Chapter 2: THE PURPOSE OF THE TTIP
Jobs and Growth
23. Both the European Commission
and the UK Government have identified "jobs and growth"
as the overriding purpose of concluding a TTIP agreement with
the US.[26] Ambassador
Sapiro, Deputy US Trade Representative, put it to us that, in
view of the economic challenges the US and EU are still facing,
there was a common view that they could not afford to leave any
jobs "on the table".[27]
GROWTH
24. In their written evidence, the
UK Government pointed to the CEPR studies commissioned by the
Department for Business, Innovation and Skills (BIS) and the European
Commission to suggest that an ambitious, comprehensive TTIP deal
could over the long-term be worth up to £10bn (or 0.35 per
cent of GDP) annually to the UK, up to £100bn (or 0.5 per
cent of GDP) annually to the EU, and up to £80bn (or 0.4
per cent of GDP) annually to the US.[28]
The GDP gains would be relative to projected GDP levels without
TTIP in place. The European Commission explained that "this
would be a permanent increase in the amount of wealth that the
European and American economies can produce every year."
The gains would be expected to build up gradually, with gains
increasing every year from the moment the agreement enters into
force until it is fully implemented, and reaching their full level
by 2027. [29]
As indicated above, the vast majority of those gains would be
expected to result from reductions in non-tariff barriers to trade,
rather than from reductions in tariffs. This is particularly true
for the UK, where up to 90 per cent of gains would be expected
to come from such measures.[30]
JOBS
25. The CEPR study produced for
the European Commission does not include figures on the TTIP's
overall impact on job creation. It does, however, examine the
potential impact on wages and on the reallocation of jobs among
different sectors of the economy as different sectors contract
and expand as a result of the TTIP. Wages for both skilled and
less skilled workers are projected to rise by around 0.5 per cent.
Meanwhile, 0.7 per cent of the labour force is expected to move
between sectors as a result of the TTIP over 10 years. The European
Commission has pointed out by way of comparison that the average
annual change in EU manufacturing employment between 2001 and
2007 was 2.1 per cent, and concluded that any labour movement
between sectors prompted by the TTIP ought therefore to be "easily
absorbed by these normal processes." [31]
SECTORS
26. In terms of sector-specific
impacts, analysis by BIS suggests that in the UK the sectors where
output would be expected to increase as the result of a TTIP agreement
are vehicles (4.1 per cent), financial services (1.1 per cent),
insurance services (0.7 per cent), processed foods (0.5 per cent)
and chemicals and pharmaceuticals (0.5 per cent). Sectors expected
to see "modest" declines would include transport equipment
(-0.4 per cent) and miscellaneous manufacturing sectors (e.g.
textiles, clothing, footwear, materials and furniture), with only
the metals and metal products sector projected to contract by
more than 1 per cent (-1.5 per cent).[32]
Across the EU, by contrast, the CEPR study produced for the European
Commission suggests that the metal products sector would be expected
to benefit from a TTIP agreement, as would the processed foods
sector, chemicals, and transport equipment. As in the UK, the
sector with the most to gain would be the motor vehicles sector.
CONSUMERS
27. The European Commission has
suggested that consumers should expect to benefit from cheaper
products as a result of the TTIP, and pointed to CEPR analysis
indicating that in the best-case scenario, the average European
household of four would see its disposable income increase by
545 per year by 2027 as a result of the combined effect
of wage increases and price reductions.[33]
WITNESSES' VIEWS
28. The AFL-CIO expressed sympathy
with the views of Dean Baker, of the Center for Economic and Policy
Research, who had noted that the projected GDP increases in the
study produced for the European Commission would not materialise
in full until 2027, and that they reflected a best-case scenario.
In a less ambitious, and "presumably more realistic"
scenario, the GDP gain for the US by 2027 would be "roughly
equal to a normal month's growth" and thus in Mr Baker's
view, "too small to notice".[34]
29. Professor Baldwin advised
us to treat the figures with caution for a different reason, pointing
out that figures were projected against a "status quo"
world, and that experiencefor example with predictions
on the effect of the North American Free Trade Agreement (NAFTA)had
shown that the status quo world "was nothing like what actually
happened, because a thousand things happened". It was consequently
"very difficult" to sort out what NAFTA did, and it
might in future be similarly difficult to disentangle the effects
of a TTIP agreement from other factors. He nonetheless judged
that the numbers "will be realistic, but over a medium run."
