Transatlantic Trade and Investment Partnership: are Welsh public services safe on the “altar of free trade”?

Darllenwch yr erthygl yma yn Gymraeg | View this post in Welsh

The Transatlantic Trade and Investment Partnership, or “TTIP”, is a proposed trade agreement between the European Union and the USA. If agreed, it will become the biggest free trade pact in the world. Some commentators are fearful of the proposals, which they think could lead to privatisation by stealth of valued public services, and give corporations an unprecedented level of power over elected governments. They are also suspicious of the fact that much of the discussion has taken place behind closed doors – something that EU officials say is necessary to protect the EU’s bargaining power. Are these fears justified?


Image from Flickr by Images Money. Licensed under the Creative Commons.

The main proposals: regulatory convergence

The European Commission is leading on the negotiations with the USA on the behalf of the EU Member States. The Commission’s aim is to use TTIP to create jobs and growth on both sides of the Atlantic, by removing trade barriers. The proposals have three main elements:

  • Market access: removing customs duties on goods and restriction on services, gaining better access to public markets, and making it easier to invest.
  • Improved regulatory coherence and cooperation.
  • Improved cooperation when it comes to setting international standards.
  • The Commission’s negotiating mandate (made available following campaigners’ calls for more transparency in the TTIP discussions) is available here.

Commission estimates state that TTIP could grow the EU economy by up to €119 billion per year. The UK Government has estimated that gains to the UK could be between £4 billion and £10 billion annually.

Central to the proposals is the plan to remove regulatory barriers that prevent companies from easily doing business either side of the Atlantic. The Commission claims that significant savings for businesses can be accrued by achieving convergence between different regulatory regimes that have at heart many of the same aims.

Concerns have been raised that this will result in lowering regulatory standards, for example, in the area of food safety. The EU has historically regulated more strictly than the US in areas such as GM crops and hormone-treated meat, and some stakeholders are worried that TTIP could result in a lowering of EU standards in this area, and subsequent competitive pressures on EU producers.

EU Commission President Juncker, however, has been keen to assuage fears that this could lead to a regulatory “race to the bottom”, stating that he will not “sacrifice Europe’s safety, health, social and data protection standards on the altar of free trade.”

Opportunities for SMEs

The Commission has argued that SMEs stand to gain most from regulatory alignment between the EU and the USA, as they will be able to access new markets without recourse to the legal advice previously needed to negotiate different regulatory regimes. These proposals have been welcomed by the Federation of Small Businesses, who called them “a land of opportunity for small businesses”.

The Commission also aims to use TTIP proposals to open up public procurement between the two markets. Business leaders see significant opportunities for EU businesses in opening up procurement markets, as they believe current law and practice in the USA (including “Buy America(n)” clauses) impedes access for European companies.

The USA is by far the biggest market for Welsh exports, and one that has grown by 1.6 per cent over the last year, so the TTIP debate should certainly be of interest to Welsh businesses.

The main concerns: settling disputes between businesses and states

However, these proposals have drawn considerable criticism from groups including the Greens/European Free Alliance Group in the European Parliament (including Welsh MEP Jill Evans), the union Unite and Friends of the Earth.

Central among their concerns is a controversial method for investors to use to resolve disputes with national governments, outside of the domestic courts. The “Investor-to-State Dispute Settlement (ISDS)” mechanism is intended to provide protection for investors against unfair treatment or discrimination from host governments. Where they feel their interests have been unfairly damaged by national or local laws investors would be able to seek redress through an arbitration panel, whose decision could not usually be challenged in the courts.

Although an ISDS tribunal would not be able to revoke legislation, some fear that the ISDS mechanism would force the hand of governments who are afraid to legislate and open themselves up to challenge under ISDS. Alternatively, governments could find themselves open to million-pound compensation bills for what many would consider legitimately-made policy decisions. For example, tobacco-giant Philip Morris is currently using a similar mechanism to challenge the Australian Government’s decision to introduce plain packaging for cigarette packets, though the verdict in this case is yet to be returned.

Campaigners have claimed that TTIP could act as a “ratchet” mechanism leading to the irreversible encroachment of the free market into public service delivery. They fear that governments would be unable to reverse privatisation decisions of previous governments (for example, by re-nationalising the railways) due to the threat of ISDS action from the private companies currently delivering these services.

The UK Government has tried to allay fears (in its response to a House of Lords inquiry into TTIP) by pointing out that the UK already has 90 bilateral trade agreements in place, the majority of which include an ISDS mechanism, and to date has never lost a case brought under these treaties. It has stated that “TTIP will not change the way the NHS or other public services are run”.

The European Commission has written to MPs following concerns they raised about TTIP and the NHS, stating “if a future UK government, or a public body to which power has been devolved, were to reverse decisions taken under a previous government, for example by discontinuing services provided by a foreign operator, it would be entirely at liberty to do so”. Both the Commission and the UK Government argue that the sovereignty of Member State governments to deliver public services how they see fit is not on the table.

The French and German governments, however, have both expressed strong opposition to ISDS, with the French government saying it will not sign the TTIP agreement if ISDS is included.

Such is the strength of public feeling on the possible risks posed by ISDS that the European Commission launched a consultation looking specifically at investment protection mechanisms in TTIP in summer 2014. The Commission is yet to respond fully to the consultation, which received almost 150,000 responses (over 50,000 from the UK).

Negotiating carve-outs

One way to protect the NHS – or any other area people felt was under threat from TTIP – would be to obtain an exemption, either specifically for the UK or more generally, for this area from the TTIP proposals. For example, France has negotiated a “carve out” that means that the audio-visual sector will be excluded from negotiations. The UK Government has stated that it does not intend to pursue such an exemption in relation to health services, and does not see TTIP as a threat to UK sovereignty in this area.

The devil is in the detail

One point that stakeholders agree upon is that the exact wording of any eventual agreement is critical to the effects it achieves. For example, ISDS clauses, if included in the final draft, will need to be watertight to avoid their exploitation by private companies keen to maximise their profits.

In part, this is hard to assess, as much of the negotiation is taking place behind closed doors. Negotiations are scheduled to continue, possibly until 2016, when the final deal will need to be agreed by the European Council and European Parliament, and subsequently ratified by Member State national parliaments. Whether TTIP paves the way to a “land of opportunity” for the Welsh economy, or opens the floodgates for corporate power to challenge democratic will, the devil will be in the detail.

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Article by Robin Wilkinson, National Assembly for Wales Research Service.