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26 April 2016

Round 13: the gloves come off

Tempers-fray, support plummets- what you need to know for the 13th round of talks

Simon McKeagney, Editor

Negotiators meet in New York this week for another week of TTIP talks, amidst new polling that suggests support for the agreement has plummeted in the US and in Germany, even amongst the business sector. It found that only 17 percent of Germans believe the Transatlantic Trade and Investment Partnership is a good thing, down from 55 percent two years ago. While in the US, only 18 percent support the deal compared to 53 percent in 2014. Not the greatest news for the leader of the free world to to receive on arrival in Germany. 

US divide and conquer approach

Obama’s high-profile visit to Hannover’s Industrial Fair on April 24 has largely been seen as a signal to European leaders to speed up the talks in order to come to an agreement under his presidency. On Sunday at a press conference with the German Chancellor, he maintained the goal of completing the deal before he finishes office, saying: 

“I don’t anticipate that we will be able to have completed ratification of a deal by the end of the year, but I do anticipate that we can have completed the agreement. And then it will be presented to our various legislatures, our various parliaments, but at that point we will have the negotiations completed, and people will be able to see exactly why this would be good for our two countries.”

Green MEPs Yannick Jadot, Ska Keller, and Reinhard Butikofer criticised his effort to speed up the talks in an open letter published on April 22, highlighting the ongoing concerns that have not been addressed, and urging him to reconsider TTIP and his trade legacy as his approaches his final months in office. An estimated 90,000 people took to the streets of Hannover in protest against TTIP on Saturday. 

His whistle-stop meeting with Merkel and his stopover in the UK has irked some Commission officials also, but for other reasons. They’re worried that the US will try to coax a number of EU governments to accept a ‘TTIP-lite’, thereby slashing ambition, but getting a deal concluded before 2017. European governments are likely to toe the Commission line however, and demand that only a comprehensive, ambitious deal is possible, a view shared by the strongest business advocates backing the deal. However, DG Trade officials have also started to temper their stance that TTIP needs to be finalised this year, saying instead that the deal could still be concluded by the end of 2017 under a new White House. With German and French elections due in 2017, time will tell whether European governments will stick to this opinion, especially as support continues to sink across Europe. 

Procurement at all costs 

One sign that conclusion looks unlikely this year is the fact that even an arrangement on market access is proving difficult to bridge. Both sides are now openly arguing over their market access offers, a basis of even a most basic deal. At the centre of this fight is procurement. The US claim its market is de facto more open, something the EU says is not true. Trade rep Froman and Commissioner Malmstrom traded blows this weekend in Hannover, over who has their facts right.

With greater access to America’s procurement market an offensive interest of the EU, Commission officials are pinning a sizeable chunk of their energy to this issue, signalling their willingness to sacrifice previously sensitive areas and reservations in order to get it over the line. They say that if the US does not provide better terms on procurement by the summer, the ‘end game’ of the talks will not be able to progress before Obama leaves office. 

In particular, the EU want more federal agencies, such as AmTrack and the Federal Aviation Agency, as well as better access to the sub-federal market where federal money is involved and further threshold reductions and extended coverage at state level. 

The US has linked any discussion on better access in procurement to the EU's services offer. They say that the EU’s services list of exemptions and reservations is too long, covering 250 specific services of public interest from various member states. They want it reduced before offering anything more themselves. Malmstrom has explained that as the EU is 28 countries, many of this listed exemptions would be too politically sensitive to offer up, as areas like audiovisual services, cultural and water-treatment services are included in the 'Annex II reservations' by member states.

… And then everything else

Negotiators have signalled that they believe the rest of the agreement can fall into place once the market access pillar has been sufficiently dealt with. On paper that means a mixed bag of progress in some areas and scaled-down efforts in others. The US seem to be point-blank refusing to include an Energy and Raw Materials chapter while Europe has scaled down its effort to include financial services regulation, opting instead for a 'memorandum of understanding'. Regulatory cooperation remains the most important (and threatening) part of the deal, but even it has been subject to redrafting. The politically sensitive proposal for an “institutional setup” has yet to be finalised in text, but there now seems to be agreement on the horizontal ‘good regulatory practices’ and ‘regulatory cooperation ‘chapters, at least on the basics.

The discussion on investor-protection and the Commission’s Investment Court System (ICS) proposal, is said to be “constructive”, though the US remains opposed to some of the suggested changes, like an appellate body. This is a significant development considering the backlash the ICS proposal received from US industry and USTR when it was first mooted, and suggests that both sides are nearing agreement on investment protection, the most high-profile controversial topic in the TTIP debate. 

The TPP doorstopper

The Trans-Pacific Partnership (TPP), while signed, is yet to pass Congress in the US. For this to happen it must be tabled in September so as to progress through Congress before Obama leaves office. Campaigners in the US are concerned that the administration would use the Lame Duck session of Congress to pass TPP quietly with little opposition, as those no longer running or who lost their seats, wrap up their term before the January inauguration, without the need to oppose the deal for re-election purposes. Obama seemed to confirm this strategy in the Hannover press conference, saying:

“With respect to Congress and the TPP, after the primary season is over, and the politics settle down a little bit in Congress and we’ll be in a position to start move to forward.” He noted that he managed to get a majority for fast-track authority and was confident TPP would get past the house.“But I think we all know elections can sometimes make things a little more challenging and people take positions in part to protect themselves from attacks during the course of election season.”

TTIP cannot reach that final ‘end game’ without TPP out of the way, as politically TPP will still be a battle the White House will need to deal with. That cuts a fine line to reach Obama’s goal of a final TTIP draft by the end of the year.

Dynamics shift: EU on the offensive, as are local authorities

Despite the US insistence earlier this year to speed up the talks, and new commitment to double-down during the last round, in terms of substance, the US has managed to drag its feet while pinning the blame on the EU side. Now the table has turned. The EU is adamant that substance prevails over timing, launching an offensive drive to vanquish any mention of a ‘TTIP-lite.’ 

Waning US interest may be down to the US elections, where trade has come centre-stage, and could even impact the passing of the TPP. The acceptance of the Canadian government to accept ICS provisions in the CETA deal also puts pressure on the US to concede on this point.

Finally, the first pan-European meeting of local authorities met on April 21 and 22, hosted by the mayor of Barcelona, to discuss the impact of TTIP, CETA and TiSA on local decision-making. Over 40 mayors, councillors and city representatives, many of which have passed “TTIP free-zones” in their regions, penned a declaration slamming the TTIP negotiations and calling for their suspension. Another battle-line has opened in the TTIP fight. The longer EU and US leaders leave it to simmer, the more likely it is to boil over.

The 14th round of TTIP talks is penned in for July 11 - 15th in Brussels.

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