EU-USA Trade & Investment (TTIP)
Category : Mairead McGuinness
Updated June 19th
What is TTIP?
TTIP is the Transatlantic Trade and Investment Partnership. It is a proposed free trade deal between the EU and the USA, concentrating on three pillars:
1. Better market access to goods and services, for example through the removal of tariffs
2. The harmonisation of EU and US regulations
3. Establishing new rules on export, import and investment.
TTIP could have wide benefits for the EU economy, helping to generate growth in GDP, cut prices for consumers, and offer more choice – these were the main impacts suggested by an independent study commissioned by the European Commission and published in March 2013, before negotiations started.
How are the negotiations handled?
In June 2013, the European Commission received a mandate from the Council of the European Union (made up of the governments of the EU Member States) to negotiate TTIP on behalf of the EU, with the objective of increasing trade and investment between the EU and the US.
The European Commission consults EU governments at every stage of negotiations, as required by EU law. MEPs are also regularly updated. EU governments and MEPs are also able to view confidential texts not available to the public due to the need for trust in negotiations.
In the interests of transparency, the Commission publishes all the EU negotiating texts that are presented to US negotiators on its website, alongside two-page factsheets in plain English.
The Commission’s TTIP negotiators have actively been reaching out to businesses, civil society organisations, trade unions and others with a stake in a potential agreement, holding consultations and events for stakeholders and the public between and during negotiating rounds. Four public consultations have been held so far.
They have a group of 16 independent experts to advise them, the TTIP Advisory Group, drawn from business, trade unions, consumer bodies and environmental public health groups.
You can also find out more about the EU’s TTIP negotiating team on their website and you can follow them on Twitter.
On the US side, negotiations are being carried out by the Office of the United States Trade Representative. Find out more about the USA’s negotiating position on their website, including a summary of American goals as set out in a letter from President Obama to the US Congress.
What stage are the negotiations at?
Nine rounds of negotiations have taken place so far, starting in June 2013, with the latest round in New York on 20-24 April this year. The tenth round of negotiations is due to take place in Brussels on 6-10 July.
It is currently hoped that the TTIP negotiations will be completed in 2016, although negotiations may last as long as 2017, as they are moving relatively slowly so far. Negotiators have exchanged proposals for about 13 out of 25 chapters.
What is the role of the European Parliament?
The European Parliament is updated by the Commission’s negotiators before each round of talks on the plans and afterwards on the progress achieved. MEPs and Parliament’s Committees are able to provide the Commission with feedback on the state of negotiations and TTIP texts, including restricted texts not available to the public.
The Parliament has also held many public hearings and workshops to allow stakeholders and the public to debate the issues around TTIP. Also available to the public are research and analysis by the European Parliamentary Research Service.
The Parliament is currently reviewing TTIP via a ‘mid-term review’, to provide input for the EU negotiating team.
After negotiations have concluded, the European Parliament will carefully scrutinise the final TTIP text before voting on whether or not to approve it, as will the national governments of EU Member States.
What is the European Parliament’s position?
The European Parliament’s position was agreed at the start of the process in its resolution of 23 May 2013, before the negotiations began.
In this resolution, the Parliament welcomed the economic potential of a transatlantic trade agreement, while setting out important interests and red lines so that European values and standards were not compromised.
For example, the resolution drew attention to the divergences between US and EU standards on matters such as GMOs (genetically modified organisms) and emphasised that there should be no reduction in environmental ambition.
The resolution fed into the negotiating mandate given by EU Member States to the Commission.
Last week, the Parliament was due to vote on an updated resolution, but the vote and debate was postponed and is expected to come before Parliament again in July or September, depending on the outcome of discussions in the Trade Committee on June 29th.
What is the role of EU Member States?
The Council of the European Union, the body made up of the governments of EU Member States, has authorised the European Commission to negotiate on behalf of EU governments.
This mandate was made available to the public in October 2014, following pressure from MEPs and the European Ombudsman.
Member States are consulted at every stage of the process, as required by EU law. They are provided with the Commission’s confidential negotiating texts, ensuring that democratically elected governments oversee the Commission as it negotiates based on the mandate they provided.
EU governments, along with the European Parliament, will have the final say on whether or not to approve the TTIP text negotiated by the Commission and the US Trade Representative.
What do the Irish and EU citizens think about TTIP?
Opinion polling suggests that people in Ireland generally support TTIP. A recent survey by European Movement Ireland suggested 69% of Irish adults supported TTIP. The European Commission’s Eurobarometer for autumn 2014 found 71% of Irish adults were in favour of a free trade and investment agreement between the USA and the EU.
A summary of public opinion across the EU Member States on TTIP is available here, suggesting broad support for a free trade and investment agreement, with the exceptions of Germany, Luxembourg and Austria.
The European Commission has launched public consultations about TTIP, which allow EU citizens, civil society, business and other interested parties to express their opinion.
In 2014, an online public consultation that was open from March until July received nearly 150,000 responses. 97% of these replies were submitted through online platforms that provided pre-defined answers expressing opposition to TTIP.
What is ISDS?
ISDS is the Investor-State Dispute Settlement mechanism, which provides a way to resolve disputes between states and foreign investors.
ISDS is one of the most commonly debated and criticised elements of TTIP, presented as a way for companies to sue governments and hold them to ransom over public policy decisions.
However, ISDS provisions exist in most free trade agreements. EU Member States have over 1400 bilateral agreements with third countries, including the US and Canada, to encourage reciprocal investment and almost all of these agreements contain investment protection and ISDS.
