EU’s trust issues may delay TTIP negotiations

EU’s trust issues may delay TTIP negotiations

Trade liberalization negotiations are on their way between the US and the EU, and may lead to the biggest bilateral trade agreement in history. However, the EU is putting the brakes on certain sensitive issues.

Despite the WTO’s modest breakthrough in December, the general view is that multilateral trade negotiations are sluggish, and countries have an incentive to turn to alternative arrangements to liberalize trade. As a result, the world has witnessed an increase in bilateral trade negotiations, and the Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU will be the mother of them all.

Formal negotiations for the TTIP commenced in July 2013 and have since passed through three rounds of negotiations, with the latest round concluding December 20, 2013. Because the EU and US constitute roughly 40% of global trade and 75% of the global financial market, the benefits of a fruitful agreement are potentially huge. Estimates often put this at over $100 billion per year for both the US and EU economies.

The geopolitical ramifications of a successful agreement are also enormous. If the two main economic superpowers on the planet agree to a unified set of regulations in trade, finance, and investment, this will put significant pressure on the rest of the world to dance to the same tune and implement similar regulations. For many countries this will pose a challenge having to choose between national or international pressures.

The stakes are high and there is pressure to address all controversial issues properly. Whereas all trade negotiations will inevitably attract opposition from elements including human rights or environmental actors and protectionist sectors, the sheer size of these negotiations means suspicions are extraordinarily high. In fact, it is the EU’s lack of trust that seems to be the biggest risk to the TTIP negotiations being completed on time.

The first obstacle is the issue of joint data protection. With the scandalous Snowden leaks uncovering the NSA’s infiltration of European public and private data, this issue has become a hot topic, not least of all for EU leaders. At the Munich Security Conference this year, the European Parliament Foreign Affairs Committee expressed particularly strong concerns over the safety of European data vis-à-vis United States intelligence authorities.

This is problematic because, like the US Congress, the European Parliament’s approval is required for any systemic trade deal such as the TTIP to be ratified. The European Parliament, facing elections in May, is also keen on being especially respectful of EU public concerns, one of which most certainly is private data protection. European Council President Herman Van Rompuy confirmed that this issue has now become a central concern for all European trade discussions.

The second obstacle is the controversial investor-state dispute settlement mechanism. The mechanism would allow investors to sue a state in an international tribunal over any harm done to their investment interests in that country. This would essentially limit a state’s ability to make changes to its own environmental or social regulation policies, but it would also serve to create a more investment-friendly atmosphere.

In any case, the European Commission has now officially postponed talks concerning the dispute settlement mechanism, with the EU Trade Commissioner Karel de Gucht stating that “governments must always be free to regulate.” It is the European Union member states that have been most wary of the mechanism, and now they now plan extended public consultation before talks can resume.

The next official EU-US negotiation summit will be held on March 26 in Brussels, and it will also be the first official visit that President Obama pays to the ‘heart of Europe’. If these trust issues are not resolved during that visit, a solution will probably have to wait until after the European Parliament elections. If this is the case, it seems highly unlikely that the TTIP negotiations will finish before their end-of-the-year deadline.

Categories: Economics, International

About Author

Karl Sorri

Karl has gained global experience working at the Transparency International Secretariat in Berlin, the Political/Economic Section of the U.S. Embassy in Helsinki, and as a freelance journalist. Karl holds an MA in Politics from the University of Glasgow and an MSc in International Relations from the London School of Economics.