TTIP & CETA in detail

Trade agreements are very complex and can sometimes be difficult to understand. If you are looking for some detailled information on TTIP and CETA, have a look at our answers to some of the most important questions!

What is TTIP?

In June 2013, US President Obama and European Commission President Barroso officially launched negotiations on a Trans-Atlantic Trade and Investment Partnership (TTIP). The name overstates the importance of trade, which is only a tiny part of the negotiations. The main objective of the TTIP is to harmonise to the greatest extent possible transatlantic rules, regulations and standards on food and consumer product safety, environmental protection, biotechnology and toxic chemicals management, financial services and banking, domestic regulation of services, pharmaceutical patent terms, and many more areas of public policy. EU and US governments will hold onto a “right to regulate” but it will be severely constrained, subsumed under the overall priority of reducing barriers to investment opportunities for multinational corporations.

The negotiations over TTIP are taking place behind closed doors, although the agreement will have far-reaching effects for the citizens of the EU. Even the composition of a preparatory group of the negotiations and the wording of the negotiating mandate are secret. This is incompatible with democratic standards!

In spite of this, some of the documents which are still deemed to be highly secret have leaked out. These include regulations which concede extensive rights to private companies. As well as special rights for companies to sue before private arbitration tribunals (Investor-State Dispute Settlement, ISDS for short), regulatory cooperation in particular is problematic. Here, all laws or regulations which could negatively affect trade between the parties to the agreement would be discussed, even before the state's own parliament, with the party to the agreement and with stakeholders. For this, representatives of large companies, above all, would be invited to participate directly in the discussions. The consequence: The implementation of stricter regulations, such as for consumer, environmental, or employment protection, would be much more difficult in future. And a lowering of standards also looms. But in a democracy new laws must be made by the parliament, and not by technocrats or lobbyists.

In addition, the EU Commission is attempting to accomplish that it is unnecessary for the national parliaments of the member states to consent to the agreement. Therefore, when TTIP takes effect, completely circumventing us as citizens, in the end our elected representatives may also have been left in the dark. On top of that, such an agreement would be practically irreversible, and would thereby greatly restrict the latitude for negotiation of future governments and parliaments.

What are the effects of the planned trade and investment agreement (TTIP) between the EU and the USA?

TTIP would have enormous effects on our democracy, the rule of law, consumer and environmental protection, and even on the provision of public services, such as our health service, education, and culture. TTIP would create binding rules on both sides of the Atlantic for all levels of the state down to local authorities, and therefore would apply to around 820 million people. It would include large areas of business life, from trade with service providers, to public contracts, agriculture and mining, and through to technical standards and intellectual property. Additionally, private companies would be given the possibility of suing states before private arbitration tribunals if the states enact laws which have a negative effect on the investments and profit expectations of the company.

Why does the alliance reject TTIP?

The negotiations over TTIP are taking place behind closed doors, although the agreement will have far-reaching effects for the citizens of the EU. Even the composition of a preparatory group of the negotiations and the wording of the negotiating mandate are secret. This is incompatible with democratic standards!

In spite of this, some of the documents which are still deemed to be highly secret have leaked out. These include regulations which concede extensive rights to private companies. As well as special rights for companies to sue before private arbitration tribunals (Investor-State Dispute Settlement, ISDS for short), regulatory cooperation in particular is problematic. Here, all laws or regulations which could negatively affect trade between the parties to the agreement would be discussed, even before the state’s own parliament, with the party to the agreement and with stakeholders. For this, representatives of large companies, above all, would be invited to participate directly in the discussions. The consequence: The implementation of stricter regulations, such as for consumer, environmental, or employment protection, would be much more difficult in future. And a lowering of standards also looms. But in a democracy new laws must be made by the parliament, and not by technocrats or lobbyists.

In addition, the EU Commission is attempting to accomplish that it is unnecessary for the national parliaments of the member states to consent to the agreement. Therefore, when TTIP takes effect, completely circumventing us as citizens, in the end our elected representatives may also have been left in the dark. On top of that, such an agreement would be practically irreversible, and would thereby greatly restrict the latitude for negotiation of future governments and parliaments.

 

What has it to do with chlorinated chickens, GM food, and hormones in meat?

The aim of the agreement is to “harmonise” standards for products and services in the EU and the USA, because in the eyes of big business these represent “non-tariff barriers to trade”, and should be removed. However, in the areas of agriculture and the chemical industry, these standards are at very different levels. For example, in the USA it is permitted to use chlorine to disinfect chickens, to treat cattle with hormones, and to process genetically modified raw materials into foodstuffs. In future, it would of course be a huge gain for US agricultural conglomerates to be able to sell these products in Europe as well.

This is the reason that they are urging for European standards to be lowered. However, our standards were introduced for the protection of consumers, the environment, or animals, and they must not be forced out by a trade agreement! On the contrary: the public is discussing the raising of standards against factory farming, the use of chemicals, and in energy policies. TTIP and CETA would endanger this, because the introduction of such rules would then create the risk of being sued for damages by private companies.

