Bursting the Bubble

The TTIP Negotiations: A Transatlantic Perspective

26 November 2013 | by

The Transatlantic Trade and Investment Partnership (TTIP) is set to become a defining moment in our relationship with America, on par with such historic events as the Fall of the Berlin Wall, or the 9/11 attacks on New York City. For the European Union (EU) as an organisation, having only achieved its current legal and institutional framework in 2009, the TTIP Negotiations will mark its first “personal” milestone as an actor on the world stage. On both sides of the Atlantic, politics seems fractured, and the effects of the recent international crisis linger in the minds of regulators, industry, politicians and the public alike.

So, where are we?

The TTIP follows in the wake of (or indeed, during, for many citizens) a prolonged period of crisis in Europe. The European Single Currency, the Euro, came frighteningly close to collapse and societies, largely in the geographical south of the continent, appeared at times close to breaking point. Crisis in the Eurozone prompted the hard-line anti-EU and anti-immigration United Kingdom Independence Party (UKIP) and the deeply Eurosceptic wing of the British Conservative Party to demand a looser relationship with the Union, much to the distain of many European capitals. A more in-depth discussion of the Eurozone Crisis and various other “moving parts” in the European system will be discussed in a moment. However, the decision to embark upon a quest to create the world’s largest trading bloc (no mean feat), as well as face the uncomfortable questions relating to how US and European regulators function, not to mention public perception, cannot be seriously considered without understanding the seismic events taking place in the EU.

EU and US negotiators met in WashingtonD.C. from July 8. to 12. 2013 across 24 Working Groups to develop a framework for the projected Transatlantic Free Trade Area. This pragmatic style of negotiation is indicative of the goals each side is trying to reach. Both parties are seeking higher levels of investment and trade to combat unemployment and economic uncertainty. In the weeks prior to the start of Negotiations in Washington, the French government set about securing the sanctity of l’exception culturelle, in effect safeguarding French (and governments across Europe) subsidisation of film and audio-visual media, deemed unable to compete with an omnipotent Hollywood. This ran contrary to the position of the European Commission which sought to keep Europe’s cards closer to its chest.  Although the Commission’s commitment to supporting and protecting European culture cannot be brought into question, French comments sparked similar demands from American Agricultural organisations and Financial Institutions. Despite these initial bumps in the road, the Working Group structure isolated areas of issue (on both sides) and those of promise, setting a framework to work through the various regulatory fields.

Despite a difficult economic period on both sides of the Atlantic, governments and regulators were able to successfully hold the Washington Round of talks, with chief EU Negotiator Ignacio Garcia-Bercero commenting that “the main objective has been met: we had a substantive round of talks on the full range of topics that we intend to cover in this agreement. This paves the way to for a good second round of negotiations in Brussels in October.”

The challenge of different regulatory cultures:

During the first round of negotiations (Washington), the EU’s controversial Common Agricultural Policy (CAP) – which subsidises large parts of the European Agricultural Sector – Financial Services, and American sanitary and phytosanitary (SPS), which were already under deep political discussion in Washington and Brussels following the global banking crash of 2008, were seen as key areas of contention.

The second (Brussels) round of negotiations discussed, in principle, investment rules, trade in services, energy & raw materials, as well as “regulatory coherence, technical barriers to trade and sectoral approaches”, as described by the Commission’s Trade Spoke-service. These topics, although clearly important, are however, somewhat removed from concerns on both sides of the Atlantic (although as a European, I was sickened at the thought of my foie gras or veal being washed in bleach in American processing plants!). The EU has long praised itself (and has even been praised by others!) at being at the forefront of environmental protection and having high food standards. The concerns come amid claims from the environmental lobby that firms would be granted the right to sue governments for losses resulting from democratically made laws, designed to protect citizens. Not being present in the meetings myself, I cannot say if this is true or not, or even if I believe it is (which I hope it’s not, usually a bad sign…). It is a concern of mine.

The European Commission however has, perhaps more than any US administration, been hampered by the small-state radicals who cherish the “freedom” of poverty to the “socialism” of welfare (alarm bells in the UK may be heard ringing here), basing much of its legislative reputation on consumer and citizen rights. Moving specifically to the difficult issue of Financial Services, the US also has its reservations on the suitability of EU legislation. The Drank-Dodd Act, a signature piece of mid-crisis legislation, predating European Banking Union, is taken very seriously in Washington. Any concerns that European regulation my hamper the bills applicability or functionality, will be taken just as seriously in turn.

Perhaps here lies the light at the end of the tunnel – that dangerous hope. Policy makers, regulators and citizens are moved by the desire to defend protective legislation, especially with the GOP in opposition

External factors:

Given that the US perspective on this discussion is not being covered in this piece, I will spend very little time on the topic of the US Government Shutdown. However, it is also important to acknowledge the European perspective on this event and its implications. First and foremost, the Shutdown delayed the second round negotiations from commencing, much akin to the issues surrounding l’exception culturelle in July. While the European project has been tested to the fullest by the financial hurricane since 2008 (although it has made it through the crisis with an institutional and monetary system stronger than that before), the US – armed with a much more established currency and light-touch regulatory framework – is often viewed as the stronger partner.

To some in Europe, the US Shutdown was viewed with a little Schadenfreude (although never by me, of course…), after consistent calls by the Obama Administration to, one way or another, deal with the crisis in Europe. It was US brinkmanship over an issue as basic as social healthcare which threatened to launch the world into an economic apocalypse. To those with more emotional restraint, or taking a long-term view, the Shutdown reminded many that domestic concerns surrounding those in poverty and without health insurance (as well as the unemployed or those living in poorer areas) was, by default, at the top of the US agenda. In both Washington and Brussels, officials’, crisis weary, and accustomed to consistent political deadlock, stand to use the TTIP as a demonstrable sign of their commitment to support growth in the transatlantic area.

