Chapter 5: SUMMARY OF CONCLUSIONS AND
RECOMMENDATIONS
Chapter 2: The Purpose of the TTIP
JOBS AND GROWTH
223. 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. (Paragraph 33)
224. 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. (Paragraph 34)
225. 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. (Paragraph 35)
226. 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.
(Paragraph 36)
OTHER PURPOSES
227. 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. (Paragraph 73)
228. 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. (Paragraph 74)
229. 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. (Paragraph 75)
UNINTENDED CONSEQUENCES
230. 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. (Paragraph 76)
231. 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. (Paragraph 77)
232. 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. (Paragraph 78)
233. 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. (Paragraph 79)
234. 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. (Paragraph 80)
235. 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.
(Paragraph 81)
236. 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. (Paragraph 82)
Chapter 3: Content of the TTIP
AUTOMOTIVE SECTOR
237. We were warned that, when going
from the objectives of the TTIP at 36,000 feet to the nuts and
bolts, we would see a gap.[303]
We detect no such gap in the automotive sector. Consistent with
projections that the sector may have most to gain from a TTIP
agreement, the industry on both sides of the Atlantic is organised
and vocal. The most striking aspect of this observation, in our
view, is that other sectors appear to be considerably less mobilised,
and that this sector may therefore be unrepresentative of the
business community at large in terms of its engagement and advocacy
of the initiative. (Paragraph 102)
238. Although we therefore see scope
for other sectors to learn from the motor industry's approach
to the TTIP negotiations, we anticipate that the sector will need
to articulate more clearly the possible benefits for consumers
from attainment of their objectives, and explain why they expect
to see jobs added, rather than lost or reshuffled, if they are
to build public and political support for their goals. We judge
that for the largest companies with production facilities on both
sides of the Atlantic those goals are primarily about reducing
production costs and acquiring more flexibility on where to locate
production. The extent to which this will increase trade between
the EU and US will depend on a host of consequential decisions
to be taken by the companies about how best to further their commercial
interests. (Paragraph 103)
239. We note that the industry views
TTIP as a platform from which to inject momentum into the existing
multilateral process for developing Global Technical Regulations
and are encouraged by this approach, which is consistent with
our view that the TTIP should serve to catalyse multilateral negotiations,
and not substitute for them. (Paragraph 104)
240. We recognise that there is
merit in pursuing mutual recognition of environmental and safety
standards for motor vehicles where they are assessed as producing
equivalent outcomes. We nonetheless urge the UK Government and
the European Commission to ensure that this only occurs where
EU and US standards are genuinely equivalent, so that existing
environmental and safety standards are not compromised. (Paragraph 105)
FINANCIAL SERVICES
241. In a negotiation that is ostensibly
between equals, it is in our view essential that one party should
not be permitted to exclude a sectorwhich for these purposes
includes not just the banking sector but also related industries,
such as insurancethat is clearly central to both economies.
We therefore judge that the EU is right to press the US on the
inclusion of financial services regulatory matters in TTIP.
(Paragraph 122)
242. We were nonetheless struck
by the vehemence of the US Administration's opposition, and found
lukewarm support for the EU's stance among several of its member
states. We struggled to understand what the UK Government's objectives
were, and believe they must be articulated much more clearly if
they are to have traction elsewhere, including among other EU
member states. The shroud of secrecy around UK and EU objectives
thus far has been unhelpful, and stokes unnecessary suspicion.
(Paragraph 123)
243. We see no threat to financial
and prudential regulation from the establishment of a more effective
dialogue between EU and US regulators, for the reasons set out
by the Financial Conduct Authority. We nonetheless judge that
the UK and the European Commission will need to build a more compelling
case for why the TTIP is the right vehicle for securing that outcome.
(Paragraph 124)
244. There is clearly widespread
dissatisfaction with the Financial Markets Regulatory Dialogue
(FMRD), both in terms of its capacity to deliver results and in
terms of a perceived lack of transparency and accountability around
discussions held in that forum. We recommend that, pending any
progress that TTIP may deliver, the UK Government should press
the European Commission to bring forward proposals to improve
transparency around the existing process, and allow member state
governments and industry to hold the Commission to account in
respect of its engagement in the FMRD. (Paragraph 125)
FLAGSHIP ISSUES: PROCUREMENT
245. We concur with Commissioner
De Gucht's assessment that a deal on procurement is likely to
be hard-fought, not least because the EU hopes to obtain commitments
from US states as well as the US federal government. The precedent
set in negotiations with Canada and its provinces, and our witnesses'
suggestions for steps the US federal government could take to
create incentives for states to participate nonetheless demonstrate
that with political will, there would be ways to attain the UK
and EU's objectives. (Paragraph 137)
246. Political will on the part
of the US administration and state authorities will in part hinge
on the attractiveness of the reciprocal offer from the European
Union. We are not persuaded that all EU member states consistently
apply EU public procurement rules as diligently as could be hoped.
