The European Parliament’s Committee on International Trade has given its go-ahead to the European Commission on the EU-US trade agreement, conceding that a controversial arbitration clause, albeit reformed, needs to remain part of the deal.
At the end of fierce horse-trading between political parties, the non-binding resolution negotiated through late into the night passed on Thursday (28 May) with 28 votes, 13 against and no abstentions.
MEPs urged negotiators to make sure the Transatlantic Trade and Investment Partnership (TTIP) would not undermine EU standards or governments’ right to regulate in the public interest, but also find a way to include a reformed Investor-State Dispute Settlement (ISDS).
“We have pushed very hard for this resolution to come to life, to send the strong message that the European Parliament will not simply accept any deal they are presented with. On the contrary, we have clear cut demands and red lines when it comes to the content of the agreement,” said the author of the parliamentary report and chairman of the Parliament’s International Trade Committee, Bernd Lange (S&D).
Despite the red lines and the call for a reformed ISDS, the response has been mixed.
The vote was hailed as a “victory for free trade” by the EPP’s spokesman on the committee, Christofer Fjellner. But it was criticised by German MEP Ska Keller (Greens) who said it was unclear whether the resolution excluded an ISDS or a reformed ISDS.
“This has been one of the hardest fought votes in the recent history of the European Parliament. It sends a strong signal that the European Parliament and citizens are keeping a close eye on the negotiations,” said Monique Goyens, director-general of the European Consumer Organisation (BEUC), which has been one of the most vocal critics of TTIP negotiations.
“Deplorably, the European Parliament took a very ambiguous stance on the infamous ISDS system. We have yet to see any facts justifying its inclusion in an EU-US trade deal,” she said.
Currently, the ISDS system allows investors to take governments to international arbitration tribunals rather than to domestic courts.
Even though the US has insisted that ISDS be included in the landmark free trade agreement, the Commission proposed to reform the system following widespread protests across Europe.
The Commission proposed steps that can be taken to transform ISDS into a system which functions more like traditional courts. That involves the appointment of permanent arbitrators, with similar qualifications to those of national judges, and the introduction of a bilateral appeal system.
In parallel, the EU wants to work towards the establishment of a permanent multilateral investment court with tenured judges, who would replace the bilateral mechanism over time.
Even though MEPs seemed unimpressed with the Commission’s proposal, they did in the end give it qualified support. However, the resolution is due to be put to a full plenary vote in the European Parliament in June.
“This resolution is the beginning of the end for ISDS, a development which is long overdue,” said Lange.
MEPs have also urged negotiators to safeguard EU safety standards in areas where US regulation is “very different”, such as authorising chemicals, cloning or endocrine-disrupting chemicals. The EU “precautionary” principle must be respected, they insisted.
Lawmakers have also insisted on eliminating excessive procedures for vetting imports on food and plant health grounds, favouring mutual recognition of equivalent standards.
On the long-contentious agriculture sector, MEPs have also underlined the need to eliminate all customs tariffs, drawing up an ‘exhaustive list’ of “sensitive agriculture and industrial products” which would either be exempted from trade liberalisation, or subject to a longer transitional period.
MEPs asked EU negotiators to make every effort to insert a “safeguard clause”, reserving the right to close markets for specific products in the event of import surges that threaten to cause serious harm to domestic food production.
They also asked for the US to lift its ban on EU beef imports and include strong protection for the EU’s geographical indications system.
Liberal MEP Marietje Schaake commented, “High European standards for products that protect consumers or the environment cannot be affected by a trade agreement. Public services such as education and drinking water, certainly do not belong in this agreement.”
EU-US partners have gone through nine rounds of negotiations since summer 2013 and are aiming for December 2015 to agree on a draft text. But officials close to the negotiating table consider mid-2016 as more realistic. The next round of talks will take place in July.
“We need the EU and the US to work together to set higher standards worldwide when it comes to food safety, the environment, health or labour. That is essential in a rapidly changing world with emerging economies that do not share our values and rules-based approach,” added Schaake.