What does an Investor-State Dispute Settlement mean?

ISDS

is the short version of Investor State Dispute Settlement.
It is a mechanism that allows investors to sue states if any action (a new regulation, administrative decision or court ruling) by this state diminishes the investor’s profits - even profits that they expected to make in the future.

The debate on it is hot right now - and it has reached the Commission. That is a big success for everyone who made their voice heard and shared their concerns!

Watch this video to get a basic understanding of ISDS:

In the video, you can see that there are a lot of procedural problems: A team of three lawyers makes a decision, they can be a judge in one lawsuit and an attorney in the next, their decisions cannot be appealed and because hearings are not public, we don´t know how that decision came to be. Ms Malmström, the EU Commissioner for trade, proposed to improve these procedures by introducing an appeal-mechanism and making hearings more transparent. This isn’t enough.

The fundamental problems with ISDS are not solved:

This demonstrates the perversion of the system:

  • a) investors get to circumvent regular national courts (even when there is no reason to suggest that they’d be discriminated in these courts);
  • b) investors’ rights are defined in very broad terms in investment treaties. For instance in CETA, investors gain the right to have their “legitimate expectations” in an investment protected. Any changes in the political conditions (such as a new environmental rule) are a potential breach with the investors’ expectations and could thus trigger an ISDS case.

We have collected what scientists, legal experts and lawyers think of ISDS - read below:

Going deeper:

"The ultimate question in this case, is whether a foreign investor can force a government to change its laws to please the investor as opposed to the investor complying with the laws they find in the country." (Luis Parada)

Luis Parada is one of the few lawyers in the world who specialize in defending states in ISDS cases. Journalists from the Guardian have spoken to him and other people who got to know the ISDS mechanism from the inside. Here is their verdict.

Corporate Europe Observatory spoke to Professors of Law, Scientists, members of NGOs and defendants and produced this video, "Suing the state: hidden rules within the EU-US trade deal". The german channel ARD screened an investigative piece on ISDS as well, "A secret parallel legal system".

Still want to know more? We recommend Corporate Europe Observatory’s study of ISDS in CETA "Trading Away Democracy" (you can find it in other languages here).

Media & Debate:

The economist and Nobel laureate Joseph E. Stiglitz has written a Letter to the US Congress, supported by both Democrats and Republicans.
Joseph E. Stiglitz teaches economics at the Columbia University, NY, is the Roosevelt Institute Chief Economist and was Chairman of President Clintons Council of Economic Advisers. He served as Senior Vice President and Chief Economist of the World Bank.

"ISDS is about rewriting the rules of how our economy works, tipping the balance of power in favor of big businesses at the expense of workers and the public here and in partner countries." (Joseph E. Stiglitz)

Other voices in the debate include the senior UN lawyer Alfred de Zayas, who is voicing his criticism in the Guardian ""UN calls for suspension of TTIP talks over fears of human rights abuses".

“We don’t want a dystopian future in which corporations and not democratically elected governments call the shots. We don’t want an international order akin to post-democracy or post-law.” (Alfred de Zayas, Special Rapporteur to the UN)

And a group of UN Special Rapporteurs (reporting on various fields of human rights and international law) issued this statement, in which they say:

"ISDS chapters are anomalous in that they provide protection for investors but not for States or for the population"

"We invite States to revisit the treaties under negotiation and ensure that they foster and do not hinder human rights." (Statement of UN Special Rapporteurs on legal developments)

Documents:

You can find the non-binding concept paper of the European Commission here, and why we think that it is not enough (by far) here. The ISDS Chapter in CETA is here.

What does regulatory cooperation mean?

In the secret negotiating mandate, which has nevertheless leaked into the public domain, a “stepwise implementation of the compatibility of the regulatory systems” is mentioned. What lurks behind this vague form of words is described by the lobbying groups, US Chamber of Commerce and BusinessEurope, in the following way: “Interest groups would sit together at a table with regulators, in order to write laws together”[1]. This creates the risk that interest groups which have not been democratically legitimated would be systematically brought into the legislatory process at an early stage, and would thus be able to define it or at least to influence it. To their own benefit, they would be able to promote or impede laws. Incidentally, the idea does not come from the EU Commission. It was originally formulated in a joint paper by BusinessEurope and the US Chamber of Commerce.[2]

A leaked document from the EU Commission indicates the way that regulatory cooperation is actually intended to function: A transatlantic regulatory council, whose members will be officials from the relevant regulatory authorities, will be responsible for the “regulatory cooperation”. There is no mention of participation by parliaments or citizens. By means of a so-called “early warning system”, the EU and the USA should mutually inform each other as soon as possible if they plan measures which could affect trade between them. The other party can then issue a position statement on the planned measures. In addition, the party planning a regulation must present analyses with regards to the effects on trade, and must consult with representatives of affected interests. Measures which, for example, are intended to ban or restrict the sale of goods which are dangerous or hazardous to health could quickly be declared to be “trade restrictions”. Even if the regulatory council itself makes no binding decisions, and cannot directly forbid measures, this bureaucratic process will in any case delay draft legislation and impede it overall.