TTIP negotiations may therefore present an opportunity to examine
what the EU still needs to do to monitor and enforce the rules
it has set for itself, and may to that extent help to spur the
completion of the Single Market in this area. (Paragraph 138)
FLAGSHIP ISSUES: AGRICULTURE
247. On GMOs, we share the Commissioner's
assessment that the area for compromise with the US lies in allowing
existing EU procedures for cultivation and commercialisation of
GMOs to work as intended. We note that the UK is in the unusual
position of being closer to the US than the EU in its stance on
this issue, and judge that it therefore has an important role
to play in helping the Commission to win support for such a compromise
among other EU member states. (Paragraph 146)
248. We are more pessimistic than
Commissioner De Gucht about the ease with which an agreement on
access for US beef products to EU markets could be reached, and
note that parts of the UK industry could have difficulty in this
area. We recommend that, as a possible compromise on this issue
begins to take shape, the UK Government should produce a comprehensive
impact assessment of the changes proposed on the UK's agriculture
sector. (Paragraph 147)
FLAGSHIP ISSUES: GEOGRAPHICAL INDICATIONS
249. The prospects of reaching an
agreement on Geographical Indications (GIs) are in our view better
than Commissioner De Gucht predicted, at least insofar as the
UK interest is concerned. We anticipate that, as in negotiations
with Canada, protection for names potentially considered generic
(parmesan, feta) will be hardest-fought. We see scope for the
UK Government to attain its objectives, which mainly relate to
protection for compound names, and should be correspondingly less
contentious. (Paragraph 155)
FLAGSHIP ISSUES: INVESTMENT PROTECTION AND INVESTOR-STATE
DISPUTE SETTLEMENT
250. We agree with those witnesses
who emphasised that Investor-State Dispute Settlement (ISDS) provisions
are in themselves only an enforcement mechanism: the substantive
protections afforded to foreign investors in the investment chapter
of a TTIP agreement would matter most. (Paragraph 167)
251. We are persuaded that, as appears
to have been achieved in the CETA agreement between the EU and
Canada, steps can be taken to strike a better balance between
affording protection to investors and the right of states to regulate,
notably by defining the grounds on which claims may be brought
with more precision, and allowing for binding interpretations.
Measures can also be taken to improve transparency around ISDS
proceedings, for example by making hearings and documents public,
allowing interested third parties to make submissions, and reviewing
rules around the appointment of arbitrators. We deem the "loser
pays" principle particularly important, as without it all
these steps can be in vain. We recognise that the European Commission
is already committed to pursuing all these improvements. (Paragraph 168)
252. We nonetheless conclude that
proponents of investment protection provisions enforced by an
ISDS mechanism have yet to make a compelling case for their inclusion
in TTIP or to convincingly dispel public concerns. We recognise
that there may be a precedent value in their inclusion and that
this may be an important consideration ahead of similar EU agreements
with other countries such as China. We also recognise that for
member states with an existing bilateral investment treaty with
the United States, TTIP presents an opportunity to update such
provisions. From the UK's perspective, however, we see two principal
justifications for their inclusion: to attract more investment
from the US, and to afford better protection to our investors
in the US. We recognise the potential risk to UK investors in
the US but judge that, to build a better case for the inclusion
of investment protection provisions in TTIP, isolated cases would
need to be supplemented by evidence that the UK could attract
more investment from the US by signing up to such provisions.
(Paragraph 169)
253. We see a risk that this issue
could distract from, or even derail progress on TTIP negotiationsespecially
in view of the hostile stance of the German government and German
public. We therefore recommend that, having expressed a preference
for the inclusion of ISDS provisions in an eventual agreement,
the UK Government should use the Commission's consultation period
to take a more proactive role in the debate before valuable momentum
and public confidence are lost. We support the Government's stance
on the inclusion of investment protection provisions only on condition
that the EU is able to secure the same range of safeguards in
an agreement with the United States as were included in the CETA
agreement with Canada. Those safeguards themselves require proper
explanationa task for which we believe member states including
the UK should take their share of responsibility. (Paragraph 170)
Chapter 4: Securing a Deal
TIMETABLE
254. Without Trade Promotion Authority
(TPA), the United States cannot make serious offers as part of
the TTIP negotiations, lest they should put off the very people
whose support they need to secure TPA. Although important technical
progress can still be made, we anticipate that there will come
a point when negotiations enter a holding pattern, and contentious
issues are deferred until the US administration has secured TPA.
