TTIP Update VI

In my previous TTIP update, I reported on an extremely important leak about the Trans-Pacific Partnership agreement (TPP), which is the other half of the US attempt to stitch up world trade through supranational agreements.

It's still too early to hope for something similar on the TAFTA/TTIP front – but rest assured, it's only a matter of time (another reason why the insistence on secrecy is not just anti-democratic and insulting, but stupid, too.)  However, Corporate Europe Observatory (CEO), one of the key sites dealing with transparency (and lack of it) in Europe has come into the possession of a TTIP document that is very interesting:

CEO has today published a leaked version of the European Commission's communication strategy for overcoming public skepticism about the controversial EU-US trade negotiations, the so-called Transatlantic Trade and Investment Partnership (TTIP). The document was discussed at a meeting with EU member states on Friday 22 November. In order to "reduce fears and avoid a mushrooming of doubts", the Commission proposes to "further localise our communication effort at Member State level in a radically different way to what has been done for past trade initiatives".

It's not very long, so I recommend reading the whole thing on CEO's site; here I'd like to pick out a key passage.  The leaked document spells out what it sees as the three main communication challenges, the first of which is the following:

Making sure that the broad public in each of the EU Member States has a general understanding of what TTIP is (i.e. an initiative that aims at delivering growth and jobs) and what it is not (i.e. an effort to undermine regulation and existing levels of protection in areas like health, safety and the environment).

TAFTA/TTIP may "aim" at delivering growth and jobs, but what exactly does that mean?  The European Commission's own research predicts a range of possible outcomes:

Under a comprehensive agreement, GDP is estimated to increase by between 68.2 and 119.2 billion euros for the EU and between 49.5 and 94.9 billion euros for the US (under the less ambitious and more ambitious scenarios). However, if the FTA would be limited to tariff liberalisation only, or services or procurement liberalisation only, the estimated gains would be significantly lower. For example, an FTA limited to tariff liberalisation would lead to a lower (23.7 billion euro) increase in GDP for the EU and a 9.4 billion euros increase for the US.

There's a big difference between the 119 billion euros – the figure routinely quoted by the European Commission, even though it is only one extreme case – and the 23.7 billion at the other end, for estimates of the boost to the EU's GDP.  From the research document again:

The comprehensive option includes two scenarios: a less ambitious agreement that includes a 10 per cent reduction in trade costs from NTBs and nearly full tariff removal (98 per cent of tariffs) and an ambitious scenario that includes the elimination of 25 per cent of NTB related costs and 100 per cent of tariffs.

NTB refers to "non-tariff-barriers, and basically means things like health and safety regulations, environmental protection, employment rules and financial rules.  In other words, most of the things that make Europe what it is today: an extremely safe and pleasant place to live.  The 119 billion euro figure always quoted by the European Commission refers to "the elimination of 25 per cent of NTB related costs".  If we don't get rid of those, the predicted GDP boost is a much more modest 24 billion euros – hardly worth bothering about, given that the EU's GDP in 2012 was 12,900 billion euros (indeed, even the massively-improbable 119 billion euro figure is still less than 1% of GDP.)

In some cases, it may be possible to remove those non-tariff barriers that without compromising on health and safety standards, but in others, it is clearly impossible.  A symptomatic case in point is the famous chlorine-washed chicken.  In the US, it is permitted to wash chicken carcases in chlorine water, whereas this is not regarded as safe in the EU.  These positions are not compatible.  So how will this "non-tariff barrier" be dealt with?

The European Commission has said that health standards will not be compromised, which suggests that the EU will not accept chlorine-soaked chickens; but the senior vice president of America's National Chicken Council has a different view of what will happen in TAFTA/TTIP [pdf]:

We have been assured on a number of occasions by our trade negotiators that our industry's issues will not be traded-off for some other issue on the EU side.  We trust our negotiators will secure the most favorable outcome possible, but at the risk of being redundant, we will want to be doubly-assured that the end product is worthy of our support.

That certainly sounds like they think that chickens washed with chlorine water will soon be winging their way to European plates, whether Europeans want them or not.  The same confidence that the EU public's wishes will be swept away during the TAFTA/TTIP negotiations can be found in other food safety areas, such as bringing US beef produced with growth hormones to Europe, and the contentious area of GMOs, as well as the EU's rigorous chemical safety framework REACH - another target of US industry.

This exposes the central dilemma at the heart of TTIP: either the European Commission abandons the precautionary principle – something that is actually enshrined in the Lisbon Treaty – in a desperate attempt to realise some of the over-promised financial gains, or it gives up the big numbers and settles for a mere 0.2% GDP growth in order to preserve European health and safety regulations: it can't in general have both.

