Transatlantic Trade and Investment Partnership (TTIP)

Transatlantic Trade and Investment Partnership (TTIP)

About the Transatlantic Trade and Investment Partnership (TTIP)

The Trans-Atlantic Trade and Investment Partnership (TTIP) is a deal being negotiated between the European Union and the United States. If concluded, it would be the largest trade and investment treaty ever signed. 

Negotiations on TTIP were launched in June 2013, with the ambitious aim of concluding by the end of 2015. The EU and US are the world's biggest trading blocs, together accounting for one half of global trade. Since tariffs between the two blocs are low across the majority of goods, the main focus is 'regulatory cooperation'. this means that the parties will seek to recognise each others' regulations as being equivalent to their own and will cooperate on the development of future regulations. 

Negotiations cover a broad range of topics, although there is a particular focus on opening up government procurement and services, including financial services (both UK priorities), as well as regulatory harmonisation in industries like automotives and pharmaceuticals.

So what's the problem?

TTIP is part of a new generation of free trade agreements which aim to entrench neoliberal policies and give unprecedented powers to multinational corporations. It threatens to undermine our democracy, social and environmental standards, and public services. Its impact would reach far beyond the European and US boarders as it aims to set a new pattern for trade and investment agreement around the world.

The principal objective of TTIP is to remove ‘regulatory barriers’ to trade, which it is argued, will generate growth, jobs and prosperity on both sides of the Atlantic. Yet, study after study shows that the economic gains from TTIP will be minimal, or even negative, and an official assessment shows that more than 1 million Europeans would lose their jobs as a direct result of TTIP. Moreover, the barriers identified are in fact the regulatory standards that act to protect our social rights and the environment, including workers’ rights, safety regulation, food standard regulation and environmental protection rules. The Trade Justice Movement is calling for an end of the negotiations of TTIP and its Canadian sister treaty CETA.

The EU and the US have explicitly stated that they view TTIP as a way of setting the global standard for multilateral negotiations. This means that the world’s richest nations will decide the future of trade between them: developing countries will have no voice. Yet there are huge issues with the negotiations and the content of the deal: the lack of transparency and civil society voice; the erosion of policy space and the right to regulate; the inclusion of an investment chapter; the push for liberalisation of services; the impact on the environment and efforts to prevent and mitigate climate change. As well as limiting what they can achieve internationally, the deal is also set to have a direct negative impact on developing countries. 

In depth

Un-transparent and undemocratic

TTIP has been negotiated behind closed-doors with very little input or insight from the public. The European Commission has repeatedly been criticised for the lack of transparency and it was only through a leak by Greenpeace in May 2016 that the public finally got access to the negotiation documents. The Commission has also come under increased scrutiny for the undemocratic nature of TTIP. EU citizens have been given minimal opportunity to give their input on the treaty, and among 597 official consultation meetings in 2012-2014, just 9% were with public interest groups whilst 88% with corporate lobby groups. It has also been revealed that the European Commission has actively encouraged companies to give their inputs, strengthening the fear that TTIP is a treaty by and for big businesses. 

TTIP also poses a threat to our democracy by giving foreign investors new unprecedented powers to shape policy-making. Firstly, TTIP includes the Investor State Dispute Settlement (ISDS) mechanism which allows companies to challenge government measures that in a way conflict with their ability to make profit. Secondly, a new supranational regulatory body would be put in place which would oversee current and future regulation in the EU. Multinational corporations would have a central position in this body and it is no surprise that big businesses are lobbying heavily for its provision. 

Undermining regulation

Proponents of TTIP claim that 80% of its benefits will derive from the removal of non-tariff barriers to trade. This will primarily be achieved through two mechanisms. The first is mutual recognition, which means that companies that laws in the US and the EU will be seen as equivalent. So products meeting less rigorous standards could be sold in either market.  This not only poses a threat to consumers and the environment – as there would be pressure to adjust standards to the lowest level – it would also have dangerous long-term implications as cheaper imports would put enormous pressure on producers to cut costs and on policy-makers to reduce regulatory standards.

The second mechanism is regulatory cooperation, which seeks to align existing and future standards by changing law-making in the EU and the US. A new transatlantic regulatory body would be introduced wherein US regulatory authorities, the European Commission, business groups and other ‘stakeholders’ would be able to influence the early stages of law-making – before reaching elected officials in the European Parliament or the European Council. According to proposals from both sides, legislation would be assessed according to a narrow cost-benefit analysis wherein economic benefits would trump social and environmental concerns. Big businesses would also have a central role, in setting the political agenda and influence proposals that are up on the table. In a nutshell, regulatory cooperation would enable TTIPs deregulatory agenda to be enshrined long after the agreement is signed.

Weakening public services

Lastly, TTIP threatens public services, including the NHS. The agreement includes a service chapter which would open up public services to private companies – and to date only audio-visual services are exempted. Privatisation would also effectively be ‘locked in’ as companies would be able to sue government from bringing back services into public ownership. 