AmCham EU welcomed the vote and said TTIP presents one of the best opportunities to create the conditions to further trade and investment with the United States and bring about more jobs, lower prices, greater consumer choice and more investment across Europe.
Member of the European Parliament Marietje Schaake (ALDE/D66) reacts: "With this report the Parliament takes an important step, it should be seen as an extensive stocktaking to strengthen the negotiating position of the European Commission. Increasing market access in the US, especially for small and medium size enterprises, is essential for ALDE. The Parliament states that requirement clearly now. It is high time that the US comes up with proposals how the unfair and protectionist situation hindering European businesses in the US can be fixed."
S&D spokesperson on trade, David Martin MEP said: "Today we have sent a clear message that ISDS is not needed in TTIP; that the ratification of International Labour Organisation (ILO) standards is important; and the full exclusion of public services is paramount.
"We are making it clear to the Commission that setting high and binding standards and bringing an end to secret investor tribunals are essential elements of any EU-US trade agreement. The Socialist and Democrats are unequivocal on these issues and will continue to press for a progressive trade deal with strong social protections. This is within reach if the European Commission is prepared to take our concerns seriously."
European Conservatives and Reformists Group trade spokesman Emma McClarkin welcomed the parliament's vote, particularly its decision not to lay down red lines on investor protection at this early stage. An amendment had been tabled by left wing MEPs seeking to demand that an investor-state-dispute-settlement (ISDS) clause be ruled out of any agreement. The rejection of the amendment was supported by McClarkin who believes that European investors must be able to ensure non-discriminatory treatment in the US, and with a proposal on the table to reform ISDS so that it is more transparent and includes additional safeguards, any refusal to consider it is premature.
She said: "This vote has injected a dose of caffeine into TTIP negotiations. The parliament is right not to take investor protection off the table at this early stage. This resolution should be about telling the USA what we do want in a balanced and ambitious agreement, not setting down red lines that risk scuppering the talks. ISDS needs to be reformed and we should give those reforms a chance before ruling out any form of ISDS in this agreement when there are already 1400 ISDS clauses in EU Member States' bilateral investment treaties.
"TTIP is worth far too much to our economy and to everybody's pocket for us to let it fail. This agreement is not just about the wider issues of growth, jobs and investment but it would have tangible benefits too such as an estimated 17 percent saving on the price of shoes, 12 percent on jeans and even 30 percent on sweets.
"We will continue to push for an ambitious and comprehensive agreement that will benefit people across Europe. We cannot begin to seriously grow Europe's economy without opening up for trade, and this agreement would show the world that we mean business."
After the vote, Greens/EFA trade spokesperson Yannick Jadot said: "This resolution does not reflect the ever-growing concern among the public and civil society with the TTIP negotiations and their overt corporate agenda. Instead of using the resolution to help give voice to this concern, Socialist MEPs have rowed in behind the centre-right and ensured a tame and sanitised outcome, notably on the controversial issue of an ISDS investor to state dispute settlement mechanism. This resolution remains a proposal from the trade committee however and we hope Socialist MEPs will rediscover their critical outlook when parliament votes as a whole in its June plenary session.
"There is a growing public outcry against enabling corporations to use extra-juridical tribunals to challenge state authorities and democratically-decided legislation. This was reflected in the votes of a number of other parliamentary committees, which adopted opinions on TTIP that included outright rejection of ISDS (1). The European Parliament is the institution which represents the voice of European citizens and we hope this legitimate criticism of ISDS will be reflected in the final resolution adopted by MEPs. This is crucial for the democratic credibility of the EP."
Helmut Scholz, shadow rapporteur for GUE/NGL parliamentary group, criticised this outcome: "Compromises agreed between rapporteur Lange (S&D group) and the conservative and liberal groups are deliberately ignoring the deep concerns raised during the broad public debate in many EU member states regarding the creation of a common transatlantic market."
