TTIP and the cost of free trade

It is hoped that the Transatlantic Trade and Investment Partnership will increase trade between the EU and the US. But sceptics don’t trust that the secret negotiations will benefit consumers, while proponents have little to support their optimism

TTIP is Europe’s dirtiest acronym. On the one hand, business leaders are selling the Transatlantic Trade and Investment Partnership as the right medicine to treat Europe’s sick economy.

On the other, TTIP is being met with strong resistance across civil society. Not only do the private negotiations to shape the deal lack transparency, aspects of the deal that have been released raise concern that democracy and consumer protection will bear the costs of improved trade.

In March, an EU-wide coalition of 375 NGOs penned an open letter to MEPs expressing “deep concern” over the agreement. In response, the US Embassy in Copenhagen released a “Call to Action” report, which encouraged Danish businesses to promote TTIP.

But the report’s promise of economic growth, better environmental protection, and higher safety standards was condemned by the Danish Ecological Council (DEC).

“There is no evidence that’s what TTIP would do. I’d almost call it propaganda,” argues Tobias Sørensen, TTIP consultant at DEC.

Whose standards?
It is hard to judge what the impact of TTIP will be, given how little we know about it. While the European Commission and US authorities continue their private talks, it is ultimately the European Parliament has the final say on whether it will be adopted.

But while few details have so far leaked from the negotiations, we do know that its focus is two-fold: harmonising import duties and standardising rules and legislation.

The problem now is that products designed to conform to the EU market don’t necessarily live up US regulations, and vice versa. To fix this, negotiators want to introduce so-called “mutual recognition”, in which products that meet standards in one market are then approved for sale in the other market.

“Broadly speaking, what’s good for an American consumer is also good for a European consumer and vice versa.” says Einer Dyrhauge, Executive Director of the Danish-American Business Forum.

“It’s hard to believe that certain standards on one continent would hugely influence higher standards in the other. We don’t see a real danger there.”

This view is shared by Ole Schmidt, Head of Policy at the American Chamber of Commerce.

“Mutual recognition will make a big difference to all companies, particularly small ones. The critics argue that standards will be lowered, but nothing in the negotiating mandates suggest that should be the case. There are a lot of no-go areas, and the EU and US respect that.”

Fears that the EU will have to accept lower standards from the US are misplaced, argues Christel Schaldemose, Danish MEP for the Social Democrats. She sits on the committee for consumer protection in the European Parliament, and points out that the EU doesn’t always have higher standards than the US.

“No one in the EU wants to lower standards,” she says, adding that when the EU and US modify legislation in the future, it needs to be informed by better transatlantic dialogue.

Goodbye Precautionary Principle
It would make sense that trade between the EU and the US would benefit from harmonised rules. But there are good reasons why the two markets maintain different standards, particularly when it comes to the environment.

In the US paradigm, harm must be demonstrated with a high degree of certainty before environmental regulation can be introduced. The EU, however, has adopted the so-called precautionary principle, which allows it to step in and regulate with a lower burden of proof when inaction could result in significant harm.

The difference in approach has led the EU to ban three insecticides due to the risk they pose to honeybees, while the US argues there is insufficient evidence of harm to ban their use.

“A former US trade representative, now a lobbyist for big businesses, has said that TTIP was only worth doing if the precautionary principle could be done away with,” recalls Sørensen.

“If we mutually recognise any products, it would be a race to the lowest standards,” he says, adding that he prefers a sector-by-sector approach.

“You can’t throw everything in a box and say – now we recognise it all. Our cultures and systems are so different.”

Elephant in the room
Even more controversial is the decision to allow foreign companies to sue governments after a change in law. The Investor State Dispute Settlement, ISDS, is already well established within the EU. For example, the Swedish energy giant Vattenfall demanded €3.7 million in damages from the German government after it halted its nuclear energy programme in the wake of the Fukishima disaster.

“The critics say it’s terrible that you can sue governments – but we’ve always been able to sue governments, it doesn’t mean you will win,” says Ole Schmidt.

“It’s not a question of whether the state has a right to regulate – it’s whether they need to compensate an investor who has invested in good faith, perhaps even several billions, only to see it go up in smoke after a legislative change.”

Sørensen is unconvinced, however, arguing that the necessary legal systems to let businesses sue governments already exist.

“But [the proposed] arbitration body, consisting of three private lawyers who are biased in favour of big corporations – for them to judge whether any regulation or rule is illegal? That is problematic and very undemocratic.”

Christel Schaldemose recognises these concerns and argues that the proposed ISDS mechanism needs to change.

“While it’s fair to have a mechanism to decide on agreement interpretation, it must not compromise the democratic system. If we want a minimum wage, it must be possible. I don’t care if this causes them to get less return for their investment because that’s how it is, a democratic system,” she says.

Calls for greater transparency have plagued negotiations. At a time when the EU is subject to increasing pressure over its ‘democratic deficit’, the debate signals a turning point with respect to the European Commission’s recent commitment to increased transparency.

“It has lacked transparency from the outset,” says Sørensen. “It was just politicians and bureaucrats saying this is going to be a gift to the economy and consumers and everyone will win. Only after a huge amount of pressure were some documents released. We’re scared that a lot of information will be published right at the end, so there will be very little time to scrutinise and discuss it before it’s adopted.”

Schmidt and the American Chamber of Commerce think these allegations are unjustified.

“It’s clear that [people like Sørensen] don’t want change, and will use whatever argument they can to whip up a political storm against it. If the negotiators come up with a result people don’t like, they are blamed for not being transparent – it’s just ridiculous.”

While Schaldemose acknowledges that there is still room for improvement, she also suggests the issue has been overblown.

“Trade agreements between the EU and other countries have never been transparent. You can’t have the public sitting around the negotiation table, but it is important that we can extend our political signals – that is what is happening now.”

A Pew Research study in 2015 puts Danes amongst the most pro-TTIP Europeans, with 71% supporting the deal, compared to only 39% in Germany.

But while they may support the agreement in principle – making trade easier between the two markets – no one yet knows what sacrifices we will have to make to secure the benefits.

One irony is that while TTIP threatens the EU’s precautionary approach to policy, that cautious approach might actually prove wisest when deciding whether to agree to TTIP’s terms and conditions. Until the final agreement is held up for scrutiny and there’s conclusive evidence available, we have little to go on – and that’s a problem. M


By Alistair Cooper

A freelance writer and law student from Scotland, Alistair laps up European politics when most switch off.

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