TTIP Update XLII

The problems of TTIP are so many - total lack of meaningful transparency, the unnecessary inclusion of an ISDS chapter, the threat to Europe's high standards governing health, safety, the environment, labour etc. - that the agreement's supporters have been forced to fight back with the only thing they claim to offer: money.  TTIP, they argue in multiple ways, will take us to the land of milk and honey, boost the GDP massively, and lead to lots of extra dosh for every family in the EU.

But as I've explained, none of this is true.  Even the European Commission's own research shows that the most ambitious outcome - that is, one that is already totally unrealistic given the resistance that TTIP is meeting - would produce a boost to Europe's GDP of 0.5% - just 119 billion euros.  However, as I and many others have pointed out, this is after ten years, and therefore represents a *cumulative* boost to GDP, which therefore works out at around 0.05% GDP boost per year on average.  Here's someone else joining that chorus:

at the end of the simulation period in 2027, GDP would be 0.5 percent higher in a TTIP scenario than the baseline, non-TTIP scenario, implying negligible effects on annual GDP growth rates.

That comes from an important new study by Jeronim Capaldo from the Global Development and Environment Institute at Tufts University in the US.  It also points out the obvious fallacy with the European Commission's claim that EU households would gain 545 euros more every year:

these estimates are misleading since the studies provide no indication of the distribution of income gains: they are simply averages. With EU wages falling as a share of GDP since the mid-nineties, it is far from certain that any aggregate gains will translate into income increases for households living on income from wages (as opposed to capital).

Or, to put it more bluntly, claiming that any benefit from TTIP would be shared out equally among all families in the EU is only going to happen if communism sweeps across the continent - and about as likely.

Capaldo's study begins by pointing out the glaring flaws in the Computable General Equilibrium (CGE) model used by the studies invoked by the European Commission.  This CGE approach includes the astonishing assumption that employment will not change as a result of TTIP, because somehow the inevitable job losses in some industries will be magically balanced by job creation in others.  Morever, as I have discussed before, another huge flaw in the CGE approach is that it ignores the costs it brings.  As Capaldo puts it:

the strategy chosen to simulate a “TTIP future” has a strong impact on the results. Ecorys assumes that so-called "Non-Trade Barriers" impose a given cost on trade and that TTIP can remove up to one half of them. CEPR and CEPII borrow this approach, but assume a lower share. These barriers can include what other stakeholders refer to as consumer and environmental regulations. Phasing them out may be difficult and could impose important adjustment costs not captured by the models.

In an effort to avoid these and other problems, Capaldo uses a different model: 

To obtain a more realistic TTIP scenario, we need to move beyond CGE models. A convenient alternative is provided by the United Nations Global Policy Model (GPM), which informs influential publications such as the Trade and Development Report. The GPM is a demand-driven, global econometric model that relies on a dataset of consistent macroeconomic data for every country.

You can read the detailed results in his paper, but his title sums it up pretty well: "The Trans-Atlantic Trade and Investment Partnership: European Disintegration, Unemployment and Instability".  Using a more advanced model, that does not bake in ridiculous assumptions like no job losses, TTIP is predicted to produce the following chilling consequences for the EU and its citizens:

TTIP would lead to losses in terms of net exports after a decade, compared to the baseline “no-TTIP” scenario. Northern European Economies would suffer the largest losses (2.07% of GDP) followed by France (1.9%), Germany (1.14%) and United Kingdom (0.95%).

TTIP would lead to net losses in terms of GDP. Consistent with figures for net exports, Northern European Economies would suffer the largest GDP reduction (-0.50%) followed by France (-0.48%) and Germany (-0.29%).

Thus, even the paltry 0.5% GDP gains of the European Commission's study prove hopelessly inflated.

TTIP would lead to a loss of labor income. France would be the worst hit with a loss of 5,500 Euros per worker, followed by Northern European Countries (-4,800 Euros per worker), United Kingdom (-4,200 Euros per worker) and Germany (-3,400 Euros per worker).

This contrasts with that illusory 545 euros per household, as claimed by the European Commission.  Instead, a typical UK working family would lose thousands of pounds per year as a result of TTIP, according to this analysis.

TTIP would lead to job losses. We calculate that approximately 600,000 jobs would be lost in the EU. Northern European countries would be the most affected (-223,000 jobs), followed by Germany (-134,000 jobs), France (- 130,000 jobs) and Southern European countries (-90,000).

TTIP would lead to a loss of government revenue. The surplus of indirect taxes (such as sales taxes or value-added taxes) over subsidies will decrease in all EU countries, with France suffering the largest loss (0.64% of GDP). Government deficits would also increase as a percentage of GDP in every EU country, pushing public finances closer or beyond the Maastricht limits.

TTIP would lead to higher financial instability and accumulation of imbalances. With export revenues, wage shares and government revenues decreasing, demand would have to be sustained by profits and investment. But with flagging consumption growth, profits cannot be expected to come from growing sales. A more realistic assumption is that profits and investment (mostly in financial assets) will be sustained by growing asset prices. The potential for macroeconomic instability of this growth strategy is well known after the recent financial crisis.

Even if the UK escapes relatively unscathed on the employment front, losing "just" 3,000 jobs according to the new model, it is hit badly in terms of falling Government tax revenues (down 0.39% of GDP) at a time when the country's national debt is big and getting bigger.  In other words, far from being a panacea, a "once in a generation prize", as David Cameron called it, TTIP would probably fatally wound the European project, not least because it will lead to the economic hollowing-out of the EU - something already predicted in previous models.  Capaldo explains:

increases in trans-Atlantic trade are achieved at the expense of intra-EU trade. Implicitly, this means that imports from the US and imports from non- TTIP countries through the US will replace a large portion of current trade among EU countries.

Capaldo's conclusions make for grim reading:

First, as suggested in recent literature, existing assessments of TTIP do not offer a suitable basis for important trade reforms. Indeed, when a more realistic model is used, results change dramatically. Second, seeking a higher trade volume is not a sustainable growth strategy for the EU. In the current context of austerity, high unemployment and low growth, increasing the pressure on labor incomes would further harm economic activity.

Some will doubtless say this is just one model, and might be wrong.  But exactly the same argument can be applied to the widely-cited CEPR study, and yet the Commission is happy to accept its predictions uncritically, as if its figures were certainties. 

Whether or not you believe that Capaldo's model is superior - and that's a matter for economists to argue about - it would clearly be reckless to pursue the TTIP negotiations without commissioning much more detailed research to explore the agreement's likely impact, and to get a better idea of its real benefits - if any.

To give up national sovereignty because of ISDS's supranational powers, and weaken Europe's high standards in order to remove "non-tariff" barriers, is bad enough.  But to bargain them away in return for a flawed agreement that will harm every economy in the EU, and leave families thousands of pounds worse off, is just beyond stupid.

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TTIP Update XLI

In my last update, I noted that the highly-contested investor-state dispute settlement (ISDS) chapter remains the centre of attention, with rumours swirling around that the President-elect of the new European Commission, Jean-Claude Juncker, would pull a rabbit out of his hat by announcing that ISDS would be dropped.  That didn't happen, and it seems that once more, the UK is to blame.

A group of 14 EU nations - including the UK, Spain, Ireland and Denmark - sent a pointed letter to Juncker on the subject of TTIP and ISDS.  Here's the key part [.pdf]:

One of the issues that has attracted criticism is investment protection.  The Commission is currently analysing the results of a public consultation on this issue and we look forward to the Commission's response.  The consultation was an important step in ensuring that we strike a correct balance to ensure that governments retain their full freedom to regulate, but not in a way that discriminates unfairly against foreign firms.  It is important that the outcome of this consultation runs its course and we carefully consider the views expressed by our stakeholders before reaching firm decisions on the way forward.  The Council mandata is clear in its inclusion of investor protection in the TTIP regotations; we need to work together on how best to do so.

That one paragraph includes a number of very interesting points. First, there's the strange insistence on the importance of the public consultation on ISDS.  We know that the overwhelming majority of submissions were against ISDS, so it's odd to see the UK government and its allies place such great emphasis here.  This suggests to me that we are about to witness a stitch-up - for example, we might see 149,000 of the 150,000 submissions counted as just *1* or something similarly outrageous.  The outgoing trade commissioner, Karel De Gucht, has already hinted some trick along these lines might be adopted.

