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Has TTIP hit the buffers?

Negotiations on the transatlantic free trade agreement have stalled, while even in the US doubts are growing as to the benefits of TTIP. Businesses and the European Commission are uneasy.

It was US President Barack Obama who got the ball rolling over two years ago. Back in February 2013, he used his State of the Union address in Congress to make the case for opening negotiations with the European Union on a transatlantic free trade agreement. Discussions on a free trade zone would be initiated, he said, “because free and fair trade across the Atlantic will secure millions of good-paying American jobs”.

Obama has over 18 months left in office. The hope, shared by German Chancellor Angela Merkel, is that the most important features of a TTIP agreement will have been set out by then. A change of government could throw some potentially fatal obstacles in the deal’s path.

However, it is virtually certain that Obama will not be around to conclude the negotiations that he played a major role in instigating. Discussions between US representatives and the European Commission are in deadlock. It was the same story at the ninth round of negotiations, held in late April, even though the issues on the agenda, such as harmonising standards in the automotive sector, seemed relatively straightforward.

What Germans and Americans think of TTIP

Anton Hofreiter, co-chair of the parliamentary group of Alliance ‘90/The Greens in the German Bundestag, now believes it “extremely unlikely” that the free trade agreement will ever come to anything at all in its current form. “Politically, it’s a non-starter, especially in the US”, he said at a discussion forum set up by “Junges Europa” (“Young Europe”), an association based at the University of Regensburg.

TTIP meeting resistance in the US

In fact, TTIP is not just proving a contentious issue in Germany, Austria and Luxembourg – on the other side of the Atlantic too, US opponents of free trade are also growing increasingly vociferous. Last week, US President Barack Obama was thwarted by his own party, who refused to grant him the fast-track negotiating authority that enables the government to put international agreements to a vote in Congress without giving politicians the chance to change the content of the bill. This applies both to TTIP and to the free trade agreement that the US is negotiating with Pacific countries (TTP).

One of the most high-profile members of the anti-TTIP camp in Germany, Hofreiter is clearly enjoying watching developments unfold in the US. The Green politician does not even try to hide his pleasure at the resistance being put up by the US Democrats. “What the EU and the US are negotiating is bad for employees, consumers and, most of all, democracy. I hope TTIP never materialises.” The 63 members of his parliamentary group are fully against the agreement, he stresses.

Courts of arbitration: a bone of contention

Whilst the Democrats in the US are fretting over American jobs, the main thing troubling the Greens is the issue of investment protection. Under TTIP, companies are to be given legal security regarding their expenditures and the opportunity to claim compensation in the event of government misuse, with cases being heard not by regular courts of arbitration but by private ones. 

Hofreiter is critical: “The US and the countries of the EU are established constitutional states. I don’t understand why we need a parallel justice system operating behind closed doors.” He is worried that business owners will be able to directly influence politics and use the threat of legal action to nip unwelcome regulations in the bud, such as more stringent anti-smoking legislation or environmental restrictions on power stations and cars.

EU fighting for greater transparency in negotiations

The European Commission, which is leading the negotiations on behalf of the EU’s 28 member states, is concerned by the growing criticism and frequent negative headlines. It has attempted to turn the tide with a “transparency offensive” and proposals for reforming the courts of arbitration, but to no avail.

EU Trade Commissioner Cecilia Malmström has suggested setting up a permanent commercial court of justice designed to enable negotiations to be held independently but with greater transparency – an idea that has failed to convince TTIP’s critics. “It’s not an appropriate compromise because it can’t prevent companies influencing legislation”, says Ludwig Maier, head of the Economic Affairs office at the Bavarian branch of the German Trade Union Confederation. He is afraid that an investment protection agreement might, for instance, lead to an increase in the statutory minimum wage further down the line.

The free trade agreements

Officially, this is prohibited in the EU’s negotiating mandate, the rules laid down by member states for the European Commission. The mandate stipulates that “the right of the EU and the Member States to adopt and enforce [...] measures necessary to pursue legitimate public policy objectives such as social, environmental [and] security” should not be prejudiced. However, Maier simply has no faith in the document. “I don’t believe things will be as written in the mandate”, he says. He feels that politicians have made many promises in the past but stuck to only a few.

