18 February 2014

Commissioner De Gucht in Washington: Towards the TTIP - Stepping up a gear

We have divided the negotiations into three different areas. We have work to do on all of them.

The first area is market access – for goods, services and public procurement… All three aspects of the market access negotiation are equally important. It is essential we move forward on all of them in parallel in order to keep a good overall balance.

The second area of the talks we need to work on in the coming months is what we in the trade world call "rules". I'm thinking of the vital work we are doing on trade facilitation.., I'm also thinking of the hugely important disciplines we are establishing on state–owned enterprises... The same goes for rules on raw materials and energy… and I'm thinking of the crucial issues of labour and the environment. We need to make absolutely sure that transatlantic trade and investment supports, rather than undermines our high standards on these sustainable development issues. We will not sacrifice them for commercial gain. On the contrary, this agreement offers the potential to go beyond what we have been able to include in previous trade agreements on these issues.

The final area we need now to work on is certainly the most difficult. But also the most important: reducing regulatory differences to facilitate trade. It's difficult technically and difficult politically.

The technical difficulties are obvious. In what we might call the good old days, trade negotiators only had to work with tariffs and quotas. Those are fairly simple tools to understand. As are the effects of changing them. However, if – as trade negotiators – we want to deal with regulatory issues, our discussion suddenly becomes broader and more complex. Broader because – and it's obvious – regulators, not trade negotiators, are in charge of regulations. We will get nowhere without their full implication in our work.

More complex because – if we want to make trade easier without undermining the objectives of the regulation – then we need to come to grips with whole new areas of policy:

• We must understand and respect the purpose of the laws and rules we are dealing with– to protect human health, the environment and financial stability.
• We must come to terms with entire new fields of expertise – biology, chemistry, even psychology – though negotiators already know a thing or two about that.
• And we must master the legal mechanisms that put regulatory goals into practice – standards, inspections, conformity assessment.

As to the politics, both the European Union and the United States strive to remove all politics from regulation. For good reason, concepts like independence and impartiality of the regulatory process are at the core of how our systems are designed.

But despite this fact, in neither system have we have been able to eliminate politics entirely. When it comes to basic regulatory choices, politics is necessarily involved. Your laws are decided by Congress. Ours by our own legislature – the Council of EU Member States and the European Parliament – on the basis of a Commission proposal. Moreover, even when regulators have full delegated powers, we know that every day they are forced to make judgement calls based on the information available – even when it is imperfect. Uncertainty is a fact of life, which is why the precautionary principle plays a role in both of our systems and is enshrined in the WTO.

And alongside all of these decision–making processes, we know that the public debate between interest groups of all stripes is every bit as political, every bit as passionate, as any electoral campaign – regardless whether it refers to primary law or executive action.

That complex world is the context where TTIP takes place. As a result, in Europe at least, we have already seen that people have very serious concerns about what TTIP might mean for regulation.

What it means is that our shared objective:…to lower barriers to trade and investment enough to have a real world economic impact on the world… while keeping the levels of regulatory protection that our citizens have chosen… is going to be a challenge.

Let me be clear: it is certainly possible. 30 years ago, the European Union went much further than we will go with TTIP. We were able to demonstrate to people that it was possible to adapt our rules and reach common standards while still maintaining the highest levels of regulatory protection. But it will require hard work – from trade negotiators and from regulatory authorities – in the coming weeks and months. That means looking at both horizontal rules about how we make regulation and solutions to current sector-specific problems with equal care.

If we want a result that makes a difference, we need to look at the way we produce regulation. Can we make the processes more transparent so that we can give useful feedback at the early stages of the regulatory process? Can we encourage the regulators to deepen their relationships so that they brainstorm solutions to new challenges together?

At the same time, if we want to be credible we need to find a critical mass of regulatory solutions for specific sectors.

(...)

Buckling down to take all of these areas forward – market access, rules and regulatory barriers – will require effort. So we had better know why we are doing it. The answer for me is very clear – growth and jobs on the one hand, and strategic vision on the other...

And this is why both the regulatory and the rules part of this agreement are so important. At the most basic level, TTIP provides a laboratory for future global disciplines... The role of TTIP is therefore to pioneer solutions that can later be applied more widely – especially as they will already be operating in 40 per cent of the world economy.

Looking further ahead, one thing about the 21st century is certain. It will be a multipolar century, neither American nor European. The European Union and the United States will still be important players but we will have less weight than in the past. By 2050, our share of world output could drop by as much as half. That is a natural consequence of the spread of prosperity to other parts of the world. As such, it is certainly to be welcomed.

It will – however – have an impact on the rules–based international system that Europe and America have championed together over the last 60 years. That system needs to adapt to accommodate the new rising players – as the WTO showed us in Bali is possible. But Europe, America and the world as a whole also have a very strong interest that the system continues to be based on principles not only of economic openness, but also of high standards for health, the environment, labour and consumer protection. On these issues the truth is that the EU and US share much more than where we differ. TTIP, by bringing us even closer, strengthens the position of our shared values on the global stage.

