TTIP Update XLVII

As long-suffering readers of this column wil have noticed, the dominant theme of the discussions around TTIP so far has been the investor-state dispute settlement provisions (ISDS).  We are still waiting for the European Commission's analysis of the massive response to its consultation on the subject - it will be fascinating to see how it tries to put a positive spin on the overwhelming public refusal of ISDS in TTIP. 

The issue that crops up most often after ISDS is probably transparency - or rather the complete lack of it.  Yes, it's true that there have been some token releases of documents: initial position papers in 2013, and some more in 2014; but these don't really tell us much that we didn't already know, or could guess.  The main obstacle to greater openness was Karel De Gucht, the European Commissioner for Trade when TTIP was launched.  As he showed time and again during the ACTA fiasco, he had little but contempt for the European public and its unconscionable desire to know what the politicians whose salaries it pays are up to in Brussels.  That made his retirement at the end of last year an important moment and opportunity.

His successor, Cecilia Malmström, is cut from a very different cloth, as was apparent from this announcement right at the start of her tenure of De Gucht's post:

'TTIP is an immensely important agreement,' said Commissioner Malmström, 'with huge potential to create jobs and growth and to set standards. Yet, even though the TTIP talks are the most transparent and open the Commission has ever conducted, there are still a lot of doubts around what is being negotiated.'

'That's why we want to consult even more extensively on TTIP, and go even further in terms of transparency. Increased transparency will enable us to show, more clearly, what the negotiations are about and to de-mystify them. We will use this as a basis to engage further with a broad range of stakeholders and the public,' said Malmström.

The Commissioner outlined two main proposals for boosting transparency.

First, to extend access to TTIP texts to all Members of the European Parliament, beyond the currently limited group of Members of the European Parliament’s International Trade Committee.

Second, to publish texts setting out the EU's specific negotiating proposals on TTIP.

As I've discussed many times, TTIP does not have "huge potential to create jobs and growth", even under the most optimistic assumptions, but it's certainly important, so Malmström's promise of consulting "even more extensively" is extremely welcome.  Indeed, I was pleasantly surprised last month to experience first-hand just how extensively she means to consult:

Whether that meeting actually happens, remains to be seen.  But Malmström's two main proposals for "boosting transparency" have now been implemented.  The first of them - providing access to MEPs - happened immediately.  The second, publishing actual negotiating texts - happened earlier this week:

The European Commission today published a raft of texts setting out EU proposals for legal text in the Transatlantic Trade and Investment Partnership (TTIP) it is negotiating with the US. This is the first time the Commission has made public such proposals in bilateral trade talks and reflects its commitment to greater transparency in the negotiations.

Specifically, here's what is being made available:

The so-called 'textual proposals' published today set out the EU’s specific proposals for legal text that has been tabled in the proposed TTIP. They set out actual language and binding commitments which the EU would like to see in the parts of the agreement covering regulatory and rules issues. The eight EU textual proposals cover competition, food safety and animal and plant health, customs issues, technical barriers to trade, small and medium-sized enterprises (SMEs), and government-to-government dispute settlement (GGDS, not to be confused with ISDS). Today, the Commission has also published TTIP position papers explaining the EU's approach on engineering, vehicles, and sustainable development, bringing the total number of position papers it has made public up to 15.

To make the online documents more accessible to the non-expert, the Commission is also publishing a 'Reader's Guide', explaining what each text means. It is also issuing a glossary of terms and acronyms, and a series of factsheets setting out in plain language what is at stake in each chapter of TTIP and what the EU's aims are in each area.

That's certainly a big step forward for transparency, as is to be welcomed.  However, not everything is available yet.  For example, in two areas that are likely to be of particular interesting to readers of this column - "Information and communication technology" and "Intellectual property rights" - we only have some rather thin factsheets.  The first of these [.pdf] is particularly slight - just one page.  Perhaps the only element of interest is the following:

In ICT, we want to:

set common principles for certifying ICT products, especially for encoding and decoding information ('cryptography' in the jargon).

But the European Commission is quick to assure us that:

The EU won’t accept lower security levels. We want common principles for assessing how products comply with regulations.

Presumably that means the EU and US will agree to use the same set of backdoors in crypto tools...

On the copyright and patent front [.pdf], it's striking that the Commission is still assuring us that TTIP is not ACTA 2.0 - evidence once more of how deep the fears run of another defeat at the hands of the European Parliament - for example:

The EU and US have detailed enforcement provisions already, whereas some other countries that planned to join ACTA didn't. So we won’t negotiate rules on things like:

penal enforcement

internet service provider liability.

