TTIP Update XXXIII

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

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

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

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

European Trade unionists are against ISDS:

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

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

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

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

So are health organisations [.pdf]:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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




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

TTIP Update XXXII

The most important news of the last few days is undoubtedly that the European Commission's consultation on ISDS in TTIP has been extended by a week until 13 July - for full details on how to reply, see previous update.  Other than than, what is striking is how TTIP is moving into the mainstream, with developments across the entire political and economic spectrum.

For example, over 100 organisations from 17 EU member states have expressed support for organising an European Citizens' Initiative (ECI) on TTIP:

Organisations from all across Europe are currently gearing up for 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 registration of the ECI is planned for July. The collection of signatures is due to start in September 2014.

It is highly significant to see CETA here as well as TTIP - a recognition of the fact that allowing CETA to be ratified with an ISDS chapter would effectively allow US companies to sue Europe using Canadian subsidiaries as a proxy.  Here's what an ECI is and does:

An ECI can request a legislative act from the European Commission and force a hearing at the European Parliament. For an ECI to be successful, at least one million signatures must be collected. At the same time, country-specific quorums must be achieved in at least seven EU member states. In Germany, for example, the quorum will be 72,000 signatures. France has to collect 55,500 signatures and the United Kingdom and Italy need 54,750 signatures. Estonia, Malta, Luxembourg and Cyprus have to collect 4,5000 signatures. The level of the quorum depends on each country’s number of deputies in the European Parliament. The most notorious ECI so far is “right2water”. It led to the exclusion of the liberalisation of water supply from the scope of the EU directive on concessions.

Clearly, achieving those numbers will require considerable effort, but the success of the right2water ECI shows that it can be done.  Moreover, resistance to TTIP is growing rapidly, and brings together groups from the most diverse areas, so the pool of support is probably even larger than that for water as a basic right.

At the other end of the political spectrum, the person likely to be the next President of the European Commission, Jean-Claude Juncker, was quizzed today by the Greens in the European Parliament, who are deciding whether or not to support him.  Here's what he said when asked about the inclusion of ISDS in TTIP:

Juncker replied that he does not understand why great democracies do not have confidence in their own judicial systems, and that he personally does not see the benefits of ”private courts”, which does not need to justify their decisions. ”I believe in the rule of law, and the application of the rule of law”, Juncker concluded.

TTIP has assumed such importance in the European Union, that Juncker had earlier made it one of just five priorities that he promises to set himself.  Here's what he wrote [.pdf]:

under my presidency, the Commission will neg otiate a reasonable and balanced trade agreement with the United States of America. It is anachronistic that, in the 21st century, Europeans and Americans still impose customs duties on each other’s products. These should be swiftly and fully abolished. I also believe that we can go a significant step further in recognisin g each other’s product standards or working towards t ransatlantic standards. However, as Commission President, I will also be very clear tha t I will not sacrifice Europe’s safety, health, social and data protection standards on the altar of free trade. Notably, the safety of the food we eat and the protection of Europeans' personal data will be non-negotiable for me as Commission President.

Talking of sacrificing standards, the US Senate Finance Committee on trade enforcement  has held some interesting hearings in which representatives of US agricultural industries made it clear that the European Commission's statements that food standards would not be lowered were simply "not an acceptable position". The TTIP site put together by the European  Greens has a good explanation of what is likely to happen if the Commission caves on this:

allowing US lobby groups like the National Chicken Council to challenge EU regulations as part of TTIP, could result in sub-quality produce entering the EU market; an inferior, but cheaper, product to buy. This in turn risks undermining EU producers who could be priced out of the market. The knock on effect of this alone will be the downward pressure on regulations, as EU farmers will call for changes to allow them to compete with these cheaper US imports. Hence, the inferior product will reign. Our regulators and the Commission should be doing all in their power to resist such moves by industry.

That's true for all sectors: if cheaper, lower-quality US products are allowed into the EU, European manufacturers will be unable to compete, and so will either go bankrupt or - more likely - lobby hard for EU standards to be lowered in order to create a "level playing field."  The net result will be an inevitable race to the bottom.

Despite swearing blind that it won't, the European Commission may well capitulate on this - after all, that's what happens in tough negotiations.  You state you absolutely won't compromise, but what you really mean is you are going to extract a high price for your capitulation.  The problem is that we already know of two areas where the European Commission is pushing hard for things that the US is also swearing blind that it won't do - which also means that it will extract a high price for doing so, like lowering EU health and safety standards.

One concerns energy.  Here's what the EU Greens' blog post has to say about a recent leak here (also includes the full document):

The Washington Post has leaked a non-paper by the European Union regarding the Energy and Raw Materials chapter of TTIP. The letter, dated May 27 2014, details efforts by the Commission to secure commitments from the US to export natural gas and crude oil to Europe, the latter of which has not been available for export since it was banned by Congress in 1975.

Such a move has alarmed environmentalists on both sides of the Atlantic, who fear that such an deal as part of TTIP will lock both sides into increased use of fossil fuels, driving up harmful production methods such as fracking in the US, and making it more difficult for both regions to curb their greenhouse gas emissions.

Here's why the US will extract a high price for agreeing to this:

US Senator Edward J. Markey (D-Mass.) released a statement on Tuesday criticising the move saying that “attempting to use a transatlantic trade agreement to scuttle established U.S. law prohibiting the export of America’s oil would be a titanic mistake for our consumers, national security, and energy policy. The Middle East is in turmoil. Gas prices are sky high in the middle of driving season. And we still import millions of barrels of oil a day. Exporting our crude oil is not the answer for anyone but oil companies."

This secret move is particularly blameworthy, because it goes against the European Commission's own research that analysed the environmental impact of TTIP [.pdf]:

[TTIP] is estimated to lead to a total global increase of 4 and 11 thousand metric tons under the two different experiments respectively [less ambitious and ambitious]. CO2- emissions are expected to increase in the EU and US by around 3 and 4 thousand metric tons, respectively. On the other hand, emissions are expected to decrease somewhat across some other countries. Looking at the percentage increase, the estimated changes are shown to be very small, being 0.02 per cent in the
less ambitious case and 0.07 per cent in the ambitious case. Depending on future changes in the coverage of emissions trading in the EU (increased and more binding coverage), and possibilities for future introduction of such a scheme in the US, the net effect would then be even smaller than
reported here.

As that makes clear, the modelling takes no account of the possibility that the US will export oil and gas directly to the EU - something that is likely to increase emissions drastically, especially if it slows down the move to renewables.

The other leak concerns financial services, analysed here by Corporate Europe Observatory:

If the EU has its way, a final agreement between the EU and the US to establish a free trade and investment agreement the Transatlantic Trade and Investment Partnership (TTIP) will weaken regulation and raise obstacles to much needed reform of the financial sector. That is the conclusion after the leak of an EU proposal for so-called “regulatory cooperation” on financial regulation.1 tabled by the EU in March 2014. Regulatory cooperation is a continuous process of ironing out disagreements and differences between the two Parties to ensure agreement on what constitutes legitimate regulation – which in this case, would serve the interests of the financial industry. In the document, the EU suggests a number of mechanisms that will both scale back existing regulation, and prevent future regulation that might contradict the interests of financial corporations from both sides of the Atlantic. The leak follows news that EU negotiators have increased political pressure on the US to accept negotiations on “financial regulatory cooperation", which the US negotiators have so far refused.