Then of course we have the line about ensuring "the correct balance" between governments' right to regulated and investors' rights to make profits.  As I've written before, there should be no  balance here, because clearly the sovereignty of governments is paramount: to suggest otherwise amounts to a silent coup against democracy.  But even more ridiculous is the letter's insistence that TTIP must ensure that foreign firms are not discriminated against.  That's downright laugable, because ISDS would give foreign firms extra rights that local firms *don't* have: foreign investors could use national courts and ISDS tribunals, whereas local companies could only use the former.  So it's the national companies who will actually be discriminated against under ISDS: foreign ones will gain huge new powers.

Finally, the letter says that the TTIP mandate [.pdf] is "clear in its inclusion of investor protection mechanisms", but it omits to mention the very important caveat there:

the inclusion of investment protection and investor-to-state dispute settlement (ISDS) will depend on whether a satisfactory solution, meeting the EU interests concerning the issues covered by paragraph 23, is achieved.

Paragraph 23 includes the following key section:

should be with out prejudice to the right of the EU and the Member States to adopt and enforce, in accordance with their respective competences, measures necessary to pursue legitimate public policy objectives such as social, environmental, security, stability of the fin ancial system, public health and safety in a non - discriminatory manner.

So the mandate is clear that ISDS is only included if it meets those requirements, not otherwise.  But there's an even more outrageous twisting of the facts earlier in the letter.  Right at the start, the UK and its mates assert:

The Transatlantic Trade and Investment Partnership (TTIP) will add over €100bn to EU GDP and has the potential to transform not just our own economies, but also the global economy.

As readers of this blog will recall, that €100bn figure is the *maximum* likely benefit, in the best of all possible worlds; here it is being put down as a certainty, not ifs or buts.  That's downright dishonest, and shows how desperate the pro-TTIP camp has become: it knows that the supposed arguments in favour of the agreement are weak that it is forced to claim the most extreme outcomes as certainties.  And yet, as readers will also know, that best-case €100bn figure is in 2027, and represents a footling 0.05% average GDP boost each year until then - statistically, that's indistinguishable for zero given the huge number of uncertainties in the econometric model used.  So the letter from the UK and friends is based on the flimsiest of reasoning, and is really quite a disgraceful piece of bullying.

Unfortunately, it seems to have had the desired effect.  Here's how Juncker responded in his speech to the European Parliament:

I took note of the intense debates around investor-state dispute settlement (ISDS) in the Transatlantic Trade and Investment Partnership (TTIP) negotiations. Let me once again state my position clearly, that I had set out on 15 July in front of this House and that you will find in my Political Guidelines: My Commission will not accept that the jurisdiction of courts in the EU Member States be limited by special regimes for investor-to-state disputes. The rule of law and the principle of equality before the law must also apply in this context.

The negotiating mandate foresees a number of conditions that have to be respected by such a regime as well as an assessment of its relationship with domestic courts. There is thus no obligation in this regard: the mandate leaves it open and serves as a guide.

I had thought my commitment on this point was very clear but I am happy to clarify and reiterate it here today as a number of you have asked me do so: In the agreement that my Commission will eventually submit to this House for approval there will be nothing that limits for the parties the access to national courts or that will allow secret courts to have the final say in disputes between investors and States.

I have asked Frans Timmermans, in his role as First Vice-President in charge of the Rule of Law and the Charter of Fundamental Rights, to advise me on the matter. There will be no investor-to-state dispute clause in TTIP if Frans does not agree with it too.

Again, there are lots of interesting details here.  First, the statement "My Commission will not accept that the jurisdiction of courts in the EU Member States be limited by special regimes for investor-to-state disputes."  That's clever, becauses it is trivially satisfied by ISDS actions.  They do not "limit"  jurisidiction in any way - national courts are untouched.  But what ISDS does provide is a *parallel* system that foreign investors can use to have a "second go" at suing governments.  So ISDS is in addition to, not instead of, national courts.  Similarly, ISDS has no effect on the  "The rule of law and the principle of equality before the law".

This issue comes up yet again in the sentence: "there will be nothing that limits for the parties the access to national courts or that will allow secret courts to have the final say in disputes between investors and States. "  But secret courts won't have the final say, they will just be a factor that may well cause governments to change their policies.  The rule of law will still be there, but it will be irrelevant when large sums of money are involved (and remember that they can be very large: the Russian government has been ordered to pay no less than $50 billion by an ISDS tribunal...)

So far the, Juncker has artfully managed to say nothing of any substance whatsoever.  But his passing shot is more significant:

I have asked Frans Timmermans, in his role as First Vice-President in charge of the Rule of Law and the Charter of Fundamental Rights, to advise me on the matter. There will be no investor-to-state dispute clause in TTIP if Frans does not agree with it too

That's a classic passing of the hot potato to someone else, and a delaying tactic to avoid making a decision now.  But it is a very clear insult to the incoming trade commissioner, Cecilia Malmström, who has effectively been told that she does not have the final say here.  The big question is: what exactly does Timmermans think of ISDS, and would he actually veto the chapter after months or years of negotiations?

In any case, the rumours continue to swirl that ISDS will come out before then.  Here's a report from last week on euractiv.com:

The European Commission may have changed its view over including investment arbitration in the EU-US trade agreement TTIP, a move that would be a wish-come-true for Economic Affairs Minister Sigmar Gabriel and others, who fear the measure could lead to companies influencing government policy. EurActiv Germany reports.

The European Commission is considering omitting much-disputed plans for an arbitration procedure, a safety net for investors, from the Transatlantic Trade and Investment Partnership (TTIP) currently under negotiation. An internal document from DG Trade addressed to EU Trade Commissioner Cecilia Malmström, revealed plans to strike the passage from the negotiating mandate.

As I've said before, I'll believe that when I see it - the UK will doubtless be working furiously behind the scenes to prevent ISDS coming out.  But there's certainly no question that ISDS is endangered, and that there is still a very real possibility it will be dropped.  Stay tuned....

Full list of previous TTIP Updates.

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TTIP Update XL

There's a rumour going around that ISDS may be coming out of TTIP:

Incoming Commission president Jean Claude Juncker is said to have decided to remove the controversial investor-to-state dispute settlement (ISDS) from TTIP, citing that it is “too late” to win on the issue, and to send a clear signal to EU citizens that he has “heard them" a new news report says

According to the Dutch journalist Caroline de Gruyter, writing for NRC Handelsblad, Trade Commissioner-elect Cecilia Malmström had threatened to resign over Juncker’s plans to exclude ISDS, but to date, this has not happened. The news sheds further light on the tug-of-war taking place within the Commission regarding investor rights in international trade agreements, as was demonstrated in Malmström's parliamentary hearing in September.

Well, that's certainly plausible, but I'd like to see this confirmed before I start rejoicing. And even if ISDS were taken out of TTIP, it's important to remember that the threat of corporations suing nations directly, over democratic developments that harm future corporate profits, will not have disappeared. That's because ISDS is most definitely still in the trade agreement between the EU and Canada, known as CETA. That means that any US company with ‘substantial business activities’ in Canada - that's all that the text of CETA requires - can sue the EU using the new agreement.

And just to make things a little harder, it was announced today that another major EU free trade agreement with ISDS has been concluded:

The European Union (EU) and Singapore have concluded the negotiations of the investment part of the EU-Singapore Free Trade Agreement (EUSFTA). This marks the successful conclusion of the negotiations of the entire EUSFTA, following the initialling of the other parts of the agreement in September 2013.

As that makes clear, it was precisely the chapter dealing with investment - and hence the highly-contronversial ISDS provisions - that was holding up the agreement with Singapore. We finally have that investment chapter (pdf). Two things are striking. First, that once again, any company that has "substantive business operations" in Singapore will be able to use the new agreement - known by the unlovely abbreviation "EUSFTA" - to sue European governments and the EU itself. The other thing that is noticeable is that zero notice has been taken of the 150,000 (mostly negative) submissions to the European Commission's consultation on ISDS.

This isn't the only example of the Commission showing its contempt for the European public and democracy. As I mentioned in a previous update, plans to organise a European Citizens' Initiative, a formal petition against both TTIP and CETA, were blocked by the European Commission, which flatly refused to allow people even this, largely symbolic, way of expressing their views on TTIP and CETA.

However, the organisers realised that they didn't actually need permission from Brussels to run this pan-European petition, and set up the site stop-ttip.org, where people were able to sign in a wide range of European languages. Even though this was only launched last week, it's been a stunning success: at the time of writing, over 637,000 signatures have been gathered (please do add your name if you haven't already.) That's two-thirds of the nominal million that would have been needed for the ECI, but the way things are going, I think the total will go well beyond that - a wonderful answer to the mean-spirited and cowardly actions of the European Commission.