The idea that criminal penalties and ISP liability were only in ACTA because "some countries" did have strong enforcement is ridiculous: they were there because powerful copyright lobbyies in the EU and US wanted them there.  But it is nonetheless welcome to have set down here that neither will be present in TTIP.

The most recent release of TTIP documents shows two things.  First, that we have started the journey towards real transparency, but by no means arrived there yet.  And secondly - and perhaps most importantly - that public advocacy does work.  Although it is true that the present move owes a lot to  Malmström - and kudos to her for taking this step - it is also true that it would never have happened had not thousands of people demanded more openness.  It demonstrates what can be done simply by asking in a polite but persistent manner, and encourages us to keep doing so.

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TTIP Update XLVI

Not much has been happening on the TTIP front during the holiday break, but there's one extremely important report that came out a little earlier that I'd like to explore in this update.  It's called "The hidden cost of EU trade deals: Investor-state dispute settlement cases taken against EU member states", and has been put together by Friends of the Earth Europe.  As that title makes clear, it's about an aspect of the ISDS mechanism that has so far been overlooked: the fact that the EU has *already* suffered as a result of the inclusion of ISDS in other agreements.  As such, they give a foretaste of what's likely to happen if ISDS is included in TTIP (and CETA):

One of the European Commission’s arguments supporting the inclusion of the mechanism in those trade deals is that EU member states have already signed thousands of trade and investment agreements, which include such investor-state dispute arbitration. Investor-state arbitration has become a consistent feature bilateral investment treaties (BITs), with EU member states being party to some 1,400 BITs including ISDS since the late 1960s. So the European Commission says it should be part of the agreements now under negotiation.

What the European Commission rarely mentions is how often this mechanism has been used against EU member states, and how much this mechanism has cost EU taxpayers. The ongoing negotiations of trade and investment agreements – including the Transatlantic Trade and Investment Partnership, the Transpacific Partnership, and negotiations between the EU and the US respectively with China – are unprecedented in size and scope, and would drastically expand the extent of foreign direct investments covered by investor-state arbitration. Such an expansion would risk seriously undermining governments’ ability to regulate for the protection of people and the environment.

Here are the report's key findings:

127 known ISDS cases have been brought against 20 EU member states since 1994. Details of the compensation sought by foreign investors was publicly available for only 62 out of the 127 cases (48%). The compensation sought for in these 62 cases amounts to almost €30 billion.

The total amount awarded to foreign investors – inclusive of known interest, arbitration fees, and other expenses and fees, as well as the only known settlement payment made by an EU member state – was publicly available for 14 out of the 127 cases (11%) and amounts to €3.5 billion.

The largest known amount to be awarded by a tribunal against an EU member state was €553 million in the Ceskoslovenska Obchodni Banka vs. Slovak Republic case (1997).

The report is valuable not just for bringing all these figures together for the first time, but for providing details of several of the most significant cases.  They're all well-worth reading, since they flesh out the otherwise rather dry ISDS concept.  I'd like to focus on one, which raises some particularly important issues.  Here's the report's summary of the case:

The Micula brothers invested in the North West region of Romania – setting up multiple food processing, milling and manufacturing businesses. In 2005, the claimants initiated a dispute against Romania seeking compensation to the tune of €450 million. The case emerged following a series of decisions taken by Romania, which altered or withdrew a number of investment incentives (ie: exemptions from custom duties and certain taxes) that had previously been offered to the Micula brothers in support of their investment in a disadvantaged region of Romania. Romania argued that the regulatory changes they made were warranted, as they were implemented as part of the lead up to accession to the EU in 2007. In December 2013 the tribunal found Romania in breach of the Sweden-Romania BIT and obliged to pay more than $250 million (€183,311,335) in damages.

Clearly, $250 million is a lot of money for a government like Romania to find, money that will have to be taken from other areas of the country's budget - perhaps things like health provision and education.  That's bad enough, but what's really problematic here is that Romania withdrew the investment incentives involved in the case because the European Commission required it as a condition of Romania's accession to the European Union:

The Micula vs. Romania case has incited a great deal of interest, particularly in relation to the sovereignty of EU law. The European Commission (EC) intervened and attempted to convince the tribunal that the actions implemented by Romania were taken in an effort to comply with EU law obligations to eliminate state aid (ie: subsidies and incentives). The Commission argued that if the tribunal ordered Romania to pay compensation it would be considered state aid under a different pretense. The arbitrators were not swayed by the EC’s interventions and, in relation to the enforceability of the final award, drew "attention to Romania’s obligations under the ICSID Convention to comply with the final ICSID awards."

