The Transatlantic Trade and Investment Partnership - European Union Committee Contents


Monday 27 January-Thursday 30 January

Five members of the Committee (accompanied by the Specialist Adviser and Clerk) visited Washington, D.C. The aims of the visit were to take evidence from relevant witnesses in the United States, and to explore US objectives and concerns in regard to a prospective TTIP agreement.

Members visiting: Lord Tugendhat (Chairman), Baroness Bonham-Carter, Lord Foulkes of Cumnock, Lord Jopling, Lord Radice. In attendance: Miss Julia Labeta (Clerk) and Dr Dennis Novy (Specialist Adviser).

Day One: Tuesday 28 January

British Embassy

The Committee met with HE Sir Peter Westmacott, UK Ambassador to the United States, for a private briefing.


The Committee took evidence from Celeste Drake, Trade Policy Specialist, Brad Markell, Executive Director, and Damon Silvers, Director of Policy at the American Federation of Labor and Congress of Industrial Organization (AFL-CIO).

1.  Ms Drake explained that the AFL-CIO was concerned that the TTIP should not become a tool to drag standards—such as labour and environmental standards—down. For the EU, this would involve levelling down to US standards. In the hands of "aggressive and litigious" US companies, Investor-State Dispute Settlement (ISDS) provisions could serve as a mechanism for bringing standards down.

2.  The AFL-CIO was also keen that the ability to use public procurement to promote economic and social policy should be maintained. Ms Drake emphasised that they did not wish to see "Buy America" provisions obliterated by a TTIP agreement.

3.  Asked about whether there were any useful precedents on ISDS in CETA, the EU-Canada free trade agreement, Ms Drake said that including ISDS provisions was not a good precedent, and that the AFL-CIO's preference is not to have ISDS provisions included at all, because they view them as undermining, rather than advancing, the rule of law.

4.  Asked about the reaction of the US Administration to the AFL-CIO's views on ISDS, Ms Drake explained that opinion in Congress varied, with approximately one-third of members sympathetic to their concerns, one-third strongly in favour of ISDS provisions, and one-third in the "mushy middle". The Administration had, however, told them that it regards ISDS as a good system and will continue to include it in US Free Trade Agreements (FTAs).

5.  Mr Markell added that in Congress, turnover was so great that many members were not aware of the issues. He suggested that the inclusion of ISDS provisions in TTIP would reflect a presumption that EU legal systems are not up to the task of adjudicating commercial disputes.

6.  Asked about whether labour standards might not be pulled up rather than dragged down as the result of regulatory dialogue between the EU and US in the context of TTIP negotiations, Ms Drake suggested that in practice, trade agreements signed by the US tended to set a floor for labour standards, and that mechanisms to enforce those standards were generally weak at best.

7.  Responding to a suggestion that things might work out differently when dealing with a developed economy like the EU, Ms Drake was pessimistic, arguing that the way US corporations do business is to drive down standards. They might start in Bulgaria or Romania, but ultimately UK workers would also be affected. Mr Markell suggested that the phenomenon might also apply in reverse, as had been seen with German car companies coming to low-wage America—such as Mercedes Benz in Alabama—and pushing unions out.

8.  Asked about whether TTIP might bring any benefits to consumers in terms of lower prices, Ms Drake dismissed such effects as "marginal", noting that European goods were already widely available, and that in their view, any prospective benefits on that front were more than outweighed by the risk of dragging down standards, for example food safety standards. Big food conglomerates did not want to label growth hormones or GM ingredients, and would therefore try to sideline the EU's precautionary principle and "go after" labelling rules. "Sound science" was no more than "code words" to get rid of safeguards, leaving no room for future improvement in US standards.

9.  Responding to the suggestion that the negotiations on TTIP might be used to raise US standards in this area, Ms Drake argued that although the AFL-CIO would welcome such a development, they would not wish to foreclose future opportunities to change US regulations. If, for example, there were to be future challenge under the terms of a TTIP agreement, and it were to be found that labelling GMO ingredients in a breakfast cereal was more restrictive than necessary under the terms of that agreement, then that would foreclose that type of regulation in Europe, but also in the US. It is not that by signing the agreement, US or EU standards would automatically change, but it's the policy space box that they would not want to lose, so that the US could get better than it is now.

10.  Mr Markell described the chapters of the TTIP as a "corporate wishlist" and suggested that, as someone from Detroit, his view was that the downfall of the auto industry had been trade-linked. The automobile industry and now increasingly the aerospace industry had moved to low-wage Mexico as a result of NAFTA. Developed nations could not compete with markets where there was still labour repression. Recognising that the TTIP would be concluded between two developed economies, Mr Markell suggested that the equation he had described would be very much flipped, with the EU on the receiving end.

11.  He went on to suggest that NAFTA is what put bad trade deals on the political map with workers in the United States and that it has never really gone away. Ms Drake noted that, "in the comparison to NAFTA, the US would be Europe's Mexico"—particularly the southern states that are lower-wage, that are "right-to-work", that would be less tolerant of workers exercising their labour rights.

12.  Responding to a question about transparency, Mr Markell took the view that transparency around TTIP negotiations has been very low. "There are about 600 people who can see what's being written, and nobody else can. What is it you're doing that is so horrible that it needs to remain in secret until you're ready to pull it all out?" The idea that none of this can be discussed publicly was "a real red flag".

13.  Ms Drake suggested that secrecy is a holdover from the days when agreements were about tariffs, and "you didn't want the potato farmers to know that their protectionist tariffs were being cut until you could show them that the tariffs on automobiles were going to be cut too. But now that we're talking about food safety policy and financial services regulation and all of these additional things, those are the kinds of things that, in a democracy, need to be discussed in the open, and not behind closed doors."

14.  Responding to the suggestion that it would be infinitely more difficult to give and take in public, and the answer might thus be to put together a package which people can then vote against if they want, Ms Drake countered that in the AFL-CIO's experience, Congress has never rejected a trade deal that was presented under fast-track. All legislation is difficult to do in public. She went on to suggest that the WTO does release draft texts, before it gets to final texts, and that is one better and more legitimate way to do it.

15.  Mr Silvers noted that his colleague Celeste is among the 600 people who have access to the texts, and that he personally had talked to Mr Froman "about as many times as most people in the policy-making process in the United States". He suggested that it was not the case that the American labour movement is radically isolated from the policy-making process, but rather that, "you can be talked to without genuinely participating." He noted that having formal standing in the process did not mean being part of policy formulation, and that the only way to be included in the policy formulation process was to have a process that was sufficiently broadly open that you could marshal allies in the conversation.

16.  Mr Silvers suggested that if one put the question of what the goal of a trade agreement between the world's two largest economies should be to a rather open process, there would clearly be a consensus in both societies that the goal of such an agreement would be to try and further develop the things that make EU and US societies particularly successful—the social values of the EU, the extent to which those values are shared with the United States, the values of openness, of democracy. "Every indication that we have of the strategic purpose of this agreement is that it is intended to go in the opposite direction, and that it has been set up to do that by people with a very specific agenda, and that is to diminish the power of democratic institutions vis a vis the power of large corporations. And the only way that kind of agenda gets imposed on two large democratic polities is by having a closed process." He went to add that this was nowhere more concerning to the AFL-CIO than in the area of financial regulation.

17.  The AFL-CIO strongly supports a robust common floor between the US and EU on financial regulation, and see it as critical to achieving the purpose of the Dodd-Frank Act. However, they have no reason to believe that the TTIP would produce a financial regulatory framework that they would support. Indeed they feel certain, based on their understanding of the politics, that it would be a weakening, a least-common-denominator agenda. They therefore support Secretary (Jack) Lew's position that financial regulation should not be in the TTIP.

18.  Mr Silver noted that they had had to fight very hard to protect the regulatory framework for derivatives that came out of Dodd-Frank against pressure from European financial services institutions and from transatlantic financial services institutions working through the EU, seeking to weaken that regulatory framework and make it possible for US institutions to use European platforms to avoid US derivatives regulation. "That sort of experience colours our view of what is possible in the TTIP framework".

19.  He went on to suggest that US business would like to dismantle European food safety regulation, European data privacy regulation, European anti-trust rules, and that "US financial services institutions would like to ally with European institutions to come back at Dodd-Frank from offshore." Mr Silvers went on to describe the TTIP negotiations as "a coalitional effort by global corporations based in both societies aimed at the societies themselves."

20.  Ms Drake emphasised that the AFL-CIO had not come out against the TTIP and do not think it is a lost cause, but that it was right to go in "with our eyes open" based on previous experience with trade agreements and with the WTO, which in their view seems to primarily benefit the large global corporations. Ms Drake pointed out that the US had twice lost WTO challenges against attempts to label tuna as dolphin-safe. What the consumer wants to know about the product had been relegated below the right to sell the product in another country. The AFL-CIO did recognise the potential benefits to the consumer from lower prices, but based on what they have seen, they expect it to be outweighed by the potential negatives.

