The TTIP: Partnership or legal straitjacket?

The Transatlantic Trade and Investment Partnership(TTIP) currently under negotiation between the US and the EU has been billed as a free trade deal. And indeed, for the last couple of hundred years it has been clear that free trade has led to economic growth and its associated human prosperity. But the TTIP has given rise to much community opposition suggesting that the economic gains from trade are not the end of the story.

Rather, the controversy surrounding the deal underscores the tensions that exist between the notion of free trade on one hand and sustainability and other social outcomes on the other. Of particular concern (and relevance to this blog) is the potential of the TTIP to roll back environment protections and food standards – two key legislative measures aimed generally at achieving sustainability.

In the twenty-first century, with global tariff barriers at very low levels, “modern” free-trade agreements are refocusing their priorities toward “trade irritants”. Investment protections, such as provisions for Investor State Dispute Settlement (ISDS) mechanisms and behind the border issues – essentially regulatory matters traditionally the responsibility of national legislators and courts – are now the key targets for “liberalization”. So the question is really: who benefits from such agreements?

The TTIP has been described as a “corporate bill of rights” by its critics who see it as an instrument to enhance the profitability of multinationals. They suggest that the public has little to gain from the “partnership” – an initiative of the Transatlantic Economic Council whose raison d’etre is “reducing regulations to empower the private sector”. Whatever the merits of this argument, the EC has done little to prosecute the case that the deal serves the public interest.

While the EC helpfully reminds us that “free trade is a source of economic growth” the public seems unconvinced and the secrecy surrounding the negotiations has served only to entrench skepticism. In May this year, 250 people were arrested protesting against the TTIP in Brussels. More recently, the EC was recently inundated with over 150,000 submissions to its “consultation” about including an ISDS in the treaty. And in response to public pressure, the European Ombudsman has opened investigations into the EU Council and Commission over the lack of transparency regarding the negotiations.

So now the EC has embarked on a transparency offensive – a recent factsheet is titled “The TTIP: We’re listening and engaging”. And after six rounds of negotiations the EC is now publishing its negotiating position and has put the contentious discussion of on ISDS on hold pending public consultation. (It has 150,000 perspectives to assess!)

Although the secrecy surrounding the deal means that the specific behind the border issues that it addresses are uncertain, its aim is to “harmonize” regulations and “mutually recognize” standards. This implies something like a race to the bottom. For instance, European regulation on the labelling of genetically modified organisms and bans on hormone-treated beef and pork are threatened by the TTIP. As are moratoria or bans on fracking (high-volume hydraulic fracturing to extract unconventional fossil fuels) instituted under the precautionary principle.

The ISDS is especially troubling because it would elevate corporations to legal equivalence with nation-states. ISDS have been shown to exert a “chilling” effect on domestic legislators – sometimes the mere threat of a claim is enough for legislation to be abandoned or watered down. According to the Transnational Institute:

“The [TTIP] proposal follows a persistent campaign by industry lobby groups and law firms to empower large companies to challenge regulations both at home and abroad if they affect their profits. As a result, EU member states could soon find domestic laws to protect the public interest challenged in secretive, offshore tribunals where national laws have no weight and politicians no powers to intervene”.

Notably, a Swedish company, Vattenfall is suing Germany under the Energy Charter Treaty – which includes investment protection measures – over Germany’s decision to phase out nuclear energy power plants (for €3.7 billion).

The EC comforts us with ideas about how “modern” trade agreements include many non-tariff issues which “strengthen the EU’s rules-based system” meaning “that trade and investment are protected and can thrive”. Yet according to its website the “EU has some of the world’s highest environmental standards, developed over decades”. Such a situation did not come about by accident but through deliberative democratic processes. The public seems disinclined to sacrifice these environmental standards in favor of the economic benefits that might flow from creating the world’s biggest trade bloc.