[35]
30. With regard to income gains
for consumers, Professor Baldwin told us that it was "basically
impossible to say how much this will add to people's income"
and suggested that we "take with a large grain of salt any
particular numbers on the overall numbers". We could, however,
have confidence in the sectoral predictions: "if you look
at the CEPR studies saying that the biggest sectors that will
be [affected] are motor vehicles, chemicals and processed food,
you can take that to the bank."
31. Professor Baldwin noted
that "rich people consume a lower fraction of their income,
so anything that lowers prices of consumption tends to favour
lower income people." He also pointed out that, on both sides
of the Atlantic, the most protected parts of the economy were
food, so that if there were to be progress on liberalising the
food trade, it would be more favourable for people with low incomes,
who spend more of their income on food. He warned, however, that
this would be difficult to achieve, as the big protectionist barriers
were usually associated with extremely strong special interests.[36]
The US Department of Agriculture also sounded a note of caution,
suggesting that, while expanded choice and increased competition
did tend to lower prices, in the US the effect would more likely
be felt in industrial goods, whereas in agriculture, the EU's
competitive advantage tended to be in high-end products rather
than in basic food basket commodities.[37]
On this side of the Atlantic, the National Farmers' Union was
more optimistic, suggesting that it would be "axiomatic"
that if tariffs were reduced, one would expect consumers to benefit,
and that if the TTIP talks were to succeed in liberalising trade
and making food more affordable, consumers should expect to benefit
both in price and expanded choice.[38]
32. In regard to jobs and wages,
the TUC told us that while they would "welcome the creation
of decent quality jobs and higher wages", they saw a need
for "an independent analysis of the labour market impact
of the TTIP so negotiations can be guided to maximise the deal's
potential to create higher skilled jobs, and industries likely
to be negatively impacted by the TTIP are supported to retrain
their workforce."[39]
Other unions such as the AFL-CIO (American Federation of Labor
and Congress of Industrial Organisations) and the UK's GMB expressed
concern that jobs in those EU member states that have higher wages
and more employment rights might be lost, rather than created,
if reductions in tariff and non-tariff barriers as part of the
TTIP led to a reallocation of investment. We return to this issue
in paragraph 58 below.
Conclusions and Recommendations
33. By analogy with the Single
Market programme to which a number of our witnesses have likened
the initiative, we judge that a Transatlantic Trade and Investment
Partnership has the potential to deliver substantial economic
benefits to both parties.
34. We recognise that the potential
economic benefitsand costsof a trade and investment
treaty between the United States and the European Union are difficult
to predict with any certainty while negotiations are still underway.
Were a Transatlantic Trade and Investment Partnership (TTIP) to
be concluded, its effects would no doubt be difficult to disentangle
from many other factors that influence growth and employment.
We nonetheless judge that the net effect of the agreement would
be to boost employment and prosperity on both sides of the Atlantic,
and that neither the UK nor the EU should pass up the opportunity
to reap those gains.
35. We recommend that, in making
the case for TTIP, the UK Government and the European Commission
should deploy the headline figures from economic studies commissioned
prior to the start of negotiations with extreme caution, lest
they dent the credibility of an initiative that has merit in its
own right.
36. In our view, GDP figures
beginning with zero and household income gains that would not
materialise in full until 2027 will not win hearts and minds,
even if they are substantive effects. The traditional political
hurdle for trade agreements is that potential benefits are diffuse
while potential costs are concentrated, and TTIP is unlikely to
be an exception. Proponents will therefore need to show that there
are tangible potential gains for identifiable groups. We recommend
that, as negotiations progress and the outline of a possible agreement
emerges, the European Commission and the UK Government should
commission more detailed analyses of the possible practical effect
of tariff reductions for consumers of particular goods and services
in the EU, and on the effects that TTIP may have on investment,
and by extension jobs, in particular sectors and EU member states,
much like the material that has already been prepared for US audiences.[40]
Other purposes
37. Although the European Commission,
the UK Government, and the US Administration have all placed bilateral
economic objectives at the centre of what the Transatlantic Trade
and Investment Partnership is about, our witnesses drew attention
to a range of other objectives that could be pursued through the
TTIP, many of which would have implications for third countries.
