They announced a rapid negotiation, to be concluded by the end of 2014 – then, by the end of 2015. After 18 months of exploration, the menu for the proposed Transatlantic Trade and Investment Partnership (TTIP) will require significantly more time to digest than was first thought, writes Elvire Fabry.
Elvire Fabry is a Senior Researcher at Notre Europe – Jacques Delors Institute
Obstacles are cropping up even for the questions which initially seemed the simplest to answer, such as tariff reduction – already quite low on both sides of the pond – or the inclusion of an Investor State Dispute Settlement (ISDS) mechanism, which is present in nearly all bilateral investment treaties. What’s more, the secrecy surrounding the negotiation’s mandate and the promise of speedy negotiations combined to produce a toxic, anxiety-inducing effect on public opinion. Outcry was immediate in face of the risks of weakening European standards and the ability of states to legislate.
Should we fear a stalemate for the negotiations? Or rather, consider that the TTIP is entering a new policy cycle – TTIP 2.0 – in which we need to distinguish between the short-term and medium-term issues?
In the short term, we should not expect any groundbreaking news from the 8th round of negotiation (2-6 February 2015). It essentially involves regulatory cooperation, notably concerning Sanitary and Phytosanitary (SPS) measures. It is highly technical and, as for the last three rounds, primarily entails the cross-referencing of reciprocal estimations of what is possible in terms of reducing the import and export costs caused by differing standards (i.e. the production costs of different standards, certification, and border controls).
The issues surrounding the scope of the negotiations (particularly the decision to include, or not, financial services and the opening of public procurement at the Federal and state levels) will be postponed to a later date. The sensitive question of the inclusion of an ISDS mechanism has also been suspended, and will not be reopened until the end of negotiations. Because the negotiators are attempting to balance their respective concessions through the negotiations’ many chapters, the final terms of the proposed agreement will remain unclear until it reaches a more advanced stage.
Nevertheless, TTIP’s finalisation will entail another, significantly more important sequencing that we must keep mind to fully take stock of what is at stake. We must distinguish between two stages.
On one hand, the “negotiation” of several chapters (tariffs, geographical indications of origin, the possible inclusion of chapters on energy and financial regulation, public procurement, etc.) and the horizontal principles that will establish the foundations of bilateral regulatory convergence – which makes the TTIP different from past trade agreements, and is what would account for 80% of its benefits. This first stage is in the hands of the negotiators, and will be subject to the agreement’s final ratification.
On the other hand, we have the second stage of bilateral regulatory “cooperation.” At the moment of final ratification, the respective regulatory bodies would determine, sector by sector and standard by standard, whether or not mutual recognition of such standards is conceivable. This stage, which is currently merely the subject of a study whose aim is to develop the definition of horizontal principles, could take several years and thus remains a medium-term, if not long term concern.
At the present stage of negotiations, the arrival of the new Trade Commissioner could shake things up. Cécilia Malmström has marked a shift from her predecessor by committing to maximum transparency and by drawing an essential red line: in terms of precaution, there is no possibility for the sort of compromises we find with tariffs – regulatory cooperation is only possible for standards which are deemed equivalent.
Malmström has also acknowledged that the actual negotiation phase would take time. This is especially true given that the TTIP is clearly not the present priority of the United States, which is concentrated on the Trans-Pacific Partnership currently being negotiated with eleven other countries. The length will also depend on the likelihood that a majority of Republicans and Democrats will pass Fast Track legislation, which would permit the president to negotiate trade agreements without intervention from Congress until the final review process.
In any event, there will be no significant progress until the negotiators have clarified what is to be done for standards that are deemed not to provide the same level of protection (around 60% of the standards are divided between American and European standards that respectively offer higher levels of protection). In early December 2014, the American Secretary of State, John Kerry, made reference to former WTO Director General Pascal Lamy’s recommendation that only the highest standards should be retained. This is a decisive step – one that negotiators must take in order to ensure the project’s legitimacy in the eyes of the citizens and to lead to a final agreement which, once ratified, would allow regulators to embark upon regulatory cooperation.