The Transatlantic Trade and Investment Partnership - European Union Committee Contents


Chapter 2: The Purpose of the TTIP


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 benefits—and costs—of 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)


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)


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 features—including those we have listed—we 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 standards—for example some product safety standards—are directly under negotiation, while others—such as specific employment rights—are 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 investment—and with it, jobs—as 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 evaluated—as recommended in Para 36 above. (Paragraph 80)

235.  Employment rights—on either side of the Atlantic—are 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


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)


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 sector—which for these purposes includes not just the banking sector but also related industries, such as insurance—that 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)


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)


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)


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)


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 negotiations—especially 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 explanation—a task for which we believe member states including the UK should take their share of responsibility. (Paragraph 170)

Chapter 4: Securing a Deal


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)


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 regulation—as one factor among many—should disempower democratic institutions. (Paragraph 193)


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 States—whose decision it was to keep the negotiating mandate out of the public domain—who 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, and—in our experience of the UK—not necessarily seized of the importance of promoting TTIP to the public and other interested parties. (Paragraph 198)


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 community—with notable exceptions, such as the motor industry—has 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 to—particularly 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 UK—in some respects like the 50 States study prepared for US audiences—in 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)


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

previous page contents next page

© Parliamentary copyright 2014