GEOPOLITICAL
38. A first point made to us was
that TTIP would inevitably serve a political, as well as an economic,
purpose. Dr Daniel Hamilton, Director of the Center for Transatlantic
Relations at Johns Hopkins University's School for Advanced International
Studies, suggested TTIP could be viewed as a new link and commitment
in the economic sphere to supplement NATO in the military sphere
and thus help to rebalance the transatlantic relationship between
the US and Europe. He warned us that there was a danger that the
EU-US relationship would increasingly be seen in the US as a legacy
relationship that was less relevant to the current world. The
health of the transatlantic relationship, he argued, had for decades
been defined primarily through the military prism, and had failed
to tap the huge potential of the economic connection. TTIP could
therefore be seen as a "second glue" to shore up the
transatlantic relationship, at a time when the old linkNATOwas
"a little wobbly". Calling TTIP an "economic NATO"
would in his view be wrong, in that it could give the impression
that there was an enemy, but it served as convenient shorthand
for conveying the message.[41]
TEMPLATE FOR FUTURE TRADE NEGOTIATIONS
39. A second function for TTIP identified
by almost all our witnesses was its potential to serve as a template
for future bilateral, plurilateral and multilateral trade agreements
by virtue of the fact that any provisions agreed between the US
and EUwhich together account for almost half of world GDP[42]would
inevitably serve as an orientation point for others. The TUC,
for example, anticipated that once the world's two biggest economies
signed up to a deal, the rules it contained were likely to become
the "gold standard". In their view this meant that the
standards set by a TTIP agreement would be much more important
than for their impact on the EU and US alone: standards could
be "locked in" for future agreements, for better or
worse.[43]
40. Other witnesses arrived at the
same conclusion from a different starting point. They noted that,
as tariffs fall, non-tariff barriers to trade tend to be erected
in their place.[44] It
would follow that in negotiating a TTIP agreement with a focus
on non-tariff barriers, the EU and US would be at the cutting
edge of where trade negotiations are expected to head in future.
Lord Mandelson described the focus on behind-the-border barriers
to trade in TTIP as "almost virgin territory in international
trade negotiation" while Commissioner De Gucht identified
norms and standards as "the next big battle in trade
what it is really about in the decade to come".[45]
The Commissioner went on to suggest that if the EU and US could
forge common standards they would play a very important role worldwide.
41. The UK Government took the view
that such progress would have two systemic benefits. First, unblocking
divisions between the EU and US could "provide a boost to
sectoral negotiations across the multilateral system"for
example those conducted under the auspices of UNECE[46]
or the World Intellectual Property Organisation, where divisions
between the EU and US frequently block progress. Second, horizontal
measures adopted as part of TTIP could serve as the basis on which
to improve relevant WTO agreementsfor example on Technical
Barriers to Trade and Sanitary and Phytosanitary Measures.
[47]
42. The UK Government nonetheless
recognised a "danger" that the regulatory lead shown
by the EU and US either on horizontal issues, or in specific sectors,
might conflict with multilateral efforts and establish competing
regulatory approaches. They suggested this risk would "need
to be managed" and identified three ways of doing so: adopting
rules of origin that are as open as possible; adopting regulatory
approaches that are based on existing internationally agreed best
practice; and having an accession process to TTIP that encourages
others to join provided that they can comply with the regulatory
components.[48]
CATALYST OR SUBSTITUTE FOR THE DOHA
ROUND
43. A third potential function for
TTIP that witnesses drew to our attention was its relationship
to the Doha Round of multilateral trade negotiations among members
of the World Trade Organisation (WTO). Our witnesses were divided
on whether TTIP could help to catalyse the Doha Round or might
insteadperhaps in combination with the Trans-Pacific Partnership[49]
(TPP) that is also under negotiationserve as a substitute
for it.
44. Lord Mandelson anticipated that
the EU would place great emphasispossibly more than the
United Stateson making sure that anything achieved in the
TTIP would, over time and by whatever means possible, be multilateralised
through the World Trade Organisation (WTO). He emphasised that
the TTIP should not be "a closed shop for Europe and America
to serve and suit each other but an open architecture that others
can join and emulate".[50]
45. Dr Hamilton suggested that
EU and US leaders had not yet been clear enough on this point.
He drew a contrast with the Trans-Pacific Partnership (TPP), where
leaders had said that although there were 12 countries negotiating,
it would also be open to all members of APEC[51]
and even beyond. The US and EU had not said anything equivalent
in respect of the TTIP, which in Dr Hamilton's view risked
creating the impression that it would be a closed agreement, "about
rich countries pulling up the drawbridge." He proposed that
leaders should affirm that the TTIP was part of open-architecture
trade and would be WTO-compatible, or face losing some of the
public debate.