This shows that the US is likely to demand extremely painful concessions from the EU if it were to contemplate accepting the Commission's proposal.  The end-result would be a lose-lose situation: losses for US consumers thanks to weakened oversight of the financial industry, and losses for EU consumers thanks to weakened health and safety.   And for those who like to claim that such compromises can't possibly be made, it's worth bearing in mind that if they aren't, there will be almost nothing major in TTIP, and only a tiny fraction of the already small gains that are predicted to flow will be realised.  In other words, the EU and US have painted themselves into a corner, where the only way out is to make extremely broad and bad concessions in a desperate attempt to justify their earlier exaggerated promises.

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TTIP Update XXXI

In my last update, I focussed once more on the Investor-State Dispute Settlement element of TTIP, this time in the light of the European Commission's consultation on the subject, which closes this week, on 6 July.  Alongside that column, I also wrote a similar post over on Techdirt, which contains yet more information about ISDS and the consultation.

Specifically, in that last piece I called the Commission's consultation a "sham".  That's because it does not ask what people think about including ISDS in TTIP; it simply offers some minor tweaks to the basic ISDS idea, and asks for feedback on those.   Moreover, the 12 main questions are couched in such technical language that most non-experts will be put off from expressing their views (the thirteenth is the only general one that allows you to express your views more freely.)  Essentially, the consultation is designed for show, with the conclusion already foregone.

However, that reckons without the determined efforts of civil society organisations who have been putting together some great resources to help ordinary citizens navigate through the conceptual minefields, and to have their say.  I mentioned one of these last week.  "No 2 ISDS" allows you to enter your name and email and to use pre-written answers supplied by the site.  At the time of writing, around 10,000 people have done that.  Although the answers are very good, I would urge you to write your own, since it is likely that the European Commission will try to dismiss identical answers.  However, if you really don't have time for a more personal response, this is certainly better than nothing.

The EDRi organisation does not write your response for you, but it does make it very easy to formulate them.  It has produced an Answering guide [.pdf], which you can download and read offline (there's also an online version - see below.)  This not only explains what each question means, but lists a number of points you might like to consider in your answer.  This makes it very easy to pick out the one you care most about, and to put it into your own words so that the Commission cannot claim it is a cut-and-paste job. 

As well as illuminating the often opaque questions, EDRi has addressed another major flaw in the EU consultation: the fact that you must submit your answers using the online form, and that you only have 90 minutes to do so.  Both of those are absurd, and suggest that the Commission is going out of its way to make it hard for ordinary citizens to respond - lobbyists, of course, are adept at accommodating anything, so it's no barrier for them.  Helpfully, EDRi has provided an online system that not only gives you each question with its explanation and talking points, but also a box to draft your own response:

You can use this form to draft your answer(s) to the questions raised by the Commission.

It is possible to save your answers. In that way, if you accidentally close your browser session or if you want to continue at a more convenient moment, you do not have to start over. By the way, your answers will be saved locally, in your browser, and will not be transmitted to us or to a third party. The answers are purely for your own reference.

Each answer is limited to 4,000 characters by the Commission, therefore we have also restricted the length of the comment areas.

Once you are finished, go to the Commission online consultation form, just click here.

With all these tools and background documents at your disposal, I therefore strongly urge you to make a submission to the European Commission on the inclusion of ISDS in TTIP.  Since the Commission has shown precious little inclination to allow us any other opportunity to express our views about this important trade agreement, even though it will touch on many aspects of lives, we should take this rare opportunity to make our views known as clearly as possible.  As usual, I included below what I have submitted.

Question 1 : Scope of the substantive investment protection provisions

In your explanation, you write that the key question here is: "What type of investments and investors should be protected?"  The answer to this is simple: no type of investments or investors should receive additional protection under TTIP.  The key word here is "additional":  I am not saying that investment and investors should not receive protection at all, just that it is unnecessary to give them extra privileges. 

There is simply no justification to give already-powerful companies even more power and privileges.  The legal systems in the EU and US have evolved and been refined over many years; they already offer companies huge advantages not available to members of the public.  That is because companies have resources that they can use to fight and exploit even the strongest legal system.  This has been seen time and again when skilful lawyers have managed to limit or eliminate fines imposed on corporate offenders.  Similarly, investors are already accorded a wide range of preferential treatment, often to the detriment of local companies. 

If TTIP is going to alter the balance of power here, it should arguably do so by diminishing the power and privileges of investors and companies, not by increasing them.  I therefore believe that the objective and approach taken in relation to the scope of the substantive investment protection provisions in TTIP is fundamentally misguided, wrong and inequitable.  The solution is to drop investment from TTIP completely, and to allow the national legal systems to do their job.

Question 2 : Non-discriminatory treatment for investors

As my answer to Question 1 indicates, I believe that foreign investors already have privileges not accorded to local companies.  This is patently unfair for European companies, and should be rectified by removing all and any such discriminatory features of TTIP, which means removing this chapter completely.  This is doubly advisable given the fact that the European Commission has admitted that there is a massive loophole in the Most Favoured Nation article of CETA which would have undermined any so-called "safeguards" in this area.

The fact that the European Commission experts overlooked this important flaw, and that it was only spotted thanks to a leaked copy of CETA emphasises why the absurd refusal to allow the public to see any draft documents is not just anti-democratic and lacking in transparency, but counter-productive too.  Adopting an open approach to negotiation would allow external experts to spot this kind of mistake before it is too late.  Who knows what blunders are currently lurking in the secret TTIP proposals?

Question 3 : Fair and equitable treatment

Never was an approach more of a misnomer.  As the European Commission itself is forced to concede, the lack of definition of "fair and equitable treatment" has led to such a wide range of interpretation by the secretive arbitral tribunals that the concept is clearly not fit for purpose.  It is so vague as to be useless, and guarantees that it will be challenged and gamed by lawyers (many of whom will also be sitting on those same arbitral tribunals, in a clear conflict of interest.)  This element cannot be salvaged, as the Commission's own unsuccessful attempts to do so demonstrate: its "closed" list is not properly closed, and therefore useless in terms of limiting the damage that this concept can cause.

Once again, the only solution is to remove the entire investment chapter from TTIP and allow national courts to adjudicate on what is "fair and equitable", as they have always done, and done well thanks to the far better established body of law on both sides of the Atlantic. That contrasts with the arbitrary and capricious judgments handed down from lawyers who have a vested interest in making "fair and equitable treatment" mean whatever they want.

Question 4 : Expropriation

This is a perfect example of why ISDS is outdated and no longer required.  The original impetus behind expropriation clauses in ISDS was to prevent rogue governments from seizing factories and other materials - a physical expropriation.  Today, expropriation has reached the absurd heights of companies making claims against governments for "indirect expropriation of future profits".  Trying to close all the loopholes in this idea is like trying to stop a sponge from leaking: it is neither possible nor sensible.  Again, the only rational solution is to drop this and all other elements of investment protection. The European Commission's foolish attempt to "clarify the provisions on expropriation" simply legitimises an idea that should never have been taken seriously.  Enshrining it in TTIP in this way would be a gross error, and lead to yet more clever legal gymnastics, and yet more abuse.

Question 5 : Ensuring the right to regulate and investment protection

This question - and the thinking that lies behind - is not just misguided, but utterly pernicious.  It sets up a false equivalence between the "right to regulate" and the "right to investment protection."  There is no balance to be achieved here, because the former must clearly take precedence in any sovereign state.  The investment protection flows from the equitable laws of that sovereign state, and instituting a parallel system "guaranteeing" such protection is a fundamental attack on sovereignty - and democracy.

The idea of a "list of horizontal exceptions" confirms that the European Commission is actually placing investment protection above national sovereignty: the former are the rule, and the latter are only permitted as exceptions.  This is not just folly, it is a dereliction of the executive power vested in the Commission.

