As the smokescreen clears, time for more honesty on EU-US trade pact

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

Although EU-US negotiations on a Transatlantic Trade and Investment Partnership (TTIP) were launched with bombastic rhetoric, the last couple of weeks have seen confidence wane. Negotiations will take longer and the economic benefits of a deal will be far smaller than originally claimed, write Ferdi De Ville and Gabriel Siles-Brügge.

Gabriel Siles-Brügge and Ferdi De Ville are lecturers in politics at the University of Manchester and the University of Ghent, respectively.

On 21 January, EU trade Commissioner Karel De Gucht announced that he would consult the public on the investment provisions of the transatlantic trade deal currently being negotiated between the EU and the US.

Starting in March, negotiations on these provisions will be put on hold for three months while people are offered the opportunity to comment on the proposals.

This decision was prompted by the growing alarm amongst civil society groups and the public over the Investor-State Dispute Settlement (ISDS) provisions being considered. These would give companies the right to sue governments for violating provisions of a future TTIP in an international arbitration tribunal.

The concern was that this would limit the ability of governments to take measures to protect consumers, workers and the environment that might impinge on firms’ profit margin. In the UK one such fear was that private providers of NHS services would be able to take future governments to such a tribunal if they sought to undo the Coalition Government’s NHS reforms (on the basis that the liberalisation of the market for health services these reforms entailed might be enshrined within the TTIP).

This ‘pause’ in the investment negotiations is heralded as a victory for NGOs, many of who have been very critical for the TTIP. This scepticism, however, goes beyond alter-globalisation groups.

Since October last year, the UK House of Lords’ EU Sub-Committee on External Affairs has been holding hearings on the TTIP with experts and stakeholders in the negotiations. These have included Commissioner De Gucht and the EU’s Chief TTIP Negotiator Ignacio Garcia Bercero, previous Trade Commissioners Leon Brittan and Peter Mandelson, Member State officials and representatives of the UK automotive and financial services sector.

While the opinions expressed before the sub-committee have varied from outright pessimism to cautious optimism, much of the testimony has echoed the view that the negotiations will neither be concluded within two years (as the Commission claims) nor necessarily reach the level of ambition proclaimed with much fanfare by its advocates.

As we warned in a previous blog post, the headline figures cited by the European Commission and other TTIP enthusiasts – that the agreement will generate an extra 0.5% GDP growth for the EU economy, which translates into an annual bonus of €545 of disposable income for a family of four – are on ‘pretty shaky ground’.

Even if we accept the contestable assumptions these figures (and the models from which they derive) rest on, the fact remains that they will only be achieved if an extremely ambitious deal is agreed: one that removes half of the ‘actionable’ differences in economic regulation between both sides.

Even leaving aside the well-known cases where EU and US regulatory philosophies are fundamentally opposed (Genetically Modified Organisms (GMOs), hormones in beef, chlorinated chicken, data privacy, etc…), there are many hurdles that make delivering on this ambition very unlikely. On both sides of the Atlantic regulators are not exactly keen on limitations on their autonomy to regulate.

This is particularly problematic in the US, where individual states have considerable regulatory competence. Unsurprisingly, such problems have led to failure in transatlantic regulatory cooperation in the past, as the prominent trade expert professor Simon Evenett (of the University of St Gallen in Switzerland) highlighted in his testimony to the House of Lords.

It is not entirely unexpected that the proponents of the TTIP have overstated its likely economic benefits. As was noted in a leaked Commission document on ‘Communicating on TTIP’, the Commission has sought to “to define, at […] [an] early stage in the negotiations, the terms of the [public] debate by communicating positively about what the TTIP is about (i.e. economic gains and global leadership on trade issues)”.  

The Commission’s headline figures may have already succeeded in convincing Member States’ governments and the European Parliament to approve the opening of negotiations with the US. But as the ISDS furore has shown, negotiations have since become increasingly controversial in a number of EU Member States, including in the traditionally free trading and Atlanticist UK (as we noted above). Even such figures as Pierre Defraigne, a former Deputy Director-General of the Commission’s Trade Directorate and Chef de Cabinet of former Trade Commissioner Pascal Lamy, has referred to the TTIP as a ‘faux pas’ in a strongly-worded paper

Such debate is of course to be welcomed, especially as it opens up the traditionally quite secretive world of EU trade negotiations to greater public scrutiny; indeed, the lack of transparency has been another major criticism levelled at the TTIP negotiations despite attempts by EU negotiators to engage with civil society actors.

That being said, critics of the TTIP should not get hung up too much on the ISDS issue or indeed many of the other issues (such as GMOs and audio visual services) that have made the headlines. While these are clearly important, a debate purely focused on the agreement’s most controversial provisions – which may well get left out of an eventual deal – risks overshadowing the broader public debate on the pros and cons of the agreement that we should be having.

Challenging the optimistic assessment of economic gains made by the pro-TTIP camp is only the first step in this regard. The TTIP’s ambition to create a single transatlantic marketplace raises all manner of questions in our eyes, including:

  • Even if the TTIP leads to some moderate economic benefits, how will these be distributed among different economic groups?
  • What will be the TTIP’s effects be on the generally more stringent labour and social protection provisions found in EU Member States?
  • How will the TTIP impact on the EU’s climate and energy policies, especially in the light of the controversial shale gas ‘revolution’ in the US?
  • How will a single transatlantic market including two of the world’s key currencies affect monetary and macroeconomic policy space?

Now that the smokescreen put up by the TTIP’s advocates is dissolving, questions such as these deserve wide, honest and profound debate.

This opinion was originally published on the Manchester Policy Blog of the University of Manchester.

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