In fact, even if the European Union *did* deregulate massively – something that industry on both sides of the Atlantic is pushing hard for [.pdf] - with who knows what consequences for public health and safety, it might all be in vain anyway.  It's obviously hard making prediction (especially about the future, as they say), but luckily we do have the past as a guide. 

TTIP (and TPP) are actually part of a series of major trade agreements that the US has been signing  in order to impose its laws and economic philosophy around the world.  The two most important ones prior to TPP and TTIP are the North American Free Trade Agreement (NAFTA) and the South Korea-US Free Trade Agreement (KORUS).  Here's what happened with NAFTA:

The United States ran a $1.6 billion trade surplus ($2.6 billion in today's dollars) with Mexico in 1993, the year before NAFTA. Last year [2011], the United States ran a $64.5 billion deficit.

And here's KORUS:

In the year after the agreement took effect (April 2012 to March 2013), U.S. domestic exports to South Korea (of goods made in the United States) fell $3.5 billion, compared with the same period in the previous year, a decline of 8.3 percent. In the same 12-month period, imports from South Korea (which the administration consistently declines to discuss) increased $2.3 billion, an increase of 4.0 percent, and the bilateral U.S. trade deficit with South Korea increased $5.8 billion, a whopping 39.8 percent.

But maybe the trade agreements are generating jobs at least – that's one of the things that the European Commission says TAFTA/TTIP will do. Here's what happened with NAFTA:

Bill Clinton (1993) and his supporters claimed in the early 1990s that the North American Free Trade Agreement would create 200,000 new jobs through increased exports to Mexico. In fact, by 2010, growing trade deficits with Mexico had eliminated 682,900 U.S. jobs

Well, what about KORUS?

When the U.S.-Korea Free Trade Agreement was completed in 2010, President Obama said that it would increase U.S. goods exports by "$10 billion to $11 billion," supporting "70,000 American jobs from increased goods exports alone"

Here's what actually happened:

Using the president's own formula relating changes in trade to jobs, the growth in the trade deficit with South Korea in the first year since KORUS took effect likely cost more than 40,000 U.S. jobs

So if you were willing to water down health and safety in the hope that you will be recompensed with that 119 billion euros GDP gain, every indication from the past suggests that you are a mug, because the claimed benefits would not flow. 

Actually, that's not entirely true: some companies would indeed save money by being able to dump today's EU environmental, labour, health and safety regulations.  But those savings certainly wouldn't "trickle down" to the public, not even as more (lower-paid) jobs – because, don't forget: one consequence of trade agreements is that companies tend to move their production to the country with the lowest costs.  One way of reducing costs is to reduce wages, and so TAFTA/TTIP may well actually see working people in the EU worse off than the current situation.  And if you think that's just my ill-informed opinion, you might like to read what the Economic Policy Institute has to say on TAFTA/TTIP:

A much more likely outcome [than the European Commission's rosy projections], based on North American experience under NAFTA, is that production workers in all the member countries will suffer falling wages and job losses (Scott et al. 2006), while U.S. and EU investors will profit handsomely, reinforcing the rapidly rising share of profits in corporate and national income that has taken place over the last decade in the United States (Mishel 2013).

Given these incontrovertible facts about past trade agreements, and the fundamental contradiction in the European Commission's stated aim of achieving large GDP gains by abolishing non-tariff barriers while preserving the precautionary principle and maintaining the European Union's uniquely high health and safety standards, you can see why its communication department has a big job on its hands.

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TTIP Update V

Today's update is a little odd, since it's not actually about TAFTA/TTIP.  Although the second round is taking place this week, it's almost certain we'll be told nothing about the real substance of the discussions.  That's because even thought these massive trade agreements affect hundreds of millions of people, the latter are not given any opportunity to see the draft texts as they are discussed, or to have any meaningful dialogue with the negotiators.  That may have been acceptable 30 years ago, but in the age of the Internet, when it is trivial to make documents available, and easy to enter into online discussions, it's outrageous.

The same has been true for the parallel Trans-Pacific Partnership agreement (TPP) negotiations, which is doing for the Pacific what TAFTA/TTIP aims to do for the Atlantic: define the terms of not just trade, but also the health, safety and environmental regulations that govern our lives.  The almost-total secrecy of the TPP talks, which are much further along than those of TAFTA/TTIP, was shattered yesterday, when Wikileaks released a text [.pdf] of the most contentious chapter: that covering intellectual monopolies.

What makes this particularly interesting is that it shows the negotiating positions of all the nations taking part – these are the US, Canada, Australia, New Zealand, Japan, Malaysia, Vietnam, Brunei, Singapore, Chile and Peru.  That means we can see quite clearly what the US is pushing for in TPP – and what it is liking to be looking for in TAFTA/TTIP.  Of course, the dynamics in the two agreements are very different: the EU is able to stand up to the US – at least theoretically – in a way that the much smaller nations that make up most of TPP can't (even Japan is dwarfed by both US and EU).