Dispute over free collective bargaining

It is not just the European Commission that is concerned by TTIP’s doubters being unwilling to compromise. The business sector, an outspoken supporter of the agreement, is getting jittery over negotiations once touted by Obama as a “once-in-a-lifetime project”.

“Of course, critics’ objections need to be taken into account”, says Arndt G. Kirchhoff, managing partner of the KIRCHHOFF Group. “But none of these things have a place in the negotiations.” The medium-sized Iserlohn-based company employs over 10,000 staff and supplies bodies and chassis parts to automotive manufacturers all around the world.

“We don’t want any GM vegetables and the Americans don’t want any French blue cheese”, Kirchhoff told WirtschaftsWoche Online. The same is true of free collective bargaining, he says – the Europeans aren’t keen to give it up, while the Americans aren’t keen to introduce it. “Some differences we should accept. As we know, not all countries in the EU are bound by the same rules in all areas.” 

It is hardly surprising that Kirchhoff should want to see the free trade agreement come to fruition, given that the automotive industry is particularly affected by differing standards in the EU and the US.

Pointless duplication in production

“With the European and American automotive construction industries applying different standards, we have to design, develop, manufacture and test parts twice – despite these parts looking completely identical on the surface”, he says. “The consumer doesn’t gain anything at all from the process, because both versions are just as safe.”

What a free trade agreement between the EU and the US would bring

Having varying standards means that human resources which could otherwise be invested in innovations are being taken up unnecessarily. Duplication in production also increases costs. According to a study by research institution Ecorys on behalf of the European Commission, the automotive industry incurs additional costs equivalent to paying tariffs of around 26 per cent.

These are costs that Kirchhoff believes TTIP would eradicate – and that consumers could save when buying a new car. And this situation is not unique: sectors such as mechanical and electrical engineering and the pharmaceutical industry currently have to manufacture and test in duplicate due to differences in safety standards and licensing procedures.

“It would be good if the savings actually filtered down to consumers”, says Anton Hofreiter. “However, I don’t think that cars will get noticeably cheaper. Profit will go to the company, the shareholders, potentially also a bit to the staff, if there’s a powerful works council.”

Even if this were to happen, however, Hofreiter would still not dream of backing TTIP: “You don’t need TTIP to abolish tariffs and harmonise product standards.” As long as investment protection and thus the move to set up private courts of arbitration remain part of the agreement, he says, the Greens will be firmly in the “No” camp.

Battleground TTIP: chlorinated chicken versus horsemeat lasagne

Kirchhoff disagrees: “Courts of arbitration are entirely standard procedure in industry.” He sees them as the most practical solution, regardless of whether companies are signing contracts with one another or with local authorities, federal states or entire countries. “Conventional judicial proceedings have a fair few disadvantages.”

Removing the “Buy American” clause not up for discussion.

If a foreign company, for instance, is in dispute with a country, he says, then it will be at a disadvantage – not least because it is unfamiliar with the customs of that country. Conventional court cases also take a long time, even those only involving a dispute between two companies. “In addition, proceedings of this kind cost a lot of money and spend ages mired in uncertainty. For this reason, companies always choose the pragmatic option, i.e. going to a court of arbitration”, Kirchhoff explains.

“Although that costs money like any procedure under civil law, the case itself is over much sooner.” Of course, he says, there is the risk that you might lose. “But at least everything is cleared up quickly and you can keep a lid on the costs.”

Contrary to what Hofreiter hopes, TTIP without investment protection is inconceivable. After all, the EU is hoping to derail the controversial “Buy American” clause, which requires the public sector to buy US products instead of looking abroad for any better or cheaper alternatives. This major hurdle will be virtually impossible to clear without legal support.

The problem is that the “Buy American” clause is practically non-negotiable for the US and the idea of revoking it outrageous. It is thus yet another stumbling block in the path of the TTIP negotiations, which look set to drag on for a good while yet. So the ball that Barack Obama set rolling back in 2013 has now grown into something of an unwieldy, insuperable obstacle.

Source: http://www.wiwo.de/politik/europa/freihandelsabkommen-ist-ttip-am-ende/11789966.html

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