21.  Mr Silvers suggested that 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. He set out the view that what is problematic about TTIP is not the attempt to address tariff barriers and long-standing tensions between the two economies on e.g. aerospace or the automotive industry, but what the AFL-CIO sees as the dominant regulatory component of the negotiations and the balance of power between civil society, the state, and the corporate sector in both societies. He suggested that this was "a choice that has yet to be locked in"—policy makers are still in time to change course, and this would change the AFL-CIO's view. He added that if there were to be a more open process and both societies were able to more genuinely pursue what the publics in both societies would want, then this could be something quite positive, but at the moment they [the AFL-CIO] see another agenda.

22.  Mr Silvers rejected the suggestion that broadly speaking, the EU had higher standards of regulation than the US, arguing that this might have been true five years ago, but is no longer the case. In financial regulation, for example, the US had in his view gone further in dealing with the causes of the financial crisis than the EU has. In terms of basic workers rights, to the extent that there are EU-wide standards, there is no question that there is a higher standard in the EU, but in crisis-hit countries like Greece or Spain, standards have been slipping even if they are probably still just above those found in southern US states.

23.  Responding to a question about procurement, Ms Drake expressed concern about privatisation and outsourcing of public services. In the United States, there is almost no public service that is not privatised somewhere. The AFL-CIO view public procurement as "not a trade issue" but about "how a domestic government chooses to spend its very precious resources". Being able to use that money in targeted places for target people is very important. If the rules say that all public procurement must be open to European companies, then the funds raised through taxes aren't necessarily going to recirculate in the community and have that multiplier effect.

24.  Responding to the suggestion that foreign companies would still employ local workers to provide local public services, at a lower cost to the taxpayer, Ms Drake argued that the discretion to allow a local public service to be administered by a foreign company should still rest with each municipality, state or the federal government. She also added that workers typically lose benefits when they are contracted out from the federal government to a private company.

25.  Mr Silvers made a distinction between two different concerns. One is about whether the TTIP will be used as an instrument to force privatisation. That is not a suitable issue for a trade agreement to address. There the issue is not who the contractor is, but whether it's a public or private company. Then there's a second issue around the procurement of manufactured goods. According to Mr Silvers, the US and the UK are the two major industrialised economies that have most radically de-industrialised, which is now regarded as a mistake. If the US is to re-build its manufacturing sector, it needs to compete with economies who are clearly—and rightly, in the AFL-CIO's view—using their industrial policy around procurement. "We don't want the US to be barred from playing that game which everyone else is playing by the TTIP."

26.  Responding to a question about data protection in the wake of the Snowden revelations, Ms Drake suggested that the issue had not captured the public's attention in the US in the way it had in the EU. The AFL-CIO has long been supportive of greater privacy than US law affords and what USTR includes in trade agreements. USTR has in their view not been responsive enough yet to real concerns and would continue to learn by getting pressure from the European side that its status quo approach would not work. The large US internet companies like Google and Microsoft, who are quite influential with the US administration, would have to learn that what has been the practice simply isn't good enough. The AFL-CIO has not, however, dealt with the issue directly, nor taken any position on the CIA and Snowden revelations.

US Chamber of Commerce

The Committee met informally for a roundtable discussion hosted by the US Chamber of Commerce, and chaired by Marjorie Chorlins, the Chamber's Vice-President for European Affairs. Also in attendance were her colleague Philip Finiello and representatives of the following member companies: Lisa Schroeter of the Dow Chemical Company, Stephen Biegun of the Ford Motor Company, Kevin Mundt of Chrysler, David Short of Fedex, and Michael Fitzpatrick of General Electric.

27.  Ms Chorlins began by welcoming the group and explaining how the Chamber was helping to generate political support for the Transatlantic Trade and Investment Partnership (TTIP). The Chamber favours a comprehensive and ambitious TTIP agreement. In addition to its direct thought leadership, the Chamber serves as secretariat for a broad business coalition known as the Business Coalition for Transatlantic Trade (BCTT). The BCTT includes hundreds of companies and associations. There are 11 working groups that have developed position papers on agriculture, digital trade, mobility, public procurement, goods, services, trade facilitation, regulatory cooperation, competition, investment and intellectual property. These papers are publicly available and have been submitted to both EU and US interlocutors.

28.  Mr Biegun (Ford) stated that his company seeks to narrow regulatory differences that exist between US and European markets, in addition to reduction/elimination of tariffs that hinder transatlantic trade. But tariff elimination alone would not be enough to facilitate the increase in trade that they would like to see. They are also looking for sustained, high-level political support to achieve this outcome. He pointed out that it was not the first time that the US and EU had begun this conversation, but "it withered on the vine last time" because it lost political attention on both sides of the Atlantic. He therefore suggested that it was critical to sustain a high degree of top-level attention this time around.

29.  He added that his company TTIP to enhance trade and improve the investment climate for future investments in the US and Europe, which are two of the largest markets in Ford's worldwide operations. Without the scale that can be achieved by creating a more open and common regulatory scheme between the markets, the European and US markets might begin to lose favour compared with the scale that is achievable in countries like China. Global vehicle safety standards are no longer set by the US alone but rather by markets where sales are greatest. Last year [2013] Chinese consumers bought 22m new automobiles, compared to 13.5m new automobiles in Europe, and 16.5m new automobiles in the US Separately the US and Europe do not have markets of sufficient scale to compete with China, but together they do.

30.  Michael Fitzpatrick of General Electric noted that if the TTIP were to succeed in creating mechanisms for more coherence and alignment in regulation, it would be the most important trade agreement to date. It would provide a model for the next generation of trade agreements that are likely to be seen over the next 25 years as economies become more complex. Thus TTIP is not only critical in its own right but also because of the example it would set.

31.  GE was interested in three segments in particular: first, improvements in transparency and openness in the way policy is made on each side of the Atlantic. Second, better analysis and greater communication between regulators on proposed new regulations so that solutions can be sought that don't necessarily impinge on economic activity. This can be done without sacrificing regulators' sovereignty or forcing a "raise to the bottom" in regulations. Third, addressing the large stock of regulations already on the books on both sides of the Atlantic. Here there are efforts already underway to look at sectoral initiatives, for example in autos, to reach back and better align the rules already on the books. It was GE's sense that it would only be possible to tackle a limited number of sectors as part of the negotiations and what would therefore be really important would be to set up a horizontal mechanism, so that as new proposals emerge, there is a way for regulators to engage with one another.

32.  There needs to be in GE's view some mechanism established, a Council of some sort, that includes regulators from both sides of the Atlantic, but also central, high authorities, e.g. the Vice-President of the US and a suitable EU counterpart, who will guide/police/manage/oversee these efforts into the future. Some legacy institution with the highest authority should manage the mechanisms and provide sustained political accountability.

33.  David Short of Fedex explained his company's enthusiasm for TTIP and that they had already testified before the Senate Finance Committee on the subject. He identified two reasons why his company was so enthusiastic: one was that anything that promotes GDP growth was good for their business, because it meant people were shipping more packages; and second, anything that promotes trade is vital since it is the essence of their business. The biggest area of focus for Fedex is trade facilitation—making the customs processes more streamlined and efficient. Stansted is the company's main gateway for the UK, and from there they can ship to 95 per cent of the world within 72 hours. If customs did not do its part to clear the goods efficiently, the value proposition offered to their customers would be negated. What good is it to offer to ship something from the UK to country X in 72 hours if the parcel is going to sit in customs for hours, days or weeks? Of the 28 member states of the EU and the US, only one was in the World Bank's top five jurisdictions for ease of trading across borders—Denmark. He suggested other EU countries and the US needed to catch up and should not concede the advantage of being world leaders in trade facilitation. Tariffs serve to re-allocate resources from one place to another. Improving trade facilitation eliminates the waste of resources, and so the payback is higher.

34.  Responding to a question about financial services, Marjorie Chorlins explained that the Chamber's view was that no sector should be off the table for the purpose of these negotiations. There had been a lot written and opined about potential downsides of including financial services, but from both from a market access perspective and from a regulatory perspective, the Chamber's members believe there are only upsides to be had. This is not about a race to the bottom in regulatory protection and the application of prudential measures, but rather an opportunity to ensure that regulators on both sides take the time—as they look forward in particular—to think about the impact of a new regulation on transatlantic capital markets. The two economies opted for very divergent approaches to dealing with the economic crisis of the late 2000s, and some of that has had a negative impact on the integration of transatlantic capital markets. So the idea is not to roll back what's been done—some think the American business community wants to roll back Dodd-Frank, but that's not what the Chamber is suggesting. Both the US and Europe still have hundreds of measures being promulgated to implement their approaches to the financial crisis. As in other sectors, financial services regulators should utilize "best regulatory practices," including consideration of potential transatlantic impacts. What this is about is looking at the regulations, especially as they're being promulgated—there is still something in the order of over a hundred regulations still to be promulgated from Dodd-Frank, so that those regulations as they're developed take into account the transatlantic impact.

