All hands on deck for the transatlantic market

Paweł Świeboda
Commentary

The geopolitical context for negotiations on Transatlantic Trade and Investment Partnership (TTIP) has changed beyond recognition. But the idea still needs to gain traction with US and EU citizens. One year after launching this largest ever economic bargain, progress is slow. It is not the substance of the talks which is at issue but the question of legitimacy. The negotiators embarked on TTIP talks pretty much as they always would – the two sides have kept their cards close to their chest. The EU has until today not made public its initial negotiating position, much to the frustration of numerous interest groups and observers involved. The intention was to rush to the conclusions and present the package on a take-it-or-leave it basis. It is in that spirit that Michael Froman, the US Trade Representative, spoke about doing TTIP on a single tank of gas. It was thought that given substantial gains from additional trade and investment, in a period of meagre economic growth, the public would have no choice but to cheer.

This plan got derailed last autumn when the NSA saga broke out, blowing a hole in the support for the deal in the pivotal EU country, Germany. Washington had from the beginning underestimated the depth of the sentiment in a country in which safe distance to the US, mingled with a non-negligible current of anti-Americanism, played a powerful role in the shaping of its modern political identity. No-one can doubt the pro-American sentiment of Chancellor Merkel and her commitment to TTIP. However, faced with a blatent manifestation of American intrusion, she herself had no choice but to let TTIP temporarily move to the back-burner of her political agenda.

The NSA acrimony became important not so much by what eavesdropping itself signified, but more because it opened the gates to an across-the-board questioning of both sides‘ political intentions. Those who had always believed TTIP is a US plot aimed at reversing the unfavourable trade balance with the EU, gained the ammunition they wanted. It is worth going through the minutes of the 9 January session of the French Senate, devoted to TTIP, to understand the strength of that emotion. Even the most TTIP-friendly contributions called for a significant scaling-down of the exercise. As a result, it is now mainstream thinking in Europe to argue for the politicisation of TTIP, meaning the tackling not just of the technical issues of trade and investment, but also the wider issues of privacy and mutual trust. Marrying discussions on investor protection with those on values is a nightmare scenario for any government strategist. Nevertheless, what is now clear is that business as usual will not suffice.

The negotiators are on the defensive. In January, the European Commission called a three-month public consultation over the issue of the Investor-State Dispute Settlement (ISDS) mechanism which allows for resolving disagreements outside of the regular judicial system by means of tailor-made arbitration tribunals. Even though ISDS is a well-known mechanism which is part of many bilaterial investment treaties, it has become an explosive issue because many in the EU worry that powerful US firms, with their formiddable legal machinery, would use it to undermine future regulatory progress in Europe in fields such as employment protection or environment. There is a handful of flagship cases around the world which testify to the risk of this. The issue is therefore about nothing else but mistrust in each other’s intentions.

What has also not helped, is the lack of clarity about the exact formula for dealing with behind-the-border, regulatory barriers, removal of which is meant to be the main prize of TTIP. Negotiators have come up with creative terms such as regulatory „convergence“ or „compatibility“, admitting that harmonisation of norms and mutual recognition might not always be applicable, given systemic differences in the way policy is shaped in the US and the EU. They have, however, not been able to explain how convergence is going to work in practice, fueling fears in Europe that lead to the lowest common denominator.

European Commission officials are now beginning to speak of a new governance system for TTIP which would bring stakeholders on board, not just representing the different policy options but also the diverse strata of government. The latter is particularly relevant on the US side where subfederal level is responsible for important issues of public procurement. One way for such a new governance system to be organised is through a Standing TTIP Stakeholder Forum – a permanent platform to bring in the different points of view and ensure transparency. On the European side, the Forum would need to involve government and parliamentary representatives, members of the European Parliament, business and interest groups. Co-chairs of the Forum should take part in the negotiating sessions while the full body should meet both before and after the formal EU-US sessions.

Those who believe this would be unruly will surely find plenty of arguments to prove them right. At the same time, governments cannot assume stakeholders aim at nothing short of blowing up TTIP altogether. On the EU side, ultimate responsibility must still rest with the European Commission and the member states. The Commission’s Denis Redonnet rightly observes that TTIP is about moving from the culture of regulatory competition to one of regulatory cooperation. If this is genuinely the case, there is no reason to worry about lifting the vail of secrecy over the talks. Quite the opposite, the logic of the argument demands that the arrangements are made in the open.

All this might take time. The original objective of having TTIP concluded on the spur of the moment is no longer on the cards. When one looks at the five years it took for the Canada – EU agreement to be negotiated, this should not be suprising. If it succeeds, an inclusive trade and investment negotiation, will be a novelty in global terms. It is bound to be even more consequential than previously assumed. There might be others in the world who will cheer as they watch the occasional transatlantic tension. Yet, the EU and the US will still have the last laugh.