Question 6 : Transparency in ISDS

The European Commission is to be congratulated for recognising that "Transparency is essential
to ensure the legitim acy and accountability of the system."  But as far as ISDS is concerned, the Commission seems to be trying to use a false syllogism:

"Transparency is essential for legitimacy and accountability;

ISDS lacks transparency;

Adding transparency to ISDS will make it legitimate and transparent."

Of course that is nonsense: making a system that undermines national sovereignty and democracy more transparent does not suddenly render it legitimate.  It simply means we can observe our national sovereignty and democracy being eroded in greater detail.  Clearly the European Commission is trying to use this issue as a (transparent) fig-leaf to cover up the fact that ISDS has no place in functioning democracies.

In terms of "additional suggestions", since the Commission perspicaciously notes that "transparency is essential to ensure the legitimacy and accountability of the system", it should try applying that insight to the TTIP negotiations too, where the lack of transparency inevitably means that there is little or no legitimacy or accountability. 

Question 7 : Multiple claims and relationship to domestic courts

It is simply absurd that the European Commission recognises that investors can bring their disputes before domestic courts, and yet seeks to subvert national legal systems and sovereignty by allowing them to use secret, biased tribunals instead.  The Commission's own analysis here makes it abundantly clear that investors must not be allowed to circumvent the law in this way.  That means ISDS must not be included in TTIP in any form.

Question 8: Arbitrator ethics, conduct and qualifications

Again, the question answers itself: instead of trying to correct a manifestly rotten, biased and unethical system with some future weak and vague code of conduct, the solution is to use what has had just such a code of conduct for centuries: the legal system.  If something you don't need is broken, you don't try to fix it, you just throw it away.  We should do the same with the fundamentally broken and unfixable ISDS system.

Question 9: Reducing the risk of frivolous and unfounded cases

This is pointless because it begs the question what exactly "frivolous" means.  Whatever the definition, lawyers will always challenge it, leading to yet more litigation and expense for the public purse.  The only solution is to drop all ISDS from TTIP.

Question 10: Allowing claims to proceed (filter)

Again, this simply legitimise attacks on national sovereignty by even discussing this issue.  The only way to preserve that is to reject ISDS in all its forms.

Question 11: Guidance by the Parties (the EU and US) on the interpretation of the agreement

This is pointless and redundant.  Pointless because lawyers will always argue, whatever the "guidance"; and redundant because both the EU and US already have well-functioning legal system where this is handled as a matter of course.  Placing ISDS tribunals above those systems is just folly.

Question 12: Appellate Mechanism and consistency of rulings

This would compound the folly of ISDS tribunals by adding yet another unaccountable layer on top.  That would be great news for the lawyers, but bad news for the public that would have to fund even more expensive fights to defend national sovereignty.  Moreover, instituting such a system would bolster the parallel legal system that is only available to deep-pocketed investors, not the general public - hardly how an equitable justice system is supposed to operate.

Question 13: What is your overall assessment of the proposed approach on substantive standards of protection and ISDS as a basis for investment negotiations between the EU and US? / Do you see other ways for the EU to improve the investment system? Are there any other issues related to the topics covered by the questionnaire that you would like to address?

The European Commission's approach to investment protection is fundamentally misguided.  ISDS is simply not needed.  Both the EU and US have extremely well-functioning legal systems that provide sufficient protection for investors.  That is clearly demonstrated by the following facts, taken from the Commission's own Web site (http://ec.europa.eu/trade/policy/countries-and-regions/countries/united-states/):

"Total US investment in the EU is three times higher than in all of Asia.

EU investment in the US is around eight times the amount of EU investment in India and China together."

The Commission's own figures show that in 2012, the foreign direct investment from the US in Europe was 1.5 trillion euros, while Europe's in the US was 1.6 trillion euros.  If over 3 trillion euros has been invested without ISDS, there is clearly no problem to solve here.

Moreover, any company that feels for whatever reason that it needs better protection than the EU and US courts are able to offer is at liberty to take out insurance to provide it, for example from the World Bank.  ISDS is a classic attempt to socialise risk while privatising profit, and it is totally bizarre that the European Commission would wish to impose this burden on European citizens in this way, since ISDS costs are ultimately an expense borne by the taxpayer, who gain nothing in return.

Worse than that, the risks of ISDS are huge.  We are already seeing billion-dollar awards being made by ISDS tribunals, while the number of cases against EU countries is shooting up.  Claims that ISDS is totally standard in investment agreements wilfully misses the point that these are with developing countries that are relatively weak, not with the world's most powerful and litigious nation.  Given that there are over 50,000 US subsidiaries in Europe, the potential for ISDS awards totalling billions - possibly trillions one day - of euros is obvious.  To enter into an agreement with this hanging over the European economy and citizens would be totally irresponsible.

To "improve the investment" system, the national courts should be allowed to do their job, which they have generally done extremely well in the EU and US.  Placing an ISDS tribunal above them will not only undermine investment law, but have huge knock-on effects in other areas.  Of course, ISDS judgments cannot overturn EU law directly, but the chilling effects observed in Canada, for example, where environmental laws were simply dropped when lawyers threatened to invoke NAFTA's ISDS chapter if they went ahead, should be warning enough.

The stated aim of the TTIP is to provide a boost to the EU economy, and create jobs for citizens.  In fact, as the European Commission's own CEPR research shows, even the most ambitious forecast is that TTIP would produce a cumulative 0.5% GDP boost over ten years - in other words, barely 0.05% extra GDP per year.  Therefore taking on open-ended risks through ISDS - something not factored into the already-low growth forecasts - is clearly not something that should even be contemplated.  Instead, risks need to be minimised in order to protect what few benefits might flow from TTIP - not least because the "ambitious" scenario is predicated on a massive deregulation that looks increasingly unrealistic for many sectors.

Finally, a quick comment on transparency.  Although I naturally welcome this opportunity to express my views on ISDS, it is unacceptable that this was a concession that had to be wrung from the European Commission: the people of Europe have a right to express their views on this extremely important project, and fobbing us off with a self-evidently risible claim that we will have our opportunity once the text is agreed is little short of insulting.  At that point, no changes can be made, not even by the European Parliament, which is simply presented with a yes or no choice.

Fortunately, the example of ACTA shows us that MEPs are willing to stand up for their constituents when presented with an anti-democratic agreement, negotiated in secret, that offers benefits only for multinational corporations at the expense of the European public.  I would therefore urge the European Commission to reflect long and hard on that as they read through the submissions to this consultation, and decide how best to respect the wishes of the people who pay their salaries.

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TTIP Update XXX

As well as all the developments I discussed in the previous TTIP update, plenty has been happening recently in the hotly-contested area of investor-state dispute settlement (ISDS).  The United Nations Conference on Trade and Development (UNCTAD) has published another of its informative reviews of developments in the ISDS field [.pdf].  This edition is particularly welcome since it focuses on the interaction between the EU and US in this area.  Here are some of its findings:

16 [ISDS] cases have been initiated against the US to date, among those not a single one originated from an investor from a EU Member State.

EU Member States have been respondents in 117 known cases, of which almost a quarter faced by one country (the Czech Republic). Several EU countries (e.g. Austria, Denmark or Finland) have faced no known ISDS claim to date. 88 of the 117 cases are intra-EU disputes.

To date, there are few (nine) known claims in the EU-US relationship. All of them were filed by US investors, constituting about seven per cent of all ISDS claims filed by US investors.

The nine cases also represent close to eight per cent of all cases faced by EU Member States (or close to one third, if intra-EU disputes are disregarded).

All nine cases were brought against “new” EU Member States.

