UK-US Trade Relations Contents

7Other Lessons from TTIP


109.In this chapter we consider the recent TTIP negotiations and the potential lessons for the UK. TTIP negotiations commenced in July 2013, and sought to agree an ambitious, comprehensive EU-US FTA with extensive alignment of EU and US regulatory practices. The 15th and most recent negotiating round was held in October 2016, with negotiations remaining in abeyance since then. According to a US-EU Joint Report published in January 2017, while negotiations made progress on several key issues (e.g. removing duties on 97% of tariff lines; importance of transparency), the parties still had significant work to do on other issues (e.g. unlocking market access in key service sectors; reconciling differences on SPS measures).304

Transparency, Accountability and Scrutiny of Negotiations

110.The TTIP negotiations witnessed unprecedented public interest in trade agreements. Dr García told us that one of the major concerns for civil society was “the secrecy of negotiations.”305 Shortly after TTIP negotiations commenced, over 80 EU and US organisations wrote a letter opposing “the use of behind-closed-door trade negotiations to change and lower public interest measures for the sake of commercial interest”.306 NGOs, in particular, called for transparency through the provision of negotiating rather than just explanatory documents (e.g. negotiating mandate, EU textual proposals, and consolidated versions of the draft text featuring the US’s negotiating position).307 In response to the unprecedented public interest in talks, the Commission undertook to publish more EU negotiating texts, provide access to TTIP texts to all Members of the European Parliament and extend the use of a ‘reading room’ to MEPs, and classify less TTIP negotiating documents as ‘EU restricted’.308 A 2015 report of the European Ombudsman welcomed this initiative, but urged further publication of documents and meeting agendas, and public consultation.309

111.The Government is yet to clarify its future approach to transparency, accountability and scrutiny in trade negotiations. Currently, treaties, including trade treaties, are subject to provisions of the Constitutional Reform and Governance Act 2010, which provides that they should be laid before Parliament and only debated or voted upon if an objection is made and parliamentary time can be found for such a debate or vote.310 In October 2016, Dr Fox told the European Scrutiny Committee in relation to CETA that he “very much believe[s] in the democratic process and the importance of transparency”.311 He further added that he “would like to see the precedent of the TTIP reading room and the transparency that that brings adopted” for future trade agreements.312 In the Trade White Paper, the Department committed to “develop[ing] a trade agenda that is inclusive and transparent”.313 It undertook to “continue to respect the role of Parliament”, “seek the input of the developed administrations”, and “seek the input of all stakeholders”.314 In its response to the submissions on the Trade White Paper, the Department acknowledged the concerns raised regarding transparency in trade negotiations. However, it committed only to “work[ing] to ensure that the process of negotiating and implementing new trade deals is transparent, efficient and effective”.315 It further noted it would table legislation to establish a framework which allows trade agreements to “move quickly from agreement to ratification and implementation, whilst supporting the due processes for full Parliamentary scrutiny.”316

112.In evidence on the Trade Bill, witnesses told us that they were concerned about the lack of scrutiny mechanisms in the Bill. Nick Dearden, Global Justice Now, summarised the EU’s current transparency measures as follows:

… the Commission has to hold a public consultation and scoping exercise, the Council has to set a mandate and the Parliament has the right to make its views known on that mandate. Various committees will discuss as the negotiations are going on and offer their views. The European Parliament must give consent and Council must give consent. For some agreements, all 40 recognised Parliaments must give consent. There must be formal civil society dialogue. There are less restricted texts than ever in the European Union.317

Industry representatives argued that they should be able to input into trade negotiations. Mike Hawes called for a “very structured [consultation] arrangement”.318 Giles Derrington also said that the US’s model of business engagement in trade agreements was “very good” and that “the sooner that there is a structure in place for all trade agreements, that we understand how to engage, the sooner and easier it is for trade associations like ours to help our members structure to best facilitate that.”319

113.In November 2017, at the second meeting of the UK-US Trade and Investment Working Group, the US and UK agreed to keep confidential certain information exchanged during the Working Group for up to four years after the process concludes. However, this obligation does not apply to each party’s own information.320 This position somewhat mirrors the EU’s current approach to trade negotiations—namely, it will not release other parties’ documentation but it does publish its own proposals for the negotiation.321 However, some NGOs have criticised the UK’s approach, stating that it “will make it much more difficult to find out what is being discussed in early-stage US-UK trade talks”.322

114.It would be a retrograde step if the trade negotiations undertaken by the UK independently were less transparent than those undertaken at EU level—although we are not implying they will be. Throughout this inquiry, issues have arisen regarding the transparency and scrutiny of trade negotiations, and we will return to these issues shortly.