Between UKIP and the Eurozone – the TTIP and the political struggle towards a European idea:

In the EU, a five year recession in the Eurozone, as well as anaemic growth in the UK and Eastern Europe, has placed combatting unemployment (in many cases, Youth Unemployment) at the top of the agenda. Beyond this rather more obvious reasoning for an ambitious trade deal, the EU, given that it is EU Officials, not those from the Member State Governments, who actually serve as the negotiating Partners, also has something to gain. The Crisis in the Eurozone, as well as rising populism in across the EU, has seen much criticism directed at the EU Institutions. Rather unloved as they are and distant as they are perceived (or vice-versa), the TTIP represents an opportunity for the self-same Institutions to deliver jobs and growth on a scale not seen since the Single European Act and deepening of the Single European Market.

As the dust settles, the role of the Eurozone Crisis can be viewed as adding the impetus to negotiations. The Crisis served to highlight the need for Eurozone authorities to support large firms, SMEs, and all manner of economic services to restore growth to the currency and its Members, the TTIP is a means to these ends (although these ends are typically at the core of any centre left/right elected government). The TTIP has a special significance in the UK. Or, to be more precise, the UK’s role in Europe (a topic dear to my heart and best avoided in the pub for those wishing to get a word in). Eurosceptics from both sides of the Commons, and extremist UKIP, have called for the re-establishment of Britain’s national sovereignty against the best interests of the population (and ignoring the fact that by making the City of London a key global financial centre – a policy advocated by Nigel Farage and by the right of the Conservative Party – sovereignty is revealed to be an illusion, the unattainable autarkic dream of the isolationist. A decidedly Atlanticist UK, (in)famous for its failure to understand the key rational of the European project (shared by the Scandinavian Member States) is undoubtedly a key player in the TTIP negotiations. A close partner of the US and MemberState of the EU, the TTIP provides a powerful argument to those in the UK who see the enormous potential of EU Membership – the TTIP could not be achieved by Britain alone. This is of particular salience now as the UK continues to struggle to reconcile itself with its (natural) position in Europe. After two decades of uncontested press hostility and the rise of the far right UKIP, the TTIP presents a national platform where the values of Membership of the world’s largest trading bock can be seen as unequivocal.

The second round of TTIP negotiations followed an interestingly mirror image of the first. Following French threats regarding the inclusion and exclusion of certain policy areas, the Washington Round was successful and established a way forward. Following the US Shutdown, a similar mood fell over the talks. Once again we hear news of “good progress” and “nothing off the table”, even in advanced discussions such as Financial Affairs. Issues raised concerning public fears of a decrease in consumer protection are yet to be vindicated. However, decision makers and negotiators are also yet to prove their honest intentions, beyond bland assurances. We can be sure that the evolution of the TTIP and interchanging public debates that accompany it, will be one of the most important milestones in the development of the transatlantic area, since ships, people and trade started to routinely cross it.

3 Comments

  1. For one–rather than the fall of the Wall or 9-/11, a better comparison might be the Economic Cooperation Act or European Recovery Program, or Marshall Plan, whatever name you choose for establishing US regional hegemony. The TTIP could very well amount to building a new wall separating BRICS from EU-US. Consider that much of the TTIP discussion falls along the lines of trade and investment rules in developing countries. TTIP and TTP may attempt to isolate BRICS from engaging developing countries in their relatively appealing State-owned investment protocols and redivide the world– as the US did with the Marshall Plan.

  2. I agree with onibaba1 – don’t compare 9/11 and the Berlin wall to TTIP. From an American perspective it can be seen as a bit inappropriate, since that is the most tragic event in US recent history resulting in the death of innocents. Marshall plan is much more appropriate, and as pointed out applicable.

  3. The way I see it:

    The financial crisis has demonstrated the utter regulatory failure of the United States. Europe became their “bad bank”. 911 demonstrated the air defense incapability of the US and the unreasonable governance responses to the psychological warfare of the terrorists. It appears large parts of their political class are unreasonable.

    In many areas our EU authorities do what US regulators are disarmed or unwilling to do, think of high profile competition cases, think of privacy laws — while the US struggle to get a universal health insurance done. Whenever a regulator from the US visits Europe he tells us how much government regulation sucks. In other words, these are not the persons to interfere with EU regulations (but the wrong persons put on their job by the US system).

    The US is perfectly capable to unilaterally harmonise with the EU to modernise its environment, without TTIP. What 27 sovereign nations agree upon can’t be difficult to get adopted by a 28 nation. We don’t need the hormone meat, the chlorinated chicken, and the gene corn and other TTIP goodies from the USA. Before the US does not revise “Buy America” it is pretty pointless to discuss Free Trade and governent procurement. Before the US does not terminate its spying and privacy violations it is pointless to disarm our capability to regulate US software services from our market as a matter of defending our national security.

    The US lead in defense capabilities, we lead in order and regulation. It is foolish to invite the US (corporations) to water down our joint regulatory standards.

    I can’t see why an emerging EU power should tie itself to an fading empire with utterly broken regulation and governance. Rather we should interface with Canada, Australia, Israel and other nations of the Occidental community and wait for the US to harmonise unilaterally with the EU set standards. The strong gravity center of the EU would be seriously compromised if we get on terms with the US via TTIP at this stage.

What do you think?