That shows that already the EU suffers disproportionately from ISDS cases; including an ISDS chapter is likely to open the floodgates of US companies suing across the whole European Union.  One of the most interesting facts in the new report is the following:

The US-EU relationship is the largest in terms of the amount of FDI [foreign direct investment] stock held by investors from these countries in each other’s territories. 10 Investors from EU Member States hold a total of 1.6 trillion USD of FDI stock in the US, which represents 62 per cent of the total inward US FDI stock. 11 Investors from the US hold a total of 1.9 trillion USD of FDI stock in EU Member States which represents around 38 per cent of the total inward FDI stock in the EU.

That is, even without ISDS in place between the US and most of the EU (the US currently has agreements including ISDS with Bulgaria, Croatia, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia), the total transatlantic investment is 3.5 trillion euros - much more than when I last looked, which suggests that it is continuing to rise rapidly.  This demonstrates beyond any doubt that ISDS is simply unnecessary for the EU and US: investment is already flourishing on an unprecedented scale.

Bringing in ISDS would therefore have no benefit for Europe - but plenty of dangers.  An important post by Ante Wessels over on the FFII site explores one aspect I hadn't seen before: the fact that the ISDS system is inherently biased in favour of the US:

Investor-to-state dispute settlement (ISDS), the most controversial element of the proposed trade agreement with the US, has characteristics of a rigged system. ISDS gives the US an unfair advantage, we can not expect EU companies to win ISDS cases against the US.

Here's why:

The appointment of arbitrators is not neutral. One arbitrator is appointed by each of the disputing parties. In which supreme court can parties bring their own judge? The third arbitrator, the presiding arbitrator, is appointed by agreement of the disputing parties.

The US appoints the president of the World Bank. This president

- is ex officio chairman of the International Centre for Settlement of Investment Disputes (ICSID) Administrative Council,
- proposes the ICSID secretary-general,
- appoints all three the arbitrators in appeal cases under ICSID rules.

The secretary-general of ICSID

- appoints the third arbitrator if the parties can not agree on the third one,
- will decide over conflicts of interest. (ICSID, articles 5, 10, 38, 52 and Commission, 2014b, Table 8, article x-25.10)

The ISDS system gives the US an unfair advantage. Adjudicative processes have to be free of reasonably perceived bias. This is not the case with ISDS.

The rest of the post provides compelling evidence that this bias is already visible in the results of previous years' ISDS cases, where the US always seems to win.  

Against that worrying background, it becomes even more vital to respond to the European Commission's consultation on ISDS.  The deadline for replying is July 6, and I'll be writing an update detailing my own response soon.  In the meantime, here's what other people think about ISDS and are planning to send to the Commission - you may find them useful in framing your own.

First, a splendidly robust response from the Trade Union Congress, which states quite bluntly:

The TUC's response to this consultation will not follow the specific questions outlined, as they present ways to improve ISDS and investment protection measures in TTIP. The TUC, like the ETUC and AFL-CIO, opposes any form of ISDS in TTIP.  Our response, therefore, will detail why ISDS is unnecessary in trade agreements and poses a serious threat to public services and states’ ability to legislate in line with citizens' interest and wishes.

After that wonderful start, it goes on to offer cogent reasons why ISDS is simply superfluous, like this one: 

The fact that the UK has not been sued through an ISDS procedure in the past is also not a credible argument for its inclusion in TTIP.  This merely shows that the British governments have refrained from signing investment treaties with large capital-exporting states. It can be seen that when Canada, another country not previously subject to ISDS proceedings, signed the North American Free Trade Agreement (NAFTA) with USA and Mexico, they found themselves the subject of several ISDS cases, several of which were successful.  Canadian companies also used ISDS to sue the US government successfully through ISDS provisions in NAFTA.

It also explains why ISDS is "inequitable and undemocratic:

Inequality lies at the very foundation of ISDS as it privileges foreign investors over any other economic actors - domestic investors or interest groups such as consumers or workers – by giving them the right to access special courts for pursuing claims of expropriation.

It notes that ISDS is a particular danger for the UK:

In the UK, there is a danger that if a future government were to bring parts of the National Health Service back into public ownership by overturning the Health and Social Care Act (2012), it would be prone to challenge through ISDS by American companies that have significant investment in the NHS.  In addition, ISDS mechanisms could be used by US companies to litigate against tighter regulation of the UK’s growing for-profit education sector.

It's really well-worth reading the rest of the TUC response, which is in a similar vein.  It's great to see, not least because it shows that trade union organisations have woken up to the very real threat that ISDS represents for their members.

Next, an equally fine response to the unnecessary and frankly rather dishonest EU ISDS consultation, this time from the Trade Justice Movement (TJM).  You can read the detailed, ten-page question-by-question response [.doc] - indeed, I urge you to do so, if you can - but here's TJM's summary of its main points:

Approximately 70% of global investment happens without this kind of [ISDS] investment protection.

There is no valid reason to transfer business risk to communities by making governments liable. Transferring the risk to governments causes 'policy chill' whereby governments resist passing policies in case they get sued. For example: governments thinking of introducing plain packaging to cigarettes are watching the Philip Morris cases against Uruguay and Australia carefully: the company is arguing that the legislation is a breach of their intellectual property rights, the countries could face million-dollar compensation bills.

There is no reason to give international investors greater rights than domestic investors: both kinds of investors can access domestic courts, only international investors can access the private tribunals associated with ISDS.

Businesses should protect against risk via insurance: a scheme already exists via the World Bank. This could be supported by mediation and state-to-state diplomacy where necessary.

Finally, I need to point people to a new site that has been set up with the rather self-explanatory name "No 2 ISDS", which explains its purpose as follows:

The arguments against investor-state dispute settlement have been known for many years. Despite this, the European Commission has attempted to silently push it through in its ongoing trade negotiations with the US. It was only after sustained and substantial protests by citizens, trade unions and civil society groups that the European Commission launched a public consultation on the mechanism. However, this consultation - that was initially sold by the European Commission to the public as a way to involve citizens, trade unions and civil society - turns out to be a mere caricature.

First of all, the consultation does not ask the public whether they want investor-state dispute settlement or not in TTIP. Furthermore, ordinary citizens are overwhelmed with a highly technical and lengthy questionnaire. To make matters worse, the public are forced to exclusively stick to this electronic questionnaire that is not very user-friendly. Letters or E-Mails are not permitted. This contradicts the very essence of public consultations and makes it highly problematic from a democratic point of view.

For all of these reasons, AK EUROPA (the Brussels office of the Austrian Federal Chamber of Labour), the ÖGB Europabüro (the Brussels office of the Austrian Trade Union Federation), and Friends of the Earth Europe (the largest European environmental grassroots network), wish to offer guidance to anyone who would like to speak out against investor-state arbitration and secretive, opaque trade negotiations taking place behind closed doors.

We believe that special privileges for investors should be excluded from TTIP. We therefore also reject the Commission’s proposal to ‘improve’ the currently foreseen investor-state dispute settlement system. The only viable solution is: NO INVESTOR-STATE DISPUTE SETTLEMENT AT ALL!

It is of fundamental importance that we send a clear and strong message to the European Commission. Take part in the consultation and help us push back unjustified privileges for private investors at the expense of people and societies as a whole!

They're right, of course, and the good news is that this site (also available in French and German) helps people do that.  It does so by running through the questions found on the Commission's ISDS consultation, explaining in very clear terms what the issues are, and offering sample answers to those questions.

Once you've had a glance at these, you can then provide your own answers for the EU's online form, or wait a little longer for my comments too.  Either way, it is really important that as many people as possible reply to this consultation so that the European Commission cannot claim that nobody really cares about ISDS, and that it can therefore negotiate as it wishes.  This is an important opportunity to make our voices heard: let's take it.