Put simply, what that means is that the tribunal ruled that when it came to protecting investments, EU law should be ignored - a real slap in the face for the European Commission, which had made a direct intervention to avoid just such an outcome. 

This is the key problem with ISDS: it places the rights of corporations above the rights of nations - indeed, in this case, above the rights of the EU to determine law within its borders.  ISDS cannot be "fixed", as the European Commission would have us believe, because it was designed with exactly this purpose in mind: it was introduced as a way of protecting investments in countries where the local rule of law could not be depended upon.  Since that is manifestly not the case in the EU or US, it serves no purpose other than to undermine the strong legal systems there.  The only solution is therefore to drop ISDS from TTIP, CETA and all future agreements.

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TTIP Update XLV

The TTIP negotiations are in trouble.  After 18 months of talks, the EU and US have precious little to show.  And external factors such as the imminent Presidential race in the US means that time is running out to get the deal signed and sealed.  Against that background, there is signs of a (rather feeble) attempt to put “rocket boosters” under the negotiations, as David Cameron likes to phrase it - although he forgets that rocket boosters can also explode on take-off, destroying their cargo completely.

For example, earlier this week the UK government published a Web page entitled "Transatlantic Trade and Investment Partnership (TTIP): benefits and concerns".  Rather surprisingly, it consists entirely of re-heated numbers that I've debunked in earlier TTIP Updates.  Is that really the best they can do? Curiously, TTIP proponents are calling for a political debate based on "facts" and "hard evidence".  I say: bring it on, because the facts are actually pretty damning for most of the hyperbolic claims made by the European Commission as pro-TTIP governments like the UK's.

Always in search of facts about transatlantic trade, I was delighted to come across a publication [.pdf] from the American Chamber of Commerce to the European Union among others, detailing the transatlantic economy 2013. These are figures from a strongly pro-trade group, and surely represent precisely the kind of "facts" and "hard evidence" that supporters of TTIP are calling for.  So let's take a look at some of the key areas.

US-EU merchandise trade totaled an estimated $650 billion in 2012, up 68% from $387 billion in 2000.

In other words, transatlantic trade is already huge, and growing.  So the idea that we desperately need TTIP to make that happen seems curious to say the least.  What about US investments in Europe?  Some figures from the report:

The US and Europe are each other’s primary source and destination for foreign direct investment.

Europe has attracted 56% of US global foreign direct investment (FDI) since 2000.

On a historic cost basis, the US investment position in Europe was 14 times larger than the BRICs and nearly 4 times larger than in all of Asia at the end of 2011.

Here's European investment in the US:

European investment in the US, on historic cost basis, was $1.8 trillion in 2011, 71% of total FDI in the US.

even in bad year 2011 Europe’s investment flows to the US were 7 times larger than to China.

In 2011 total assets of European affiliates in the US were an estimated $8.6 trillion. UK firms held $2.2 trillion; German firms $1.5 trillion; Swiss and French $1.3 trillion each; and Dutch firms $959 billion.

So, the "facts" and "hard evidence" suggest that transatlantic trade is booming; in particular, transatlantic investment is at dizzyingly-high levels - and all of that has taken place in the absence of ISDS.  The argument that TTIP "must have" ISDS in order to keep the investment flowing is not just wrong, but an insult to our intelligence.

Another area where I would like to see some facts and hard evidence involves claims about the alleged boost that TTIP will give to the EU and US economies.  I've debunked the 119bn euros figures regularly trotted out by the European Commission - but without explaining that this is a best-case result in 2027 - on a number of occasions.  I've also noted that there is criticism of the basic modelling technique used in the CEPR study paid for by the European Commission, something known as "Computable General Equilibrium" (CGE).  But I have recently come across a fascinating document from the European Court of Auditors, which describes itself as "Guardians of the EU's finances".  Here are a couple of things that august body has to say about the use of CGE models [.pdf]:

Both the Commission and the external consultants have also highlighted the inherent limitations of the CGE model:

(a) the CGE model can only be used for simulation purposes and not for forecasting and its simulation of long‑run effects is tenuous ;

(b) its somewhat tautological construction, i.e. all results are implicitly linked to the assumptions and calibra tion made

In other words, not only is it impossible to make forecasts with CGE models - let alone ones out to 2027 as the CEPR model does for TTIP - but the results are more or less built in to the assumptions of the model anyway.  That 119bn euros GDP boost cited endlessly by the European Commission is looking shakier than ever.  But there's actually an even more profound problem with the quantification of the claimed benefits of TTIP.  These are explored in a brilliant blog post by Martin Whitlock, whose analysis of TTIP I have cited before. 

