17 July 2014

Do the Commission’s assurances on TTIP stack up?

Examining the issues of ISDS, public services and GMOs

Dr Gabriel Siles-Brügge Lecturer in Politics at the University of Manchester.

The last few months has seen growing opposition from European civil groups and political parties to many potential features of the Transatlantic Trade and Investment Partnership (TTIP). Of the issues raised by various groups, arguably the three controversial have been the inclusion of Investor-State Dispute Settlement (ISDS), the consequences of a liberalisation of public services (especially health) and the impact of the TTIP on EU food safety regulations.

The European Commission, which is negotiating the TTIP on behalf of the EU, has sought to offer assurances on all three issues. On ISDS, Karel De Gucht has consistently claimed that his objective is to ensure that ‘the right of the state to legislate in the public interest is fully preserved’, while on food safety he has strenuously insisted ‘that EU law on hormone beef and genetically modified foods won’t change as a result of this deal’. Finally, on public services the official line (as stated in a letter from the Chief Negotiator to a UK MP) is that the TTIP affords states sufficient ‘policy space’ to maintain publicly funded healthcare services.

But how do these pledges stack up, especially if we consider that the Commission has oversold the benefits of the agreement? While of course coming to a definitive determination at this stage is impossible – because the negotiations haven’t been completed yet, many of the negotiating documents are not in the public domain and a blog entry faces considerable constraints in terms of space – it is certainly worth briefly reflecting on these issues in the light of the available evidence. These tentative responses can hopefully feed into the lively policy debate surrounding TTIP. 

Limitations of 'improved' ISDS 

On ISDS, the basis for my assessment is the consultation document provided by the Commission, which includes numerous excerpts from the EU-Canada free trade agreement CETA, as well as a discussion of the Commission’s aspirations for improving the system of investor arbitration. These suggestions are the thrust of the Commission’s (and others’) arguments in favour of including ISDS in TTIP: it would provide a means of improving on existing bilateral investment treaties (BITs) which offer much less protection against investor claims for states pursuing legitimate regulatory objectives.

It is certainly true that ISDS in CETA (and as appears to be envisaged for TTIP) would restrict the autonomy of states less than existing BITs. But, as is highlighted in a submission to the consultation by a group of prominent political and legal experts, the existing proposals fail to address a number of significant issues, both in terms of investment protection regime and the procedure for ISDS.

These limitations include: failing to sufficiently protect states’ ‘right to regulate’; not spelling out the legal obligations of investors in host states; allowing tribunals far too much discretion in assessing investment protection provisions; not addressing the issue of ‘forum-shopping’ (i.e. that investors can essentially pick the most favourable investment protection regime) and not dealing with potential conflicts of interest in the adjudication process. More generally, and regardless of whether the system is substantially reformed, the authors conclude that ‘the system involves a shift in sovereign priorities toward the interests of foreign owners of major assets and away from those of other actors whose direct representation and participation is limited to democratic processes and judicial institutions’.

'Policy space' for public services

On public services, which have been a particularly contentious issue in the UK where fears have been raised about the privatisation of the NHS, the Commission has insisted that in the EU-Korea FTA ‘the EU and its Member States have reserved full policy space for publicly funded health services, such as hospital and residential health services or ambulance services, by not including them in the scope of commitments’.

This is not untrue (as a reading of the EU’s services market access schedule in the EU-Korea FTA will confirm). But of course, what such statements fail to mention is that Member States can choose to commit their public services to liberalisation in the agreement. A reading of the leaked (and admittedly, draft) EU services market access offer confirms that, in the specific case of health services, medical, dental and ‘services provided by nurses, physiotherapeutic and para-medical services’ are included in the market access schedule (with some limitations on market access and national treatment which vary by nation state). Moreover, critics of TTIP have also pointed to the limited ability of existing safeguards to protect the NHS, which they argue does not fall under the definition of a service supplied ‘in the exercise of governmental authority’ because it is often supplied on a commercial basis and in competition with other service suppliers.

Food safety regimes worlds apart

Of the three issues discussed here, food safety is probably the least likely to be significantly affected by TTIP, as the agreement is unlikely to overhaul institutionally embedded food safety regimes. Scholars often point to the entrenched nature of the regulatory systems on both sides of the Atlantic – with the US employing a science-based approach to risk assessment and the EU a more restrictive ‘precautionary’ one. There has been little regulatory approximation in this domain between both partners despite several attempts to do so.

That said, there is considerable pressure from agribusiness on both sides of the Atlantic to soften the EU’s approach. Evidence from Corporate Europe Observatory shows that  lobbyists for this sector  met most frequently with Commission officials regarding the TTIP. For the US’s part, Secretary of Agriculture Tom Vilsack has pushed for a more permissive ‘science-based’ approach to food safety regulation.  Moreover, the same scholars who point to the entrenched nature of transatlantic regulatory regimes also point to ‘the Commission consistently attempting to use international pressures to secure reforms to domestic European legislation [on GMOs]’.

In this vein, De Gucht’s comments to the European Parliament on 15 July 2015 that ‘we should rely on the opinions of our own scientists in EFSA [the European Food Safety Authority] and not on ideology’ seem to position him closer to the ‘science-based’ approach than the ‘precautionary principle’. Thus, even if TTIP makes little headway on this issue, the prospect of a ‘living agreement’ with a strong ‘regulatory cooperation’ chapter – which would potentially involve discussions between regulators on ‘any planned and existing regulatory measures […] with significant […] impact on international (and in particular) transatlantic trade’ – means that potentially the ‘precautionary principle’ could still be diluted over time in light of the increased mobilisation of agribusiness on this issue. Indeed, the EU would not, strictly speaking, need to completely overhaul its system of food regulation to do so: a recognition of certain US food safety standards would be all that was needed.

All in all, the Commission’s assurances on these three issues do not appear to tell the whole story. Accusing critics of TTIP of spreading ‘lies’ (as De Gucht has done on at least one occasion) is not fair. Important questions still need to be answered regarding the TTIP’s impact on domestic policy space and existing levels of social and environmental protection in the EU.

Bio note

Dr Gabriel Siles-Brügge is Lecturer in Politics at the University of Manchester.  His research and teaching interests lie broadly in the areas of European and International Political Economy.  His book Constructing European Union Trade Policy: A Global Idea of Europe has recently been published by Palgrave Macmillan.

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