35.  The Treasury Department had made clear its desire to keep financial services out of the TTIP negotiations, and instead rely on existing mechanisms both at the multilateral level and the bilateral level to address concerns about divergences on financial regulatory matters. Ms. Chorlins observed, "No-one really disagrees with relying on existing mechanisms provided that they are efficient and effective. There are many in the financial services sector who will tell you that the existing mechanisms, particularly at the bilateral level—the FMRD—is not as transparent or productive as they would like or as they think the situation calls for." We understand where Secretary Lew is coming from, and we know that Ambassador Froman appreciates where the private sector is coming from. For those who think they can divine whether financial services are in or out—"it's too soon".

36.  Mr Fitzpatrick (GE) concurred with Ms Chorlins' statement. He explained that GE Capital is the largest non-bank financing company in the world, so they have a large stake in these issues. They are strongly in support of the inclusion of financial services in the negotiation. There are bilateral and multilateral regulatory cooperation efforts in many other domains, and yet those are not being carved out of TTIP as is being proposed for financial services.

37.  He explained that it has been his impression over the last five or six years of working on regulatory cooperation that one of the good qualities was that it is generally a non-partisan issue. Generally speaking it had been viewed as good government, as cutting away the fat and the undergrowth that is unnecessary, and not dangerous to anyone. He was sensing in some of these discussions—particularly on the European side but it could easily spread to the US side—some growing rhetorical anxiety among some interest groups and some factually inaccurate views, especially around investment issues. He suggested it was critical that perspectives on this agreement stay rooted in fact and there be a clear understanding of what is being sought and what is not being sought as part of this agreement. We in the business community are being very careful to be clear what we're not trying to do. Nobody is under any illusion that somehow this is a back door to getting regulatory regimes on both sides lowered in their stringency, that there is going to be a race to the bottom. The business community's perspective is that there more than enough work to be done in alignment and coherence where the regulatory standards basically stay the same—that is the whole point, we have equivalent outcomes in these areas—and that we can benefit from that without playing any games. He also argued that he had "zero expectation that regulators on either side are somehow going to capitulate their missions and their authority to serve up all kinds of pro-business weakening of regulation"—that is just not going to happen. He suggested that the business community needed to be clear on their objectives and be vigilant to push back on those who might try to mischaracterise what is being negotiated.

38.  One of the issues on the US side is the distinction between non-independent and independent regulators. Almost all financial regulators are independent: the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), Commodities Futures Trading Commission (CFTC), the Securities and Exchange Commission (SEC)—all of these are independent regulatory entities.

39.  The Treasury Department is a non-independent regulatory entity though may operate independently in some regards. If the Europeans could give way on certain issues on their side vis-à-vis transparency perhaps the US can find ways to bring closer the operations of the independent regulatory system.

40.  Lisa Schroeter of Dow Chemical explained that as large-scale manufacturers, a lot of other companies had also been weighing in on this subject, as access to capital is crucial to run their operations. Turning to issues around the rhetoric surrounding the negotiation, she noted that the chemicals industry had been very vocal around regulatory cooperation, and had tried to put the message out that it is not about getting rid of anybody's regulatory system. "We are a heavily regulated industry, we expect to be." They were working at that time on the US system of chemicals regulation, known as TOSCA, which had not be been updated for about 20 years. What they had in mind was keeping the existing systems—TOSCA on the US side, REACH on the EU side—but making them more efficient. Since they are meant to achieve equivalent outcomes, they would like to see discussion on processes, datasets and the risk assessment methodology. The more that could be done to streamline the process and make it more transparent, the better it would be in terms of the access people have to information. It would also have value for the regulators themselves, in that they would view how regulatory decisions come about. Dow and companies like it can go through the regulatory processes on both sides of the Atlantic without unnecessary duplicative procedures. For small businesses, many of whom larger enterprises such as Dow rely upon, the easier it is for them to make their applications simultaneously, the more likely they can enjoy transatlantic growth.

41.  Ms Schroeter added that the business community has consistently stated tariff elimination is not enough. And while that is, the benefits of full tariff phase out on both sides of the Atlantic is not insignificant. Dow alone spends tens of millions of dollars a year paying tariffs on goods it is essentially trading with its own company—a reflection of the fact that a large portion of transatlantic trade is intra-company. The idea that some things still need to be protected sends the wrong sign to the rest of the world. If even the US and EU can't agree to eliminate tariffs, what incentive is there for the rest of the world..

42.  She noted that there is a strong community that is and will always be anti-trade. Anything that starts to sound like NAFTA—some call TTIP the 'TAFTA'—it automatically creates a negative impression to certain elements of the public. There is a huge opportunity to turn that rhetoric around into a much more positive discussion of what trade really means. "At the end of the day, most Americans are not worried about their jobs going to Germany. They probably already work for the Germans over here anyway."

43.  Marjorie Chorlins suggested that one of the challenges with a protracted negotiation like TTIP is that there is a tendency for negative rhetoric to balloon, almost immediately, at the front end of the talks. The business community is doing what it can to explain to elected officials why they think TTIP is important. But often these issues are only of interest to government officials when they are truly ripe, that is, when negotiations are on the verge of being concluded. "This negotiation is far from being concluded, and so getting the attention of members of Congress, is extraordinarily difficult." The business community must communicate on a regular basis but also pace their communications through what will be a long negotiation. Ms Chorlins suggested that there was an imbalance at present, where "naysayers" have the airwaves a bit more than the business community and that was something that they would be looking to balance out over the coming year.

44.  Asked about concerns about the offshoring of jobs, for example in the motor vehicle industry, Steve Biegun of Ford suggested that "rarely if ever" had Ford moved a plant to another country because wage rates were lower—instead there would be a collection of factors that would lead to that decision, including tariffs. For example, a high tariff of 25 per cent in China meant that it was very likely one would build cars in China. When looking at the cost contribution of labour, it is only one small factor of that equation. Raw materials, the efficiency of business, the ability to source parts and suppliers, energy costs, etc. also played a role. In the US and Europe, that debate was largely moot in any event, whereas in the case of US FTAs with Latin America or the poorer parts of Asia it was a reasonable area of debate. Between the US and Europe, there was not a situation in the transatlantic marketplace where you had a huge advantage on one side or the other, either in terms of regulation or from the cost of labour. There are more important issues that will weigh on their considerations, including and especially the degree to which the market in which they are investing is growing. That is the most compelling producer of jobs. Creating the efficiencies in the market that something like TTIP presumes to do was in their view one of the lowest-cost incentives in investment that Governments could make.

45.  Asked about US labour unions concerns that foreign auto manufacturers coming to the United States were building their plants in non-unionised areas, Mr Biegun recognised that this was an issue that was sensitive in the US, but saw it as a competitive equation between the unions and the employees that they seek to organise. There is nothing in TTIP that would impact that.

46.  On the subject of agriculture, Lisa Schroeter pointed out that Dow AgroSciences was one of their largest global business units. They are not looking to force product into a market that doesn't want it, but they are asking for the existing regulatory process to be allowed to work. Looking at the way the EU is meant to regulate agricultural products, the approval system is "actually quite functional", if it were allowed to operate. Very often applications are stopped along the way, politics takes over, and applications no longer move. They are looking for a "fair chance" to work through the current system.

47.  Marjorie Chorlins rebutted the suggestion that all the US wants to do is flood Europe with GM products. The reality is that the EU does have processes to allow for the inclusion of GMOs, the challenge is not that they want that process eliminated, but that they want the process to work better.

48.  Ms Schroeter added that this is not a case of the US pushing on the EU but a common transatlantic viewpoint: industry associations on both sides are in agreement on this objective.

49.  Responding to a question about what a living agreement might mean in practice, Steve Biegun of Ford noted that while agreeing with the concept, it should not take away from the urgency of concluding the agreement. There is a need to recognise that the eyes of the world are on the US and EU, but so is "the hot breath of the world, breathing down our neck". In the automobile sector, US regulators had existed for 50 years in a world that had seen the automobile industry relocate overseas and yet they continued to act as if the US determines the global standards in the automobile sector. The US's Federal Motor Vehicle Safety Standards (FMVSS) are now a minority standard globally and are exceed by both Chinese and EU standards. If they do not embrace a more common global standard that achieves the exact same outcome on safety, they run the risk of forfeiting their ability to effectively uphold standards, because "someone else will write our standards for us". He predicted that the industry would follow the standards that represent the largest portion of their business. It was a question of business survival, not patriotism. Regulators need to recognise that the world they are operating in is significantly different from when the US dictated those standards to the rest of the world.

50.  On the subject of the US public procurement, and the limitations of what the federal government could impose on the states, Ms Chorlins suggested that the US government has not yet determined how best to approach this. No-one should expect a radical shift in the way states approach the issue of procurement, but there may be a hint of opportunity that might not have been there in the past: States are much more actively competing for investment on the one hand, and they are also faced with tighter and tighter budgets. Against that backdrop, they may see the need to identify the most cost-effective solutions—which in some cases might not be solely US content.

51.  Ms Schroeter pointed out that the business community had also been reaching out to state governors, and the importance of reaching out to the states early so that they see their vested interest in access to the broader market.