Investor-State Dispute Settlement

115.Before negotiations were suspended, TTIP was expected to contain provisions on investor protection.323 Such protections are often conferred by way of investment treaties or can be embedded within trade agreements.324 These treaties and agreements “typically set out between those states that are party to them the protections that each will accord to investors from the other state.”325 They also provide a mechanism, investor-state dispute settlement (ISDS), which “allows an investor from one country to bring a case directly against the country in which they have invested before an arbitration tribunal.” In order to bring a case, an investor must claim that the party has breached rules set out in the agreement.326 These claims are arbitrated “under international law, rather than through the domestic legal system of the state that has hosted the investment”.327

116.Investor protections, and particularly ISDS, was said to be one of the ‘lightning rods’ for the opposition to TTIP.328 Samuel Lowe told us that the inclusion of ISDS “effectively killed TTIP or at least ensured that it was put on ice forever”.329 Several concerns were raised about the inclusion of ISDS in a UK-US FTA in evidence. Dr García said that the “mere existence of ISDS may have a ‘chilling effect’ on Government’s proposals for regulation in the public interest” and can also “threaten public services”.330 Global Justice Now said that the “system can only be used by companies suing states, not vice versa”, highlighting the system’s non-reciprocal nature.331 Dr Holmes also noted the potential for a tribunal to adopt an interpretation of the agreement’s scope not intended by the parties. He told us:

… when it gets to a tribunal, the tribunal have a mind of their own and can say, ‘Actually, we think that this should not be treated as a public service; it should be treated as something else,’ and then you’re lost.332

He recommended keeping ISDS out of a UK-US FTA, a conclusion echoed by StopAIDS.333

117.Some witnesses doubted whether it was necessary to include an ISDS mechanism in a UK-US FTA. Howard Chase, Dow Chemicals, suggested to us that ISDS may have been included in TTIP to “set the standards for dispute resolution going forward”, but doubted it was required in the context of a UK-US FTA.334 Witnesses also noted the sophisticated nature of the UK and US legal systems in questioning the need for ISDS. The CBI told us that the US legal system is widely recognised as “a fair and predictable means of seeking redress in lieu of a formal bilateral resolution mechanism.”335 Mr Singham also noted that the US’s concerns regarding European domestic legal systems in TTIP did not apply to the UK. He concluded that the UK and US should “be able to achieve a high standard of protection of investment and probably do not need ISDS in that context”.336

118.However, others argued that an ISDS mechanism was necessary, and should be included in any trade agreement. BritishAmerican Business said that an agreement “should provide for an investor-state dispute mechanism”, but seek to develop “a state-of-the-art dispute mechanism for investments which is efficient and transparent”.337 Chevron also told us that an FTA “should include ISDS for investment, as well as trade in goods and services” and that “it is critical that the investment rules be based on the 2012 U.S. Model BIT”.338 Chevron was also sceptical of recent EU initiatives, such as CETA, which establishes a reformed system of investor protection (the ‘Investment Court System’).

119.ISDS is a contentious issue in trade negotiations. Recent EU and mega-regional FTAs have adopted a variety of approaches to the issue, from the Investment Court System proposed in CETA to a more limited ISDS mechanism proposed in TPP. Before entering into negotiations with the US, the Government should clarify its policy on ISDS. In particular, it should identify the purpose of an ISDS mechanism in circumstances where both the US and UK have sophisticated, independent domestic judicial systems.

Public Services and Intellectual Property Rights

120.Concerns regarding states’ right to regulate and public services, particularly the NHS, featured heavily in the TTIP debate. Edward Barker told the previous Committee that there were two lines of argument regarding the potential detrimental impacts of TTIP on the NHS: “[o]ne of them is that [the NHS] will be captured as part of a liberalisation of services … [t]he other concern people raised was around the operation of [ISDS]”.339 With regards to ISDS, the Trades Union Congress told the Lords EU Committee that including ISDS “might restrict the ability of a future Government to redraw the boundary over what is provided publicly and what is provided privately in [the NHS]”.340 As regards privatisation, StopAIDS told us that “US companies are particularly keen to gain access to the public health systems of Europe” and that the US government intended to use TTIP to “pry open the service markets of Europe for the benefit of US capital”.341 Global Justice Now likewise told us that several mechanisms proposed in TTIP could have adversely affected public services,342 including the ‘negative list approach’343 and ‘standstill and ratchet clauses’.344