46. Other witnesses saw the TTIP
as a distraction from the Doha round of trade negotiations among
WTO members. The AFL-CIO expressed concern that "together,
the TTIP and the TPP are substitutes for a Doha round agreement
at the WTO. What developed countries like the US, EU and Japan
cannot achieve multilaterally at the WTO, they may be seeking
to accomplish in smaller groupings where they have more leverage."[52]
47. Lord Mandelson contested the
idea that the TTIP was a distraction from the Doha Round, arguing
that much of what the TTIP would focus on was a very long way
from where most of the other WTO members trade and where they
would wish to negotiate, both with the EU and with the United
States.[53] Professor Baldwin
judged that the Doha Round was in any event "in a sort of
holding pattern."[54]
48. A number of our witnesses suggested
that TTIP could help to catalyse the Doha Round by changing China's
attitude to the WTO negotiations. According to Professor Baldwin,
the US had found it very frustrating that China would not treat
itself like a developed country in the WTO and would not step
up to the plate and make concessions in the Doha Round. In his
view, the US was using the TTIP to "make China demandeur",
in the belief that once China had something to negotiate for in
the WTO it would expand the Doha agenda and take a leadership
role in the WTO.[55]
Lord Mandelson also judged that "the United States, but not
so much the European Union, is pursuing what to my mind is a fairly
clear policy or approach of encirclement of China."[56]
49. Lord Green of Hurstpierpoint,
then UK Minister for Trade and Investment, was more circumspect,
but expressed hope that as progress was made on TPP, TTIP and
in the WTO (through the Bali agreement struck in December 2013),
China would become more and more keen on becoming involved. He
suggested it would be in the UK's "global interest"
to keep this momentum up.[57]
50. The Chinese government advised
us to regard the possibility of exporting elements from a TTIP
agreement into a multilateral setting as no more than an aspiration.
"This is an intention from the US and the EU. This is not
automatically the common understanding from other members [of
the WTO], because we know that the multilateral system serves
all members." They reminded us that there were varying levels
of economic development among WTO members, and warned that, if
the intention on the part of the EU and US was to convince third
parties that their result would be suitable for others, "any
others will see whether this idea is a good or bad one for third
parties."[58]
51. Commissioner De Gucht told us
that he had no intention of imposing norms and standards on China.
He did, however, "want to create a situation where China
cannot impose standards on us."[59]
Dr Hamilton suggested the TTIP was about helping to define
the terms on which China and other developing countries could
be integrated into the world economy. Until now, each side had
been talking to third countries separately in an attempt to shore
up their own standards: EU and US messages to third countries
had been divided at best, and competitive at worst. The approach
the US and EU had taken to tackling the problem of lead in toys
imported from Chinacreating a trilateral consumer safety
processdemonstrated that when the US and EU joined forces
they could exert much more influence. This was in his view the
logic of TTIP.[60]
Unintended Consequences
52. Quite apart from the official
and unofficial reasons for concluding a trade and investment treaty
with the United States, a TTIP agreement might also have unintended
consequences. Our witnesses highlighted in particular its possible
effects on third countries, and especially developing countries;
its potential to send jobs overseas if it were to lead to a redisposition
of investment; and the potential for regulatory co-ordination
between the US and EU to undermine labour, environmental and consumer
protection standards.
EFFECT ON THIRD COUNTRIES
53. A number of witnesses highlighted
the potential for changes in tariffs and tariff preferences to
impact negatively on third countries. The TUC directed us to a
study by the Bertelsmann Stiftung projecting that EU trade with
neighbouring states in North Africa and Eastern Europe would decline
by an average of 5 per cent if there were to be a comprehensive
agreement between the EU and US, because this would devalue existing
preference agreements.[61]
Professor Rollo pointed out that for a lot of developing
countries, particularly low-income developing countries, the tariffs
that might be removed in transatlantic trade by a TTIP agreement
are not trivial for the products in which they are competitive
and which are currently their major exports, such as textiles,
clothing and footwear.[62]
The UK Government told us they had commissioned analysis on the
potential effect of a TTIP agreement on developing countries,
which showed that some countries and products might face increased
competition, for example Bangladesh, Pakistan and Cambodia on
garments and footwear, Ghana on fish, and Nigeria on light oils.[63]
54. Most witnesses concurred, however,
that these effects should be "limited", for two reasons.[64]
First, the exports from developing countries to the US and EU
are very different from the trade the TTIP partners have with
each other.[65] Lord
Mandelson told us that "many of the emerging economies, most
of the developing countries, and all of the least developed countries
are not competing with us in those markets at that top end of
the value chain."[66]
Professor Rollo also noted that in the areas where there
were still significant tariffs between the EU and US, such as
on textiles, the EU and US are not competitive in each other's
markets, so that it was arguable that even a 10 per cent or 15
per cent tariff preference would not make that much difference
to the underlying competitive position of third countries.[67]
Second, it was suggested that there would be ways to mitigate
these kinds of negative effects. Professor Baldwin noted
that if the US and EU gave each other tariff preferences on textiles,
apparel and agriculture, that would hurt the third countries that
were left out, but Europe could potentially counter that by unilaterally
improving GSP preferences and thus attempting to offset any negative
effect.[68]
55. Some witnesses warned that TTIP