52.  David Short of Fedex added that it was very instructive to look at the recent EU-Canada agreement. It was really giving a push and could act as a catalyst, for example wheat farmers in Montana who supply a lot of high-value durum wheat to Europe had found that their competitors just across the border in Alberta, Canada who grow the same product now have duty-free access to the European market and the Montana farmers do not. the former Senator from Montana, Max Baucus (now US Ambassador to China), was hearing from the farmers in Montana who were facing losing market share to their neighbours in Alberta because they have a trade agreement and the US doesn't. So in turn he was "putting the fire under" US negotiators to get this done and get this done quickly, in order to avoid the loss of market share, because once a customer was lost, it was much harder to win them back.

53.  On the subject of geographical indications, Mr Short pointed out that during stakeholder days as part of TTIP negotiating rounds, his observation was that American producers—Napa wine, Kona coffee from Hawaii—wanted to have a scheme that would product the geographical origin of their products. So a key to that issue might be to find allies and identify synergies.

54.  Mr Finiello stated that a separate GI system in the US or any attempt to 'claw back' generic foods terms in the US would face stiff opposition from the US dairy foods industry. The US currently protects GIs through its collective mark system.

55.  On the subject of whether there is competition with TPP, Ms Chorlins suggested that if there was a challenge, it would be in terms of resources on the US side, the availability of negotiators. USTR is very small by comparison to other agencies and subject matter experts must juggle to work on both agreements. Recognizing this constraint, the Chamber has advocated for higher budget levels for the agency.

Mr Edward Luce

The Committee held a private discussion with Mr Edward Luce, Chief US Columnist at the Financial Times.

Senator Thad Cochran

The Committee took evidence from Senator Thad Cochran (Republican—Mississippi).

56.  Senator Cochran explained that in his situation, representing the state of Mississippi, the state's economic interests had been served for many years by export relationships in Europe and the United Kingdom. The state of Mississippi is synonymous with the cotton belt in the United States, and agriculture is a huge provider of jobs and income and related business activity. A large part of the purchasing that sustains that and grows that economy is based in Europe.

57.  Asked about how much interest there was in Congress in the TTIP negotiation, the Senator suggested that there was "a very important amount" of interest, and that members of Congress—certainly in the Senate—recognise the importance of trade relationships and other cooperative relationships the US enjoys with Europe.

58.  Asked about negotiations between the US and EU on agriculture issues as part of TTIP negotiations, and whether trade-offs might be necessary, Senator Cochran stressed that he was "not interested in trading off anything". US export-import policies should be based on mutual benefit, fairness, openness, and so on.

59.  Responding to a question about the openness of the negotiations, the Senator noted that openness in government is very popular in the US, and particularly in Congress.

60.  Asked about whether there was majority support in Congress, or the Senate in particular, for a TTIP agreement, Senator Cochran said that as the details were not yet known, it was too soon to make a judgment. His aide suggested that a large majority of the Senate did want to see the TTIP succeed, but that as the details were not yet known, it was too soon to say "where the votes would come down".

61.  On the subject of Trade Promotion Authority, and whether Congress was more reticent to grant it than it had been in the past, Senator Cochran insisted that as long as it meant supporting American products being sold in overseas markets, members of Congress would not be bashful about supporting whatever serves US economic interests. The agreement would, however, have to be mutually fair and beneficial. The Senator also emphasised that the agreement would initially be a proposal, not a deal—it would not be a deal unless and until it is ratified.

62.  Asked about genetically modified crops and livestock, and the use of growth-promoting hormones, the Senator said he would keep an open mind, but recognised the issues were enormously important to the countries involved, so that the Senate would have to be very diligent in examining the benefits, and the dangers, if any, that an agreement might pose to the US economy.

63.  Responding to a question about how people in the state of Mississippi would look at a deal optimistically, looking for gains, or with suspicion, looking at risks, the Senator judged it would be "a balance of both". The benefits that might accrue to the state would be the number one consideration, but if there were any negative aspects that ought to be considered or that benefits should be balanced against, they'd want to know about them and would feel betrayed by their representatives if they were not told about them.

64.  On the subject of public procurement, and whether people in the state of Mississippi would be open to provision by foreign suppliers, the Senator said he expected that local arbiters of these issues, politically active constituents, would prefer local, home-grown workers to be doing that work and to own the company that employs them.

65.  Asked about whether the authorities in his state would be open to public procurement of manufactured goods, such as cars, from foreign suppliers if they were cheaper and better, the Senator judged that the political pressures on local officials would be very great. He pointed out that Mississippi is an auto-producing state—Nissan, Toyota, and other auto suppliers all have plants in the state. Foreign auto makers are hiring local Mississippians to make their automobiles "and we all seem to be happy about it", the Senator observed.

66.  Asked whether trade and trade policy is ever an issue that is raised with him when he is back in his state, the Senator responded that it is not the top concern he hears from constituents. However, his constituents do recognise that agriculture, especially cotton, and soya beans that are grown in Mississippi, provide export revenues to the state and they know that the market for those products includes Europe, and indeed that the European Union is one of the biggest markets for those products.

Congressman Fred Upton

The Committee took evidence from Congressman Fred Upton (Republican—Michigan), Chairman of the House of Representatives Committee on Energy and Commerce.

67.  Congressman Upton noted that it was still early in the process, but that all eyes were on that night's State of the Union address. In his view, "the President really has to say something about trade" and the issue "really is right now on his shoulders." Congressman Upton explained that he was close to a lot of businesspeople across the country and that there are two main advocacy groups in that community, the US Chambers of Commerce, and the Business Round Table (BRT). The BRT has four issues, one of which is trade.

68.  On the subject of Trade Promotion Authority, Congressman Upton suggested that the President has a real issue within his own party. Around 150 Democrats had just that day signed a letter effectively asking the President not to move TPA. It was known from the beginning that most House Republicans were going to vote for TPA, but the Republicans have about 30 or 40 members in the House who are "Ron Paul-types" and against any trade agreement, so to pass something, around 50 House Democrats would be needed to offset those Republicans and get it done.

69.  According to the Congressman, NAFTA, which he supported, would never have passed under George Bush. It only passed because Bill Clinton "was a remarkable guy and convinced enough Dems to vote with enough Rs to get it done". He warned that by contrast, so far, "Obama has not been able to find a Democrat in the House". If the President "cannot get people to be with him—and he hasn't shown much in five years—it's not going in this Congress". This need not mean it won't go in the next Congress—the Republicans are for the most part pro-trade—but there is a shortened timetable to contend with. In the November 2014 mid-term elections, the Senate may well flip. The Republicans may well pick up 8 or 10 more seats, and their Speaker is pro-trade, but primaries start again as early as March 2015 (in Texas), meaning there is much-shortened legislative time, and so it is not clear whether TPA could happen in a lame-duck session or not. TPA "is a pretty heavy lift", according to the Congressman. "But without any real leadership in getting people to move, it doesn't happen."

Day Two: Wednesday 29 January

US Department of Agriculture

The Committee took evidence from Darci Vetter, Deputy Under Secretary for Farm and Foreign Agricultural Services at the US Department of Agriculture.

70.  Responding to a question about the most important objectives for the US in the agriculture element of the negotiations, Ms Vetter emphasised that the TTIP was a huge opportunity not only for the US and EU economies but also for other economies in the world, by sending important signals. It was an opportunity to expand two-way trade, to take a hard look at the way agricultural products were regulated, and to try to find commonalities of approach, particularly by encouraging the use of science-based decision-making. She suggested that the agriculture element of the negotiations had been mischaracterised as one of defence for the EU and one of offence for the United States. There were significant opportunities for the EU and the US, and the two sides should find ways to take advantage of these opportunities.

71.  When asked what the US's main objectives would be, Ms Vetter said that meat and poultry access would be very important. Additionally, the US wants more normalised trade in areas where they have experienced real regulatory barriers, such as in biotechnology food products, and where they have seen real impediments not only in the form of tariffs on meat but also impediments on the use of certain food safety practices used in the US.

72.  In terms of the most difficult concessions for the EU to make, Ms Vetter said they had seen a real hesitation on further opening of the meat sector—beef, pork and poultry. There would be difficult conversations on how each side operated their regulations. On SPS issues, there was an opportunity to look at bilateral issues, specific products currently blocked or inhibited because of SPS barriers, and look for ways to solve those specific issues, but also to look more broadly at the way each side operates their regulatory regime and try to avoid simply creating another list of issues in the future. The two sides have the opportunity to align food safety standards by using international standards. "If we (the US and the EU) do this well, we could lead the world on regulatory approaches in a way that increases trade opportunities and assists in the regulation of food safety and animal health in other countries as well."

73.  Responding to a question about the extent to which the EU-Canada agreement might serve as a catalyst, Ms Vetter said that in agriculture, the US has seen its share in the EU market decrease while other countries' trade relationships with the EU strengthened. The US is one of Canada's competitors in the EU, and is therefore watching closely.