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TTIP Update XXIX

In my last update, I introduced the secretive Trade In Services Agreement (TISA), currently being negotiated in parallel with both TTIP and sibling the Trans-Pacific Partnership agreement.  With rather nice timing, WikiLeaks has just released one of the key chapters from TISA, concerning financial services.  Since the text itself is pretty dry, WikiLeaks has asked one of the world's top experts on these trade agreements, Professor Jane Kelsey of the Faculty of Law, University of Auckland, New Zealand, to provide a detailed guide to what it all means.  I strongly recommend reading her analysis, since it really explains what all those innocuous-sounding phrases really mean.  Here is her summary of what the new leak tells us:

The secrecy of negotiating documents exceeds even the Trans-Pacific Partnership Agreement (TPPA) and runs counter to moves in the WTO towards greater openness.

The TISA is being promoted by the same governments that installed the failed model of financial (de)regulation in the WTO and which has been blamed for helping to fuel the Global Financial Crisis (GFC).

The same states shut down moves by other WTO Members to critically debate these rules following the GFC with a view to reform.

They want to expand and deepen the existing regime through TISA, bypassing the stalled Doha round at the WTO and creating a new template for future free trade agreements and ultimately for the WTO.

TISA is designed for and in close consultation with the global finance industry, whose greed and recklessness has been blamed for successive crises and who continue to capture rulemaking in global institutions.

A sample of provisions from this leaked text show that governments signing on to TISA will: be expected to lock in and extend their current levels of financial deregulation and liberalisation; lose the right to require data to be held onshore; face pressure to authorise potentially toxic insurance products; and risk a legal challenge if they adopt measures to prevent or respond to another crisis.

Although financial services are not currently part of TTIP, largely because the US government is unwilling to water down its standards, expect something very similar to the leaked TISA chapter to turn up in TTIP once the haggling begins.

Although not exactly a leak, because obtained through the US Freedom of Information Act, the publication of a letter from the US Chief Negotiator Dan Mullaney to EU Chief Negotiator Ignacio Garcia-Bercero is rather ironic, since it contains details of the efforts that the US will be making to keep TTIP as secret as possible.  It's in reply to a letter from the EU to the US outlining the measures in place there - although unfortunately we don't have this. 

The letter is easily summarised: the only people who will be granted access to TTIP documents are US government officials and "persons outside the US government who participate in its internal consultation process and who have a need to review or be advised of the information in these documents" - industry lobbyists, in other words.  No surprise there, given the US government's refusal to allow any relaxation of secrecy by the European Commission.  But the following section is something we didn't know before:

The United States will hold the TTIP documents in confidence for five years after entry into force of the TTIP Agreement, or if no agreement enters into force, for five years after the last round of negotiations.

So not only is the US doing everything in its power to stop the public seeing the negotiating documents while TTIP is being discussed, but it aims to keep them under lock and key for another five years after TTIP is agreed - or fails.  That really shows an extraordinary contempt for the US people who are not even allowed to see what their officials are doing for many years after its too late to do anything about it anyway.

Finally, a quick note about what the pro-TTIP camp have been up to recently.  Things aren't going to well for them, of course: resistance throughout Europe is growing by the day, as more people - and media - wake up to the deep problems of TTIP, not least ISDS.  Because of this pushback, momentum has been lost, and the negotiations aren't moving forward as fast as had been expected at the beginning.  In an attempt to get things going again, the Business Europe organisation has put together a Q&A page on TTIP.  Sadly, it contains the same old misleading claims, like this one:

For the EU, independent studies point out to an additional GDP growth of 0.5%, translating into EUR 120 billions annually. This compares to a GDP growth of 0.1% in the EU-28 and of 0.4% in the Eurozone in 2013.

Except, of course, as readers of this blog will know, that is comparing two completely different kinds of growth: the predicted cumulative extra GDP growth after *ten years* of TTIP (0.5%), with the *annual* growth in the EU-28 (0.1%).  A more honest way of putting that would be that the most optimistic forecast from the European Commission's research is that at best TTIP would add on average just 0.05% extra GDP growth per year.  The fact that Business Europe has to resort to this kind of obfuscation shows how weak the case for TTIP really is.

More interesting is a recent speech from Anthony L. Gardner, the US Ambassador to the European Union.  Here's the problem he's noticed:

Despite the benefits that would flow from a deal, the media coverage – especially in social media in certain EU member states – has started to turn negative.

Well, maybe the real problem is that there are *no* overall economic benefits, as the European Commission's own econometric models definitively prove.  But choosing to ignore that rather important fact, here's what Gardner says needs to be done:

I think our strategy has to change: I intend to take the debate to the critics, rather than accept speaking engagements only from the usual business federations where we preach to the converted. I intend to meet with representatives of civil society that have an open mind – including from labor, environmental and consumer groups; and I intend to focus in particular on rallying small and medium sized businesses because they struggle to spend the resources to deal with the bureaucratic red tape that we hope to reduce.

And here's how he intends to do that:

I believe this public diplomacy has to be centered on stories, not statistics: simple language that ordinary people can understand.

That's a wonderful admission that the facts about TTIP simply don't stand up to scrutiny, as I've shown in multiple previous updates.  Instead, what Gardner will offer is "stories", and "simple language that ordinary people can understand".  Isn't that consideration for the public's sadly-limited ability to understand complicated things like numbers just touching?  Thank you Mr Ambassador, you're a gent....

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TTIP Update XXVIII

The big news this week is an important leak detailing what the European Commission will offer the US in the fields of services and investments.  It's super fresh: the document is currently being circulated to the governments of the EU's Member States, and comments remain open until 30 June, so we are gaining important insights into real-time discussions that have hitherto been completely hidden from us. 

That makes this leak doubly important: not just for its content, but for the fact that it took place at all.  It shows that despite the European Commission's attempt to keep key negotiating documents out of the public debate, the Brave New World of leaking whistleblowers means that we will get to see some of them anyway.  The only difference is that the Commission looks arrogant and high-handed by refusing to release them officially.

The leak takes the form of three PDF files [.< ahref="https://data.awp.is/filtrala/2014/06/13/4.html">pdf

] - unfortunately they are scans, not searchable documents.  They were leaked to the European Federation of Public Service Unions, which apparently represents some 265 unions and 8 million public service workers.  Here's what it has to say about the content:

There is no general exclusion of public services and waste water services are committed for market opening. "Such an EU liberalisation agenda should be publicly debated at national and EU level, including the guarantees and rights that would accompany this agenda. Any discussion on water and sanitation services should include the realisation of the UN human right for water and sanitation in legislation, as demanded by the first successful European Citizens’ Initiative Right2Water and in which 1.9 million Europeans said no to inclusion of water and sanitation services in trade agreements. It is not clear if the national parliaments have agreed. The EP has not agreed the offers which apparently are also discussed with Canada and with other OECD countries (TISA)".

As that points out, services like water and sanitation are not excluded, and that's deeply problematic given the growing recognition that it makes no sense to privatise these natural monopolies.  That's because such critical monopolies allow companies to charge pretty much any price they like, since (a) we can't do without their services (b) we can't go simply turn to some rival provider.  That's led to a number of moves to put water services back into public hands, running them as the commons they obviously are.  The refusal of TAFTA/TTIP to recognise this issue is another reason why it is a poor fit for the realities of 21st-century European life.

The other important point to note from the comment quoted above is the mention of a mysterious TISA.  To my shame, I only heard about this about a month ago, and yet it has been around for a year.  The reason for the discrepancy is that TISA - which stands for "Trade in Services Agreement" - is yet another set of secret negotiations that are being conducted in our name, but about which we are not allowed to know anything important.