might also have an impact on third countries through a different
channel, namely if regulatory cooperation between the US and EU
resulted in standards becoming more stringent.[69]
Professor Baldwin put it to us that "the problem for
developing countries is that we get this US transatlantic [TTIP],
transpacific [TPP] set of high-standard rulesbut are they
the right rules for developing countries? They will not have a
choice. They obey those rules or they do not export, just like
Switzerland."[70]
The UK Government recognised this risk, but again thought it could
be mitigated: "there are development assistance funds that
could be allocated to help developing country exporters meet new
standards."[71]
56. Others emphasised that regulatory
cooperation between the US and EU might also bring benefits to
third countries. Professor Rollo explained that "even
if you harmonised at a higher level of protection, it might still
be outweighed by having the two markets together and the economies
of scale in conforming to that new harmonised regulation. It is
costly to conform. If you have to conform to two different regulations,
that is twice the cost, so there is a trade-off."[72]
Professor Baldwin drew our attention to the parallels with
the single market project: "everybody said "Fortress
Europe! What are we going to do?"In the end there was no
Fortress Europe. The single market was good for Japanese and American
exporters."[73]
Professor Rollo acknowledged this, but noted that it had
been a conscious choice. Mutual recognition agreements, he explained,
can be strictly preferential, i.e. they can be bilateral and exclude
third countries. In building the Single Market, the EU by and
large went down the road of being non-discriminatory in its application
of mutual recognition, which according to Professor Rollo,
"was a big and important point."[74]
The UK Government appear to acknowledge this, noting that "if
there is mutual recognition of standards through TTIP, it would
be in the interest of developing countries for this recognition
to be open to third countries that currently meet either EU or
US standards."[75]
57. The majority of our witnesses
therefore concurred that the scope for negative effects on third
countries from changes in tariffs and tariff preferences between
the US and EU was limited, and that although they might also face
new regulatory hurdles as a result of TTIP, this might be offset
by the benefit of not having to conform to two different sets
of standards when exporting into EU and US markets.
OFF-SHORING JOBS AND DEREGULATION
58. A number of witnesses drew our
attention to their concerns that a trade and investment treaty
between the EU and US might result in jobs being sent off-shore,
and that regulatory co-ordination between the two parties might
undermine labour, environmental or consumer protection standards
in the European Union.
59. Corporate Europe Observatory
told us that, in their view, "a trade agreement is about
doing away with and reducing barriers to trade to make it easier
for companies to move their goods, services and investments. It
increases their power and leverage in a society." Trade agreements
such as TTIP would therefore serve to "increase competition
between workers, which in the long term puts pressure on issues
such as wages and labour rights."[76]
60. The GMB saw a "very real
risk of our hard-won European employment and social rights being
levelled down to often much lower American standards".[77]
The TUC echoed this concern, pointing out that the US has not
ratified six of the core International Labour Organisation (ILO)
conventions, and that "Right to Work" laws, "which
clamp down on unions' capacity to bargain and organise",
had been passed in 24 US states.[78]
The GMB went on to argue that "contrary to the rosy predictions
made by TTIP advocates, that the deal will boost employment and
create thousands of new jobs, in reality it could lead to increased
unemployment and mass social dumping as EU companies relocate
to the US to take advantage of their weaker labour laws, or US
companies choose to operate only in the poorer EU member states,
where wages and conditions are lower and trade unions weaker."[79]
61. This concern was shared not
only by other UK unions (TUC and Unite) but also by the AFL-CIO
in the United States. They told us that from their point of view,
the TTIP is unique in the sense that the United States is the
low-wage participant in the agreement, because US wages are lower
than in the major manufacturing economies in the EU. They also
warned that "in the comparison to NAFTA, the US would be
Europe's Mexicoparticularly the southern states that are
lower wage, that are 'right-to-work', that would be less tolerant
of workers exercising their labour rights."[80]
62. Other witnesses firmly rebutted
the suggestion that TTIP might prompt companies to relocate across
the Atlantic as a result of wage competition from the US. Lord
Livingston of Parkhead, UK Minister for Trade and Investment,
emphasised that "the average wage in the US is higher than
the average wage in Europe by some distance."[81]
Ford Motor Company told us that "rarely if ever" had
Ford moved a plant to another country because wage rates were
lower. Instead, numerous factors would lead to that decision,
including tariffs, energy costs, the ability to source parts and
suppliers, and access to raw materials, so that the cost contribution
of labour was only one small factor in the equation. They went
on to argue that, between the US and Europe, there was in any
event no huge advantage on either side of the transatlantic marketplace,
either in terms of regulation or from the cost of labour.[82]
63. It was also suggested to us
that there might be scope to use the negotiations to "level
up" in the area of labour standards instead. Unite proposed
that the EU should call on the US to ratify fully the ILO conventions
as part of negotiations towards a TTIP.[83]
The UK Government appeared to be open to this suggestion, stating
in their written evidence that the TTIP negotiations "represent
an opportunity to work with the US on the implementation of International
Labour Organisation standards."[84]
Professor Baldwin took the view that this was the more likely
direction of travel, noting that "the political game in the
US is to get the US more or less to agree to the core ILO things.