74.  Asked about potential domestic threats to concluding an agreement, Ms Vetter suggested that the difficulty for the US would be a lack of ambition on the EU's part, the US agricultural groups would be concerned if an agreement were not comprehensive enough. Consistently showing solid progress in addressing regulatory barriers and eliminating tariffs would be necessary to win agricultural support. Other sectors of the US economy were known to complain that when it came to agriculture, the sector might provide 20 per cent of the economic support but 80 per cent of the political support. It would be difficult to get an agreement through Congress without having a high-standard agreement in agriculture. She therefore suggested that she was not looking at people pulling her back, but rather pushing her forward, at a pace that might be difficult for the EU.

75.  On the subject of geographical indicators (GIs), Ms Vetter explained that a TTIP agreement would not necessarily be a US compromise on GIs. She said she did not think that the CETA agreement offered a suitable precedent, since the US has different views than Canada. The US is concerned with the protection of generic names. The market circumstances for the US and Canada are different. Canada has a highly protected, supply-managed dairy sector. The US dairy sector is looking at opportunities for export to the EU. The US was concerned by the breadth of protection the EU was seeking for names that the US considers generic. She predicted that there would be a lot of GIs, particularly compound GIs very specific to European places, where the US and EU would not have a disagreement, but in the broader area of protection for names the US considers generic and recognises as generic in their US intellectual property system, that would difficult for the US. The US was not a huge fan of the deal that Canada had struck with the EU so far.

76.  She added that the US was willing to engage on the basis of a system that recognises generics and trademarks. If it were possible to engage on that level and have a "granular" conversation, then it should be possible to make progress. She explained, for example, that they would consider "parmesan" to be a generic name, but would not consider "parmiggiano reggiano" to be a generic name. The latter was quite specific and indicated to their consumers an association with place. In the US market, parmesan is widely used as a generic term.

77.  On the subject of Genetically Modified Organisms, Ms Vetter explained that it was important for the US to be able to address this issue, but she believes there is an opportunity to make progress. She said it was encouraging that EFSA's assessments are the same as US assessments suggesting that products are safe both for consumption and cultivation. She noted that the EU does have a procedure for approving new products, starting with the EFSA evaluation, but the procedure does not always operate on the timeline that it is supposed to. Even when the timeline is observed, every application takes the maximum number of days for consideration. The US needs improved predictability and timeliness of approvals for new biotechnology products. That would do a lot to normalise trade in those products, if there were greater predictability in those processes, and a greater preponderance for looking at the science. "We are not asking that EFSA take our word for it, we think it's essential that countries be able to carry out their review, and we understand that getting dossiers to the EU for timely consideration is part of making sure that commerce flows well."

78.  On the subject of hormone-treated beef, Ms Vetter suggested that the main issue is access for US beef to the European market. She pointed out that it has been possible so far to put in place phases on a path towards a negotiated resolution of the hormone case that the US won against the EU in the WTO due to a lack of scientific basis for the ban. She expressed scepticism that a quota increase for US beef would be sufficient in a US-EU agreement. The US is looking for results on tariffs and quotas across all beef products, and simply expanding that quota was not what they had in mind for a fuller negotiation on beef.

79.  On the more general issue of tariffs, Ms Vetter reiterated the objective set out in the report of the HLWG that the TTIP should seek to eliminate all tariffs on goods, and that included the full suite of agricultural goods. Looking back at US trade agreements with other countries, it could be seen that they largely did achieve that, with all tariff lines going to zero save for a very few exceptions. That is the level of ambition they were seeking. She recognised the US had sensitivities just like Europe does, where staging for tariff reductions and tariff rate quotas might be used to help deal with those sensitivities. Such devices should not, however, be permanent.

80.  On non-tariff barriers and regulatory collaboration, Ms Vetter suggested that the comprehensive nature of the TTIP conversations was an opportunity to address issues where other regulatory dialogues have been unsuccessful. In the agriculture and food sector in particular, when looking around the world, more and more of the impediments to trade were not tariffs but due to the regulatory structure. "Once tariffs go down, sometimes other barriers go up", and so they wanted to take a more comprehensive look at regulatory coherence and science-based regulations, also in the TPP negotiations. She expressed hope that a committee on SPS might be able to prevent new barriers from arising.

81.  Ms Vetter suggested that both the EU and US were disappointed that the multilateral system had not been more effective in moving forward, and suggested that the only way of getting back to that table would be when developing countries felt like they had something to gain from, and could fully participate in, that global trading system. Navigating competing standards and layers of regulation was in her view one of the reasons why industries in those countries were not more competitive and could not quite figure out how to participate. To the extent that the EU and US, as leaders in creating high standards for food safety and animal health, could take common approaches to new challenges, even if they do not end up with the same regulation, then they would be creating an environment that would be easier for third countries to take advantage of.

82.  On the subject of consumer prices, Ms Vetter suggested that expanded choice and increased competition did tend to lower prices. She did think it would be a significant benefit of trade, but noted that in terms of using it as an argument for winning support in Congress, the case would be more compelling on industrial goods, whereas in agriculture the EU's competitive advantage was in high-end products so arguments around a lower price for basic food basket commodities would be less relevant. The US generally had low tariffs in most of their sectors, and therefore saw most of those benefits already.

83.  On TPP, Ms Vetter argued that it was neither a hindrance nor a help, the negotiations were at different stages. Nonetheless, both TPP and TTIP would send a very important message to other countries that those countries that were willing to make hard choices, that were willing to have a comprehensive and difficult dialogue, were not going to wait for everybody else to get on board. In the past, the EU and US had wanted to wait for Doha, but they have been waiting for going on 13 years now, and it just did not happen. Both sides had heard criticism that they were leaving the WTO behind or were not committed, to which the US response was that when there was an offer on the table, they would be the first ones in line. She added that these developments could therefore be "a bit of a wake-up call" for those countries, and that it was the natural outcome of the lag in Geneva.

Think-tank Roundtable

The Committee took evidence from Gary Hufbauer (Peterson Institute for International Economics), Kent Hughes (Woodrow Wilson Center), Dan Hamilton (John Hopkins University) and Claude Barfield (American Enterprise Institute).

84.  On the subject of TPA, Kent Hughes drew attention to the fact that the last time there was a battle over TPA, it was very contentious. George W. Bush had a great deal of trouble getting it. There were three votes in the House and very close margins. The rise of the tea party in the Republican Party has shifted what one would have previously expected to be an overwhelming vote in favour of Trade Promotion Authority into something that is more of a question. The Democrats, often reflecting a labour union point of view, are increasingly sceptical. The bottom line was that the President could get TPA, but it would depend "on what he is willing to offer in response", for example trade adjustment assistance for people who lose their jobs because of a trade agreement.

85.  He added that the President had other priorities, notably immigration reform, and would also have to spend some political capital on ongoing problems with the Affordable Healthcare Act.

86.  Asked about a realistic time-frame for TTIP, Kent Hughes suggested one would want to say 2015, because even then one would be in the middle of a Presidential election, and 2016 even more so. Already major groups were talking about raising money for prospective presidential candidates.

87.  Dr Hamilton suggested that the administration had waited so long on TPA that the issue of the TPP had been conflated with the TPA debate, to the detriment of the latter. He too thought the administration would get TPA, but at some pain. There was a lot of noise at the moment that Congress should have more direct influence in the negotiations. The real battle lines would be over TPP. In terms of "one tank of gas", Dr Hamilton suggested "they would have to go back to the filling station". The timetable was not as problematic on the US side as on the European side. Not until next November/December would there be any clarity on the European side. Also, interest groups were much more engaged in Europe. He suggested that the free-trade member states in the EU had not done a very good job of engaging publicly on this agreement, and at the moment were losing the public debate. The concerns from European interest groups appeared to be that the American system, broadly conceived, was going to come in and steamroller the European way of life. EU member states who are in favour of this would have to do a much more activist job to get TTIP moving and to understand what it is and what is not about.

88.  On the subject of the NSA revelations and data privacy, Dr Hamilton argued that no-one should doubt that there was a political link with TTIP even if there was no formal link, because when it came to ratification, the European Parliament would not do so unless it was satisfied that there was some US-EU arrangement on data privacy.

89.  Gary Hufbauer suggested that the TPP would take all the heat, and so far as TPA went through, if it went through, TTIP would get a free ride. He identified two political issues. For the regulatory agenda which the EU has espoused, to be serious, it would require trimming the authority of the US independent regulatory agencies by some oversight as they write their regulations going forward. This would produce push back from the constituencies and the regulators themselves. The second issue would be the US states. Most services are regulated at the state level, as is procurement, so there would be a lot of pushback from the states about being subjected to or included in a TTIP agreement. The USTR formula up til now had been "come along if you wish", and in recent trade agreements, none of the states have wished, so they would have to be forced or some very strong incentives would have to be provided.

90.  In terms of the timeline, Mr Hufbauer argued that it would not happen in this Administration. It might be set up in this Administration, in the same sense that Korea was set up in the Bush administration, or NAFTA in the previous Bush administration, but ratification would be an issue for the next Administration, because President Obama's ability to push through any thing is a rapidly wasting asset, and they would run out of steam, although there was still much useful negotiation that could be done.