The post is entitled 'The E.U. needs to learn the true meaning of "wealth" ', and Whitlock begins by referring to recent moves by the new European Commission:

Reports emerging from the European Commission last Thursday suggest that two key environmental proposals may be dropped from its programme. The object is to reduce the number of regulations with which businesses must comply.

If true, the associated losses could be considerable. The Clean Air package could deliver “monetised air quality benefits” of up to €151 billion per year by 2025, according to the E.U.s impact assessment. The Circular Economy package, which is focused on recycling, offers net savings to businesses of a staggering €604 billion through “resource efficiency”. To put that in context, the controversial Transatlantic Trade and Investment Partnership (TTIP) promises a boost to E.U. GDP of €120 billion by 2027 in the best case scenario.

Why would the Commission want to drop widely-supported proposals for clean air and recycling worth a potential €755 billion between them, while pursuing a controversial trade deal worth €120 billion at best? The answer lies in the provenance of those numbers, all of which are measuring different things.

His post then goes on to analyse this situation, and shows how much of the problem is that the debate around TTIP tends to focus selectively on a few misleading numbers - like 119bn euros.  Doing so ignores the broader context - and the availability of other, rather different, solutions:

A clean environment ... provides direct social benefits for everybody. The additional costs incurred by business will be repaid in spades by improvements in quality of life and human wellbeing. In this scenario, corporate profits may grow less quickly, but the totality of human wealth has greater potential for sustained increase in the longer term.

Whitlock concludes:

If the E.U. is keen to assert leadership on these issues, it could do worse than reflect upon what “wealth” really means for its 500 million citizens. Higher corporate profits extracted from an increasingly “flexible” labour market is probably not the answer to this question. Among possible alternatives: clean air to breathe; an affordable place to live; a fair share in the wealth that society produces and the time to enjoy it. All things that GDP can’t measure and which form no part of what  "economic growth" currently means.

That's a truly profound reflection that the European Commission should really take to its heart - but won't.

Full list of previous TTIP Updates.

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TTIP Update XLIV

The TTIP negotiations have started in earnest - before, meetings were largely preliminary, aimed at establishing the general positions of both the EU and US.  And yet, curiously, very little seems to be happening, at least publicly.  The next official round is not until early February next year, although it seems likely that informal meetings are still taking place behind closed doors. 

One reason for this hiatus is that there has been a change at the top.  Karel De Gucht has relinquished his post, which has been taken by the Swede Cecilia Malmström.  She is adopting a very different style, not least in terms of her attitude to the public.  Faced by the growing scepticism about TTIP's benefits, and anger over its complete lack of any meaningful transparency, Malmström has taken a conciliatory approach, promising more openness, some of which has now been announced.

But Malmström is still trotting out the same old misinformation about TTIP.  In a recent opinion piece she published in the Frankfurter Allgemeine Zeitung, the paragraph about ISDS is particularly pernicious.  Malmström says that European member states have signed a total of 1400 agreements that include ISDS; this is presumably to "prove" that ISDS is completely normal and totally harmless.  Neither is true.

Those 1400 agreements were overwhelmingly with developing nations.  The ISDS clauses were there to protect European investments in countries where the judicial systems were perhaps less than fair and reliable.  In a sense, these were one-way ISDS chapters, since companies from those emerging nations almost never invested in Europe, and thus were unable to avail themselves of the ability to sue for alleged expropriation there - that's why European nations have rarely been sued under these trade agreements.

Moreover, just seven of those 1400 agreements were with the US.  The countries involved were former Soviet states, plus Poland.  Even though in retrospect the terms of those agreements were pretty bad, they looked good as a way of escaping the clutches of Russia, and of encouraging the US to support the countries signing them.  Like the other ISDS chapters with developing countries, they are unrepresentative of what will happen with TTIP. 