Now, some will say that e-petitions really don't count, since it's so easy to gather names. There's some truth in that, except that people need to know about the e-petition before they can sign it, and so as minimum we can say that two-thirds of a million people now know enough about TTIP and CETA to dislike them. Moreover, the idea that the European public don't really care that deeply about these so-called trade agreements was given the lie by the astonishing "Decentralised Day of Action against TTIP, CETA and TISA", which gave rise to 450 events in 24 EU member states, involving many thousands of EU citizens. Lots of great pictures give some flavour of the depth of support.

However much the European Commission would like to ignore what the little people like you and me think, many among the European public clearly have no intention of meekly accepting what the Commission has stitched up in secrecy behind closed doors. Their anger is not least because of an insulting logic at play here: that you have no right to criticise what's being negotiated until you've seen the final text, because it's not yet finished; but then to be told, once the text is finalised, that you have no right to change anything, because it's finished (as with CETA.) They call that democracy?

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TTIP Update XXXIX

As previous updates - and many economists - have pointed out the huge economic gains claimed for TTIP are largely illusory.  The 119bn euros boost for the EU not only turns out to be under the most optimistic assumptions, clearly impossible to obtain now given the growing resistance to TTIP's de-regulation, but refers to 2027, and is the difference between an EU economy with TTIP and without.  That means the claimed 0.5% GDP boost is actually a ten-year cumulative figure, and amounts to the rather less impressive 0.05% extra GDP on average - in mathematical terms, indistinguishable from zero given the very approximate nature of the models used to make these predictions.

That's been quite widely known for a while.  But it turns out that there is another extraordinary fact buried within the main CEPR study, which was paid for the European Commission [.pdf]. I've discovered this thanks to an illuminating post about TTIP by Martin Whitlock, published in the UK edition of The Huffington Post. 

I'll cover his main point later on, but first I want to explore the extremely important piece of information that he mentions almost incidentally.  It goes some way to explaining the European Commission's obsession with cars: whenever they give an example of an industry that could benefit from TTIP, it's always cars.  And when asked about harmonisation of standards, it's again always about the different rules that apply to cars on each side of the Atlantic.  Here's what Whitlock writes:

cars form a big part of the E.U.'s case for TTIP. They account for 47% of the increase in exports and 41% of the increase in imports in the best case scenario, with well over three times as many vehicles braving the Atlantic storms in one direction or the other than at present.

When you think about it, that's staggering.  Indeed, so staggering that I checked what the CEPR study says to make sure those figures were correct.  For those of you following at home, it turns out that the relevant numbers are on pages 68 and 69 of the report.

In the most ambitious scenario, and in 2027, CEPR expects there to be a positive change in bilateral exports from the EU to US of 186,965 million euros (that's obviously a ridiculous precise figure - no model can provide six significant figures of accuracy about aspects of the world economy in 2027.)  Of that, fully 87,358 million euros are predicted to come from the motor industry.  The works out as 47%, as Whitlock writes.  Similarly, the table on page 69, CEPR expect there to be a positive change in bilateral exports from the US to EU of 159,098 million euros, which 65,903 million euros come from the motor industry, representing 41% of the total.

So that confirms Whitlock's figures.  But let's just think about what those CEPR predictions mean.  In rough terms, they say that in 2027, nearly 50% of TTIP's boost to transatlantic trade will come from one industry: cars.  Not only that, but CEPR further claims that the transatlantic exports for both the EU and the US industries will be boosted by roughly the same amount.  In other words, TTIP will lead to more cars being shipped from the EU to the US, but also for almost the same number of extra cars to be shipped back across from the US to the EU.

Since the number of cars travelling in each direction across the Atlantic more or less cancel out, this means that TTIP's net effect will be to cause vast quantities of fuel to have been burnt carrying out this vehicle swap.  It turns out, then, that 50% of TTIP's trade boost is pure environmental profligacy.  This is not an aspect of TTIP that the European Commission emphasises much, for some reason.

As I mentioned, this hugely important insight was only mentioned in passing by Whitlock, who goes on to analyse what are the consequences of moving roughly the same number of cars across the Atlantic in both directions.  Here's what he writes:

If the extra cost of transporting cars back and forth across the Atlantic is to be absorbed, and the vehicles are to offer better value to the consumer, it follows that the productive work contained in them will have to be acquired more cheaply. That could mean greater automation, or lower wages, or both. Either way, a smaller slice of the value of cars will go to the people who actually make them.

...

Trade which outsources production to low wage countries has the effect of importing poverty from the poor country to the rich one, since the loss of productive work in the rich country causes wages to fall. The danger of TTIP is that Europe and America will start exporting their significant levels of poverty to each other at a much faster rate than at present - a potentially disastrous chase to the bottom in which poverty increases inexorably as real wages continue to fall. Meanwhile, the capacity of governments to address the problem will be further eroded by the investor protections of ISDS and the tax breaks inevitably demanded by investor capital that can go wherever the return is greatest.

There are two important points here.  First, that it is inevitable that workers will suffer if CEPR's predictions for TTIP turn out to be true.  That's just simple economices: the whole "point" of TTIP from a business point of view is to allow cheaper labour to be used in this way; but, by definition, cheaper labour drives down wages.  Indeed, that is precisely what has happened with earlier trade agreements like NAFTA and KORUS.

The other point is that even if they wanted to, EU and US politicians wouldn't be able to pass new regulations to ensure that wages did not fall, say.  That's because such new rules would inevitably be called an "indirect expropriation of future profits" by the companies affected.  And if you think that is far-fetched, it's worth bearing in mind that ISDS has already been used in precisely this way: the French multinational Veolia is suing the Egyptian government for daring to raise the country's minimum monthly wage.  Preserving national sovereignty in the fields of wages and social justice is yet another very good reason for taking ISDS out of TTIP.

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TTIP Update XXXVIII

In my last update, I mentioned plans to organise a European Citizens' Initiative, a formal petition against both TTIP and CETA.  I think everyone assumed that the European Commission would just ignore this, but in fact it has done something rather more spectactular - and stupid: it has refused to allow the ECI to go ahead at all.

In its rejection of the ECI, the European Commission claims that the negotiating mandates on TTIP and CETA are not legal acts but internal preparatory acts between EU institutions and therefore not contestable via an ECI.

“The Commission’s view that only acts with an effect on third parties are permissible for an ECI is obviously a legal error. The negotiating mandate of the Commission is a formal decision of the Council and therefore a legal act. If the Commission’s legal opinion had any substance, then in plain English this would mean that Europe’s population is excluded from participation in the development of any kind of international agreements – information that is as frightening as it is scandalous,” according to Efler.

What’s more, the Commission claims that it cannot make negative ratification proposals and therefore cannot comply with the ECI demand not to conclude the CETA and TTIP negotiations. “Contrariwise, this means that citizens can only applaud international negotiations carried out by the Commission, but not criticize them,” said Efler.

The group behind the petition have realised that they don't actually need the European Commission's permission anyway, and so are simply going ahead without it:

We reject the Commission’s attempt to silence us and will carry out our European Citizens’ Initiative anyway, without approval from Brussels. We are currently preparing an online signature gathering tool as well as paper signature forms and will start collection in early October. At the same time, we will challenge the Commission in court by appealing to the European Court of Justice.

In the past couple of weeks our campaign has gathered support from over 240 civil society organisations in 21 EU member states. It is somewhat ironic that the European Commission, which often complains about the “lack of a European public”, is trying to stop this truly European movement in its tracks. We will continue to speak out against the Commission’s total lack of transparency in the negotiations and favouring of corporate interests over the common good. We will stay very public and very European in our opposition to TTIP and CETA!

This refusal even to allow a largely symbolic petition to proceed is indicative of the contempt with which the European Commission regards any expression of the public's view on these matters, which it seems to think are the exclusive domain of bureaucrats and politicians (and lobbyists).  That was underlined even more strongly last week, when the official text of the trade agreement with Canada, CETA, was finally released.  However, at precisely that moment, the European Commission was also "celebrating" the conclusion of the talks, with the implication that no further changes can be made.  So after telling everyone that the public would have its chance to comment on the CETA text later, it turns out that in fact it can only see the document not change it.  The European Commission has an interesting concept of what democracy means.