91.  He added that the State of the Union address had been truly underwhelming on trade—at the low end of his expectations, which had already been low. He also suggested that there was not the pro-trade strength in the Congress that had been there in the past.

92.  Claude Barfield suggested that the timeline for concluding TTIP would be sometime after 2017 and before 2020. Because of the timing, the battles would be fought over TPA and TPP. He suggested that the big fight in 2002 over TPA was anomalous in that it was a highly personal contest. The then Chairman of the Ways and Means Committee had given up on winning support from Democrats and decided to rely solely on Republicans to get it through. That could be done only by not losing many Republicans, and that was his problem. There were still some protectionist Republicans, and so it was a battle. The pattern of TPA is that the key is the House of Representatives. Even with a Democratic president, you can get two-thirds or maybe three-quarters of the House Republicans, but beginning with NAFTA, a Democratic president is not going to get a majority of House Democrats to go along with a free trade agreement or TPA. 150 Democrats voted against NAFTA when Bill Clinton had backed it. The President would have to get enough Democrats to go along with the Republicans to make sure that it carries. The Republicans had in his view made a mistake in demanding that the President get 50 Democratic votes—the Speaker should have asked simply for enough Democratic votes to get it through.

93.  In regard to the Senate, he suggested that normally there was no need to worry, but that there are now some anti-globalisation senators in key positions, including on the Finance Committee, who could be more trouble than one would expect.

94.  On the subject of the US states, Gary Hufbauer suggested that a plain reading of the Constitution indicated that the federal government has power over inter-state commerce, if the Congress decides to exercise it. The USTR was known to have a "waffly and different" view, which he felt was wrong, and that if Congress to chose to exercise it and determine that state procurement should be subject to a trade agreement, the Supreme Court would uphold it. But as a political matter it was a different story than as a legal matter.

95.  He suggested that if TPA was drafted in a way that for a state, it was "all or none", that would be constructive cooperation. The TPA should also say that companies that have most of their employment in a state that signs up—that company will then be eligible for procurement in Europe. But if it had most of its employment in a state that does not sign up, then it would not be eligible. In his view this would create an incentive for that company, which is far stronger than the USTR, to lobby the Governor on procurement or on aligning professional certification standards or other state competences. The other thing he thought could be done would be for the federal government to say that if there is a significant amount of federal funding for procurement, that would have to be open under the terms of the TTIP. So access to federal funding could be made conditional in that way.

96.  Kent Hughes seconded the suggestion of finding creative ways of "using the carrot". Some states had already introduced certain regulations—e.g. speed limits—in return for federal transportation money, so the federal government already had practice in using incentives to influence the states, and this was a more likely path to success.

97.  Claude Barfield suggested that while this was a great idea substantively, it might be difficult to shoehorn into either the TPA or TTIP. He warned that the federal government would face opposition not only from the states but from the separate and equally influential Buy America groups.

98.  Dan Hamilton noted that if one looked at the WTO procurement agreement, only 37 states were party to that, and there was also a separate US-Canada agreement where not many US states got involved even though the provinces did. He went on to suggest that the EU-Canada agreement would maybe have some relevance for the TTIP, because the provinces were at the negotiating table. His assessment was that the EU goal for government procurement was maybe the top goal, or one of them, and it was a very sensitive issue for the US side.

99.  Asked whether after Presidential elections, it would become harder to press ahead with TTIP, Dan Hamilton predicted that any executive branch would try to continue, but that it would be a new composition of Congress in both the House and the Senate that would be hard to predict. Claude Barfield pointed out that Tea Party Republicans' voting record on previous FTAs was higher (more supportive) than the normal Republican vote, as in the past they had seen it as part of "getting the state off people's backs" but that they were under some pressure now not to be seen to give anything to President Obama.

100.  Asked about how many people talk about trade policy, Gary Hufbauer suggested that it would be very few, 1-in-50 or 1-in-100, but the way they would talk about it would be to associate trade with all the bad things in American life: inequality, unemployment, environmental degradation, etc. This atmosphere among opponents, who are few but vocal, was very strong. It had never come up as a presidential issue, but does come up in congressional races.

101.  On the subject of governors' support for TPA, Claude Barfield suggested that governors were all trying to attract investment, and saw trade as about jobs, but that it would depend on the state. Dan Hamilton suggested that much would also depend on how it is framed. TTIP was not a normal trade agreement, because trade barriers across the Atlantic are not very high, but if it were framed as just another trade agreement, then it would be in more trouble than if it were framed as something else. In his view, the lifeblood of the transatlantic economy was investment, not trade. US commerce with Asia was trade-driven, while US commerce across the Atlantic was investment-driven—this simple distinction made all the difference. When talking to a Governor, this would mean talking about onshore jobs, and investment coming to the states, and that would be what they would want to hear. Across the board, and across the United States, the main investors in all the states, the main investors creating jobs that were on average better paid and with better benefits, came from Europe. The UK in particular was a huge piece of that. He therefore suggested there was a need to explain that what the US and EU were trying to do with the TTIP agreement was to keep standards high, and set a benchmark for global standards, and that if they did not do it then the result would be to end up with Chinese standards, and that was the simple choice.

102.  Dan Hamilton warned, however, that framing the TTIP as an "anti-China strategy" would be the easy way to win support, but that it was not what TTIP was really about. Instead, it was about helping to define the terms of China's integration into the world economy. The question was on what terms China and other developing countries could be integrated. EU and US messages to those third countries had thus far been a divided message at best, and a competitive message at worst. Each side had been talking to third countries separately in an attempt to shore up their standards rather than those of the other side, and the result had been a lowest common denominator approach. He cited the example of lead in toys, an issue that had arisen in both the EU and US in respect of toys coming from China. Instead of doing what they usually do, US and EU officials joined forces and created a trilateral consumer safety process with the Chinese, in which their major customers got together and indicated they were happy to keep importing the toys but subject to certain standards. That was not about containing China, but about the US and EU protecting a certain standard. That was in his view what the logic of the TTIP was in terms of influencing third parties—to influence their own debates. His critique of it at the moment, was that leaders had not said for TTIP what they had said for TPP, which is whether it will be part of open architecture trade or not. TPP leaders have said that although there are 12 countries negotiating, it is also open to all members of APEC and even beyond. In the TTIP, the US and EU had not said anything about that, and so the impression they could create is that it is a closed agreement, about trade diversion rather than trade creation, and about rich countries pulling up the drawbridge. Although that was not the logic of what was being attempted, without saying it—even in just a general way—the US and EU would start to lose others. He proposed that at the EU-US summit in March, leaders should affirm that the TTIP was part of open-architecture trade, and would be WTO compatible. In his view they did not need to specify modalities of what that would mean yet, but without saying something they would lose some of the PR/public diplomacy debate.

103.  On the subject of financial services, Gary Hufbauer suggested the real problem was Senator Warren and her allies in the Democratic party. If financial services were included, it would be one of the regulatory issues on which one could guarantee strong opposition, because they would see it "as a way of putting more money in Jamie Diamond's pocket, and to keep the big banks strong and out of control and ripping off consumers, etc."

104.  Returning to the subject of China, Claude Barfield suggested that TTIP did not have the same near-term diplomacy and security overlay that TPP did. For that reason, it would be a disaster for the US if TPP went down. Dan Hamilton agreed, but argued that the TTIP did also have a security and diplomacy overlay.

105.  Dan Hamilton added that looking at the components of TTIP, it would reach deeply into both domestic societies. Aligning regulatory differences would be where the politics and the tough trade-offs would be. This is where TTIP would go beyond previous trade negotiations, including the TPP. Claude Barfield warned that the Obama administration did not appear to have prepared the business community for where it might have to compromise, for example on IP protection, or on services.

106.  On the subject of how to engage with the public about TTIP, Dan Hamilton suggested that leaders should be talking about spurring on investment flows, which means more investment, translating into real jobs. "When you do trade, you send stuff across the ocean. Investment is going to be in your community." That would be the sort of case people could relate to. Talking about transatlantic barriers had led some to think that the agreement was about and for big companies. It would be important to counter that by pointing out that a big part of the reason why small companies don't engage in trade is because it was too much paperwork, and too complicated. If those barriers could be cleared away with two-thirds of the world's richest economies, then the artisan cheese maker in Wisconsin would have a market in Europe that he might not want to engage in right now because it's too complicated.

107.  Returning to the lead in toys example, he went on to suggest that if the EU and US could at least agree on some basis, it would not set the global standard anymore, but at least there would be an orientation point. If the US could not do that with the system most like theirs, how could they possibly do it with other countries. These kinds of arguments were more likely to have traction than expert studies. Governments had not yet been able to boil the case down to the types of arguments people could relate to.

108.  He also warned that the TAFTA label was misleading in suggesting that the TTIP was predominantly about trade, and would invite all sorts of arguments that could be avoided if one made clear that it was about something different. Beyond the economics, there was in his view another diplomatic/security argument to be made. "NATO is a little wobbly, it is the only glue across the Atlantic, it is our only commitment to each other." Calling TTIP an economic NATO was bad for a lot of reasons, but was good shorthand in that it conveyed the message quickly. But it was the wrong label because it gave the impression that there was an enemy. The idea of TTIP as a "second glue" across the Atlantic could, however, be helpful. Having another link across the Atlantic at a time when the old link we have (NATO) was for an old purpose which doesn't seem to be there. Arguing that case could be helpful. The notion of keeping standards high, not letting the US-EU way of life deteriorate in the international global system, and explaining that that meant doing a bit more with European colleagues, would also have a bit of resonance in some circles, he predicted.