For a start, US investment in those ex-Warsaw Pact countries is relatively low, which means the opportunities for it to use ISDS clauses are very limited.  Compare that with the whole of the EU, where there are around 50,000 subsidiaries of US companies, representing very substantial investments, and you can see that the risks of the EU or a member state being sued under ISDS in TTIP are vastly greater than was the case for those 7 earlier examples.  So Malmström's claim that ISDS wasn't a problem then, and so won't be a problem now, is simply false.

She then goes to admit that the current ISDS chapters are problematic, but that the EU has already addressed that objection by reforming ISDS in CETA, the trade agreement with Canada.  Specifically, she claims that in CETA:

Nations always have the freedom to decide about health systems, minimum wages and environmental protection.

That sounds good, but when you analyse the detailed wording of CETA's ISDS provisions, as the Canadian Centre for Policy Alternatives has done in its excellent, in-depth exploration of the final text, "Making Sense of CETA", this is what you find is actually the case as regards that supposedly strengthened "right to regulate":

The ‘right to regulate’ is mentioned three times in the agreement. In the preamble, the parties simply ‘recognize’ that the Ceta protects the right to regulate (“recognizing that the provisions of this Agreement preserve the right to regulate...”), yet the text fails to clearly and unequivocally confirm this right, especially in the investment chapter. The other mentions are to be found in the labour and environment chapters, so that, in effect, the Ceta shields the right to regulate from any international obligations to protect labour or the environment but not from all the detailed obligations in the investment chapter. Also in the environment chapter, the right to regulate is limited by formulations which require environmental policies to be implemented “in a manner consistent with the multilateral environmental agreements to which they are a party and with this Agreement,” meaning that environmental policies have to be consistent with the Ceta - not the other way round.

As that makes clear, far from protecting the EU's "freedom to decide" in the environmental sphere, as  Malmström claims, CETA actually imposes new constraints on governments.  The Canadian Centre for Policy Alternatives also points out that CETA is worse than earlier agreements in the way that the so-called "fair and equitable treatment" clause is framed.  This does not inspire confidence for TTIP, since we know from the consultation that the ISDS chapter will be modelled on the earlier agreement.

Even if it weren't, CETA's ISDS will be a disaster for Europe if it is ratified - something that is fortunately still a long way off.  That's because of the following:

The Ceta definition of ‘investment’ and ‘investor’ are overly broad and far beyond what would be advisable from a regulatory or public interest perspective. The Ceta defines an ‘investment’ as, “Every kind of asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment.” It defines an ‘investor’ as: “a Party, a natural person or an enterprise of a Party, other than a branch or a representative office, that seeks to make, is making or has made an investment in the territory of the other Party. For the purposes of this definition an ‘enterprise of a Party’ is: (a) an enter prise that is constituted or organised under the laws of that Party and has substantial business activities in the territory of that Party”). The reference to ‘substantial business activities’ is not enough to pre vent ‘treaty shopping.’ For example, U.S. investors in Canada would be able to use the C eta investment provisions and ISDS to challenge European state measures.

There's another trade agreement that the EU has recently finalised (but not ratified) that has exactly the same problem.  It's with Singapore, and the dangers of its ISDS chapter are analysed in an important post from the FFII.  If, like me, you don't know much about the EUSFTA, as it is know, this is a good place to start.  Here are a couple of the key issues:

1. The agreement creates a lock-in. Unlike most investment agreements ratified by European countries, it is not a stand-alone investment treaty, from which parties can withdraw. The investment chapter is part of a trade agreement, from which it is near impossible to withdraw.

2. The text lacks basic institutional safeguards for independence, creates perverse incentives and does not observe the separation of powers.

Expanding on the last point:

No institutional safeguards for independence

The text lacks basic institutional safeguards for independence: tenure, prohibitions on outside remuneration by the arbitrator and neutral appointment of arbitrators.

Perverse incentives

Arbitrators are paid for their task at least 3000 US dollar a day. This creates perverse incentives: accepting frivolous cases, letting cases drag on, letting the only party that can initiate cases (foreign investors) win to stimulate more cases, pleasing the officials who can appoint arbitrators.

No separation of powers

Both the claimants and the executive have a 50% influence on the make-up of [ISDS] tribunals. In a [national] court neither the claimant nor the executive has an influence on appointments, as both parties are not neutral.

A government may dislike a law by the former legislative and appoint an arbitrator accordingly. Only independent courts should decide on constitutional matters and questions of law.

