TTIP & responsibility in trade agreements – Can these be reconciled?

Projekt MORE is actively engaged in analysing the potential impact on small and medium-sized enterprises (SMEs) of trade agreements currently under negotiation – such as the Transatlantic Trade and Investment Partnership or TTIP, the Comprehensive Economic and Trade Agreement or CETA and the Trade in Services Agreement or TISA. Projekt MORE aims to inform the public debate about risks to local economies in Europe. Projekt MORE is not opposed to free trade, provided it takes place in accordance with fair and responsible rules. Projekt MORE endeavours to promote agreements that foster the interests of business as well as those of society as a whole.

Questions

As a motor of the European economy, small and medium-sized businesses are also aware of their responsibility towards society and the environment. Trade agreements such as TTIP, CETA or TISA, therefore, raise fundamental questions concerning trade policy for SMEs.

The lack of transparency surrounding the negotiations does not cohere with a concept of shared sustainable development of the economy and society and does not comply with fundamental democratic principles. This is especially true insofar as TTIP and CETA are not classical trade agreements but agreements that will encroach profoundly on state legislative contents and procedures. Nevertheless, the negotiations continue to be conducted behind closed doors. Although since early 2015 the new commission had published a portion of the original negotiating documents, they are in part outdated and the especially important shared textual foundations of the negotiating committees remain secret, as do the U.S. proposals. In future, members of Parliament are supposed to be able to examine the texts in so-called Reading Rooms, but without any opportunity to discuss them with their electorates or to consult with external experts.

The ambitions of TTIP and CETA go far beyond any existing trade agreements. Tariff barriers to trade between the USA and Europe in the form of customs duties and charges have already been reduced to negligible levels and stand at some 3% on average. The principal stated aim of TTIP is in fact the removal of the remaining ‘non-tariff barriers’, that is, the existing statutory rules and regulations, so that these no longer stand in the way of business interests – on both sides of the Atlantic. These non-tariff barriers, however, are just another name for the social and environmental standards established over a long period of time and act as a necessary brake on the unrestricted pursuit of economic efficiency and profit.

Since the parties foresee that it will not be possible to test all standards for convergence within the framework of the TTIP negotiations themselves, they plan to include a process – called Regulatory Convergence – within TTIP “that allows for progressively greater regulatory convergence over time against defined targets and deadlines”. The proposal is to entrust this process to a regulating council which will develop new standard and make decisions on mutual recognition far removed from public and democratic decision-making structures. New guidelines and regulations, but also laws at the level of the member states, will have to be declared at an early stage to the U.S. authorities and subsequently withstand a time-consuming consultation and voting process. Even if at the end of the day both sides have a formal right to decide independently on their laws and regulations, it is to be feared that proposals which do not meet with the agreement of the other side will be subject to considerable delays or even may never see the light of day. The EU Commission’s negotiating proposal envisages that guidelines and regulations will already be coordinated with the U.S. side before they are presented to the Parliament.

Because of limited resources, trade barriers and bureaucratic regulations pose disproportionate challenges for SMEs in particular. A chapter for small and medium-sized enterprises and the envisaged creation of an online help desk which affords SMEs easier access to information about market opportunities, customs duties, taxes, and regulations must therefore be welcomed.

Nevertheless, SMEs merit more consideration than just a single chapter of the agreement. TTIP should follow the European ‘think small first’ principle in all areas. Otherwise with TTIP we run the risk of creating an agreement tailored to the interests of the large corporations on both sides of the Atlantic.

Up to now, the precautionary principle has applied in the European Union. According to this principle, new products or technologies may be introduced only if it has been proved that they do not cause any consequential damage. In the United States, by contrast, consumer and environmental safety are regulated through the possibility of suing for damages in accordance with the principle of science-based evidence. There, any new product or technology can be offered freely on the market until its harmfulness can be demonstrated. But then the damage to human health or the environment has already occurred and can no longer be made good even through compensation payments.

Mutual recognition of the two systems would amount to a clear competitive advantage for American companies. While the harmlessness of a product would still have to be demonstrated in Europe, the product could already be traded in the United States. This would be to subvert a successful principle which protects the environment and human health while at the same time offering small and medium-sized businesses in particular maximum legal certainty.

The Investor-State Dispute Settlement (ISDS) regulations provided for in TTIP and CETA constitute a parallel judicial system without a court of appeal. But both the EU and its member states as well as the United States are functioning constitutional states which have no need of special rights for foreign companies. For SMEs it is impossible to bring a case before an arbitration tribunal already on account of the immense legal costs. In addition, there is the danger that this procedure will enable large corporations to wield undue influence over political decision-making processes. Even the threat to bring an action could lead a government to decide against introducing planned social welfare or environmental protection legislation.