Interestingly, the meeting between the European Commission and the Canadian government was called a "celebration" rather than a signing because Germany has indicated that it is not happy with the inclusion of the problematic investor-state dispute settlement (ISDS) chapter in CETA.  Since it is likely that CETA is a "mixed agreement" - that is, one that requirements approval from all 28 member states, as well as from the European Parliament - if Germany were to say "no", CETA would be dead.

It turns out that ISDS is only one of the really bad ideas contained in CETA.  That's what emerges from an excellent analysis of CETA from the Canadian Centre for Policy Alternatives, called "Making Sense of the CETA".  It's very clearly written, and I recommend it to anyone who wants to understand what the implications of CETA will be for business or, indeed, for all of us. 

Another key factor influencing both CETA and TTIP is the appointment of a new European Commissioner responsible for trade, and thus trade agreements.  The Commissioner-Designate is Cecilia Malmstrom, and she was involved in yet another storm around ISDS at the weekend.

Jon Worth has all the details in a blog post, but essentially a document from Malmstrom indicated that she was willing to drop ISDS from TTIP.  The S&D group in the European Parliament issued a statement welcoming the move, but then Malmstrom tweeted that she hadn't written the words.  This made her appearance yesterday before the European Parliament as part of the process of confirming her as trade commissioner even more important, since it would clarify what exactly she thought on this matter.

Her statements during that session were unequivocal: she will not take ISDS out of CETA, which she regards as finished.  She claimed she had an open mind on ISDS in TTIP, saying that it might be taken out, but she was unconvincing here.  It seems clear that she wants ISDS in TTIP.  Her justification was very weak.  She kept on saying that ISDS existed in other treaties (true), was problematic there (true), and therefore required a new, improved version to be used in TTIP (false).  She seemed to be under the impression that "improving" ISDS in TTIP would somehow rectify all the deeply-flawed versions elsewhere, when they are completely unrelated.

It's true that there are some EU countries that have bilateral trade agreements with the US that includes ISDS.  These are ex-Soviet countries that clearly signed up to bad deals because they were desperate to escape the clutches of Russia.  But that's not a reason to include ISDS in TTIP, and inflict the same problems on everyone else.  The East European treaties can all be cancelled in due course, and that is what those countries should do.  Adding ISDS to TTIP simply gives new life to the idea. 

Equally, the view that ISDS can be "improved" sufficiently to make it acceptable is wrong: it is just not needed between the EU and US, both of which have well-functioning legal systems.  Creating new rights for corporates that allow them to challenge national regulations outside the legal system is just anti-democratic and bad policy. 

Finally, it was clear that Malmstrom laboured under the delusion that we "need" this ISDS in TTIP so that we can demand that China accepts it in a trade agreement that is currently under discussion.  What this overlooks is the painful fact that soon China will be investing more in Europe than Europe invests in China, such is the strength of the China's economy, and the size of its reserves.  This means that ISDS will be chiefly a weapon that can be used by Chinese companies *against* the EU, not for EU companies to use in China.  Not only will ISDS by harmful in TTIP, it will be actively dangerous in any agreement with China.

Although it was clear from the meeting yesterday that Malmstrom is not another Karel De Gucht, who was far more abrasive and arrogant than she is, equally she will not be deviating much from his policy, even if she dresses it up differently.  She made vague but essentially empty promises about increasing transparency, but ignored the real issue: that we do not have access to negotiating documents. 

Some claim that such documents must be secret, otherwise the EU negotiators will lose the advantage; this is demonstrably not true, since for WIPO talks, all the documents are open by default without problem.  But even were it true, the solution is simple: make available all those documents once they are *tabled*.  At that point, there is no negotiating advantage in keeping them secret, since the US side has already seen them.  That's also true for the lobbyists that have routine access to these documents.  The only group that suffers is - of course - the public, that never has any means of seeing what is supposedly being done in its name.  Instead, as the CETA fiasco shows, at the end of the process we are presented with a fait accompli, and told simply to like it or lump it.

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TTIP Update XXXVII

In my last TTIP column, I discussed the CETA negotiations with Canada, which started before those of TTIP, but have continued in parallel with them.  That's because what happens with CETA has a massive effect on TTIP, in part because it acts as a template for the TTIP, but also because Canada's economy is tightly integrated with that of the US in many ways, and so CETA is already a kind of shadow agreement with the US.  Once again, the area where that probably matters the most is for the investor-state dispute settlement chapter included in CETA.

To see why, consider what happens if ISDS is not included in TTIP, but is present in CETA.   Philip Morris is suing Australia over the latter's strict laws aimed at reducing tobacco consumption, even though the trade agreement between the US and Australia does not contain any ISDS mechanism, by invoking an agreement between Australia and Hong Kong, using its subsidiary in the latter.  Similarly, any US company that wanted to sue the European Union would not be greatly inconvenienced if there is no ISDS in TTIP: it will simply use a Canadian subsidiary, which are pretty common given the integration between the economies in north America, to sue using CETA.

That means even before fighting ISDS in TTIP, we must fight it in CETA. But time is running out.  As I mentioned in Update XXXVI, CETA seems "finished" in some undefined sense - at least finished enough that both sides are getting ready to sign something later this month.  Since there is no way that the results of the ISDS consultation conducted by the European Commission earlier this year will be ready then, this effectively means that the intention is to ignore the 150,000 comments, most of which were strongly against including ISDS in TTIP, and enshrine it in CETA.  If that happens, then US companies will in any case have a large and convenient back-door for suing the EU even if ISDS is dropped from TTIP.

We have every reason to fear that ISDS will indeed be in CETA because of remarks made by the Italian vice-minister for trade to the European Parliament's international trade committee, INTA.  Here's how the Canadian title Embassy reported his comments:

The controversial investment protection chapter of the Canada-European Union trade deal should not be reopened, Italy’s vice minister of trade said on Sept. 3, putting his comments at odds with those of other EU countries—and raising further questions about the approval process of the much-awaited deal.

“We [member states] gave the [European] Commission the mandate to negotiate the investor-state dispute settlement agreement. Now that negotiations are finished, it is difficult to say we changed [our mind] and let’s re-discuss,” Carlo Calenda, Italy’s vice-minister of trade, told members of the European Parliament during a meeting of the parliament’s international trade committee. “If we move in this way, we will have to open up all the chapters and waste a lot of time.”

That's pretty extraordinary.  He's arguing that allowing the European public, in whose name these negotiations are supposedly being conducted, to express their opinions on the text before it is fixed for ever, would "waste a lot of time".  That reveals why the European Commission's assurance that the people would have an opportunity on to be heard later on was always a completely worthless, since at point the text would be frozen.  The Italian minister's comments confirm that there is no intention of changing anything that was agreed in secret behind closed doors, whatever the EU public thinks.

This represents a betrayal that is exacerbated by the fact that the public has forcefully let the European Commission know that it does not want ISDS, even if the detailed results of the consultation have not yet been released.  Instead, the Commission is pretending those 150,000 responses never happened, and that it is at liberty to push through its own anti-democratic agenda.

What makes things even more ridiculous is that in the same Embassy article, the EU's chief negotiator for CETA, Mauro Petriccione, is reported as saying that it was impossible to address all the issues that were likely to arise:

“The debate isn’t finished,” he added. “I cannot promise you that this text answers concerns that are still being debated or which may arise in the future.”

In fact, as I explained in a column back in March, we know that a previous massive flaw in the text was only discovered because a copy was leaked that allowed independent experts to check it.  Freezing CETA's text without allowing more such scrutiny to be applied is just folly, and almost guarantees that there will be problems later on.

That meeting before the European Parliament's INTA committee drew an another, even more significant comment from the Italian politicians present, as Yanick Jadot, an MEP on INTA explained in a perceptive article:

In one of Italy’s first appearances in the European Parliament since it assumed the Council Presidency in July, Carlo Calenda, the minister charged with overseeing TTIP for the Council, announced to the INTA committee the possibility of concluding an “interim agreement” for TTIP in light of lack of progress to date.

The announcement is politically significant. It is both a clear indication that a thorough TTIP reevaluation is underway at the highest levels in Brussels, and that a comprehensive agreement may be too controversial and substantial to swallow in one go. The minister noted that a “profound reflection on the negotiation strategy” was now needed and that a decision to go for an interim agreement could take place after the US mid-term elections in November, with an aim to conclude it in 2015.