It's that last point that remains the central problem with ISDS in TTIP: it effectively allows corporations to attack any legislation that affects their future profits, even if it has been passed by governments with an explicit mandate from the public.  Signing up to any treaty - be it CETA, EUSFTA or TTIP - that contains ISDS is thus nothing less than a fundamental betrayal of European democracy.

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TTIP Update XLIII

On Monday, I attended an interesting meeting at the Heinrich Böll Stiftung, in Berlin, with the intriguing title of "re:negotiate (ttip)".  This was valuable for two reasons.  First, because I had a chance to hear the arguments advanced by senior figures in the pro-TTIP world (surprisingly weak, even after all this time), and secondly, because I was asked to talk about "TTIP and global data transfer".  That's not something I've written much about here, so this gives me an opportunity to set down what I learned as I prepared for my session in Berlin.

The official negotiating mandate from the European Commission [.pdf], released recently (but very belatedly), does not mention words like "e-commerce, electronic services, telecommunications providers, cloud computing, data protection" at all, which is pretty extraordinary given their importance.  However, the section covering Trade in Services states:

The aim of negotiations on trade in services will be to bind the existing autonomous level of liberalisation of both Parties at the highest level of liberalisatio n captured in existing FTAs, in line with Article V of GATS, covering substantially all sectors and all modes of supply, while achieving new market access by tackling remaining long - standing market access barriers, recognising the sensitive nature of certa in sectors.

"GATS" is the overarching General Agreement on Trade in Services   The above paragraph would therefore seem to require that all kinds of e-commerce and online services should be covered by TTIP.  The Commission's mandate makes another reference to GATS here:

The [TTIP] Agreement will not preclude the enforcement of excep tions on the supply of services justifiable under the relevant WTO rules (Articles XIV and XIVbis GATS).

That's crucially important, because Article XIV includes the following exception:

nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Member of measures:

(c)      necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement including those relating to:

(ii)     the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts;

That seems to provide the basis for the following statement in the European Commission's TTIP FAQ:

Will TTIP mean US data privacy standards prevailing over or undermining EU standards on the same?

No.  The EU and US have long since recognised that we each regulate data privacy in a different way.  The TTIP negotiations are not the right place to address these differences though.  We have already developed suitable ways of handling transatlantic data flows - for example, the Safe Harbour Agreement.  In addition, we are currently in talks with the US on access to data by enforcement authorities.  The aim is to get an 'Umbrella Agreement' on data protection to strengthen our joint efforts to combat terrorism and serious crime.  These talks will not be affected by the TTIP.

Of course, the Safe Harbour Agreement is a joke.  It basically lets US companies take personal data out of the EU, and do what they like with it by "self-certifying" that they are jolly nice people, and that they wouldn't dream of doing anything nasty with all our data, oh no, sir.  But thanks to Edward Snowden, we now know that once the data is out of the EU and across in the US, the NSA can and do access it freely - which is why the European Parliament's LIBE committee called for Safe Harbour to be suspended.

Leaving that big issue aside, there remains a central question: how exactly will data flows be handled in TTIP?  Despite the soothing words from the European Commission, it is by no means clear that European privacy will be preserved.  That's evident thanks to a US Bill that was proposed last year.  It has the significant title "Digital Trade Act of 2013", and it would have required the US negotiators in all future trade agreements to insist on a number of key demands:

It shall be a negotiating principle of the United States in negotiations for a bilateral, plurilateral, or multilateral agreement, and in multi-stakeholder fora, to seek the inclusion of binding and enforceable provisions that promote and enhance Internet-enabled commerce and digital trade, including provisions--

(1) preventing or eliminating barriers to the movement of electronic information across borders, including by encouraging interoperability of data protection regimes and eliminating barriers to accessing, processing, transferring, or storing information;

(2) ensuring transparency in measures affecting the free flow of information within and across borders;

...

(4) prohibiting measures that condition market access or other commercial benefits on localization of data, infrastructure, or investment;

(5) prohibiting any country from imposing measures that require an entity to use computing infrastructure or services in that country or otherwise require an entity to access, process, transfer, or store data in the territory of that country;

Those last two are absolutely key, since they would forbid any country that has a trade agreement with the US from passing laws that require local storage or processing of data. Even though the Bill was not passed, all the indications are that the US negotiators will demand precisely these provisions in TTIP.  That's a problem, because one way to improve the privacy of EU citizens would be to require that their personal data is stored and processed in the EU, and to forbid it being sent abroad. 