ISDS exists to encourage foreign investment, helping to ensure that foreign investors are able to invest under the same terms as domestic investors – a key part of free trade. It would give EU companies protection against discriminatory regulation when they invest in the US, for example in the services sector, where EU companies are especially efficient.
In addition, the European Commission has launched public consultations to listen to concerns around the potential misuse of ISDS by private firms and has proposed reforms to the system. For example, to avoid frivolous claims, an investor would have to pay all the state’s legal costs if it lost a case. There would also be protections for governments if they introduced measures that did not discriminate on a company’s origin for legitimate public policy reasons, such as protecting health or the environment. The Commission has also suggested making all court hearings and documents public.
The Commission has also proposed including two additional options for solving disputes in TTIP, alongside national courts and ISDS, a multilateral investment court and a TTIP-exclusive bilateral appeal body with seven judges.
For more information and analysis about ISDS, see this collection of sources prepared by the European Parliamentary Research Service.
What about EU standards, particularly in food safety and animal welfare?
Tariffs are not the only barriers to transatlantic trade: currently companies often have to pay and go through regulatory procedures twice, which can prove to be an insurmountable obstacle, particularly for smaller businesses, if they want to export their goods or services.
As part of the pillar on regulatory cooperation, negotiators will be discussing the compatibility of EU and US regulations across different sectors, such as chemicals, cars, pharmaceuticals and financial services. The aim will be to make EU and US regulation compatible.
There are, however, concerns that this will lead to a weakening of EU standards, particularly in the areas of food safety and animal welfare.
However, EU negotiators, while wishing to improve cooperation between the EU and the US on these matters to boost food exports, have emphasised that they will uphold the EU’s strict standards.
In the area of GM foods, for example, US agribusinesses would like the EU to move away from its more stringent regulations, but EU negotiators have maintained that this is a red line that will not be compromised on. Agriculture Commissioner Phil Hogan has stressed that the EU will remain firm on this issue.
For more information and analysis about regulatory cooperation, see this collection of sources prepared by the European Parliamentary Research Service.
What does TTIP mean for Ireland?
The USA is already an important trade partner for Ireland; in 2013, 21% of Ireland’s total exports were to the USA. TTIP could help Irish businesses further expand their exports to the US; for example, small and medium-sized enterprises (SMEs) would find it easier to do business with the USA, as EU and US regulations would be harmonised in many areas.
In addition, tariff protections still present a significant barrier to Irish companies that want to do business in the USA. The average tariff protection for EU agricultural products is 6.6% – and is much higher for dairy products at 22%, including 40% on yoghurts and 33% on certain types of cheese. Every year, Irish exporters pay over $300 million in tariffs to the US government.
The potential impact of TTIP on Ireland was analysed in a February 2015 report prepared for the Department of Jobs, Enterprise and Innovation. It found that TTIP would have a positive impact on the Irish economy, although with varying impacts across different economic sectors.
If TTIP were implemented today, Irish GDP would be 1.1% higher as a result. Irish exports would likely increase by 4%. There would be a corresponding increase in export-related jobs, with 5,000 to 10,000 additional jobs created. Real wages are also likely to increase, on average by 1.5% across all skill groups.
Opportunities would exist for all types of export-oriented Irish companies, but particularly in the sectors of pharmaceuticals and chemicals, electrical machinery, other machinery, agri-food (especially dairy and processed food) and insurance.
There would also be challenges for the Irish economy, and Irish businesses would have to prepare for increased global competition. In particular, the report suggests that Irish beef producers would face greater competition from cost-efficient US beef producers.
An analysis carried out in 2013 by the think tank Bertelsmann Stiftung suggests that Ireland (alongside the UK, Sweden and Spain) is among the EU countries that would benefit most from TTIP in the case of an ambitious deal that tackled not only tariffs, but also other impediments to trade such as policy barriers, including licenses and standards.
Irish business associations have spoken in favour of TTIP. Chambers Ireland strongly supports TTIP in light of the potential benefits for SMEs. American Chamber of Commerce Ireland, representing US firms with a base in Ireland, has spoken of the potential benefits of a free trade deal for investment in Ireland.
In contrast, the Irish Congress of Trade Unions has expressed strong reservations about TTIP and the inclusion of ISDS.
What does TTIP mean for the rest of the world?
The issue of TTIP’s effects on the rest of the world, especially developing countries, has been raised in particular by the development sector.
Studies suggest that the impact of TTIP on the rest of the world would depend on the scope of the final deal, although trade would probably be diverted from third countries.
For more information about the effect of TTIP on different EU Member States and third party countries, see this European Parliament summary of recent studies.
What’s happening in the USA with TTIP?
Free trade agreements have also been receiving societal and media attention in the USA – although greater attention has been paid to the TPP, the Trans-Pacific Partnership. The TPP is a proposed agreement between the USA and 11 other countries in the Asia-Pacific region.
US President Barack Obama is attempting to pass legislation through the US Congress to allow a fast-track ratification of any free trade agreement – including TTIP and the TPP. This is known as the TPA, the Trade Promotion Authority, and would still allow lawmakers to vote on a final deal, but prevent any amendments.
On Friday, President Obama’s own party, the Democrats, defeated him on TAA (Trade Adjustment Assistance), part of the TPA, reflecting their growing opposition to free trade agreements.
What happens next?
As noted above, negotiations for TTIP are still ongoing. After both parties agree on a final text – which may only happen in 2016 or 2017 – it will have to be ratified both by EU governments and the European Parliament.