109.  In the end, when it came down to the US Senate or members of Congress, they would ask to questions: first, what it would mean for their constituents. Studies about what the TTIP would mean for states would therefore be quite important. Second, there would be a lot of other questions unrelated to the agreement about the US-EU geopolitical relationship in general. The geopolitical argument would therefore have to be in place as well as the economic.

110.  There was a danger that the US-EU relationship would be seen in the US as a legacy relationship that was less relevant to the current world. Unless there was adjustment of the nature of the relationship, rebalancing of the pivot, it would increasingly be seen as that. Why would you do a deal with Europe if it is seen as sick and sclerotic economically. The US was basically saying to the Europeans that they needed to rebalance the relationship in three ways. One was in the security partnership. There was still a commitment to the NATO alliance, still a commitment the US would provide assets only it has in crisis, but it doesn't have to run the show every day or be in command of everything. The Europeans would have to pick up some of the slack, especially around their periphery. The second was to suggest there was a need to rebalance the economic security relationship. The health of the transatlantic relationship had for decades been defined primarily through the military prism, and had failed to tap the huge potential of the economic dynamic, and that was what TTIP was an attempt to do—to add this second glue to NATO. It would help with the rebalancing in that area. The third rebalancing was that Europe needed to help with issues beyond European shores. Europe was no longer the problem, but wasn't at present part of the solution either.

111.  Gary Hufbauer cautioned that this point of view was what people in Washington might think, but that beyond D.C., outside the beltway, no-one would care about NATO and that there was not a security complaint outside the beltway, where Europe was still seen as a reliable partner e.g. on Iran, Syria and Afghanistan. He described the US pivot to Asia as a pivot of economic opportunism, but not a realistic substitute for the US security relationship with Europe.

US Treasury

The Committee then held a private discussion with Sharon Yuan, Deputy Assistant Secretary for Trade & Investment Policy and Susan Baker, Director of the Office of International Banking and Securities Markets at the US Department of the Treasury.

Senator Orrin Hatch

The Committee also took evidence from Senator Orrin Hatch (Republican—Utah), ranking member of the Senate Finance Committee, and Everett Eissenstat, Chief International Trade Counsel in the Senator's office.

112.  Asked about the level of political backing for TTIP, the Senator said it was very high on his agenda, but had somewhat slowed down because of the appointment of Senator Baucus to become Ambassador to China. The Senator and his colleagues would like to pass TPA before Senator Baucus went to China. Without TPA, he was concerned that the EU would not take the US seriously. So TPA was an extremely important instrument for the US. With Baucus leaving, the new Chairman of the Finance Committee would be Ron Wyden from Oregon. It remained to be seen whether the incoming Chairman would want to revamp the whole agreement. If he did, the agreement would probably have a difficult time making it through even the Senate. TPA was absolutely critical to doing the TPP with 11 nations and TTIP with 28 nations. The Senator was under the impression that the Administration did not think they could get TPA passed before Baucus left. This would mean having to work with Senator Wyden. Senator Hatch was confident that were they to bring up TPA at that moment in the Finance Committee, it would pass overwhelmingly. If it were brought to the floor it could be passed there too. But first the Administration needed to ask the Committee to get it done. The President had made all the appropriate gestures about it, but so far had not really weighed in.

113.  Asked about financial services, the Senator confirmed that he did want to see financial services included in the agreement, but noted that he also felt strongly about intellectual property issues, because that was where much of the future was, in his view. International trade would be a mess without those protections.

Senator Debbie Stabenow

The Committee took evidence from Senator Debbie Stabenow (Democrat—Michigan), Chair of the Senate Agriculture Committee.

114.  The Senator explained that continuing to open up markets and create export opportunities for US businesses and farmers was very important. There were a number of trade agreements presently under negotiation. The TPP was much more complicated. The question of TPA was controversial. Members of Congress were interested in seeing agreement by agreement, rather than giving overall authority, so there was a split on that among Democrats. Among the different trade agreements, the agreement with the EU was probably the one that people were most comfortable with. They had not gotten into specifics yet. There was a new incoming Chairman of the Finance Committee, who she expected to be very pro-trade but who would want people to be working together. Senator Stabenow described herself as "falling in the middle on this": she wanted open markets and trade, but would be looking at benchmarks in terms of fairness, such as currency manipulation. From an agriculture standpoint, one area of difference would be GMOs.

115.  Asked about whether the impression that the Democratic party was not very keen on TTIP, the Senator suggested that it would depend on how it was written and what it would look like when it was done. There was not a "knee-jerk, automatic no"—it would really depend on the details. She and other Democrats had voted in favour of the trade agreement with South Korea, but it had taken time to get it to a point where she and others felt it was right and fair for their industries. It would therefore in her view not be right to make a blanket statement. For the Democratic party it would be very much about the details: enforcement, non-tariff trade barriers, and so on.

116.  Asked about the main concerns among Democrats about the TPA, the Senator said that in general people were concerned about TPA giving the President authority to negotiate without elements that relate to the environment, labour standards, making sure that TPA would require certain parameters around different issues so as to create a level playing field and prevent trade from creating a race to the lowest common denominator for protections. They were concerned about making sure that trade raised all boats in terms of standards of living. The US and EU shared the problem of competition from other lower-wage countries and so it was about how to raise standards in other countries instead of lowering their own.

117.  Responding to a question about the President's commitment, Senator Stabenow indicated that the Administration were very committed to TPA and both trade agreements (TPA and TTIP). People in the Democratic party had very different perspectives on trade depending on which part of the country they came from. Those that were on the coast—California, Oregon, Washington State—that were more export-focused were more likely to say "yes" immediately to TPA, than those in the middle of the country like herself. The President would not automatically get TPA just by indicating he wanted it, but the Administration had already started talking to her and colleagues about it. The process that would be necessary had only just begun: there had been only one hearing on the TPA bill.

118.  On the prospects of getting some sort of agreement on agriculture, Senator Stabenow suggested everything was on the table. She had met with members of the agriculture committee in the European Parliament. Most of them still felt that GMOs were inherently unsafe, even though the science did not show that. In the farm bill they had just passed there were those that wanted products labelled in a way that would scare consumers without any evidence that anything was unsafe, and that had been rejected. Which was not to say that something could not be unsafe, but that it needed to be judged on the science. Every agricultural product was modified in some way, starting with hybrid varieties of wheat and corn. Many GM modifications were good for the environment. From an agriculture standpoint, US producers would want to make sure that they could continue to sell into the European market and wanted open markets, and were thus pro-TPA. They were concerned about SPS issues and non-tariff barriers. She suggested that people were probably open to looking at everything, including geographical indicators, depending on how it all came together as a package.

119.  On financial services, the Senator said that she did not have the same views as the US Treasury. Through the Agriculture Committee, she was involved in the regulation of agriculture derivatives, and the Committee also had oversight of the Commodity Futures Trading Commission (CFTC). They had been looking at a lot of cross-border issues, and had passed stronger regulation. There was a real concern about stepping into the middle of that through a trade agreement and changing the things they were trying to do.

120.  On the auto industry in Michigan, Senator Stabenow suggested that it appeared to be an opportunity for the industry. They were very nervous about Japan, but optimistic about Europe.

Alliance of Automobile Manufacturers

The Committee held a private discussion with representatives of the Alliance of Automobile Manufacturers and representatives of the member companies of the Alliance.

Day Three: Thursday 30 January

American Farm Bureau Federation

The Committee took evidence from David Salmonsen, Senior Director, Congressional Relations, and Veronica Nigh, Economist, American Farm Bureau Federation.

121.  Mr Salmonsen suggested that the issues in transatlantic trade in agricultural products were the old ones, including issues around meat exports—EU barriers on beef, poultry and pork—and issues around the movement of GMO products, for example the timing of approvals. He went on to suggest that many of the issues that the EU presented as food safety issues—such as GM or hormone treatment—were in fact trade issues, and restrictions served as a trade barrier. This was why the US had taken the WTO case on hormone-treated beef. The TTIP provided an opportunity to get an agreement to open the market up again.

122.  On the subject of GMOs, Mr Salmonsen suggested that for the US industry, the issue was about timeliness of approvals. The European Food Safety Agency was coming to the same conclusions as the US Food and Drug Administration, but then the process would grind to a halt when it got to the political level. In their view, the concerns in some EU member states around GM were to do with the structure of agriculture, rather than food safety.

123.  On the subject of Geographical Indications, Mr Salmonsen noted out that where the US industry had balked at EU proposals was in regard to single names, such as parmesan or feta. If one were talking about combination names, perhaps there might be room to discuss. If a compromise were there, it would be along those lines.