It turns out that TISA forms a kind of unholy trinity together with TTIP and the Trans-Pacific Partnership agreement (TPP).  Between the three of them, they aim to define the terms for world trade for the coming years: TTIP covers transatlantic trade and investment, TPP the transpacific trade, and TISA global trade in services.  TISA involves pretty much all the countries of TPP plus the European Union.  What TTIP, TPP and TISA have in common is the US, which seeks to use these three treaties to cement its position as they key player in trade and services.  The idea is obviously to set the terms for those before China takes over as the world's biggest economy.

If you're interested in finding out more about TISA - and you definitely should be - I've put together what little we know about in a post over on Techdirt.  The newly-leaked documents are important not least for the following statement:

As far as services are concerned, the attached draft offer mirrors the offer submitted by the EU in TiSA negotiations in November 2013 both in terms of format and substance

That confirms the extremely close relationship between TTIP and TISA, to the extent that TISA is pretty much being mirrored in TTIP.  Although we don't know much about TISA, and the levels of secrecy surrounding it are even greater than for TTIP, I expect that to change as more people wake up to what is going on, and whistleblowers start coming forward here too.

I'd like to finish this update with a couple of separate developments, which though small in themselves, give a sense of the growing problems for TTIP.  First, in France, where the French bank BNP is accused by the US authorities of breaking sanctions against Iran, Sudan and Cuba, and therefore liable to a huge fine - £6 billion is being mentioned.  Here's the TTIP angle:

Michel Barnier, the EU's internal markets commissioner, said any penalty on the giant French bank must be "fair and objective".

There are reports that the US may hit BNP with a fine of $10bn (£6bn) for allegedly violating sanctions rules.

France has expressed alarm at the fine, warning that it could hurt trade talks.

That makes sense, because the benefit that France will obtain each year from TTIP is likely to be far smaller than £6 billion, even under the most optimistic forecasts.  That means that fighting this fine is a far better use of its politicians' time than bothering with a trade agreement that may or may not bring any long-term benefits.

The other TTIP story comes from Germany, where the US Embassy in Berlin tweeted about a revealing little project it is running.  The original tweet is in German, and roughly translated reads thus:

Are you for #TTIP and annoyed over the negative coverage? Send us your idea and we will support you.

Here's the kind of idea and support the US Embassy has in mind:

The U.S. Mission to Germany Public Affairs Section (PAS) is soliciting proposals from not-for-profit, non-governmental organizations, think tanks, and academic institutions that focus on the Transatlantic Trade and Investment Partnership (T-TIP).  The goal is to keep our publics informed about the negotiations and offer meaningful opportunities to shape the respective negotiating objectives.

What are the facts behind T-TIP, and how will it impact you? What are some of the concerns in the European Union and the United States?  What are some of the benefits? What impact will T-TIP have everyday life?  Facts and figures are needed, and we look forward to working with partner institutions to develop a final product which informs about the agreement and which combats misinformation.

The activities funded with a Federal Assistance Award (Grant) ranging from $5000 to $20,000

Given its tweet calling for those "annoyed over the negative coverage" to get in touch, and the requirement that the "final product...combats misinformation," I don't somehow think the US Embassy will be funding anyone with serious doubts about TTIP.  In other words, this is a desperate attempt to buy some "independent" support for a treaty that nobody is willing to support because they genuinely believe in it.

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TTIP Update XXVII

It is nearly a year since the TTIP negotiations were launched, and yet things still feel strangely preliminary.  Partly that's because everything is taking place behind closed doors, so the public is not actually kept fully up to date with what is going on.  Partly, too, that's because things have gone rather more slowly than people probably expected when the talks were started.  Indeed, some institutions are still coming to grips with the whole business - like the House of Lords, one of whose sub-committees has just published a major report on TTIP. 

It's decent enough as a background document, although I don't think that anyone who has been reading these updates will learn much that is new.  Instead, they will recognise many of what have already become rather tired TTIP tropes:

The Transatlantic Trade and Investment Partnership (TTIP) is the most ambitious trade and investment pact ever attempted, due both to its scale—the European Union and the United States together account for nearly half of world GDP—and because in tackling non-tariff barriers to trade, a deal could set the template for a new generation of 21st century trade and investment agreements.

The report also quotes the by-now standard figures:

In their written evidence, the UK Government pointed to the CEPR studies commissioned by the Department for Business, Innovation and Skills (BIS) and the European Commission to suggest that an ambitious, comprehensive TTIP deal could over the long-term be worth up to £10bn (or 0.35 per cent of GDP) annually to the UK, up to £100bn (or 0.5 per cent of GDP) annually to the EU, and up to £80bn (or 0.4 per cent of GDP) annually to the US.[28] The GDP gains would be relative to projected GDP levels without TTIP in place.

However, to its credit, the report also notes some critical voices:

28.  The AFL-CIO [American Federation of Labor and Congress of Industrial Organizations] expressed sympathy with the views of Dean Baker, of the Center for Economic and Policy Research, who had noted that the projected GDP increases in the study produced for the European Commission would not materialise in full until 2027, and that they reflected a best-case scenario. In a less ambitious, and "presumably more realistic" scenario, the GDP gain for the US by 2027 would be "roughly equal to a normal month's growth" and thus in Mr Baker's view, "too small to notice".

29.  Professor Baldwin advised us to treat the figures with caution for a different reason, pointing out that figures were projected against a "status quo" world, and that experience—for example with predictions on the effect of the North American Free Trade Agreement (NAFTA)—had shown that the status quo world "was nothing like what actually happened, because a thousand things happened". It was consequently "very difficult" to sort out what NAFTA did, and it might in future be similarly difficult to disentangle the effects of a TTIP agreement from other factors. He nonetheless judged that the numbers "will be realistic, but over a medium run."

30.  With regard to income gains for consumers, Professor Baldwin told us that it was "basically impossible to say how much this will add to people's income" and suggested that we "take with a large grain of salt any particular numbers on the overall numbers".

In its summary, the House of Lords report contains the rather striking comment:

We observe that, insofar as a public debate on TTIP exists, EU member states are losing it. Proponents have yet to articulate the purpose or possible gains from TTIP in a compelling way, or to offer convincing responses to legitimate concerns.

All-in-all, the House of Lords report is a thorough piece of work that shows good awareness of what is going on.  Alas, the same cannot be said for a TTIP debate in the House of Commons, which took place a few months back, but which has only been published recently.  Again, the usual misleading figures are trotted out, but this time without the balancing caveats provided by the House of Lords.  However, one novelty did catch my eye - the fact that Which? was invoked twice by MPs:

Given that the European Union and the United States account for 40% of global economic output and that their bilateral economic relationship is already the world’s largest, the opportunities are clear for all to see. Between them, they contain more than 800 million consumers, and the TTIP has significant potential for them as well. It is clear from the helpful briefing sent to all Members by Which? that there will be big prizes for them if we can get this right.

And:

let us remember that trade deals do benefit consumers, which is why consumer groups such as Which? are in favour of this trade deal.

Given this invocation of Which? to sanctify TTIP, I was naturally intrigued to know why it was in favour.  I contacted Which?, and asked to see the briefing document mentioned in the first extract above.  Which? pointed me to a blog post by Peter Vicary-Smith, the organisation's Group Chief Executive, published in the UK edition of the Huffington Post.  Sadly, Mr Vicary-Smith has no compelling reasons for supporting TTIP, just the familiar old exaggerations:

It has been estimated that reaching an agreement could boost the EU economy, through growth and job creation, by £99 billion per year - that's £475 per household, hardly an amount to be sniffed at!