He added: "The vast majority of people outside this Committee room reject investor-state-dispute-settlement (ISDS), but those MEPs in favour think they know better. In my opinion, it is arrogant that the amendments from the opinions of five other committees, including the legal affairs committee and the constitutional affairs committee, who asked to oppose ISDS, have been completely ignored, just like the 1.9 million EU citizens who already signed a petition against ISDS."
Markus J. Beyrer, Director General of BUSINESSEUROPE, said: "Today’s vote shows we have come a long way and positive dynamics are back. We are glad to see investors’ rights are acknowledged, however we need to make sure efficient instruments to enforce them are put in place.
"Furthermore, European companies warn against overloading EU’s trade agenda on sustainability. We are concerned about the request to exclude public services - irrespective of how they are provided and funded - as the EU should not put in question its own multilateral commitments in the WTO General Agreement on Trade in Services.”
War on Want Executive Director John Hilary said: “Millions of people across Europe have said no to TTIP, in the strongest trade campaign we have ever seen. Yet MEPs have turned their backs on their own constituents, choosing instead to side with the business lobbyists of Brussels. This is an outright betrayal of the European people, and we shall not forget it.”
The European Economic and Social Committee, in its opinion adopted on 27 May, opposes the inclusion of Investor-State Dispute Settlement (ISDS) provisions in the Transatlantic Trade and Investment Partnership (TTIP) or in the Comprehensive Economic Trade Agreement (CETA), as it believes such a system has the potential to derail both agreements.
"This is not an opinion against investor protection but an opinion that opposes ISDS which is not a form of dispute settlement acceptable to a large majority of civil society" said Sandy Boyle, EESC Rapporteur. "Opacity, lack of clear rules of arbitration, the lack of right of appeal, discrimination against domestic investors who cannot use the system, have undermined the credibility of this system."
Neil McMillan, Director of Advocacy and Political Affairs of Eurocommerce said: "Trade barriers mean simply that consumers have less choice. As a sector which interacts 500 million times daily with customers, European retail and wholesale want to be able to offer their customers the widest choice and the best quality at the best price. The INTA vote is an important first step in reaching a TTIP agreement with the US which will serve the interests of EU citizens and give a much-needed boost to the European economy. As strong supporters of the WTO and multilateralism, we also support TTIP as a potential spur to new momentum in multilateral negotiations."
The Trans-Atlantic Business Council (TABC) Director-General/CEO, Tim Bennett said: “We were very pleased with the approval by the U.S. Senate last Friday night of the Trade Promotion Authority bill, and now thank INTA Chairman Lange and all MEPs and Committees which contributed to the report approved today.”
So far, nine TTIP negotiating rounds have been held, the latest in New York (20-24 April).
In June 2013, EU heads of state and government mandated the Commission to start negotiating a free trade agreement with the US, giving guidelines concerning what the negotiations should include.
The guidelines stated that the EU should seek to include provisions on investment protection and investor-to-state dispute settlement (ISDS) in the proposed agreement.
Member states already have 1,400 ISDS-type agreements with other countries, some dating back to the 1950s. There is an urgent need for reform, and everybody agrees.
The EU executive consulted the public on its approach to investment protection and ISDS in the TTIP, asking whether the EU’s strategy achieves the right balance between protecting investors, and safeguarding the EU's right and ability to regulate in the public interest.
Negotiations on investment in TTIP were suspended in January 2014. They will only resume once the Commission believes its new proposals guarantee, among other things, that the jurisdiction of national courts won’t be limited by special regimes for investor-to-state disputes.
The final decision, which must be ratified by both EU Council and Parliament in a full vote, will only be taken with the agreement of European Commission First Vice-President Frans Timmermans. Commission President Jean-Claude Juncker gave Timmermans the veto. He will ensure ISDS complies with the rule of law, and principles of equality and transparency, according to a memo published by the executive.
- 10 June: Pleanary vote on TTIP resolution