The timetable for the latter is likely to be driven by the progress
of Trans-Pacific Partnership negotiations. The TTIP initiative
is therefore in danger of drifting. (Paragraph 187)
255. The political context in the
US with mid-term elections and in the EU with elections to the
European Parliament and the appointment of a new Commission can
also be expected to limit progress on politically difficult issues
until late in 2014, or early 2015. In 2015, we anticipate that
there will be a relatively narrow window of opportunity to make
progress on the issues that require political capital to be spent
before the US Presidential election cycle takes over ahead of
2016. Due to the hold-up over TPA, it is not yet clear that the
EU and US will be in a position to seize that opportunity. (Paragraph 188)
LIVING AGREEMENT
256. We support the establishment
of a structured arrangement for future dialogue between EU and
US regulators, and consider it a critical part of the long-term
legacy of a TTIP agreement. We see no inherent reason why such
an arrangement need be complex or why taking account of the transatlantic
impact of regulationas one factor among manyshould
disempower democratic institutions. (Paragraph 193)
TRANSPARENCY
257. The European Commission is
in our view going to considerable lengths to improve transparency
around TTIP negotiations. Both Commissioner De Gucht and Chief
Negotiator Ignacio Garcia-Bercero have readily assisted us with
our inquiry. In respect of the confidentiality of the negotiating
mandate, we believe the Commissioner is right to point to the
Council of Ministers: it is the Member Stateswhose decision
it was to keep the negotiating mandate out of the public domainwho
need to defend that decision, which we judge to be correct. (Paragraph 197)
258. The European Commission cannot
be expected to make the case for the TTIP initiative across 28
member states. In our view, EU member states are not bearing their
fair share of responsibility for transparency and communication
around the project. This may be exacerbated by the fact that although
EU trade ministers lead on the initiative, the breadth of the
negotiations means that many other national ministries are involved,
andin our experience of the UKnot necessarily seized
of the importance of promoting TTIP to the public and other interested
parties. (Paragraph 198)
COMMUNICATION
259. We recommend that the UK Government
should formulate a cross-government communications strategy in
respect of the TTIP, involving ministers with sectoral responsibilities
and building on cross-party support for the initiative. It should
not be left to each Department to decide whether and how to engage
with interested parties and the public. Although the Department
for Business, Innovation and Skills is best placed to co-ordinate
this task, it should be a shared responsibility across Departments.
(Paragraph 208)
260. Insofar as a public debate
on TTIP exists, EU member states are losing it. In part this is
because they are engaging in it fitfully and invariably on the
back foot. The UK business communitywith notable exceptions,
such as the motor industryhas not been vocal in support
thus far. (Paragraph 209)
261. Proponents have yet to articulate
the purpose or possible gains from TTIP in a compelling way, nor
offer convincing responses to legitimate concerns. In too many
cases, we have had to coax out of our witnesses what TTIP might
deliver for the ordinary citizen. There is indeed a risk that
transatlantic trade is perceived as "sending stuff across
the ocean", and therefore not relevant to an ordinary household
or small business. (Paragraph 210)
262. We recommend that the UK Government
and the European Commission should review their account of what
TTIP is about. We see scope to put more emphasis on investment
and the jobs it may lead toparticularly in the UK which
is a major recipient of US Foreign Direct Investment. We also
see scope to emphasise the likelihood that small and medium-sized
businesses stand to benefit disproportionately, not only from
specific provisions under negotiation, such as protection for
Geographical Indications, but also from any reduction in red tape
associated with transatlantic trade, given that the vast majority
of gains from TTIP are expected to result from reductions in non-tariff
barriers. That case ought in our view to be made directly to small
and medium-sized businesses who might otherwise consider that
the initiative has no direct relevance to them. (Paragraph 211)
263. We recommend also that the
Government should make clear the very considerable costs to the
UK and the EU of potential failure in the TTIP negotiations (drawing
on evidence set out in paragraphs 71 and 72 of our report). (Paragraph 212)
264. We recommend that, as more
detail on potential provisions in each chapter becomes available,
the UK Government should commission work on the potential impact
of a TTIP agreement on specific regions and nations of the UKin
some respects like the 50 States study prepared for US audiencesin
order to identify tangible benefits and risks for specific geographical
constituencies. We believe that this would aid transparency and
help to identify not only where gains may lie but also which concerns
are warranted and need addressing. (Paragraph 213)
POLITICAL ENGAGEMENT
265. The UK Government have a particular
role to play in spurring on other leaders and decision-makers,
on both sides of the Atlantic, if momentum behind the TTIP initiative
is to be sustained. We judge that the Government are according
priority to this in their work in the United States, but that
there is scope for them to do more in Brussels and in national
capitals to develop and sustain coalitions with other EU member
states, in particular Germany and France. This will be vital if
the Government and their allies are to take charge of the public
debate in the EU and help ensure that a new Commission is in a
position to seize the narrow window of opportunity available to
clinch a political agreement in the first half of 2015. (Paragraph 222)
303 Q 18. Back
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