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The demise of TTIP?

The world has seen a surge in free trade agreements (FTAs) in the aftermath of the global economic crisis, including the emergence of FTAs covering significant segments of world trade. Amongst these FTAs, the Transatlantic Trade and Investment Partnership (TTIP), which is currently under negotiation between the European Union (EU) and the United States (US), would create the world's largest trade area. But recent events have cast doubts on whether TTIP will be concluded any time soon, or whether it would ever be concluded at all.

Background

In 2011 the EU and US decided to start identifying and evaluating different policies and measures on how to strengthen the EU-US trade and investment relationship. This culminated in the launch of the TTIP negotiations in 2013.

These negotiations intend to establish a bilateral FTA that aims at removing trade tariffs and reducing non-tariff barriers (NTBs), such as regulatory and industry standard differences for goods and services. The biggest bilateral trade and investment negotiations ever undertaken are set to encompass all areas of trade flows and hurdles existing between both blocs, including energy and raw materials, agriculture, government procurement, investment, manufacturing, services, regulatory coherence and industry regulatory approaches, sanitary and phytosanitary (SPS) measures, intellectual property rights (IPR), and labor and trade issues.

Main objectives: market access, regulatory issues and non-tariff barriers

The EU and US have been seeking to reach an agreement on how to tackle access obstacles in the areas of tariffs, services, investment, and government procurement.

The current tariffs applicable to trade between the EU and US are already very low (4 percent on average). Removal of these tariffs could nevertheless result in significant savings for those companies involved in transatlantic operations.

In the field of services and investment, TTIP seeks to provide a greater, or at least a similar degree of, liberalization to that already achieved by the EU and the US in other FTAs.

Another key area of discussion has been government procurement, an area where there have been conflicting views in the negotiations. The aim is to establish better access conditions to government procurement opportunities at all levels of government on the principle of national treatment. This implies that EU suppliers, products or services must be treated in the same way, as if they were US suppliers, products or services during government tenders, and vice versa.

An additional challenge has been the setting of common rules to tackle regulatory differences and NTBs. These consist mainly of customs procedures and "behind the border" regulatory obstacles.

One of the most difficult matters addressed during the negotiations is the issue of SPS measures, i.e. measures applied to protect animal, plant and human life and health. Both the EU and US maintain differing views, for instance, in relation to significant restrictions imposed by the EU on certain foodstuffs and their production processes. Some of these are permitted and widely used in the US, such as the use of hormones in cattle or of genetically modified organisms (GMOs) more generally. These issues have sparked intense opposition against TTIP, especially in the EU.

Technical barriers to trade (TBT), such as technical regulations, standards, testing and certification procedures that industrial products must comply with in order to be commercialized, are also being addressed during the TTIP negotiations. Certain notable examples include differing rules regarding cars and other motor vehicles.

Other trade challenges include activities aimed at improving the protection of IPR, rules to ensure a high level of protection of the environment and workers, measures to address bilateral forms of anticompetitive behavior and other actions in the field of customs facilitation.

The conclusion of TTIP, if achieved, could also have positive spillover effects vis-à-vis the rest of the world, according to think-tanks. It is claimed that an increase in trade between the EU and US could add several billion Euros a year to economies across Latin America, Africa and Asia.

As regards the expected time-frame, both the EU and US negotiators had hoped to avoid years of protracted discussions. Originally, the idea was to conclude the negotiations by 2015. The negotiations have, however, faced several delays and are currently far from being concluded. Recently, significant efforts have been made to conclude the negotiations before the end of the Obama presidency.

What is the current situation?

Thus far, progress has been made on areas such as customs and trade facilitation, regulatory cooperation and TBTs, and regulatory issues regarding medical devices, cosmetics, pharmaceuticals, chemicals, pesticides, engineering textiles and automobiles. Key points of contention, however, include the EU's call for greater access to US government procurement markets, the EU's request for US recognition of its geographical indications, the US push for more opportunities for agricultural exports to the EU, and the US call for the EU to fully open its financial services market. Significant frictions also surround the envisaged investor-state dispute settlement mechanism (ISDS), as well as the free flow of electronic data across borders. And while initially significant progress had been made in cutting tariffs on most products, the remaining tariffs on certain sensitive products have proven to be stumbling blocks.

These challenges faced by the TTIP negotiators are unsurprising. The transatlantic trade relationship between the EU and the US has been well-established for several decades, and is already highly liberalized. Therefore, the issues remaining on the table, even the seemingly uncontroversial tariff cuts, relate to those issues that are most sensitive to both parties.

However, recent events have complicated the talks further. Issues such as the Brexit vote and the crackdown by the EU competition authority on Google and Apple have certainly played a role. It has however primarily been the strong opposition from EU civil society against TTIP that has almost killed the negotiations. There have been several protests against TTIP as well as against the Comprehensive Economic and Trade Agreement (CETA), a similar FTA with Canada. This led to the official signing of CETA being delayed by the opposition of Wallonia, a small region in Belgium. While CETA was finally signed with a few days delay on 30 October 2016, the blocking of CETA made it abundantly clear that TTIP would face far bigger hurdles once it would be ready to be signed.

But today the main question is if TTIP will ever even make it to the stage where its signing could be blocked by an EU member state (or one of its regions). Indeed, several politicians in EU member states have voiced strong opposition against TTIP. The German minister for economy has called the negotiations "de facto failed", the French prime minister has called for "a clear halt", and ministers from other member states have made similar statements.

Despite all this, the EU institutions and the negotiators continued to strongly back the talks. But even this has changed in the aftermath of the US presidential election. President-elect Trump had made trade, and in particular trade agreements, a key point in his campaign. Indeed, he was very skeptical of them. His election has led to the EU Commissioner for Trade stating that the TTIP negotiations would be placed "in the freezer" for "quite some time".

Conclusion

The TTIP negotiations were complicated from the start, and many questioned whether they would ever be successfully concluded. After fifteen painstaking rounds of negotiations, the prospects of concluded TTIP negotiations appear as slim as ever. Civil society opposition to TTIP in the EU has grown to unprecedented levels, and has now also been growing amongst EU leaders. Coupled with recent political events that came unexpected to the EU leadership, all this appears to have lead to the demise of TTIP long before its actual conclusion.