124.  Mr Salmonsen explained that in respect of Greek yoghurt, for example, the dairy industry in New York State had made a significant investment which they would not wish to give up.

125.  Ms Nigh suggested that the issue of GIs would resolve itself over time. There was a big change underway in the way American consumers view food products. Consumers were now seeking the two-name products. As the American palate adapted and changed, these things would find a place, and a way would be found to allow co-existence of the two types of products.

126.  In respect of tariffs, Mr Salmonesen explained that the higher EU tariffs on for example beef, pork, poultry and feed grains—were where the US agriculture sector had offensive interests. They had defensive interests on dairy, and also on meat exports from the EU. A lot of the US dairy industry was regulated at the state level, meaning an organisation of state dairy regulators would have to get together and agree to changes.

127.  Ms Nigh added that on processed food products, it was very difficult for US exporters to understand what tariff their product would face. There was therefore also work to be done on the administration of tariffs, and Tariff Rate Quotas.

128.  On unpasteurised cheese, Mr Salmonsen noted that it was a huge health concern, ever since a tuberculosis problem in the 1920s. Nonetheless there was no outright ban—instead products need to be stored and cured in a certain way, and these restrictions also applied to US products. Such products did however tend to be regulated state-by-state. The organised dairy industry would be concerned about anything that made their industry look unsafe.

129.  Ms Nigh noted that 20 years ago, the US sent only bulk products to Europe, while the EU sent only processed products, whereas now transatlantic trade in food and agriculture products was much more complex. Accordingly, the cumulative effect of lots of small changes would make a TTIP deal in agriculture successful. No single change would provide multi-billion dollar benefits.

130.  On the subject of political representation for the US agriculture sector, Mr Salmonsen noted that there were agriculture interests in every seat in the Senate. In the House of Representatives, around 120 members paid close attention to agriculture issues.

131.  He suggested that since the 1970s, US labour unions had been hard-wired to oppose trade agreements, out of concern about losing jobs. In the case of the TTIP, people would not be shifting manufacturing to get a cost benefit, but the labour unions might nonetheless stay quiet rather than support the initiative. He went on to suggest that the Democrats would not want a trade agreement hitting Congress this year [2014], as they would need funding and on-the-ground political muscle from the labour unions.

132.  Mr Salmonsen nonetheless pointed out that trade agreements concluded by the US administration did get passed, even if they sometimes needed to wait for political conditions to fall right. The best odds of passing a TTIP agreement might be in 2015, or early 2016. It would not be possible to go further into 2016 and closer to the presidential election unless the labour unions were to support the initiative. It had often happened in the past that one administration negotiated an agreement, and a subsequent one got it passed.

133.  One-third of the value of US agricultural production is exported, Mr Salmonsen noted. Ms Nigh pointed out that trade was an abstract notion for most voters, with import penetration in the US being relatively low (around 15 per cent of sales). It would therefore take a long time for elected officials to work up the voter appeal of the initiative.

134.  The American Farm Bureau Federation strongly supported Trade Promotion Authority. Some crops were almost entirely exported. It would be better to have the debate on trade on the procedural TPA bill and not on the substantive agreement itself.

135.  The US agriculture industry also had an interest in trade facilitation measures, to the extent that many of their products—e.g. fruit and vegetables—were perishable, and keeping them refrigerated raised costs the longer they were left sitting around.

EU Delegation to the United States

The Committee held a private discussion with Mr François Rivasseau, Deputy Head of the Delegation.

British American Business

The Committee held a private discussion with representatives of British American Business and representatives of member companies of BAB.

Office of the US Trade Representative

The Committee took evidence from Ambassador Miriam Sapiro, Deputy US Trade Representative.

136.  Ambassador Sapiro began by noting that the European Union as a whole was the US's largest trading partner, and there was a substantial relationship already: nearly $4 trillion in two-way trade and investment, that supported about 13m jobs on both sides of the Atlantic. As impressive as the numbers already are, they felt that there was scope to do more together to promote economic growth and support and create jobs on both sides of the Atlantic. She suggested that in view of the economic challenges that the US and EU are still facing, there was a common view that they "cannot afford to leave any jobs on the table".

137.  USTR had told the European Commission that they were "ready to work as hard and as fast as they want to". They recognised that the European Parliament would be having elections in May, but were hoping that it would not affect their work, as most of it was still at the technical level, in working groups going over a range of issues. It would be important to keep the momentum going.

138.  On the subject of financial services, the Ambassador stated that the US strongly supported having financial services market access issues as part of the agreement. These issues were part of their other trade agreements and should also be part of this one. It had been proposed that under the topic of regulatory cooperation, they should also look at regulatory issues affecting the financial services sector. Their response was that they had some very sound existing mechanisms already working on this very question, and they did not see the value added of introducing another channel when the FMRD, various G20 initiatives, the FSB and other groups were already in place. Both sides had an interest in making sure those processes were working well, but they did not see the rationale for trying to move processes already working into a new agreement that isn't even written yet, much less being presented to Parliament or enforced.

139.  The discussions already underway in several fora should continue in parallel to TTIP. TTIP should be used on problems that do not currently have solutions and where solutions could only be found in a trade agreement.

140.  Asked about their efforts to bring regulators on board in order to learn the lessons of past attempts to conclude an EU-US agreement, the Ambassador said that they were determined at the highest levels to find a new way forward. From the outset of the negotiation, they had worked very closely with their regulators and were under the impression the European Commission had done the same. If there is a way to improve the status quo, they believed they would find it.

141.  On the subject of the TPA bill, the Ambassador said that they were very pleased that Congress had introduced a bill, there were many members taking a look at it, and what had changed since 2002. Things had changed—US standards had gotten higher, for example on labour issues and environmental protection, and it was appropriate to reflect that in new legislation. She saw it as Congress' opportunity to tell the Administration what it would like to see in a trade agreement. Even though the exact timetable was not known—and they hoped it would be soon—it did not directly affect their work. They had had over 1,000 consultations with Congress on the TPP since it was launched. So they were actively engaged with Congress. It was a similar process with TTIP. They had formally sent a letter to Congress last year setting out their intention to open negotiations with the European Union, and since opening negotiations 90 days later, they had already had hundreds of consultations with Congress on TTIP.

142.  On the subject of agriculture, the Ambassador said that whether it was a question of hormones or GMOs or any of the other agricultural issues that had plagued the relationship, it came down to whether or not the EU and US were using scientific assessments and risk assessments in an appropriate and non-protectionist way. They would fight for that principle. They wanted to make sure the agreement had high standards on SPS and decisions on both sides were made reflecting science and risk. In terms of GIs, it was less of a concern for the UK, she questioned whether there were practical problems in accessing the US market. They did not accept that the US should not be able to sell products like parmesan cheese in Europe or in any other country in the world, but they did want to know if someone with a product from Europe was having trouble getting access to the US market. The US operated a trademark system. Many GIs were registered as trademarks and were functioning fine as far as she knew. Broad protection for GIs would create as many problems as some people thought it would solve. On the Canada agreement, she would be happy to take a look to see if there were provisions that would be useful to take into account.

143.  On the use of hormone treatments, the Ambassador pointed out that there had been a number of cases where EFSA had agreed with the United States, but where under comitology and weighted voting it had taken a while for the Commission to get to the right decision.

144.  On the subject of procurement, Ambassador Sapiro explained that they were still in the process of discussing interests on both sides. The EU had indicated interest in more access to US states. They currently had 13 states not signed up to the relevant WTO agreement. The EU was seeking more access across the 50 states and more access to federal procurement. The US had similar interests in Europe. There was sometimes a perception that Europe was more open, but when one looked at the detail it could be seen that that was not the case. There were instances where Europe had indicated openness to certain programmes, but when reading the small print one saw they were not open to the US. So there were challenges on both sides. Sometimes it might be a matter of transparency, or information only being published in certain languages that are not spoken outside a certain country or two.

145.  Responding to a question about ISDS, the Ambassador welcomed the Commission's public consultation on the issue. They had had a similar consultation in the US about 2 or 3 years ago. The dispute settlement provision, if balanced, could successfully weigh the interests of regulators and the interests of investors operating overseas who were concerned about getting a fair hearing.

146.  On the automotive sector, the Ambassador suggested that regulators on both sides were determined to see whether they could find more common ground and ways to address similar situations. She did not see either side changing their safety standards.

147.  On tariffs, the Ambassador pointed out that tariffs were already relatively low, but that the volume of trade was so high, particularly on industrial goods, that the lowering of tariffs would have an impact and that they hoped to go to zero across the board, in time. The biggest "bang for buck" would however be on the regulatory side. The regulatory process needed to be more transparent, needed to have more participation by more people, needed to be more accountable. Their hope was that the EU would inject that kind of transparency into some of its processes. It would also help the Commission to be seen as more responsive to European citizens.

148.  On GMOs, the Ambassador pointed out that Europe has a regime for approving GMO applications, it just takes a while, usually several years, when it is supposed to take a few months or one year. The system is backed up, but there is a system, the EU does process GMOs, they are not illegal.

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