121.Witnesses also told us about the potential impacts of stringent intellectual property rights (IPR) protections on public services. On the one hand, some argued that stronger IPR protections can “encourage knowledge-based industries”.345 BritishAmerican Business told us that “UK-US trade discussions present the opportunity to enshrine high standards for [IPR] protection which could incentivise the development of pharmaceutical innovation.”346 However, Dr Holmes said that it is “not certain that incorporating tougher intellectual property rules into a UK-US agreement would stimulate innovation”.347

122.We were also told that enhanced IPR protections can have negative impacts on public health services. One form of IPR protection we heard about is data exclusivity. We were told that data exclusivity can be a “huge barrier to access to generic medicines” because it effectively prevents medicines’ regulatory authorities from registering generic medicines based on existing clinical data.348 StopAIDS told us that this “acts as a powerful form of monopoly protection that enables originator drug companies to prevent generic competition, whether there is a patent on the medicine or not.”349

123.Witnesses suggested that there were several reasons to think the US may seek enhanced IPR protections in a UK-US FTA. First, the US has historically sought such stringent patenting and data protection (for pharmaceuticals trials data) provisions in its FTAs.350 Second, Dr García told us that the US is seeking to entrench the competitive advantages of some if its sectors in the current NAFTA renegotiations, including proposing measures that “go well beyond the commitments agreed in the WTO TRIPS agreement … [and] mirror those the US imposed on partner countries during the negotiations of the [TPP]”.351 Third, Saoirse Fitzpatrick of StopAIDS told us that the Trump Administration “has been talking a lot about wanting to reduce [pharmaceutical] prices”.352 She referred us to a leaked paper from the White House regarding medical products and biomedical innovation which was said to indicate that the US “will push for longer monopolies and high drug prices in other countries as a way of lowering their domestic drug procurement bill.”353 Ms Fitzpatrick also highlighted further concerns arising from pharmaceutical annexes in other US FTAs, including the US’s approach to competitive disciplines for the pricing of pharmaceuticals and reimbursement policies for pharmaceuticals.354

124.The Government appears to have ruled out liberalisation of the NHS as part of a UK-US agreement. Dr Barker told the previous Committee that “there were a lot of measures within TTIP that prevented the sort of concern that I know people were raising about procurement and the NHS.”355 The Prime Minister further told the House in February 2017 that “the NHS is not for sale and it never will be”, and would not be used as a ‘bargaining chip’ in any US trade agreement.356 However, in February 2018 when asked to give an “absolute guarantee that the NHS will be excluded from the scope of [US trade] negotiations”, the Prime Minister said only that the Government “does not know what the American Administration are going to say about their requirements for that [FTA]. We will go into those negotiations to get the best possible deal for the United Kingdom.”357

125.There should be no ambiguity in the Government’s position in relation to the protection of UK public services in trade agreements, not least because even a perception that they could be under threat could lead to the widespread opposition that was seen to TTIP. The Government should ensure that the universal access to healthcare provided by the NHS is not compromised by a UK-US FTA. The Government should also ensure that the NHS’s pharmaceutical purchasing model is not adversely affected by any intellectual property rights protections and regulatory provisions covering pharmaceuticals.

304 USTR and European Commission, U.S.-EU Joint Report on TTIP Progress to Date, 17 January 2017

305 Dr Maria García (TER0011)

306 Niels Gheyle and Ferdi De Ville, “How Much Is Enough? Explaining the Continuous Transparency Conflict in TTIP”, Politics and Governance, vol 5(3) (2017), pp 16–28

307 Ibid, p 20

308Opening the windows: Commission commits to enhanced transparency”, European Commission press release, 25 November 2014

310 Constitutional Reform and

311 Oral evidence taken before the European Scrutiny Committee on 26 October 2016, HC (2015–17) 792, Q 1 [Dr Liam Fox]

312 Oral evidence taken before the European Scrutiny Committee on 26 October 2016, HC (2015–17) 792, Q 33 [Dr Liam Fox]

313 Department for International Trade, Preparing for our future UK trade policy, Cm 9470, October 2017, p 21

314 Department for International Trade, Preparing for our future UK trade policy, Cm 9470, October 2017, p 22

315 Department for International Trade, Trade White Paper: Preparing for our future UK trade policy: Government Response, January 2018, p 9

316 Department for International Trade, Trade White Paper: Preparing for our future UK trade policy: Government Response, January 2018, p 9

317 Oral evidence taken before the International Trade Committee on 29 November 2017, HC (2017–19) 603i, Q 58 [Nick Dearden]

