form our own opinion”.
Edited by: Lisa Enocsson