But of course, we should sniff at it, because it doesn't pass the smell test, as BEUC, the European consumer organisation, makes plain in a letter addressed to Karel De Gucht, the Commissoner responsible for the TTIP negotiations [.pdf]:

The possible effects of the Transatlantic Trade and Investment Partnership (TTIP) currently u nder negotiation are an important matter for public debate. It is essential that the expected cons equences of an agreement are communicated clearly and in easily understandable language to Europe’s citizens to enable and encourage this debate. People need to be well informed about the range of possible outcomes.

Our belief in the importance of clear communication of the cons equences of a TTIP seems to be shared by the European Commission. Official statements by the Commission have repeatedly stressed the need for a fact - based dialogue. In January 2014 you said yourself that the debate on TTIP should be “based on facts, not f ear or hyperbole.” Unfortunately, we have noticed that the European Commission has not communicated the r esults of its own economic assessment clearly. We would like to draw your attention to the follo wing examples of imprecise communication by the Comm ission.

It then goes on to raise four specific problems:

Exaggeration of the effects of the TTIP : Instead of communicating the full range of results that the Centre for European Policy Research (CEPR) study on the economic impacts of a possible TTIP delivered, the European Commission has almost exclusively used the e stimates for the highest scenario, without mentioning the other scenarios also included in the study.

...

Lacking information on the time scale :  In many instances, the European Commission makes no reference to the time that it would take for the full effects (of the best case sc enario) to be felt. It has even been suggested that these effects could materialise by the end of the negotiations, for example: “When negotiations are completed, this EU - US agreement would be the bigg est bilateral trade deal ever negotiated – and it could add around 0.5% to the EU's annual economic output,” rather than in 2027 as predicted by CEPR.

...

Use of unsubstantiated figures regarding the job creation potential: The study which has looked most thoroughly at e mployment effects expects only 400,000 jobs across Europe for the extremely ambitious single market scenario that goes beyond anything evaluate d in the CEPR study. Yet, you stated in a speech in October 2013 that an agreement “would likely translate into millions  of new jobs for our workers.”

...

Use of obfuscating language : In many publications the Commission has use d language that is very difficult to understand for lay persons and can easily create misunderstan dings. For example, the sentence: “Latest estimates show that a comprehensive and amb itious agreement between the EU and the US could bring overall annual gai ns of 0.5% i ncrease in GDP for the EU and a 0.4% increase in GDP for the US by 2027” is ambiguous at best. It can easily be read as if the agreement could create a yearly increase in GDP of 0.5%. This misinterpretation has indeed occurred even among gover nment off icials and renowned think tanks. A balanced presentation of the results would point out that the annual additional growth expected from TTIP amounts to roughly 0.05% between 2017 and 2027, and that no additional growth is expected after that.

Although couched in the politest terms, this is a real slap-down for the Commissioner.  It exposes quite clearly how the European Commission has been playing fast and loose with its own research - not only failing to mention that it always talks about the best-case scenario, and that the full benefits will not be until 2027, but glossing over the fact that those benefits are *extremely* small - despite what all the TTIP cheerleaders would have us believe.

The House of Lords report discussed above mentioned a comment from the economist Dean Baker.  His latest blog post on the TTIP negotiations has the provocative title: "Why Is It So Acceptable to Lie to Promote Trade Deals?"  Here's what he has to say about predictions of the European Commission-funded study:

Implying that a deal that raises GDP by 0.4 or 0.5 percent 13 years out means "job-creating opportunities for workers on both continents" is just dishonest. The increment to annual growth is on the order of 0.03 percentage points. Good luck finding that in the data.

In addition, there are reasons to believe the growth effect could go in the opposite direction. The model used by the London CEPR does not assume any negative growth impact from higher prices for drugs or other goods that might be more costly due to stronger patent and copyright protections coming out of the deal.

These will likely be a drag on growth. Economists tend to like patents and copyrights (probably because their friends and family members benefit from them), but that doesn't change the fact that they lead to market distortions and have major economic costs. If the price of a drug rises by 1000 percent because we imposed stronger or longer patent protection it has the same effect in the market as if we imposed a 1000 percent tariff on the drug.

In fact, the situation is even worse than that analysis implies.  All these claims are based on just two pieces of research, both carried out for the European Commission.  At the heart of them lies an econometric modelling technique called Computable General Equilibrium (CGE).  An important paper from a pair of economists has this to say about the approach in general, and its application here in particular [.pdf]:

Our central argument in this paper, drawing on the insights from the economic sociologist Jens Beckert, is that these CGE models – and the figures they have produced – represent an important exercising in the ‘manageme nt of fictional expectations’. Beckert’s notion of ‘fictional expectations’ implies that although these models are shrouded in uncertainty, as the social world is too contingent to be modeled in terms of the assumptions of neoclassical economics, they are presented as reliable predictions of future outcomes. In this vein, we show how the models make overly optimistic predictions about the ability of the EU and US to eliminate regulatory barriers to trade – which are unlikely to be realized in the face of co nsiderable political opposition. Rather than act as a reliable guide to future outcomes, we show that these models serve the pro - liberalisation agenda of the European Commission and other advocates of the TTIP. These actors are engaged in an exercise of ‘m anaging’ these fictional expectations by presenting them as incontrovertible evidence in favour of the agreement. Moreover, by glossing over the differences in impact that different forms of liberalization will have – a mutual recognition of standards is m ore likely to lead to a potential ‘downgrading’ of standards across the Atlantic than regulatory harmonization – and focusing simply on the gains of ill - defined regulatory ‘liberalisation’, the economic studies have been used to privilege the interests of t hose calling for market access gains over those concerned with a stricter regulation of the market .

In other words, not only does the European Commission use the figures from this research in a highly misleading way, as BEUC's letter spells out in detail, but those figures are not so much an objective prediction of what *will* happen, but a re-statement of what the European Commission would *like* to happen, re-fashioned as an economic model.  This means that there is simply no basis for the repeated assertions by supporters on both sides of the Atlantic that TAFTA/TTIP represents a "once-in-a-generation prize".  One year in to the negotiations, we still have no evidence whatsoever that TTIP will produce any real benefits for either the EU or US.

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TTIP Update XXVI

This is probably the most action-packed update so far, and is a reflection that we are now deep in the TAFTA/TTIP negotiations.  Of course, information about what exactly is happening behind the closed doors is still thin on the ground.  To its credit, the European Commission has recently published its negotiating positions in five areas: chemicals , cosmetics , pharmaceutical products , motor vehicles , textiles and clothing.  Significantly, though, it did not publish its proposals for energy.  That's because they are far more contentious than for those other areas.  How do we know that?  Thanks to some kind person who has leaked a draft negotiating text for that area [.pdf].  Here's how the Sierra Club and PowerShift describe the Commission's moves (they also offer a fuller analysis [.pdf]:

If enacted, the proposal would:

expand fossil fuel exports from the U.S. to the EU,

increase the EU’s reliance on fossil fuel imports,

limit the ability of governments to set the terms of their energy policy, and

restrict the development of local renewable energy programs.

“This proposal exposes the contradiction of policy makers who promise to do everything they can to act on climate and then push a trade and investment agreements that would devastate our climate,” said Peter Fuchs, Executive Director of PowerShift. “Europe should phase out the use of its own fossil fuels -- and it should not be importing fracked gas or any other fossil fuel from the U.S. This proposal is more evidence as to why trade negotiators are holding the details about this deal so close to the vest.”

In part because of the lack of real transparency - for example making all the EU's tabled documents publicly available - some people last week demonstrated peacefully outside a meeting at which both Karel De Gucht, the EU commissioner responsible for TTIP, and the US Ambassador to the EU, Anthony Gardner, were speaking.  Here's what happened:

This Thursday morning over a thousand people were in the streets of Brussels, attempting to peacefully protest against austerity and the proposed great transatlantic market (TTIP) which were being discussed in the absence of citizens at the European Business Summit.