It is not Europe going down." In his view, the Democrats
were using trade agreements as a way of forcing the US into ILO
core standards.[85]
64. The TUC and Unite also saw scope
to use the TTIP to extend elements of the EU social model to the
USor at least to European companies operating in the USin
order to promote European Works Councils and extend other worker
voice mechanisms to US employees.[86]
65. Other unions were more pessimistic.
The GMB recognised that some had argued that the TTIP might provide
an opportunity to raise labour standards, but judged that, "given
current economic pressures, there is far more risk of these being
levelled down." The AFL-CIO argued that rather than raising
the bar, trade agreements signed by the US tended to set a floor
for labour standards, and warned that mechanisms to enforce even
those basic standards were "generally weak at best."[87]
66. Professor Baldwin judged
that a prospective "race to the bottom" on standards
might be more of a concern in respect of food safety, health and
safety, and the precautionary principle than in respect of labour
or environmental standards.[88]
The AFL-CIO raised a range of concerns about the effect TTIP might
have on consumer protection, suggesting that any benefits an agreement
might bring to consumers in terms of lower prices would be "marginal"
and more than outweighed by the risk of dragging down consumer
protection standards, for example food safety standards. In their
view, large food conglomerates did not want to label growth hormones
or GM ingredients, and would therefore try to sideline the European
Union's precautionary principle[89]
(its approach to risk management on the environment and human,
animal and plant health matters) and "go after" EU labelling
rules. The term "sound science" was in their view no
more than "code words" to get rid of safeguards.[90]
Corporate Europe Observatory echoed these concerns, and told us
they feared that "if it is not the way to wipe out important
consumer legislation in future, it is definitely a good tool for
industry to prevent progressive consumer legislation in future."[91]
67. Which? took a more optimistic
view, explaining that they were "broadly supportive"
of TTIP negotiations and saw the potential for an agreement to
lead to better alignment of consumer protection on both sides
of the Atlantic as well as bringing increased consumer choice.[92]
They were in favour of articulating the consumer outcomes that
should be protected whilst allowing mutual recognition of the
ways in which those outcomes were achieved. They nonetheless warned
that there were "areas in which there should be caution",
including food safety and product safety, stressing that they
would want the EU to be able to maintain use of the precautionary
principle and that care should be taken to ensure that mutual
recognition is done in a way that ensures consumer protection.
68. The UK Government rejected the
idea that EU regulatory standards might be watered-down, emphasising
that they were clear that a "race to the bottom" in
respect of product safety, labour standards or environmental protection
"must not be the case in the TTIP negotiations" and
that they would be on their guard in this respect.[93]
The MEPs we heard from were equally adamant. Robert Sturdy MEP
told us that labour and environmental standards were "one
of those red lines that is absolutely clear."[94]
Maria Eleni Koppa MEP predicted that the EU would not give up
its labour and environmental standards, "that is for sure".[95]
69. General Electric told us that
"nobody is under any illusion that somehow this is a back
door to getting regulatory regimes on both sides lowered in their
stringency". In their view, the business community's perspective
was that there was more than enough work to be done in alignment
and coherence where the regulatory standards basically stay the
sameit being "the whole point" that the EU and
US had equivalent outcomes in those areasand that they
could benefit from that "without playing any games".[96]
70. Professor Evenett judged
that the "people who are very concerned about the race to
the bottom and the falling standards have very effectively organised
themselves and their position". Combined with regulatory
"inertia", this would act as a brake on widespread deregulation,
he predicted.[97]
The price of failure
71. We also asked our witnesses
about the implications of failing to conclude a TTIP agreement.