Courts for corporate use only

One of the most controversial aspects of TTIP is its inclusion of an Investor-State Dispute Settlement (ISDS) mechanism. This mechanism offers corporations significant rights, including to sue governments in private international tribunals if they feel that a policy or its implementation has negatively impacted the profitability of their investment. ISDS has been used to challenge many kinds of regulation, including the introduction of plain cigarette packaging, controls to keep water tariffs affordable, and increases in the minimum wage. Only international investors can make use of these courts – there is no equivalent mechanism for domestic companies, governments or citizens. ISDS effectively operates as a transfer of business risk away from companies and onto the public, there is also growing evidence that the sheer cost of ISDS cases can prevent governments from taking legitimate public policy decisions. A report commissioned by the UK government on the impact of TTIP concluded that the inclusion of ISDS would have ‘few or no benefits’ and may result in ‘meaningful economic costs in the UK’.

In response to citizen pressure, some amendments have been made to the plans for CETA’s ISDS mechanism. Rather than allowing companies and states to select their own arbitration judges, they will now be selected from a sitting panel of fifteen pre-approved lawyers. The process will be ‘fully transparent’ in open courts with case documents to be published, and there will be a second-tier appeals process available. However, none of these amendments address the key issues with ISDS raised above regarding the creation of a parallel judicial system exclusively for the use of corporations or the transfer of business risk onto the public.

A bad deal for developing countries

TTIP won’t only impact on the EU and US, it has wide-ranging implications for developing countries as well.

The EU and US are huge trading partners and sources of investment for developing countries and developing countries are engaged in a number of Free Trade Agreements or negotiations with the EU and US. The EU and US have explicitly said that they view TTIP as a blueprint for global trade. Agreeing TTIP would mean increasing pressure for developing countries to conform to the rules it sets out.  This is in direct contradiction with the central SDG aim of levelling the playing field for developing countries because it removes the possibility of ensuring developing countries have an equal decision making role in global economic and financial institutions.

TTIP threatens to close down the policy space available to developing countries for achieving the SDGs. Experience from the 20th century, including World Bank and IMF failed prescriptions, tells us that there is no 'one-size-fits-all' model of development. TTIP favours a narrow, market-led approach to everything from intellectual property rights (patents) to services and industrial development. Including ISDS in the deal would lock-in a system that allows corporations to sue governments for policy changes – yet developing countries have the highest need to introduce new policies or make changes to existing ones.

SDG target 17.11 commits governments to ”increase significantly the exports of developing countries, in particular with a view to doubling the Least Developed Countries’ share of global exports by 2020”. Yet TTIP threatens to undermine developing countries’ capacity to trade: there are worrying indications that they could experience significant trade diversion and preference erosion, with countries like Niger and Malawi seeing drops in exports to the US of between 3 and 12 per cent.

TTIP is also likely to directly undermine SDG 13, which commits countries to “take urgent action to combat climate change and its impacts”, widely accepted to be fundamental to tackling poverty. The European Commission (EC) has attempted to give reassurances that TTIP will support the EU’s climate targets, yet its own impact assessment states that its preferred outcome from the negotiations will add an additional 11 million metric tons per year of CO2 to the atmosphere. The Intergovernmental Panel on Climate Change (IPCC) argues that fossil fuel use is the leading contributor to global increases in CO2 concentrations. Yet a clear priority for the TTIP negotiations is to increase transatlantic trade in fossil fuels, with President Obama commenting that “TTIP would make it even easier to get licences to export gas to the [European] continent.” To make matters worse, if these licences are subsequently revoked, for example by EU governments elected with a clear mandate to support the transition from fossil fuels to renewable energy, TTIP’s ISDS provisions may allow US investors to sue EU governments for loss of profits. 

Finally, TTIP threatens to undermine goal 3, which commits governments to “ensure healthy lives and promote wellbeing for all at all ages”. One of the biggest difficulties for developing countries in dealing with major health issues like the prevalence of HIV and TB is the lack of availability of affordable medicines. Trade rules, in particular the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), already play an important role in driving an approach to the development and distribution of medicines that relies heavily on market principles. This has led, for example, to spiralling costs for medicines: a course of treatment for some forms of TB can cost up to US$250,000. The EC argues that it has “consistently led efforts to facilitate access to medicines in developing countries.” Yet one of its key objectives is to strengthen the very intellectual property protections that allow companies to maintain monopolies over particular drugs, keep prices high and undermine the cheaper generic drug production that is key to many developing countries’ public health objectives. It is seeking to use TTIP to develop a global blueprint that would see trade rules go beyond the WTO’s TRIPs agreement by tightening up intellectual property rules, for example to limit the disclosure of clinical trial data and to oblige health authorities to price patented pharmaceutical products at their market value.