The leaked TPP draft is from 30 August, and so represents an earlier stage of the talks.  It is so full of bracketed alternatives where the negotiators have been unable to agree on a text that it is clear a huge amount remains to be done.  The brackets also make reading the text hard: if you'd like a summary of what's in the chapter, there are good ones from KEI and the EFF.  Here I will just pull out some elements that are relevant to TAFTA/TTIP and the digital world.

As far as patents are concerned, the US wants everything to be patentable:

each Party shall make patents available for any invention, whether a product or process, in all fields of technology, provided that the invention is new, involves an inventive step, and is capable of industrial application.

That includes software patents, but also "plants and animals" and "surgical methods".  In addition, here's what the US wants:

a Party may not deny a patent solely on the basis that the product did not result in enhanced efficacy of the known product when the applicant has set forth distinguishing features establishing that the invention is new, involves an inventive step, and is capable of industrial application.

That is, it wants patents for things that don't actually doing anything more than a current invention, but are simply "new" – that is, different in some unimportant way.  This would allow so-called "ever-greening" of patents, which would dilute the value of patents even more, moving them even further from their original purpose of promoting innovation.

The copyright section is one of the most interesting in the leak, since it touches on so many areas I've discussed here in Open Enterprise in the context of ACTA.  Surprisingly, it manages to go beyond ACTA in its awfulness.  This, for example, is what the US wants:

Each Party shall provide that authors, and producers of phonograms have the right to authorize or prohibit all reproductions of their works, and phonograms, in any manner or form, permanent or temporary (including temporary storage in electronic form).

TPP would make even the transient copies of works made as they pass over the Internet, or stored in a computer's RAM, all subject to copyright.  That would mean that everyone would need to get permission from copyright holders to download or even view any copyright work.  I'm not sure how that would work in practice, but even the idea of it is chilling.  It is essentially trying to make the entire Internet a permission-based system.

As far as enforcement is concerned, there's the following (agreed) section for civil damages:

In determining the amount of damages under paragraph 2, its judicial authorities shall have the authority to consider, inter alia, any legitimate measure of value the right holder submits, which may include lost profits, the value of the infringed goods or services measured by the market price, or the suggested retail price.

Which is essentially identical with ACTA , Article 2.2:

In determining the amount of damages for infringement of intellectual property rights, its judicial authorities shall have the authority to consider, inter alia, any legitimate measure of value submitted by the right holder, which may include the lost profits, the value of the infringed good or service, measured by the market price, the suggested retail price.

This goes to show how ACTA is by no means dead, and lingers on in this residual way.  Criminal infringement is even worse:

Each Party shall provide for criminal procedures and penalties to be applied at least in cases of willful trademark counterfeiting or copyright or related rights piracy on a commercial scale.

But what is commercial scale?  Here's what the US wants:

significant willful copyright or related rights infringements that have no direct or indirect motivation of financial gain

That says people can be sent to prison for copyright infringement, even if there is no direct or indirect motivation of financial gain.  The question then becomes: what is "significant"?  Probably a smartphone with a few thousands MP3s that you've ripped from CDs...

Like ACTA, there is also criminal liability for aiding and abetting infringement, again, even if there is no financial gain:

With respect to the offenses for which this Article requires the Parties to provide for criminal procedures and penalties, Parties shall ensure that criminal liability for aiding and abetting is available under its law.

That might catch open source developers if their code is used for making unauthorised copies, for example, even if they were not for financial gain.

Moreover, the criminal penalties must be harsh:

penalties that include sentences of imprisonment as well as monetary fines sufficiently high to provide a deterrent to future acts of infringement

Another very troubling aspect is what's happening with following clause on ISP intermediary liability:

Each Party shall limit the liability of, or the availability of remedies against, internet service providers when acting as intermediaries, for infringement of copyright or related rights that take place on or through communication networks, in relation to the provision or use of their services.

Both the US and Australia oppose that protection, without which ISPs would become liable for everything that their customers do.  If that is enacted, it would mean that ISPs would have to spy on everything, otherwise they would run the risk of being held liable for infringement.  That, in its turn, would inevitably lead to massive censorship, since ISPs would naturally err on the side of caution rather than risk huge fines under TPP.

It's worth emphasising that the leak concerns an older version of the draft, and that things could have changed by now.  But that older version does show us what alternatives are being proposed, and very often the differences are minor.  What's clear, is that the US has been pushing for maximalist intellectual monopolies at every turn.  There's no reason to think that its approach during the current TAFTA/TTIP will be any different.