As Jadot rightly notes, this is a clear sign that TTIP is in trouble, and the European Council and Commission are desperately trying to find some way to conjure up at least half an agreement to save face.  Whether that can then be converted into an "ambitious" one, as the Commission has been insisting is necessary, is another matter. 

As well as this unexpected signal from deep within the political machine that even its supporters know that TTIP is going nowhere, this suggestion for an "interim" agreement is an important development because the US is totally against the idea:

Anthony Gardner, the new US Ambassador to the EU, immediately refuted Italy’s interim suggestion at the same INTA meeting, aggressively defending a comprehensive deal:

“There are many geopolitical and economic reasons to conclude an ambitious agreement, and I say ambitious because we continue to believe, like our Commission colleagues, that only a comprehensive agreement would yield the significant results our leaders want. Yes I know our friend Carlo Calenda believes an interim agreement should be considered but we continue to believe that only a comprehensive agreement will work.”

While Mr. Gardner said he would look forward to “a regular, open and honest dialogue”, he went on to attack those who have raised issues of concern, such as chlorine washed chicken. Such issues he claimed were “peripheral” and amounted to “scaremongering”. So much for an open and honest dialogue. He then warned those who “refuse to believe” the assurances of both sides: “do not prejudge the results, wait until we have advanced texts before you make up your mind.”

Of course, that's precisely what we, the public, can't do: no texts will be released to us until it is too late to do anything about - exactly with CETA.  So telling people to wait until we have "advanced texts" is just another kick in the teeth.  No wonder, then, that the resistance to ISDS and TTIP is growing.  Here's what's happening in the UK:

British trade unions are this week expected to lend their support to a growing campaign opposed to a new international trade deal which critics claim threatens to make the privatisation of the health service irreversible.

Three of the UK's biggest unions have tabled motions at the Trade Union Congress in Liverpool outlining their opposition to the transatlantic trade and investment partnership (TTIP), a huge trade deal being negotiated behind closed doors at the European commission between EU bureaucrats and delegates from the US.

Meanwhile, Europe-wide initiatives are springing up.  For example, there's the European Citizens’ Initiative, an official petition:

An alliance of more than 200 civil society organisations from all across Europe has launched a European Citizens’ Initiative (ECI) with the aim of repealing the European Union’s negotiating mandate for the Transatlantic Trade Investor Partnership (TTIP) and not concluding the Comprehensive Economic and Trade Agreement (CETA).

The ECI was registered with the European Commission on 15 July. The collection of signatures is due to start in mid September 2014.

Here's how that will work:

One million signatures must be gathered within one year. Additionally, in seven EU states a specific minimum of supporters must be achieved, e.g. 72,000 signatures in Germany, 55,500 in France, or 54,750 in the United Kingdom. If the initiative succeeds in doing this, then the EU Commission organises a hearing in the EU Parliament, and concerns itself with the matter. The ECI citizen’s committee then finally receives a written response from the Commission. If the Commission decides to present a legal act, then this is is passed on to the European Council and to the European Parliament.

Obviously, that's a pretty long-term project, and before then, people plan to take to the streets of Europe on 11 October to protest against TTIP.  Many readers will doubtless recall that demonstrations against ACTA in 2012 led to the rapid collapse of support for the agreement, and its eventual rejection by a massive majority in the European Parliament.  It will be interesting to see whether these European marches will similarly signal the beginning of the end for CETA and TTIP.

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TTIP Update XXXVI

As I mentioned in my previous update, the TTIP negotiations are currently on hold, but that does not mean that all activity has stopped.  By an interesting coincidence, the other major EU trade agreement - that with Canada, generally known as CETA - seems to have been "concluded", although quite what that means is not yet clear.  For example, back in October 2013, the EU and Canada announced that they had "reached a political agreement on the key elements" - and yet negotiations have continued until now.  Even assuming that there are not more holdups, the process of ratification is extremely long, requiring all kinds of legal "scrubbing" and then approval by the various parts of the European Union and possibly national governments too (but again, that's not yet clear.)

In theory, we would have to wait until most of that was accomplished before we got to see the text of CETA, but as I noted last time, some public-spirited soul has leaked both the main text [.pdf] and the annexes. I've skimmed through the form, but not felt strong enough to tackle the latter.  I'm hoping that  experts will take a look at sections of interest and publish their thoughts in due course.

The first such analysis has already appeared, and it will probably be of particular interest to Open Enterprise readers.  It comes from the Canadian academic Michael Geist, and looks at a key area: copyright.  As he writes:

the starting point for copyright in CETA as reflected in 2009 leaked document [from Wikileaks] was typical of European demands in its trade agreements. It wanted Canada to extend the term of copyright to life of the author plus 70 years (Canada is currently at the international standard of life plus 50 years), adopt tough new rules for Internet provider liability, create criminal sanctions for some copyright infringement, implement new rights for broadcasters and visual artists, introduce strict digital lock rules with minimal exceptions, and beef up enforcement powers. In other words, it was looking for Canada to mirror its approach on copyright.

And yet the latest leak of the final CETA text shows that all the main European demands have been dropped.  Here's why Geist thinks that happened:

First, the domestic policy situation in both Canada and the EU surely had a significant impact as ACTA protests in Europe and consumer interest in copyright in Canada led to the elimination of the criminal provisions and the adoption of better-balanced, consumer-oriented rules.

The rejection of ACTA by the European Parliament in July 2012 was certainly a pivotal event that has had a major impact on the negotiations of subsequent agreements involving Europe.  Geist's other points - that Canada's copyright laws were compliant with international standards, that they are increasingly being seen as an alternative to the hard-line approach advocated by the EU in CETA, and that copyright was not a priority in CETA for Europe -  are doubtless true, but don't carry over to TTIP.  Importantly, the US will not be fighting any attempt by the EU to introduce stronger copyright rules in TTIP - on the contrary, we know from ACTA that in comparison, the EU is likely to be the moderating force here.

Putting those facts together, we can't therefore hope that TTIP will be as reasonable as CETA as far as copyright is concerned.  Indeed, as I noted in an earlier update, there is strong evidence that the European Commission is looking more than favourably on a "Christmas list" of demands from the copyright industries.

On a different note, the Canadian publication The Tyee has a useful analysis of some of the details revealed about investor-state dispute (ISDS) settlement in CETA.  It points out that ISDS is even more problematic than thought because of the existence of an important CETA commission, whose exact details have not been revealed:

Jan Spangenberg is an associate in Latham & Watkins' international arbitration practice group in Hamburg, Germany, which regularly represents states and investors in investment treaty arbitrations. He acknowledged the more narrow definition of "fair and equitable" treatment in CETA, but points out that the treaty includes a mechanism that could allow for a later modification of the provision by a CETA commission.

"It is unclear how this will work. As a result, significant uncertainty remains," Spangenberg said.

The commission, which does not yet exist, will have the final say in the definition of "fair and equitable" treatment. As of now, nobody can tell what it will decide.

That CETA commission would have another major impact on the implementation of ISDS:

The commission will also be in charge of the right of governments to appeal the decisions of arbitration courts. Here, the same problem arises: nobody knows who will be on that commission, when it will start and finish its work, and what it might decide. Governments will have to vote on CETA before they have the answers.

How appeals will work is especially worrisome for governments, because they are always the subject of lawsuits brought on by investors. Governments, on the contrary, can't sue investors in arbitration courts. This one-sidedness becomes more acute if appeals aren't possible at all or only in limited ways.

That there is no thorough judicial review of arbitrators' decisions worries experts like van Harten: "This is a fundamental problem and makes the adjudicative process non-judicial," he said.

This CETA commission is effectively a backdoor that will allow ISDS to be made even worse than it seems in the text of the treaty.  It's another manifestation of the lack of transparency that robs CETA and TTIP of much of their legitimacy.

In the face of that and many other worries around ISDS in CETA, the following statement from the S&D group in the European Parliament is good news:

The Commission should listen to the concerns voiced by the European Parliament and the S&D Group about the investor-state dispute settlement mechanism (ISDS) in the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada.

It will be up to the Parliament – the democratic conscience of EU trade policy – to decide whether or not to ratify CETA.

The CETA agreement, to be initialled at the EU-Canada summit at the end of September, would be a positive agreement and would bring opportunities for growth and jobs on both sides of the Atlantic. It covers various sectors ranging from agricultural and industrial goods to services, intellectual property rights, public procurement and sustainable development.