318 Q 222 [Mike Hawes]

319 Q 223 [Giles Derrington]

321 Ferdi De Ville and Gabriel Siles-Brügge, TTIP: The Truth about the Transatlantic Trade and Investment Partnership (Polity, 2016), p 122

323 House of Lords European Union Committee, Fourteenth Report of Session 2013–14, The Transatlantic Trade and Investment, HL Paper 179, para 156

324 For example, Chapter 11 of the North American Free Trade Agreement.

325 House of Lords European Union Committee, Fourteenth Report of Session 2013–14, The Transatlantic Trade and Investment, HL Paper 179, para 156

326 European Commission, Factsheet on Investor-State Dispute Settlement, 3 October 2013

327 House of Lords European Union Committee, Fourteenth Report of Session 2013–14, The Transatlantic Trade and Investment, HL Paper 179, para 156

328 Ferdi De Ville and Gabriel Siles-Brügge, TTIP: The Truth about the Transatlantic Trade and Investment Partnership (Polity, 2016), p 114

329 Q 69 [Samuel Lowe]

330 Dr Maria García (TER0011)

331 Global Justice Now (TER0016)

332 Q 187. For further discussion of the concerns regarding ISDS in TTIP, see Ferdi De Ville and Gabriel Siles-Brügge, TTIP: The Truth about the Transatlantic Trade and Investment Partnership (Polity, 2016), pp 114–15.

333 Q 201 [Saoirse Fitzpatrick] (“There should be no inclusion of ISDS in a trade deal.”); StopAIDS (TER0022). See also Dr Thomas Henry Adams (TER0274); War on Want (TER0275); St Andrews TTIP Action Group (TER0268); Global Justice Glasgow (TER0262); Unite the Union (TER0261); Trades Union Congress (TER0253).

334 Qq 201–3 [Howard Chase]. Lord Goldsmith made similar comments to the Lords EU Committee, noting that omitting ISDS from TTIP “would likely affect the ability of the UK and EU to negotiate ISDS provisions in future trade deals”. See House of Lords European Union Committee, Fourteenth Report of Session 2013–14, The Transatlantic Trade and Investment, HL Paper 179, para 159.

335 Confederation of British Industry (TER0028). See also Keep our NHS Public (TER0005).

336 Q 69 [Shanker Singham]

337 BritishAmerican Business (TER0032)

338 Chevron Corp (TER0008)

339 Oral evidence taken before the International Trade Committee on 15 March 2017, HC (2015–17) 978-i, Q 41 [Edward Barker]

340 Oral evidence taken before the House of Lords European Union Committee on 27 February 2014, HL (2013–14) 179, Q 227 [Owen Tudor]

341 StopAIDS (TER 0022)

342 Global Justice Now (TER0016). See also Trade Justice Dundee (TER0001).

343 This is a method for listing services liberalisation commitments in market access schedules. Under this approach, public sectors, such as the NHS, are not protected unless they are ‘specifically and explicitly excluded’.

344 These clauses preclude liberalisation commitments being ‘wound back’. Standstill clauses require that the current levels market openness be maintained, while ratchet clauses require that any increase in the level of market openness be maintained once adopted (i.e. a new standstill position).

345 Dr Peter Holmes, “Trade and Consumers After Brexit”, UK Trade Policy Observatory Briefing Paper No. 12, November 2017, p 8

346 BritishAmerican Business (TER 0032)

347 Q 183

348 Q 200 [Saoirse Fitzpatrick]

349 StopAIDS (TER 0022)

350 See Ruth Lopert and Deborah Gleeson, “The High Price of ‘Free’ Trade: U.S. Trade Agreements and Access to Medicines”, The Journal of Law, Medicine and Ethics, vol 41(1) (2013), p 201. See also Deborah Gleeson, Hazel Moir and Ruth Lopert, “Costs to Australian taxpayers of pharmaceutical monopolies and proposals to extend them in the Trans-Pacific Partnership Agreement”, The Medical Journal of Australia, vol 202(6) (2015), pp 306–8.

351 Dr Maria García (TER0011)

352 Q 201 [Saoirse Fitzpatrick]

353 Q 201 [Saoirse Fitzpatrick]; StopAIDS (TER 0022)

354 Qq 200, 201 [Saoirse Fitzpatrick]

355 Oral evidence taken before the International Trade Committee on 15 March 2017, HC (2015–17) 978-i, Q 32 [Edward Barker]

356 HC Deb, 1 February 2017, col 1017

357 HC Deb, 7 February 2018, col 1492

Published: 1 May 2018