Full speech

EU trade chief following EU-US trade deal stock taking: good progress, time to go the extra mile

"Stepping up a gear" (press statement)

Further speech: Stronger Foundations for Europe's Economic Future, 19.2.14

Webpage

In a letter to the FT (subscription) on 16 February, trade ministers from nine EU Member States, including the UK, Italy and Sweden, said that it was "more important than ever" not to lose sight of the strategic importance of the TTIP.

"Tariffs that are still an obstacle to transatlantic trade must be eliminated. And addressing unnecessary regulatory barriers will generate a substantial part of the benefits that we expect from the agreement, especially for our small and medium-sized enterprises.

The EU and the US should open up the transatlantic market, building on the standards we have set in the areas of environment, labour, security and health. That said, the negotiations will be broad and complex, which will require great constructiveness and flexibility on both sides to reach a balanced partnership agreement, for mutual and long-term sustainable benefit. In this we are aware of the benefits to and interests of exporters, workers, consumers, investors, farmers, entrepreneurs and environmentalists on both sides of the Atlantic and wider afield.

Importantly, several EU and US trade partners have expressed interest in the TTIP. Studies show that the positive economic effects will go beyond the EU and US economies. We will work wholeheartedly for this to be an inclusive agreement.

We will also strive to make the process as transparent and open as possible. Our outreach activities will therefore involve all sections of society: the business sector, trade unions, consumer and environmental organisations and other stakeholders.

It is our firm belief that the TTIP will be able to unlock the full trade and investment potential between the EU and the US. This will strengthen our competitiveness, create jobs and spur growth. Together we will work intensively to achieve success."

Signed:

• Ewa Björling, Minister for Trade, Sweden
• Richard Bruton, Minister for Jobs, Enterprise and Innovation, Ireland
• Carlo Calenda, Vice Minister for Trade, Italy
• Jan Mládek, Minister of Industry and Trade, Czech Republic
• Jaime García-Legaz Ponce, Secretary of State for Trade, Spain
• Mogens Jensen, Minister for Trade and Development Cooperation, Denmark
• Ian Livingston, Minister of State for Trade and Investment, UK
• Lilianne Ploumen, Minister for Foreign Trade and Development Cooperation, The Netherlands
• Alexander Stubb, Minister for European Affairs and Foreign Trade, Finland

Comments

Green trade policy spokesperson Yannick Jadot stated: "Instead of blindly pushing ahead with backdoor negotiations on this potentially far-reaching agreement, the Commission should be heeding the growing opposition from civil society and the public to TTIP. If the Commission was truly looking to 'take stock' of the situation, it would be proposing the suspension of the negotiations.

"A transatlantic partnership implies a relationship based on mutual trust, respect and shared values. However, the NSA surveillance scandal has revealed that US authorities have treated European governments and citizens as if they were enemies. It is impossible to see how negotiations on a transatlantic partnership can continue in good faith against this backdrop.

"There are real concerns that TTIP could threaten core EU standards and rules, whether as regards the protection of public services, intellectual property, food safety, GMOs, geographical indications, health or environmental standards. The prospective investor-state dispute settlement mechanism (ISDS) is a massive Trojan horse, which could be used by multinational corporations to whittle away EU standards and regulations across a range of policy areas. These concerns are only amplified by the lack of transparency in the negotiations. For all these reasons, the Greens believe it is high time the TTIP process was brought to a halt." Press release

Insurance Europe would like to see the EU and US work towards full market access and national treatment for the insurance sector, going beyond the commitments made under the World Trade Organisation’s (WTO) General Agreement in Trade on Services (GATS) (the limitations are described state by state).

Insurance Europe also believes that the TTIP should include ambitious transparency standards, including a compulsory consultation process for the establishment of any prudential carve-out and following a potential carve-out being agreed a process for the discussion of the application of it.

Insurance Europe encourages EU and US negotiations to discuss in the TTIP one major market access concern, the US reinsurance statutory collateral requirements. Insurance Europe has long opposed the collateral requirements in the US. These requirements constitute a discriminatory market access barrier judging reinsurers exclusively on origin, ignoring a reinsurer’s financial strength, rating and claims-payment record, history of participation in the market and quality of domestic regulatory regime.

The Frankfurter Allgemeine Zeitung reports that shortly before the meeting, Bavarian Finance Minister Markus Söder (CSU) demanded that the EU and the US should include stricter rules for financial markets in the TTIP agreement. "European and German standards must be extended, not reduced", he is quoted in the Handelsblatt. "This is especially true for financial markets."

One thing Söder urged the United States to accept was a broader definition of the term 'bank' - which would then allow regulation of the so-called "shadow banks". He further insisted that the German three-pillar model of private banks, cooperative banks and savings banks should be allowed to remain. In the context of banks' required capital strength, Söder accused the US of being a "sham" because of its less stringent accounting rules. America should furthermore work together with the Europeans to control the risks of high-frequency trading. 

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