However, some EU member states, notably Germany, have raised serious concerns regarding the controversial ISDS clause in the agreement that allows multinational companies to bring international arbitration cases against governments. The S&D Group has always opposed the inclusion of this mechanism and we expressed our opposition in letters sent to EU Trade Commissioner De Gucht as far back as 2012. A resolution adopted by the European Parliament in 2011 on EU-Canada trade relations also states the Parliament's preference for traditional state-to-state dispute settlement and the use of local judicial remedies to address investment disputes.

The ISDS mechanism, where applied, has already shown how much power corporations have wielded in the name of profit. It is time the EU followed the Australian example and scrapped ISDS in the CETA and in the EU-US Transatlantic Trade and Investment Partnership (TTIP).

CETA has already been delayed for too long. A trade deal between the EU and Canada has the potential for great economic benefits and it should not be put in jeopardy for the sake of an unnecessary investment clause.

That's significant because putting together the S&D group with the Greens and others opposed to ISDS in the European Parliament brings the total number of MEPs very close to the majority needed to reject CETA - and maybe even TTIP - when it comes to the big vote.  Of course, much could happen between now and then, and it's quite possible that the S&D group will succumb to the promise of "concessions" on ISDS from the European Commission.  But the statement does at least indicate that getting CETA and TTIP through the European Parliament is not going to be easy.

Strangely, the European Commission seems to be going out of its way to make it even harder.  Here's what it announced last week:

The European Union today took an important step towards creating a comprehensive EU investment policy, with the publication of a Regulation setting out a new set of rules to manage disputes under the EU's investment agreements with its trading partners. The rules – set out in the Regulation on financial responsibility under future investor-to-state disputes – are a necessary component of a common EU investment policy.

'This Regulation,' said EU Trade Commissioner Karel De Gucht 'represents another building block in our efforts to develop a transparent, accountable and balanced investor-to state dispute settlement mechanism as part of EU trade and investment policy. '

The rules set up the EU's internal framework for managing future investor-state disputes. They define who is best placed to defend the EU’s and Member States’ interests in the event of any challenge under investor-to-state dispute (ISDS) in EU trade agreements and the Energy Charter Treaty. The rules also establish the principles for allocating any eventual costs or compensation. Member States will defend any challenges to their own measures and the EU will defend measures taken at EU level. In all cases, there will be close cooperation and transparency within the EU and the EU institutions.

Friends of the Earth Europe pointed out:

According to the European Commission, this regulation will come into force on 17 September. This is two months ahead of the intended evaluation of the European Commission's own public consultation on the investor-state dispute settlement mechanism being proposed in the current negotiations for the Trans-Atlantic Trade and Investment Partnership (TTIP).

Commenting on publication of this regulation, Paul de Clerk, trade campaigner at Friends of the Earth Europe said: "Finalising this regulation while the public consultation on investor-state dispute settlement in TTIP is still on-going is completely unacceptable and undemocratic. This not only undermines the 150,000 European citizens and stakeholders who have participated in the public consultation, but also brings into question the credibility of the European Commission about their willingness to listen to the voices of citizens on this important issue."

That's exactly right: this is yet another slap in the face for the European public, and confirms that the so-called "consultation" on ISDS in TTIP was simply window-dressing.  The Commission didn't even have the decency to wait until after the official analysis of those 150,000 submissions, but went straight ahead and published its new ISDS rules now, when it can't possibly take into account what all those people have said.  It is an act of pure contempt for the hundreds of millions or ordinary citizens that pay their not un-generous salaries.

It shows once more that the European Commission is hell-bent on steamrollering ISDS through, both in CETA and TTIP. Since it manifestly doesn't care a hoot about the growing rejection of ISDS by the public and hundreds of civil society organisations, it looks like we will once more have to pin our hopes on the European Parliament to stop this arrogant, high-handed behaviour by doing to CETA and TTIP what it did to ACTA: rejecting them.

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TTIP Update XXXV

According to the publication "Inside US Trade", which tends to be pretty good when it comes to sourcing its information, the next round of TTIP talks won't take place until the end of  September - obviously the negotiators felt they needed a holiday after all the excitement of the last year.  But even if TTIP news is thin on the ground, there have been a couple of big stories recently with major impacts for the negotiations.

The first concerns the following news:

Philip Morris International, the world's largest tobacco company, is prepared to sue the British government should it implement a law requiring plain packaging of cigarettes, a document seen by Reuters on Tuesday showed.

Another report claims that the tobacco company will be demanding exceptionally high "damages" - £11 billion.  Unfortunately, it doesn't provide any source for that figure, so I think it needs to be treated with caution.  However, we do know that Philip Morris (PMI) is also suing Uruguay over plain packs, and in that case is demanding $2 billion.  Given the greatly differently size of their respective economies - Uruguay's GDP is around $50 billion, while the UK's is about sixty times as great - it's quite plausible that PMI would want an even more outrageous figure.

The company has used ISDS provisions in an obscure treaty between Uruguay and Switzerland to sue the former.  Unfortunately the articles about the new threat to sue the UK don't say how PMI aims to do this; as far as I am aware, there aren't any treaties where it could invoke ISDS clauses in the same way, so presumably it will just be trying to do so under UK law.  That's interesting, because it is how the company also tried to sue Norway over its own moves to discourage smoking.  Here's what happened:

PMI tried similar bully tactics against Norway when it banned the display of tobacco products in 2010. Crucially the case was tried in an Oslo District Court because the treaty through which PMI sued Norway – the European Economic Area agreement – had no ISDS. Norway made a public health defence. Norway won.

Now imagine a situation in which either CETA or TTIP (or both) had ISDS chapters.  This would then allow PMI to sue the UK (and any other EU country) directly, using secret tribunals, rather than national courts.  Not only that, ISDS would allow any of the tens of thousands of US companies with subsidiaries in Europe to do the same.  The latest threat of PMI shows that the will is there, even if the easy means to do so are currently lacking.  Let's hope this action will cause the British government to wake up to the dangers of ISDS, just as the Germany government did when the Swedish company sued Germany in 2012 for €3.7 billion using ISDS clauses in the Energy Charter Treaty.

The other news is very different.  It comes from Professor Jane Kelsey of the Faculty of Law, University of Auckland, whom I mentioned last week for her insightful analysis of the leaked financial annex of TISA.  She's put together a hugely-important new site with the slightly odd name of "TPP: No Certification".  Here's what thte certification refers to:

The US withholds the final steps that are necessary to bring a trade and investment treaty into force until the other party has changed its relevant domestic laws and regulations to meet US expectations of its obligations under the agreement. In the past, US ‘expectations’ have gone beyond what is in the actual text, and even included matters that were rejected in negotiations.

US officials can define another country’s obligations; become directly involved in drafting that country’s relevant law and regulations; demand to review and approve proposed laws before they are presented to the other country’s legislature; and delay certification until the US is satisfied the new laws meet its requirements.

There are already moves to apply a new and extended version of certification to the Trans-Pacific Partnership Agreement (TPPA).

The [US] Bipartisan Trade Priorities Act of 2014, which seeks to establish Fast Track authority for the TPPA, contains Sec. 4(a)(2):

"CONSULTATIONS PRIOR TO ENTRY INTO FORCE – Prior to exchanging notes providing for the entry into force of a trade agreement, the United States Trade Representative shall consult closely and on a timely basis with Members of Congress and committees as specified in paragraph (1), and keep them fully apprised of the measures a trading partner has taken to comply with those provisions of the agreement that are to take effect on the date that the agreement enters into force."

Although the new site's main focus is on the TransPacific Partnership agreement (TPP), that paragraph from the proposed Bipartisan Trade Priorities Act makes it clear that the certification requirement is general: "Prior to exchanging notes providing for the entry into force of a trade agreement" - that is, *any* trade agreement.  As a result, the new site's analysis applies equally to TTIP.

There is a detailed Q&A [.pdf], which is well-worth reading (not least for the appalling saga of how the US insisted on vetting the news laws that Peru had to bring in), as well as a condensed explanation of what this is likely to mean in practice:

Certification is a legally binding obligation on the US President. The President withholds formal written notification to another party to a trade agreement that the US has satisfied its domestic approval processes until the US certifies the other party has altered that party’s domestic laws and policies to satisfy US expectations of what is needed to comply with the TPPA [and also TTIP].

The US officials transmit a list of the changes to the other country’s domestic laws and policies that the US government requires before it will allow the pact to go into force. US government officials then monitor compliance, and pressure the government of the trade partner country to alter its laws and policies until they satisfy the US view of the changes required.