Accordingly, regulatory cooperation would restrict and impede the freedom to negotiate of the legislator, whether parliament or people, whether at state or federal level. In the medium term, it would also affect existing regulations, because a further task of the regulatory council is intended to be the permanent alignment of the rules of the EU and of the USA. There is the additional danger that representatives of big business, who are already warned well in advance of a planned regulatory measure and its possible consequences, can threaten ISDS proceedings at an early stage if they see that their profit expectations are under threat.

[1] Quoted from Eberhardt, P., “Weniger Demokratie wagen? Geheimniskrämerei und Konzernlobbyismus prägen die transatlantischen Handelsgespräche” [Risking a reduction in democracy? Secretiveness and big business lobbying characterise the transatlantic trade discussions], in Martin Häusling (ed.), TTIP: No We Can’t, Wiesbaden, 2013, p. 17.

[2] US Chamber of Commerce/BusinessEurope 2012: Regulatory Cooperation in the EU-US Economic Agreement, October 2012, http://corporateeurope.org/sites/default/files/businesseurope-uschamber-paper.pdf.

 

Why would the agreement be de facto irreversible?

As a rule, international agreements are the result of frequently tedious negotiations over many years. Normally the negotiating parties involved are hardly prepared to put this at risk. If nothing to the contrary was agreed, modifications may be made only with the agreement of all parties to it. On top of this, investment agreements often result in long-term obligations. Many bilateral investment agreements may be terminated after five years notice at the earliest.

However, for investments made up to the timepoint of the termination, the agreement lasts for another 15 years. Therefore in effect the provisions are valid for at least twenty years – a period during which a new parliament is elected four or five times, during which political configurations and therefore directions can change.

Who decides about the free trade agreements?

This has not yet been definitely decided. The German government assumes that TTIP and CETA are mixed agreements. A mixed agreement arises when parts of the agreement also touch competencies of the member states. All EU member states, in addition to the EU Commission, would have to ratify a mixed agreement. And from the unofficially published negotiating mandate of the EU, it emerges that negotiations are intended to take place on portfolio investments and legal protection of ownership, which fall under the competencies of the member states. [1] A purely EU agreement would require the approval solely of the Commission, the EU Parliament and the Council of Ministers. This is the variant preferred by the EU Commission, because in this way the Commission could circumvent the national parliaments.

[1] See Sven Leif Erik Johannsen, Die Kompetenz der Europäischen Union für ausländische Direktinvestitionen nach dem Vertrag von Lissabon [The authority of the EU for foreign direct investments according to the Lisbon Treaty], August 2009, page 15.

What is the status of the trade agreement between the EU and Canada (CETA)?

On 18 October 2013, EU Commission president, José Manuel Barroso, and the Canadian prime minister, Stephen Harper, announced consensus on an economic and trade agreement between Canada and the EU (CETA). They had negotiated for four years, and then months passed with questions of detail and the legal scrutiny. Since 5 August there has been a text for the CETA agreement; this is still under lock and key, but has been leaked to the public by the German state broadcaster ARD. The agreement must now be translated into 23 languages and subjected to legal scrutiny (so called "legal scrubbing") before the ratification process can start (at the earliest this would be in Autumn 2015).

As with TTIP, large parts of CETA, which counts as a type of draft for TTIP, have unofficially become public knowledge. In CETA, critics see a resuscitation of the ACTA agreement, which broke down in 2012 after international protests.[1] At that time, the EU Parliament voted against it with a large majority. Additionally, like TTIP, it goes well beyond normal trade agreements because it also intervenes in regulations relating to public procurement, and affects environmental and consumer protection standards. As with TTIP, it is not yet definitely clear whether this is a pure EU agreement or a mixed agreement.

CETA is about four years ahead of TTIP, and contains similarly problematic regulations, from ISDS up to the mutual recognition of standards or regulatory cooperation. This is why the European Citizens’ Initiative (ECI) contains the demand that CETA is not concluded; even if TTIP fails because of the protests, many aspects which are to be criticised in TTIP could come in through the back door with CETA. For example, it is sufficient for US companies to own a subsidiary or an affiliate with substantial business activities in Canada in order to be able to submit an Investor-State Dispute against an EU member country.

[1] http://www.spiegel.de/netzwelt/netzpolitik/abkommen-ceta-gleicht-acta-wortwoertlich-a-843826.html

 

What do CETA and TTIP mean for public services and public procurement?

Public services are to be permanently defined “at the highest level of liberalisation”. This would mean that once privatisations were carried out, they would be very hard to reverse, even if the majority of the population wanted it. CETA would also open up to Canadian companies all state contracts and services which are open in the EU for private companies and which must be put out to tender right across Europe. Conversely, Canadian local authorities would also have to assign their contracts to European companies if these were cheaper.

This would mean that public contracts would therefore be even more subject to the logic of competition and the market. Encouragement of the local economy or of socio-ecological procurement would be made more difficult, and partially forbidden.