And there's another issue here.  We've long suspected that the intellectual monopolies chapter of TPP would be bad, and the Wikileaks document confirms this.  You can also understand why the US has been adamant that the negotiations should  be secret: now that we can see what's in at least part of it, we can work to improve its worst features.  Without the text, that's impossible.

This latest leak confirms once again why we must push to have drafts released immediately.  There is no justification for not doing so – they are not "secret", since all parties can see it.  The only ones who can't are the public, in whose name and for whose benefit they are supposedly being negotiated.  That's truly a disgrace.

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TTIP Update IV

One of the key issues during the ACTA negotiations was transparency – or rather the lack of it.  Despite a few token gestures from the European Commission initially, TAFTA/TTIP looks like it will be just as bad. Here's a rather nice trick the negotiators have just played:

Surprise!  The second round of negotiations for the massive Trans-Atlantic Free Trade Agreement (TAFTA) won’t be happening in Washington, DC in December as planned.  It will be happening in six days.  In Belgium.

…

USTR’s email yesterday invited “stakeholders” to a “briefing session” next Friday where “non-governmental organizations, consumer groups, trade unions, professional organizations, business and other civil society organizations will have the opportunity to exchange views with U.S. and EU chief negotiators.” It just happens to be taking place on the other side of the Atlantic Ocean.

This may well be the most expensive “stakeholder engagement” opportunity presented by the Obama administration for one of its sweeping “trade” deals. At current prices, the cheapest last-minute flight to “exchange views” with TAFTA negotiators in Brussels would set you back $1977. That may not be a problem for the approximately 600 corporate trade “advisors” who are already deeply involved in helping USTR craft TAFTA negotiating positions. For the rest of us, it’s a bit like getting an email invitation to your friend’s destination wedding in Cancun a week before the ceremony (psst...I don’t really want you to come).

That act of petty spitefulness is indicative of a deep and crucial asymmetry in the TAFTA/TTIP negotiations.  Whereas some of the world's largest companies are given privileged information about what is happening – not least *where* things are happening – the public, which is poorly represented anyway, finds itself cut out from that insider knowledge, and therefore lacks the ability to follow the negotiations properly, let alone give any input to them.

That's obviously disgraceful for something that is supposedly being negotiated in their name – and which is certainly being negotiated using their taxes, which pay the European Commission negotiators their not inconsiderable salaries, and the cost of their plane tickets as they jet to and fro across the Atlantic – first class, no doubt.

But there is an even deeper, more troubling asymmetry at the heart of these talks that concerns the investor-state dispute settlement (ISDS) element I've written about in my last two TTIP Updates.  That's probably the most problematic and worrying area of the whole agreement, because the core idea of ISDS is that any laws or court decisions that cause even the "expectation" of future profits of companies to be diminished in some way can potentially be litigated before a secret, supranational tribunal able to impose unlimited fines on entire nations.

The subtle implication of this is that legislative changes must tend to increase corporate profits.  So, for example, improved health and safety laws would be stymied by this, as would enhanced environmental protection where it causes a company's profits to be reduced (as is likely, since better protection usually means more costs for the polluters.)

In other words, ISDS introduces exactly the same kind of upward ratchet that copyright laws have produced for the last three hundred years.  Just as copyright laws only ever make copyright longer, broader and deeper – to the benefit of companies and disbenefit of the public -  so ISDS will put huge pressure on the EU and member states only to pass legislation that improves the outlook for corporate profitability.  The fact that these kind of moves may well cause huge social damage – greater health or environmental problems – is completely overlooked, because the framing does not allow the social costs to be taken into account, only private profits.

That makes this proposal in South Korea particularly interesting:

Evaluation of trade agreements have been made in economic terms. But the impact of trade agreements is not limited to economic life. They have human rights dimensions in many aspects. For instance, trade agreements containing the TRIPS-plus provisions may affect the right to access to essential medicine, the right to food and more broadly the right to science and culture, which is protected by the Article 27(1) of the Universal Declaration of Human Rights. So the UN human rights bodies have tried to develop and propose human rights impact assessments (HRIA) of trade agreements (See The Future of Human RightsImpact Assessments of Trade Agreements).

The recent move of the National Assembly of South Korea to mandate the HRIA was influenced by the efforts of the UN human rights bodies. The lawmaker, Mr. Buh, proposed a bill to amend the Law on the Treaty-Making Process and Implementation of Trade Agreements (Trade Process Act), which includes an amendment making compulsory the HRIA on every trade pacts that are likely to be agreed upon with trade partners.

This is an important move, because it begins the long journey of re-balancing trade agreements around the world so that they take in account human rights and therefore, by implication, the public interest as well as corporate profit.  Although it's not clear whether the Korean initiative will succeed, it does at least raise the issue in a political context.  We now need to start similar conversations here in the EU and in the US regarding TAFTA/TTIP if that agreement is to have any claim to fairness and legitimacy.

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