Even if the US Congress passed the Trans-Pacific Partnership Agreement (TPPA) [or TTIP], the pact would only go into effect in relation to each party when the US certified that party had satisfied US notions of compliance. Certification therefore provides additional leverage to the US Congress and US industry to impose its interpretation on a party’s obligations under the TPPA [and TTIP].

That last part is particularly worrying.  For example, the European Commission has been adamant that certain things like chlorine-washed chicken meat or hormone beef will not be part of TTIP.  Let's assume that is true.  We know that some of the most powerful US farming groups have said that they will not support TTIP without Europe opening its doors and plates to chlorine-washed chicken and hormone beef, among other things.  So one possibility is that the European Commission might refuse to allow either *in the agreement* as signed, but that under the influence of US lobbyists, the US government would refuse to certify TTIP unless they were added *afterwards*. 

In this way, the European Commission would be able to say truthfully that it managed to keep out chlorine-washed chickens and hormone beef from TTIP's text, but that it now had "no choice" but to add it in (and maybe change the relevant EU laws), otherwise all that hard work on the agreement would be wasted, and all those supposed "benefits" lost.  And so, at the twelfth hour, chlorine chickens, hormone beef, GMOs, etc. etc. would be permitted in the EU so as to obtain final certification.

Of course, it may well not come to that.  The resistance to TTIP is growing, and it may be that the whole thing - not just ISDS - collapses as people become aware of the reality of what is being planned.  But what this valuable new site from Kelsey makes clear is that even if we manage to keep out the worst demands of the US side from the "final" text, it may not actually be final.  Assuming certification is required for TTIP as for TPP, it would give one last chance for the US to try to bully the EU into accepting its demands - and one last chance for the European Commission to capitulate.

Full list of previous TTIP Updates.

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TTIP Update XXXIV

The previous update detailed the massive rejection of ISDSin TTIP, even at the highest political levels in Europe.  That refusal to allow corporations to be placed above national law has now spread to the other major trade agreement that the European Commission is currently negotiating, the one with Canada, known as CETA.  Here's the bombshell that the German newspaper Süddeutsche Zeitung dropped over the weekend (original in German):

German EU diplomats confirmed in Brussels on Friday that the [German] federal government could not sign the agreement with Canada "as it is now negotiated." Although Germany was, in principle, ready to initial the agreement in September, the chapter on the legal protection of investors is however 'problematic' and currently not acceptable.

Now, it's important to emphasise that this is not saying that Germany will *not* sign CETA, as some have reported.  What it does indicate is that the current text is problematic.  That leaves open the possibility for modifications to be made that would make it acceptable.  But as we've noted before, Germany has already expressed its view that ISDS should not be in TTIP, and presumably feels the same way about CETA. 

Thus the new battle over CETA not only provides important hints about what will happen with TTIP, but will have a direct influence on it.  If CETA includes ISDS it will enable US companies to sue the EU through Canadian subsidiaries, thus making its presence or absence in TTIP somewhat moot.  Equally, if ISDS is dropped from CETA, it is likely to be dropped from TTIP.

That has become even more likely in the wake of this new statement by the S&D Group in the European Parliament:

Following reports in the press that the German government is reluctant to sign the EU-Canada Comprehensive Economic Trade Agreement (CETA) as it currently stands, the S&D Group calls for further efforts to conclude this agreement but invites the Commission to seriously consider withdrawing the investor-state dispute settlement clause from the final text. The inclusion of this clause seems to be the main controversial point in the CETA text for the German government.

That's significant, because the S&D Group is the second-largest in the European Parliament: TTIP will not be ratified there unless it's MEPs support it, and this is therefore a further signal that they won't support it if it includes an ISDS chapter.  The wisdom of that position was underlined just yesterday with the annoncement of the biggest award ever made by a tribunal of the kind that lie at the heart of ISDS:

In an historic arbitral award rendered on July 18, 2014, an Arbitral Tribunal sitting in The Hague under the auspices of the Permanent Court of Arbitration (PCA) held unanimously that the Russian Federation breached its international obligations under the Energy Charter Treaty (ECT) by destroying Yukos Oil Company and appropriating its assets. The Tribunal ordered the Russian Federation to pay damages in excess of USD 50 billion to our clients who were the majority shareholders of Yukos Oil Company.

Yes, you read that correctly: a tribunal of lawyers has decided that Russia ought to pay $50 billion damages (although whether it will is quite another matter.)  This is a useful reminder that there is literally no limit on the awards that these tribunals can make: the ISDS system is not just undemocratic, it is completely outside anyone's control - a recipe for disaster.

The other big TTIP news is the leak of one the key chapters, on "sanitary and phyto-sanitary measures" (SPS) - basically food safety and related areas.  Here's a summary of what it reveals:

The Institute for Agriculture and Trade Policy released the draft version of the central text of the TTIP chapter on sanitary and phyto-sanitary measures; this chapter imposes restrictions on government regulations related to food safety and animal and plant health. Among the many provisional threats to public health safeguards are:

A form of mutual recognition of the safety of imported food from Europe in the U.S. and vice versa that reduces standards to the lowest levels;

 An objective that food safety safeguards should generally be enforced in the least trade restrictive manner, rather than the manner that is most protective of public health and the environment; and

 A system of “exporter country certification” that would  sharply reduce food safety inspections at ports of entry.

That same Institute for Agriculture and Trade Policy (IATP) has also provided a detailed and illuminating analysis of what the dry text will mean in practice.  Here's the key section that describes the overall intent of the SPS chapter in TTIP:

trade agreement SPS language about food safety, animal health and plant health outlines the general terms for enabling trade while complying with “the importing Party’s appropriate level of protection.” So, for example, unless the European negotiators object to the use of Maximum Residue Level (MRL) of a specific pesticide on imported grain or a specific veterinary drug in the production of imported meat, without creating “unjustified barriers to trade” (Article 2, paragraph 2), the TTIP regards that product as having an “appropriate level of protection” to enable importation and consumption of the product. Determination of MRLs and other metrics of what is “appropriate” happens in a domestic regulatory process, in which, at least in the U.S., much of the relevant data is classified as Confidential Business Information.

This is the key change proposed by the TTIP draft: "mutual recognistion" would mean that US standards for pesticides or veterinary drugs would be regarded as acceptable in the EU, even when they are manifestly lower than those currently in place here.  As that paragraph also hints, the US regulatory process is pretty much a part of the US agricultural industry, which provides most of the data used for making regulatory decisions.

Not  only that, industry generally won't even provide the "scientific" data on which government decisions are based, since it is "Confidential Business Information."  Of course, when companies won't release data it's a clear sign that they have something to hide, as the experience with clinical trials data has shown.  When it comes to health and safety, open data is even more critical than elsewhere, but the US approach is diametrically opposed to this, with secrecy as the default.  This means that European efforts to make the regulatory process more open would be undermined by the US demand for business confidentiality for their standards, which would also apply in the EU.

In fact, the SPS chapter in the TTIP draft is even worse.  Not content with allowing food that meets US standards to be imported freely into Europe, it would stop checks being carried out on that produce as it enters the EU:

industry has long sought to replace verification of food safety management performance by port of entry inspection of products with export food facility certification, by governments or third parties, verified by audits of facilities. The terms of certification and auditing to verify SPS system equivalence are outlined in Article 12 of the draft. In Article 9, paragraph 1, industry, and particularly the Grocery Manufacturers Association, has gotten its wish to eliminate port of entry inspection and testing results as a factor in the SPS systems equivalence determination. According to the draft text, recognition of SPS systems as “equivalent” by TTIP Parties will occur “without a need for individual re-inspection [of products] or other additional guarantees.

There's an interesting consequence of removing the entry inspection:

The industry rationale for eliminating re-inspection and testing is not just to expedite more food trade more quickly. Detaching re-inspection and testing from SPS systems equivalence determination provides a layer of government verified and certified food safety management insulation from liability for exporting or importing contaminated products.

This means that the kind of food scandals we have seen recently - notably of horsemeat - would be much harder to investigate.  It would also remove incentives for US food companies to worry too much about the issue, since it would be much easier for them to escape any liability.

Finally, many in Europe will doubtless be worried by this aspect of the leadked SPS chapter:

“Prominent coverage of animal welfare” refers to “best endeavor” (we will try), not binding (“shall”) measures to prevent trade in livestock products from animals that have been abused. For example, Article 11, paragraph 1, states “The Parties recognize that animals are sentient beings. They undertake to respect trade conditions for live animals and animal products that are aimed to protect their welfare.” So, while this aspirational language is perhaps new in a trade agreement, it is designed to be unenforceable. There will be no requirements that Parties mandate compliance with animal welfare laws as a condition of being able to trade in animal agriculture products.