In an unprovoked move 281 people were violently arrested, including Belgian and European parliamentarians and candidates, senior trade union officials, farmers and many elderly citizens.

And this was no genteel response to a genteel demonstration: water cannons were used, and many of those arrested were cable-tied with their hands behind their back.  That's an extraordinarily disproportionate response to a peaceful demonstration, and reveals the extreme nervousness of the authorities. However, it seems likely to backfire: it was precisely this kind of attempt to tough it out that led to the fall of ACTA in 2012.

Street protests by concerned citizens may be only just beginning, but civil organisations are increasingly waking up to the dangers of TTIP and sending warning messages in ever-larger numbers.  Here's one from over 250 groups calling for greater transparency:

"The European Commission has argued that secrecy in this process is inevitable because this is a matter of international relations. However, as these negotiations are highly likely to affect domestic regulations, standards and safeguards on both sides of the Atlantic, citizens have the right to know what is being put up for negotiation, and how decisions are being made.

All negotiating documents must be made public so that a democratic debate can take place. People – not just corporations – must be able to take part in discussions about what kind of economy, environment and future we want. Continued secrecy will only fuel suspicions that the negotiations are trading away citizens' protections for the benefits of powerful industry players."

That's a key point: by its own admission, most of TTIP's possible gains will come in the regulatory sphere; regulations are about want kind of society we want to live - what the rules are.  Changing those behind closed doors is simply subverting basic democratic principles.

Another letter, again from many dozens of organisations, also concerns itself with the regulatory sphere - specifically the possibility that some kind of transatlantic regulatory council will be set up, as discussed in a previous update.  Here's the concern [.pdf]:

The top-down coordination of these measures through an institutional framework for transatlantic regulatory cooperation, we feel, would likely become a significant source of delay and preempt a state, a country, or region’s ability to maintain or establish stronger standards when consumers demand such or to respond to emerging technologies, new scientific information, preferred policies by the public, and urgent crises. One of our main concerns is that regulatory cooperation as suggested by trade negotiators will allow business groups and their lobbyists to exert undue influence in the regulatory process.

With an objective to prevent transatlantic regulatory divergence and minimize impacts to international trade, the preemptive power and influence of this institutional framework for regulatory cooperation is of particular concern.

As proposed, this body is designed to prioritize potential trade impacts over other factors in decision making. Even without a focus on trade-related impacts, cost-benefit analysis can produce unreliable results and may be heavily tilted against the public interest. Proposals to add yet more layers of analysis and governance to the rulemaking process will increase delays and will impede achieving the central mission of most regulators: to protect the public and the environment.

Of course, there's a deep irony here.  One of the declared aims of TTIP is to reduce "trade frictions", so as to boost economies on both sides of the Atlantic.  And yet, as the quoted passage above rightly points out, the regulatory council would "add yet more layers of analysis and governance to the rulemaking process will increase delays" - adding "friction".  That's simply because TTIP is about making things easier for big business, and one way of doing that is to reduce the flow of new health and safety regulations, even though the public would suffer as a result.

The proposed regulatory council is about future convergence; but another suggestion is that "non-tariff barriers" - things like health and safety rules - could be eliminated through the process of mutual recognition.  The argument here is that since no rules would be abolished, there would be no race to the bottom.  To see why that is simply not true, it's helpful to consider the specific case of chemicals:

It might come as a shock to EU voters to learn exactly how weak US laws are when it comes to toxic chemicals, especially when the US’s chief negotiator for the Trans-Atlantic Trade and Investment Partnership (TTIP) has been claiming otherwise.  This unprecedented “trade” agreement is primarily about regulation, and threatens to create new and additional avenues for industry and government to use their influence to stall necessary action on toxic chemicals, climate change, and other critical issues that must be addressed by the EU and global community to protect human health and the environment.

How weak are US laws for toxic chemicals?  Only eleven ingredients are restricted from cosmetics in the US, versus over 1300 in the EU.  Under a law dating back to 1976, US regulators have only been able to restrict the use of merely five of over 60,000 industrial chemicals that were presumed safe when the law was adopted, including asbestos.  Under this law, and despite over a century of substantial evidence of serious adverse effects, US regulators were unable demonstrate sufficient “risk” to justify a ban on the use of asbestos, unlike EU counterparts.  Moving ahead of the US, the EU has started to implement legislation that has the potential to systematically substitute over 1000 toxic chemicals—including those linked to cancer, interference with hormone systems, reproductive harms, and other serious adverse health effects—with safer alternatives in a wide range of everyday products.  The US has no such law.

Mutual recognition of standards for cosmetics would allow some 1289 chemicals banned in Europe as toxic to be used quite legally in US-produced items.  It's easy to see that this would encourage manufacturers to move to the US where they could produce cosmetics subject to less stringent standards, and then sell them to Europe from there.

The text quoted above comes from an article on the EurActiv site, written by Baskut Tuncak, Chemicals Programme Attorney for the Center for International Environmental Law (CIEL).  That same organisation was asked by the US House subcommittee on Commerce, Manufacturing and Trade to provide answers to a variety of questions on TTIP regarding regulatory cooperation, investor-state disputes, confidential business info, and transparency.  The responses may not be for the general audience, but that offer a useful perspective on TTIP and ISDS from a US perspective.  Here, for example, is what CIEL has to say in response to a question on regulatory harmonisation and mutual recognition [.pdf]:

Whether regulatory harmonization or the mutual recognition of standards would diminish the regulatory sovereignty of the United States and the European Union, i.e., constrain the ability of the two entities to promulgate regulations it deems uniquely appropriate for the specific threats to the health and safety of their respective citizens.

Yes, regulatory harmonization or the mutual recognition of standards would diminish the regulatory sovereignty of both the United States and the European Union, both at the highest levels of government and, critically, at the subnational and subregional levels where regulatory innovations most often originate. Negotiators have stated that TTIP would not affect the right of the U.S. and the EU to regulate; however, TTIP would affect the ability of these Parties, including states and Member States, to exercise this right.

The proposed institutional framework for regulatory cooperation would be composed of representatives from both Parties, and cover “any planned and existing regulatory measures of general application” and “extend to regulations by US States and EU Member States.” It would have the unstated power to constrain the ability of the either Party to exercise its right to promulgate regulations it deems uniquely appropriate for the specific threats to the health and safety of their respective citizens. Some of the key elements of this implicit power include:

The use of “harmonization, recognition of equivalence, or mutual recognition” as tools for regulatory "cooperation"...;

The use of “cost-benefit” and “trade impact” analyses for proposed regulatory or legislative initiatives, with a special focus on international trade impacts, to be published with the proposed final measure;

A requirement for “regulatory dialogues,” with trans-Atlantic governments;

The creation of a trans-Atlantic scientific body to guide regulatory decision making ; and

The right of “stakeholders” to table “substantive joint submissions” for this body to consider.

These types of provisions are designed to weaken or delay the development and implementation laws that specifically address priorities of either U.S. or EU citizens that might not be reflected across the Atlantic. For example, the recent decision to abandon the EU’s Fuel Quality Directive, which sought to curb the use of dirty energy sources and encourage renewable, was abandoned due to U.S. government and industry interference over the potential trade-related impacts. An institutional framework would create a permanent avenue for foreign interference with the development and implementation of laws and policies sought by the public in the U.S. or EU to reflect their own values, judgments, circumstances and policy choices.

Although not exactly light reading, it's an impressive document with links to many useful sources.   It's a sign of the increasingly detailed and sophisticated response that organisations like CIEL are putting together as they gird their loins in the by-now intense battle over TTIP.

Full list of previous TTIP Updates.

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