TTIP at the forefront of international trade?

  
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If the Europeans and Americans manage to conclude negotiations over the transatlantic free trade agreement (TTIP), they will have succeeded in setting up a blueprint for a "new generation" of 21st century trade agreements, writes Elvire Fabry.

Elvire Fabry is a senior research fellow at Notre Europe – Jacques Delors Institute.

"Watchfulness" is the key word marking every stance adopted on the negotiation of the Transatlantic Trade and Investment Partnership (TTIP). None of the sixty trading agreements either signed, or currently being negotiated by the European Union, has aroused such widespread public interest. Public opinion is calling for greater transparency and consultation.

These calls have already prompted Commissioner for Trade, Karel de Gucht, to suspend a part of the negotiations in order to begin consultations on the establishment of an investor-state dispute settlement. In the United States, Congress has opposed a renewal of the so-called Fast Track procedure, which would give the president the authority to negotiate international agreements, while leaving Congress with the sole option of either accepting or rejecting them, without being able to make amendments.

But, rather than taking a position on the TTIP project at this time, we need to fully assess the challenges involved. If the Europeans and Americans pull off these negotiations, they will have succeeded in setting up a pioneering mechanism for addressing the main issue in commercial agreements in the 21stcentury: regulatory convergence.

No other agreement of the kind exists between two partners of comparable economic weight. Not even the EU's agreement with Canada, which is the first agreement to have been signed with a G8 member, but in which the EU's weight broadly dominates that of its partner. Canada accounted for almost 2% of global GDP in 2012, as opposed to the EU's 23.2% and the United States' 21.8%, while business between the EU and the United States accounts for 30% of all global trade.

But above all, the TTIP is a blueprint for a "new generation" of trade agreement because it endeavours to narrow the regulatory gap. In facilitating the functioning of global supply chains, that would have a far greater impact on the growth of trade than cutting customs tariffs, which are already fairly minimal between the EU and the United States as it is.

Customs tariffs protect the producer against imports, while non-tariff barriers protect the consumer against a variety of different risks. Thus, such measures vary from one country to the next on the basis both of collective preferences – what any given community considers to be good or bad – and of the application of precautionary principle. The complexity of regulatory convergence is due to the fact that it is also based on the sensitive terrain of values. The political dimension of these negotiations is bolstered by consumer belief on both sides of the Atlantic that the level of precaution is higher on their side.

So, should we fear that the TTIP is going to be less beneficial for consumers than for producers? A number of impact assessments have been conducted to date, but do they provide a solid basis for arguing for or against the project, when the TTIP's ultimate impact is going to depend on numerous parameters that have yet to be clarified?  The TTIP negotiations bear more than a passing resemblance to Pirandello's Six Characters in Search of an Author, a play whose script has not yet been written. It falls to the actors to write the story that has put them on the stage.

Where is the final perimeter of the economic sectors of the negotiations going to lie? How are the Europeans going to make good use of the lessons they have learnt from their practice of harmonisation and mutual recognition in the construction of the single market, in defining the ground rules for these negotiations?

It is yet to be proven that it is possible to apply the precautionary principle on both sides of the Atlantic. A detailed comparative analysis must be conducted on a sector-by-sector basis (regarding the environment, public health, safety and so forth.) This requires probing the modalities of risk management and the reasons prompting each society to evince concern with regard to certain risks rather than others. The way all the stakeholders (regulators, economic actors, civil society) are kept informed and consulted is a key factor in the success of the negotiation.

How should economic and geopolitical objectives best be made to dovetail? It is a matter of fueling the economy, by developing transatlantic trade, while taking care to ensure that the attractiveness of this huge market encourages other partners to tailor their regulatory measures to transatlantic standards. Given that there is a dearth of analyses on the impact of regulatory convergence on third countries (for example, the erosion of trade preferences or trade diversion), at what point will opening up to other trading partners make it possible to avoid retaliation?

Finally, how should we manage the timetable? The negotiation of a Trans-Pacific Partnership (TPP) between the United States and eleven countries in the Pacific region is far more advanced than the TTIP negotiations. But as things stand today, we don’t know whether it will succeed in including elements of regulatory convergence. The EU has to manage this uncertainty, and it would benefit from not slowing down the TTIP negotiations, otherwise the United States' position in negotiating transatlantic standards would be strengthened. There is also a risk in negotiating too many things too rapidly. The TTIP requires prudent planning.

Each one of these issues deserves to be better analysed ahead of time, so that the Europeans can rise to the proper strategic level, which would allow them to lay the groundwork for this new generation of trade agreements, and thus to safeguard their identity while bolstering their influence on the international stage.

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Comments

bikey's picture

Note to EU: Regulatory convergence means you converging with US lack of regulation, not the reverse. Please, get real, quick. And if you think you have a democracy deficit problem now, just wait until the 'Dispute Resolution Mechanism' kicks in.

Chris's picture

I'm sorry to read articles about TTIP that consider "consumers", "producers", but not people, or even better workers. This piece is a typical example.

Instead of looking at what are the benefits to struggling Europeans, it talks about "setting standards for the 21st century", "supply chains" and geopolitics.

This is why politics have lost our trust, analysts should know better.

rebentisch's picture

The European Union framework provides umbrella legislation for 28 member states, all of them sovereign nations with different legal systems and traditions. Our rules are copy pasted by many regulators that are not full members of the European Union. Norway and Switzerland are just the most prominent ones. It is difficult to see why the United States cannot unilaterally approximate their rules. In fact instead of abusing the trade funnel for regulatory convergence - with all the difficulties of transparency and insufficient parliamentary oversight - we should provide the experienced DG Enlargement staff with a new transatlantic mission.

Think of Trademarks, it would be of great benefit if the US acceded to the excellent Alicante system and refurbished the bureaucratic nightmare of USPTO trademark applications (European trademark owners have to go via the WIPO road to get US trademark protection). The Alicante framework provides a solid base for a Transatlantic Trademark with a +1 destination nation

The current obstacle to TTIP is that Europe has not properly defined its strategic objectives. It is difficult to see for US and EU observers alike what the EU wants from the US in the TTIP process. With respect to the chlorinated poultry (that causes so much polemics against the TTIP negotiations in Europe) the real issue seems the difficulties of the US to reform is own idiosyncratic sanitation process from the 1950ths.

ISDS was invented for trade agreement with weak, unreliable states, not for good governance. It is difficult to see why mature and trusted powers as EU and the US would want to mistrust their rule of law with ISDS. Their legal systems already provide for redress and appropriate governance standards.

The US and EU could gain a lot by regulatory approximation but they don't rely on TTIP to this end.

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