Avoiding a TTIP train wreck

TTIP Chief Negotiators: Ignacio Garcia-Bercero (EU) and Dan Mullaney (US). [US Mission to the EU]

The real goal of US and EU leaders and negotiators this week as they venture into a new round of negotiations on the Transatlantic Trade and Investment Partnership (TTIP) is to avoid the talks turning into a train wreck.

The top guys – President Barack Obama, USTR Mike Froman, five EU heads of state and government, EU trade Commissioner Cecilia Malmström – have met in Hannover to try to break the TTIP deadlock.

Meanwhile in New York, the grey-suited bureaucrat-negotiators of USTR and the EU Commission will begin work on a huge pile of paperwork for the thirteenth round of talks. Their ambition in the negotiations, which start today (25 April), is to double the number of ‘joint texts’ in TTIP in the coming days.

TTTIP – victim of public anger at political establishment

TTIP’s chances of success were low to begin with. Previous attempts to advance transatlantic trade and investment talks such as the Multilateral Investment Agreement in the OECD in the late 1990s, the frequently unsuccessful attempts to foster regulatory cooperation in the industrial sector to reduce barriers to trade started in the 1990s, or the ill-fated TEC of 2007, never got of the ground.

Anti-Americanism is deeply ingrained in centre-left circles across the EU. In Germany anti-US sentiment has been rising although it is fading in France).

Right-wing populism is gradually replacing centre-left ideologies in rejecting an economic alliance with the US. Austria, the EU country that most firmly opposes TTIP, has a right-wing populist politician leading its presidential polls. Second in the polls is an ex-Green Party leader and TTIP-critic.

It took the 2008 economic and financial crisis, the EU’s geopolitical crisis with Russia, and the conclusion of the Trans-Pacific Partnership (TPP) by the US to change the rules of the game for a transatlantic deal in the EU and in the US.

But the crisis in the political and traditional party systems pervasive across the West is proving to be a destructive force.

The occasional efforts of a largely discredited political establishment across the Atlantic to do policies that are rational and forward-looking – such as TTIP – just can’t withstand the force of popular anger.

Public opinion in Europe, perceived as highly critical of TTIP, has been more on board with the project than many suggest.

Overall a majority of Europeans remains in favour of the deal according to Eurobarometer polls. Surprisingly Germany has revealed to itself to be the outlier ,with a majority of Germans against TTIP.

But public support for TTIP has been on the decline since last year. In the US TTIP was barely on the public’s radar and generally seen more favourably than TPP,  but this has changed.

A Bertelsmann Foundation poll published late last week shows that only one in five Germans believe TTIP is a good thing for Germany, with one in three Germans rejecting TTIP outright. In the US, only 15% of those polled support TTIP.

The EU’s attempts to salvage the deal by increasing transparency, by pulling a (botched) reform of international investment arbitration out of the hat, by engaging with the European Parliament, by sending a friendly face – Commissioner Malmström – to the member states to pitch TTIP, have failed.

Angela Merkel, Germany’s Chancellor has been pitching TTIP to the German public, underlining how important it is for jobs, growth and security. Despite her popularity at home this was also to no avail.

Britain has been largely absent from the EU-wide debate on TTIP as it focuses on its high-risk referendum on EU membership.

Whether the recent rebuff President Obama gave to UK Eurosceptics who think their country’s ‘special relationship’ with the US could put them on a fast-track to a separate trade deal will contribute to halt the rising tide of supporters of the Leave camp remains to be seen.

Always second in line after TPP

In the US, TTIP is falling victim to the TPP. The US administration has spent most of Obama’s second term negotiating the complex transpacific pact with 11 other countries. It is now struggling to get it through Congress.

After an absent-minded first two years of TTIP negotiations, now the Obama administration suddenly wants to ram through the deal.

“The time to complete TTIP is now. I am here to say that the United States is prepared to make every effort to reach an ambitious, comprehensive, and high standard agreement this year”, President Obama said at the opening ceremony of the Hannover Messe in Germany on Sunday (25 April 2016).

Europeans are irked by this attitude. First they felt neglected and ignored by US negotiators who were absorbed by the heavy task of TPP. Only once that deal was done in the summer 2015, did they start paying more serious attention to TTIP.

At the stage at which the negotiations are now – barely managing to make significant breakthroughs beyond basic import tariff eliminations and a little more talking between regulators, Europeans sense that they would get a bad deal from the US if they just let Washington get its way.

Business, including US business groups like the US Chamber, have highlighted the risks of hurrying up the agreement to the detriment of a well thought-through, commercially meaningful deal that really raises the standards of economic rule-making at the global stage.

If the TTIP is to be what it was initially meant to be, it cannot be reasonably finished in 2016. In fact, the real talking has barely begun. Why nip it in the bud?

Opening up public procurement markets, advancing a framework for fruitful regulatory cooperation, significantly open services markets: all these issues will need the time they need to be worked out. If TPP took five years to conclude, why should TTIP take only three, given its inherent complexity?

Public procurement could be next TTIP deal breaker

As EU-US negotiators prepare for a new round of transatlantic trade talks in New York next week, officials fear TTIP might run into a new brick wall: Public procurement.

The US is in no position to respond to key EU market access demands in say procurement or services in an election year as Congress would just refuse to budge.

Washington has also not been in any way helpful in engaging Federal states to induce more of them to sign on to a few disciplines on public procurement to allow for European bidders to contribute to improving on the dire state of US infrastructure.

EU leaders are for their part deluded about what they can achieve in TTIP. In a statement released this weekend, French secretary of state Mathias Fekl and German economy minister Signmar Gabriel issued a new laundry list of demands to the US, ranging from accepting EU-style geographical indicators to progress in procurement and services, and concrete breakthroughs in regulatory cooperation in a range of sectors.

They also want an energy chapter, and, of course, see the US sign on to the EU’s brand new Investment Court System, a proposal which both contributed to writing. They also want to see high standards in labour and environment.

European leaders will have to understand that they just won’t get everything from the US. Not least if the French agriculture ministry continues to insist on maintaining beef and grain quotas on US imports instead of agreeing to a full phase out of tariff and quotas as asked by the US.

The best both sides can achieve this year is indeed to try to have an advanced common text, to agree to a few key compromise areas on a few meaningful sectors – services, regulation, and procurement in particular – next to a tariff deal, then put TTIP in a deep freeze in the second half of 2016.

Under a potential Clinton administration, if the bare bones of TTIP is well constructed enough, both sides could start to put some flesh onto it in 2017, and sort out final matters such as investment protection or the labour and environment chapter and broker the final compromises in services and procurement.

This kind or approach would probably be the best way to avert what TTIP is threatening to become – an utter train wreck.

The European Commission has estimated that an ‘ambitious’ TTIP deal would increase the size of the EU economy by around €120 billion (or 0.5% of GDP) and the US by €95 billion (or 0.4% of GDP). Economically, TTIP can benefit consumers from creating cheaper products, according to the Commission.

A study by the Centre for Economic Policy Research estimates that in total the average European household of four will see its disposable income increase by an estimated €500 per year, as a result of the combined effect of wage increases and price reductions.

This would be a permanent increase in the amount of wealth that the European and American economies can produce every year.

But the deal has been beset by controversies centering on accusations that the talks are too secret, will drive down environmental standards or leave governments at the mercy of lawsuits brought by rich multinational companies.

  • 24 April: US, EU and German leaders meet in Hannover.
  • 25 April: 13th round of TTIP negotiations
  • 7 June: Final presidential primaries
  • End-2016: Target date to sign TTIP
  • January 2017: Obama steps down

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