That means the opportunity to use TTIP to export Europe's higher animal protection laws to the US in order to mitigate some of the worst horrors of that country's "mega-farms" is being lost.  As a result, European farmers will be at big economic disadvantage compared to their US rivals, since they will be required to spend more money taking better care of their animals. 

This is likely to lead to European farms losing market share, as cheaper US food enters the EU, with no indication that it was produced in inhumane conditions, or that it contains pesticide levels that were previously unacceptable in the EU.  In the face of this unfair competition, the agricultural industry will inevitably push for EU standards for food safety and animal welfare to be lowered to those of the US in order to "level the playing field."  Moreover, whenever the US lowers them yet further - as it is currently doing for chickens - this will have a knock-on effect of pushing EU standards down too.  TTIP not only leads to a race to the bottom on food and health standards, it leads to that bottom being excavated to new depths.

As this indicates, the leak of the SPS chapter is extremely important, because it reveals in detail for the first time just how our food standards will decline, and that the repeated assurances from the European Commission that they will not, are worthless.  It's probably safe to assume that the same will prove to be true of the chapter dealing with intellectual monopolies like copyright and patents, which is likely to turn out to be ACTA 2.0.

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TTIP Update XXXIII

My last two updates concentrated on ISDS, and on the European Commission's consultation, such as it was.  Flawed though it may have been, it did at least give people a rare - no, unique - opportunity to express their views on this aspect of TTIP. And express it they did: although we have no official figures, I'm consistently hearing that well over 100,000 submissions were made.  That's an astonishing number for such an apparently obscure aspect of a trade agreement, and a clear reflection of how strongly people feel about this. 

That's surely not something the European Commission ever expected when they announced the consultation, and means that it can have no doubt about the public's views on this matter.  And yet, with typical contempt for democracy, Karel De Gucht, the commissioner handling the TTIP negotiations, called this massive demonstration of citizen engagement an "attack" (original in German.)

Nor is it just the public that is expressing itself forcefully on ISDS.  Criticism of the idea has come from just about every quarter.  Here's what happened on the No2ISDS site that I wrote about:

Friends of the Earth Europe, AK Europa and ÖGB Europabüro, set up an online platform to allow citizens to voice their concerns about ISDS. The website www.no2isds.eu has collected over 23,000 contributions from people across Europe and the US who fundamentally oppose the harmful investor-state arbitration system. Combined with initiatives from groups including 38degrees and SumofUs, this has contributed to a record number of over 100,000 contributions to the Commission's public consultation.

European Trade unionists are against ISDS:

In a letter to European Trade Commissioner Karel de Gucht, Bernadette Ségol the General Secretary of the European Trade Union Confederation (ETUC) says trade unionists are “particularly concerned at statements from DG Trade implying that the consultation is about a reform of the ISDS system and is not open to a decisive rejection.”

The letter tells De Gucht very clearly “the ETUC is fundamentally opposed to the inclusion of ISDS in the Transatlantic Trade and Investment Partnership.”

In its formal response to the consultation the ETUC points out that “ISDS establishes a system of judicial protection which is only available for foreign investors. By definition, this additional system awards benefits to foreign companies which are not given to domestic companies. This discriminates against domestic companies. ISDS destabilises the domestic judicial system because public measures can be subject to two diverging legal assessments.”

It also calls for ISDS in the EU-Canada Trade Agreement to be frozen at least until it is resolved in TTIP.

So are health organisations [.pdf]:

Health Action International (HAI) Europe, the Common s Net work, Knowledge Ecology International (KEI) Europe, Health GAP (Global Access Project), Salud por Derecho, the International Society of Dr ug Bulletins (ISDB), the Medicines in Europe Forum (MiEF) and Universities Allied for Essential Medicines (UAEM) welcome the opportunity to submit a response to this consultation . We believe, however, that this consultation, which aims to improve ISDS, is asking the wrong questions. ISDS cannot be improved. The real question is whether ISDS should be included in TTIP at all. The answer, very simply, is no.

As are leading members of the European Commission's own TTIP advisory group:

Following the end of the public consultation on investor-state dispute settlement (ISDS) in the EU-US free trade negotiations (known as TTIP), the European Environmental Bureau, the European Public Health Alliance (EPHA) and Transport & Environment call on the European Commission to exclude ISDS from TTIP and to publish all contributions.

The EEB, EPHA and T&E are members of the EU’s TTIP advisory group representing civil society.

One of the most devastating analyses I have seen comes from over 100 leading academics:

In our view, the logical implication of the Commission’s stance [that ISDS is flawed and needs fixing] is to raise the key question that is not asked in the consultation document: why consider including investor-state arbitration in the TTIP at all? The rationale for bilateral investment treaties was traditionally linked to views about the potential impact on foreign investment of uncertainty caused by weak legal and judicial systems in host countries. While such a vision of failed statehood should in itself be examined further, it suffices to point out, in the context of the relationship between the US and the EU, that it is difficult to argue realistically that investors have cause to worry about domestic legal systems on either side of the Atlantic. Above all, with FDI [foreign direct investment] stocks of over €1,5 trillion either way, it is implausible to claim that investors in fact have been deterred. It is true, as the Commission points out, that nine Member States already have BITs in place with the US. It may also be true that, for these nine Member States, the new arrangement might be a better alternative than ‘doing nothing.’ That, however, hardly seems enough reason to impose on the other two thirds of Member States a Treaty that profoundly challenges their judicial, legal and regulatory systems. The consultation document comes up with one additional argument: that the rights each party grants to its own citizens and companies ‘are not always guaranteed to foreigners and foreign investors.’ The claim is unsubstantiated. Even if it is accepted, there is no obvious reason why the incorporation in TTIP of a simple norm of non discriminatory legal protection and equal access to domestic courts could not address the problem perfectly adequately.

You might predict criticism from many of these groups, especially those associated with green and left-wing groups, as here:

During Tuesday's plenary session [of the European Parliament] GUE/NGL deputy Helmut Scholz addressed De Gucht, saying, "You carried out a public consultation on the inclusion of an investor state dispute settlement (ISDS) clause which received over 115,000 responses.

"Citizens don't want ISDS; neither in TTIP nor in the agreement with Canada," the German deputy argued.

What you probably would not expect is that some of the most senior European politicians are also clearly turning against ISDS.  Here, for example, is the MEP David Martin, whom some may remember as the rapporteur (Parliamentary expert) who helped kill ACTA:

The Socialists were proud to be at the birth of TTIP, and we do not want to be its assassins, and I want to tell the Commission clearly now, though, that if we have to be, we will be. And that's why we want the Commission to listen carefully to our concerns.

This is the chairman of the European Parliament's influential international trade (INTA) committee, which will give the main advice on whether or not to ratify TTIP:

German Socialist Bernd Lange, who said procedural rules would stop [right-wing MEP] Le Pen grandstanding or using sessions for publicity, also warned that an investor-state dispute settlement mechanism should be dropped from TTIP. If it wasn't, he said, the Parliament’s next resolution on TTIP could be negative.

Finally, and perhaps most strikingly, this is what Jean-Claude Juncker, the President-elect of the European Commission, writing in his "Political Guidelines for the next European Commission" [.pdf], published earlier this week:

As Commission President, I will also be very clear that I will not sacrifice Europe's safety, health, social and data protection standards or our cultural diversity on the altar of free trade. Notably, the safety of the food we eat and the protection of Europeans' personal data will be non-negotiable for me as Commission President. Nor will I accept that the jurisdiction of courts in the EU Member States is limited by special regimes for investor disputes. The rule of law and the principle of equality before the law must also apply in this context.

The plenary session of the European Parliament at which some of these comments were made included a rather lack-lustre speech by De Gucht on TTIP, which was met with a silent protest against TTIP from some MEPs.  Rather less silent was a protest by activists during the TTIP stakeholder meeting for this latest round of negotiations:




Here in the UK, resistance to ISDS is centred around concerns that it could lock in the current rounds of NHS privatisation.  This has become enough of a problem that the EU's chief negotiator, Ignacio Garcia Bercero, has written a letter [.pdf] to one of the UK supporters of TTIP, John Healey, trying to assuage those fears.  War on Want's John Hilary has put together a Twitter or identi.ca, and +glynmoody on Google+