The TUC emphasised the missed opportunity, telling us that "we
would lose the positive results that might flow from a TTIP, with
the added complication that world trade would continue to increase
without the EU playing such a key role, or benefiting as much."[98]
Lord Green of Hurstpierpoint, then UK Minister for Trade and Investment,
also saw the price of failure as the foregone opportunities, themselves
"an opportunity cost of considerable magnitude". But
more generally and in his view more importantly, failure would
have an impact on overall dialogue at the global level on trade
relationships and investment relationships that would "clearly
be deleterious". He hoped that TTIP would become "something
of a benchmark for regional agreements that can then feed into
the overall multilateral process." He concluded that "failure
in the US will not help that cause."[99]
72. Commissioner De Gucht told us
that "not making a deal will have a price and could have
a substantial price", not only for Europe but also for the
US. Not reaching a deal would weaken their position in what he
saw as the "next big battle" about norms and standards,
and so there would be "a price if we do not get there."[100]
Lord Mandelson warned that if the negotiation were to break down,
there would be "acrimony". He predicted that "a
large blame game would ensue and it would poison relations between
two very important trading partners."[101]
Conclusions and Recommendations
73. TTIP is not just another
trade deal: by virtue of the fact that the EU and US together
account for nearly half of world GDP, any agreement they conclude
would necessarily have ramifications for other countries and for
the multilateral trading system. The initiative therefore has
both a strategic dimension, and a geopolitical one.
74. TTIP is in our view a political
as well as an economic project, not least because it could serve
to revitalise and rebalance the transatlantic relationship between
Europe and the United States. One of its most important legacies
may be the establishment of a structured dialogue on regulatory
matters between the EU and US sustained into the future, through
provisions for a living agreement.
75. The initiative also provides
the EU and US with an opportunity to set a high-standard precedent
for future trade and investment agreements, and would to that
extent serve a strategic purpose. We recognise that this avowed
intention could prompt unease among other trading partners, but
in our view it should not: agreement between the US and EU is
pivotal to the progress of other multilateral initiatives, including,
but not limited to, the Doha Round. Were TTIP negotiations to
run aground, prospects for those other initiatives would look
worse, not better. We therefore agree with Lord Green of Hurstpierpoint
that a TTIP agreement should help to sustain momentum at the WTO
following the Bali agreement, and help to promote China's full
involvement.
76. The EU and US should nonetheless
address concerns that TTIP could be a "closed shop"
in which the world's richest economies pull up the drawbridge.
We welcome the UK Government's recognition that there should be
an accession process to allow third countries to participate in
TTIP; that regulatory approaches adopted as part of the TTIP should
be based on existing internationally agreed best practice; and
that any mutual recognition of standards achieved through TTIP
should be open to third countries. Provided that an eventual agreement
has the right featuresincluding those we have listedwe
anticipate that the positive external effects of a TTIP agreement
could outweigh any negative effects on third countries.
77. The design of a TTIP agreement
will matter, and we therefore recommend that the UK Government
should press its EU partners, the European Commission, and the
US administration to choose design features that will allow third
countries to participate in the benefits accruing through TTIP,
in the same way that third countries have been able to benefit
from the development of the European Single Market.
78. We also recommend that, at
a later stage in the negotiations, the UK Government and the European
Commission should bring forward proposals to mitigate the possible
adverse effects of changes in tariff preferences on developing
countries, and to help their exporters to meet new standards.
The UK Government should press for the implementation of such
measures as an integral part of its approach to the initiative
overall.
79. Concerns about the effect
that TTIP might have on jobs, on employment rights, and on consumer
protection are in our view not equally well-founded, and need
to be disentangled. This is because some of those standardsfor
example some product safety standardsare directly under
negotiation, while otherssuch as specific employment rightsare
not. We recommend that, in making the case for TTIP, the UK Government
and the European Commission articulate more clearly which areas
of regulation will be under discussion, and which will not.
80. In principle, a trade and
investment treaty between the EU and US could, over time, lead
to a reallocation of investmentand with it, jobsas
tariffs and non-tariff barriers are reduced or removed. Once an
agreement begins to take shape, the UK Government and European
Commission should therefore ensure that the likely scale and direction
of such effects are carefully evaluatedas recommended in
Para 36 above.
81. Employment rightson
either side of the Atlanticare not directly under negotiation
as part of the TTIP. We therefore see no prospect that labour
regulation in EU member states would be watered down as part of
the initiative. We nonetheless urge the UK Government and European
Commission to seize the opportunity presented by the sustainable
development chapter of the negotiations to press the United States
to ratify the International Labour Organisation's core conventions.
82. By contrast, product safety
and food safety regulation are likely to be under discussion,
and it is therefore vital that the UK Government and the European
Parliament should be vigilant in making sure that there is no
detriment to consumers and the environment from co-ordination
between the EU and US.