Despite what companies like Google and Facebook would have us believe, that wouldn't stop them providing their services here in the EU.  It would simply mean that all EU personal data would be held and processed in the EU, with other data necessary for the services being brought in from the US, say, rather than the other way around.  The Internet's symmetry makes that trivially simple, so to claim that it is impossible to work under this conditions is absurd.

In cases where personal information like physical addresses needs to be sent outside the EU so as to allow the delivery of goods, say, such information could be provided by using Vendor Relationship Management (VRM) systems, that allow users to retain full control of their personal data, while granting highly specific access to parts of it.  Indeed, developing VRM is a huge opportunity for the EU, and should be actively promoted irrespective of its usefulness in the context of TTIP.

Another meeting on TTIP took place yesterday, organised by the S&D group in the European Parliament.  That party's position is absolutely crucial for TTIP: without its support, TTIP will probably not be passed.  So it was no surprise that the new Commissioner for Trade, Cecilia Malmström, appeared here and gave her first official statement on the trade agreement.

Actually, it's stretching it to call it a "statement", because that would imply it had any content.  Instead, it was an extended set of comforting platitudes that boiled down to the same kind of self-certification used in the Safe Harbour agreement.  In other words, it was little more than empty promises that everything would be OK, just don't worry your pretty little heads about it.

One of the most worrisome parts came in the brief and superficial questions and answers that followed her words.  In it,  Malmström tried to allay growing fears about ISDS - which the French government has said it will not accept in TTIP - by pointing to the recently-concluded CETA agreement with Canada.  She claimed that the new and improved ISDS chapter there shows, once more, that there was nothing to worry about, etc. etc.

Of course, ISDS is such a technical area that is hard for most of us to evaluate that claim.  Fortunately, the indispensable Corporate Europe Observatory has carried out a detailed analysis of ISDS in CETA, and found that far from addressing the problems, it actually makes them worse:

In response to these widespread concerns the European Commission and the Canadian government have become increasingly defensive, and have begun a misleading propaganda drive. Their strategy: to appease the public by downplaying the risks of investment arbitration and to divert attention from the fundamental problems of the system by focusing on cosmetic reforms.

But a closer look at these “reforms” in the final CETA text (see Annex 2) shows that they will not “prevent any abuse of the investment protection rules and investor-state dispute settlement systems,” as the European Commission claims. On the contrary, CETA’s investor rights are arguably even more expansive than those in agreements such as NAFTA – most notably by protecting investors’ “legitimate expectations” under the so-called “fair and equitable treatment” clause and on investor-state disputes with regard to financial services (see Annexes 1 and 2). This is not surprising: the “reforms” are an echo chamber of what the business community has proposed to re-legitimise investor-state arbitration while leaving its problematic core intact.

The Annexes referred to provide detailed rebuttals in non-technical language of claims that ISDS has been improved in CETA.  Here's a sample. First, what the European Commissions claims:

Final award: A tribunal can award “only” monetary damages or restitution of property (Chapter 10, Article X.36). According to the EU this means that an order of a tribunal “cannot lead to the repeal of a measure adopted by Parliaments in the Union, a Member State or Canada.”

And here's what that actually means in practice:

This won’t stop governments from “voluntarily” repealing measures when a major lawsuit has been filed or threatened by a deep-pocketed company. Examples of such regulatory chill include the watering down of environmental controls for a coal-fired power plant when Germany settled a claim by Swedish energy company Vattenfall (see Box 2 on page 6) and New Zealand’s announcement that it will delay its plain-tobacco-packaging legislation until after Philip Morris’ claim against Australia’s anti-smoking rules has been resolved. This chilling effect on government regulation is arguably the main function of the global investment regime.

This latest report from Corporate Europe Observatory is an important contribution in the fight against the misleading comments being made by pro-TTIP politicians, both at the European and national levels.  They know that ISDS is in trouble as the public find out more about it, and are trying to fob people off with the promise that things will be better in TTIP, building on the claimed improvements present in CETA.

But there are no real improvements, just some textual fig leaves to give the appearance that concerns have been addressed.  If the European Commission and pro-TTIP politicians like David Cameron really want to save TTIP from massive rejection by the European public - the Stop TTIP petition has now reached 912,000 signatures - the only way to do that is to remove ISDS from TTIP, CETA and the new EU-Singapore free trade agreement completely.  Nothing else will do.

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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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