U.s.-eu Trade Barriers and the Transatlantic Trade and Investment Partnership Agreement

• Publication year: 2017

U.S.-EU Trade Barriers and the Transatlantic Trade and Investment Partnership Agreement

Lydia Ferrerese

U.S.-EU TRADE BARRIERS AND THE TRANSATLANTIC TRADE AND INVESTMENT PARTNERSHIP AGREEMENT

Lydia Ferrarese^*

Introduction

In recent months, we have repeatedly heard divergent opinions on whether U.S. trade agreements should be negotiated, renegotiated, or scrapped altogether. The U.S.-EU trade of goods and services totals about $700 billion annually, the largest amount of trade between any two partners anywhere in the world.¹ Despite the magnitude of the trade and economic relationship between the U.S. and the EU, many observers contend that the relationship has not reached its full potential.² Recently, concerns about chronically low economic growth and increased competition from emerging markets have intensified the need for increased economic cooperation across the Atlantic. Low growth and increased competition also prompted a protectionist reaction to increasingly free trade as evidenced by the United Kingdom's vote to leave the European Union and by the election of Donald Trump as President of the United States. Today we may either seize the opportunity to create a long-term globalized economy shaped by U.S. and European values or erect protectionist barriers to maintain certain jobs in the short term.

The stated purpose of the Transatlantic Trade and Investment Partnership (TTIP) Agreement is to remove barriers to U.S.-EU trade across a wide range of industries.³

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Since tariffs between the U.S. and the EU are already low, around 4% on average,⁴ much of TTIP's impact will stem from its emphasis on eliminating non-tariff trade barriers. These non-tariff trade barriers primarily include: harmonizing regulations pertaining to product safety and functionality, mutual recognition of professional certifications, and improved processes for investor-state dispute resolution.

The purpose of this Article is to provide an update on the status of negotiations since the U.S. presidential election, provide an overview of key TTIP provisions, and ultimately to impress upon the incoming U.S. administration the importance of maintaining a strong transatlantic alliance of which TTIP could be the centerpiece.

I. Status of Negotiations

The U.S. and the EU began TTIP negotiations in July 2013 and have held 15 rounds of negotiations so far. The fifteenth round concluded in New York on October 7, 2016.⁵

As of this writing, negotiations have been essentially put on hold until the new U.S. administration is fully in place.⁶ Given the campaign rhetoric of the incoming administration, many commentators seriously doubt that TTIP negotiations will be successfully concluded.⁷ Even before the election, the goal of successfully concluding TTIP negotiations seemed increasingly out of reach.⁸ Why? The most widely-held explanation is that "governments on both sides of the Atlantic are under pressure from populist waves of discontent."⁹ But this is not the entire story. A significant factor complicating negotiations is that they are occurring with 28 EU member states on one side, each with their own separate national interests, and the 50 U.S. states on the other, with

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different sets of laws and regulations in each. This political reality was on full display in the recent EU vote to approve the Comprehensive Economic and Trade Agreement (CETA), a trade deal like TTIP but between the EU and Canada. To be fully-implemented, CETA must be ratified by 38 regional and national EU parliaments.¹⁰ On October 14, 2016, the parliament for the Belgian region of Wallonia voted to block CETA, effectively derailing the entire agreement. Witnessing this debacle play out, observers have noted that with so many potential vetoes held by regional governments, it is difficult to see how TTIP, a much bigger deal with the United States, could possibly be passed.¹¹

Despite these difficulties, successfully concluding a substantive TTIP agreement would benefit both the U.S. and the EU resulting in more consumer choice and increased competitiveness for both large and small businesses. Along with the economic benefits of increased cooperation, a broad and substantive TTIP could also strategically complement the increasingly tenuous military alliance among NATO member states. To better understand how TTIP can deliver on its promise, we next analyze several key provisions that are still being negotiated.

II. Key Provisions

A. Investor-State Dispute Settlement

One of the most debated provisions of the TTIP is the investor-state dispute settlement (ISDS) provision.¹² An ISDS provision would allow European businesses investing in the U.S. (and vice versa) to bring claims against the U.S. government through arbitral tribunals alleging that investment protection obligations have been breached. For example, international investment agreements typically provide that a government can only expropriate (i.e., nationalize) an investment if it pays sufficient compensation to the investor. If a country expropriates such an investment without providing sufficient compensation, the investor could use ISDS to bring a claim directly against

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that country, claiming a breach of investment protection obligations and seeking damages.¹³

Supporters of ISDS use examples like...