26 See, for example, Commissioner De Gucht's speeches
on the subject, and BIS, para 1. Back
27
Appendix 4: Evidence taken during visit to Washington, D.C., para
136. Back
28
BIS, para 19. Back
29
European Commission, TTIP: The Economic Analysis Explained,
p.2 and p.6. Back
30
BIS, para 23. Back
31
European Commission, TTIP: The Economic Analysis Explained,
sections 2.2.1-2.2.2. Back
32
BIS, paras 20 and 26. Back
33
European Commission, TTIP: The Economic Analysis Explained,
Summary; and Table 18 in CEPR for European Commission, Reducing
Transatlantic Barriers to Trade and Investment: An Economic Assessment,
March 2013, available at http://trade.ec.europa.eu/doclib/docs/2013/march/tradoc_150737.pdf. Back
34
AFL-CIO and 'The US-EU trade deal: don't buy the hype', The
Guardian, 15 July 2013, available at http://www.theguardian.com/commentisfree/2013/jul/15/us-trade-deal-with-europe-hype. Back
35
Q 204. Back
36
Q 205. Back
37
Appendix 4: Evidence taken during visit to Washington, D.C., para
82. Back
38
Q 168. Back
39
TUC, para 27. Back
40
See Foreign & Commonwealth Office, TTIP and the Fifty States:
Jobs and Growth from Coast to Coast, September 2013, available
at https://www.gov.uk/government/publications/ttip-and-the-fifty-states-jobs-and-growth-from-coast-to-coast. Back
41
Appendix 4: Evidence taken during visit to Washington, D.C., paras
108-110. Back
42
48.7 per cent in 2010-see Eurostat statistics available at http://epp.eurostat.ec.europa.eu/statistics_explained/
index.php/The_EU_in_the_world_-_economy_and_finance. Back
43
TUC, para 23. Back
44
A phenomenon known as tariff substitution. Back
45
Q 23, Q 107. Back
46
United Nations Economic Commission for Europe. Back
47
BIS, para 38. Back
48
BIS, para 40. Back
49
Negotiations on a Trans-Pacific Partnership agreement between
Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia,
Mexico, New Zealand, Peru, Singapore, the United States and Vietnam
are currently underway. Back
50
QQ 32-33. Back
51
Asia-Pacific Economic Cooperation. Back
52
AFL-CIO, para 73; see also Q 19. Back
53
Q 30. Back
54
Q 203. Back
55
Q 198, Q 202. Back
56
Q 31. Back
57
Q 127. Back
58
Q 60, Q 63. Back
59
Q 107. Back
60
Appendix 4: Evidence taken during visit to Washington, D.C., para
102. Back
61
TUC, para 24. Back
62
Q 21. Back
63
BIS, para 42. Back
64
Ibid. Back
65
Ibid. Back
66
Q 30. Back
67
Q 21. Back
68
Q 203.The EU's Generalised Scheme of Preferences (GSP)
provides developing countries with preferential access to the
EU market through reduced tariffs. Back
69
BIS, para 42. Back
70
Q 203. Back
71
BIS, para 42. Back
72
Q 21. Back
73
Q 201. Back
74
Q 21. Back
75
BIS, para 42. Back
76
Q 247. Back
77
GMB. Back
78
TUC, para 14. Back
79
GMB. Back
80
Appendix 4: Evidence taken during visit to Washington, D.C., paras
11 and 21. Back
81
Q 261. Back
82
Appendix 4: Evidence taken during visit to Washington, D.C., para
44. Back
83
Unite, para 3.1. Back
84
BIS, para 51. Back
85
Q 206. Back
86
TUC, para 16 and Unite, para 3.3. Back
87
GMB; Appendix 4: Evidence taken during visit to Washington, D.C.,
para 6. Back
88
Q 206. Back
89
The concept of the precautionary principle as used by the EU was
first set out in a Commission Communication adopted in February
2000, COM(2000) 1, available at http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52000DC0001. Back
90
Appendix 4: Evidence taken during visit to Washington, D.C., para
8. Back
91
Q 243. Back
92
Which? Back
93
BIS, para 51. Back
94
Q 54. Back
95
Q 55. Back
96
Appendix 4: Evidence taken during visit to Washington, D.C., para
37. Back
97
Q 13. Back
98
TUC, para 30. Back
99
Q 127. Back
100
Q 111. Back
101
Q 23. See also Dan Hamilton and Tim Oliver, paras 15-20 about
the impact of failure or delay on the UK's domestic debate on
EU membership. Back
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