Although the EU Commission has presented a reform proposal for the negotiations over TTIP which would purge the worst excesses of the ISDS system, nothing has been done to address the fundamental problem. It is still proposed to construct a parallel legal system which provides legal remedies for foreign companies and international corporations alone, but not for states or social organizations. Furthermore, even if TTIP reflects a ‘reformed’ approach to investment protection, the ISDS regulations in CETA leave open the possibility of legal remedy. CETA, therefore, functions as a backdoor of TTIP.

A less obvious consequence may be that as Europe loses its distinctive and authentic businesses and its ways of doing business, it will also lose its cultural differences and becomes generally ‘Americanized’. European Cities could lose their unique feel and quality of life and thus their attractiveness as places to locate business, to visit as tourists, to spend time at university or to move to for work.

European Culture could become steadily marginalised and become a museum or theme-park artefact rather than a living culture sustained on the streets and in the fields and forests, and in commerce and business. Even without the direct import of goods, services and practices from the US, TTIP’s provisions could make Europe much more vulnerable to domination by multinationals.

Cultural convergence and the progressive loss of Europe’s small businesses is not an option which has been put to the European people, or even debated by thinkers and politicians, yet it may be decided by adopting TTIP.

What is Projekt MORE

In these times of ever-increasing globalisation, it often seems that profit maximization has become the sole focus of business interests. Environmental and consumer protection, tolerance and democracy are being increasingly pushed into the background. In 2015 Projekt MORE GmbH was established to challenge this trend and to promote these values. Together with partner organisations in Germany and internationally, Projekt MORE is striving for a more equitable global economic order, which supports measures to:

Team

Sabine Frank
Head of Campaigning, Brussels

sabine.frank@schoepflin-stiftung.de
Mobile +32 (0)497 469 262

Miguel Galdiz
Research & Advocacy, Brussels office
 

Rue d’Arlon 92, 1040 Brussels
Landline: +32 (0) 2 880 04 42
galdiz@projekt-more.eu
Blog: www.projekt-more.info

Chris Rose
Communications and Campaigns Adviser

Landline: +44 1328 711526
Mobile: +44 7881 824752
chris@campaignstrategy.co.uk

Richard Elsner
International Development Advisor
 

Landline: +49 761 70789266
Mobile: +49 172 744 8968
elsner@projekt-more.eu

Downloads

TTIP Sustainability Impact Assessment: MORE's contribution to improving the analysis on SMEs

10 June 2016. Is trade good for people and the environment? Do international trade agreements comply with sustainability? Trade Sustainability Impact Assessments (TSIAs) are supposed to provide the answers. The latest (interim) TSIA has been prepared for the Transatlantic Trade and Investment Partnership (TTIP) under negotiation between the EU and the USA. It was published on 13 May 2016. MORE has scrutinized the 394-page document to find out what it says that is of particular relevance to Small-and-Medium-Sized Enterprises in Europe. We express some criticism of the TSIA and go on to suggest ways of improving the analysis of the impact of TTIP on SMEs – in the hope of informing the ongoing assessment process.

UK: YouGov survey highlights SME concerns about free trade agreements

1 June 2016. The Business Growth Foundation (BGF) has published the results of its recently commissioned YouGov research (supported by the Schöpflin Foundation), which surveyed more than 1,000 UK SMEs and their views on international trade. The findings reveal profound concerns amongst SMEs about the potential impacts of the Transatlantic Trade and Investment Partnership (TTIP). BFG calls for a freeze on TTIP negotiations.

How satisfied are SMEs with current free trade policy?

10 March 2016. The Prognos research institute was commissioned by BVMW and the Schöpflin Foundation to carry out a survey on TTIP. As part of this project, Prognos surveyed 800 small and medium-­sized BVMW member companies. The results are clear: the survey showed that 62 percent of companies questioned expect the impact of the agreement to be either “rather negative” or “very negative”. Only 22 percent anticipate a positive impact. Furthermore, German SMEs are not particularly hopeful that the deal will benefit their own businesses. They currently believe that TTIP will mainly benefit large corporations.

The potential effects of TTIP on local economies and SMEs

October 2015. In the confrontation between promoters and opponents of the proposed Transatlantic Trade and Investment Partnership (TTIP), it is difficult to hear the voice of the SMEs. Yet because of their importance in European economy, SMEs have some of the strongest reasons to be concerned.

Over the past months, numerous European SMEs have expressed their concern, both individually and collectively, over the potential risks to their activity resulting from the current negotiations.

Five questions SME businesses need to ask themselves about TTIP

February 2015. Promoters of the Transatlantic Trade and Investment Partnership (TTIP) claim it’s good for all business, but is this really true?

The European Commission (EC) and the USA say it will especially help SME businesses (Small and Medium-sized Enterprises), not just multinationals. But is this really true? Once agreed it will be effectively impossible to reverse.

Read about the five questions SME businesses need to ask themselves about TTIP