TTIP: questions and answers

Contents

1. What is the origin of the Transatlantic Trade and Investment Partnership?

The idea of a trade partnership between the European Union and the United States was discussed in the mid-1990s. It came up again in the early 2010s, in the context of a renewed global focus on bilateral trade agreements, and so the European Union and the United States returned to the idea of drafting a transatlantic agreement.

Before opening the negotiations, in2011 the European Union and the United States established a group of experts from their respective administrations to see what kind of agreement on trade and investment could be sought. This group was chaired by the European Commissioner for Trade, KarelDeGucht, who was succeeded by Cecilia Malmström, and the United States Trade Representative (USTR). It considered the potential opportunities and challenges that an agreement might bring. In late2012, it concluded that a comprehensive agreement covering all sectors would have a positive impact, boosting trade, economic growth and job creation on both sides of the Atlantic.

2. Why is the European Union an essential trading partner for the United States?

The European Union is the largest economy and the biggest market in the world. It is the leading importer of services and manufactured goods worldwide, it holds the largest stock of foreign investment and it attracts the greatest share of foreign investment globally.

It is the number one investor in the United States (2013), the second-largest destination for American exports of goods (2013) and the biggest market for American exports of services (2014).

3. Why is the United States important for the French economy?

The US market is the largest market for French exports outside the EU and the top destination for French foreign investment.

With trade flows of around €59billion in2014, the US market is the largest export market for French businesses and the second-largest import market (outside the EU). Transport equipment, capital goods, and chemical, agrifood and pharmaceutical products account for three quarters of French exports to the United States. Transport equipment, capital goods, agriculture and agrifood were the main sectors driving the growth in our exports to the United States in 2014.

The United States is also the leading destination for French foreign direct investment (FDI), ahead of Belgium. French FDI stock in the United States totalled €189billion at the end of 2014. There are 3,850subsidiaries of French companies in the United States, employing a little over 570,000people. The turnover of French subsidiaries in the United States (€225billion) is more than eight times the amount of French exports to this country.

In addition, the United States is the leading foreign investor in France, with FDI stock of €106.5billion at the end of 2013. A total of 3,224American companies are present in France, employing nearly 400,000people.

4. What will the agreement be about?

Acting on a proposal made by the European and American negotiators, the President of the United States and the Council of the EU, which issued a negotiating mandate to the Commission in June2013, approved the idea of a comprehensive agreement, that is, covering many common interest topics. This draft agreement is not limited to customs duties, especially as the tariffs on trade between these two areas are already low (between 2% and 3% on average). In this respect, it reflects the new reality of trade policy, which attaches greater importance to lowering non-tariff barriers.

The negotiations are divided into three pillars:

  • Market access covers tariffs (lowering customs duties), access to public procurement, provision of services and freedom and protection of investments (part1).
  • Regulatory cooperation includes a horizontal aspect (dealing with technical barriers to trade), a sector-specific aspect (annexes focusing on ten industries, including vehicles, pharmaceuticals, cosmetics and chemicals), and lastly, an institutional aspect (setting up bodies to oversee the implementation of the agreement and promote dialogue on regulations and the convergence of future standards) (part2).
  • Rules, which cover commitments in terms of competition, intellectual property, geographical indications, etc. (part3).However, the agreement will not cover audiovisual services (excluded from the mandate at France’s request), defence procurement, or legislation on food-related consumer and health protection (e.g. genetically modified organisms and hormones in meat). As regards public services, the European Union wishes to preserve its capacity to set up and maintain public services at national and local level, in line with the position that it has always held at the World Trade Organization (WTO) and in its bilateral agreements. It systematically provides for a horizontal reservation which authorizes the parties to grant exclusive rights or create public monopolies at national and local level. The general nature of this reservation, which is enshrined in all EU trade agreements, unambiguously allows for major exclusions, at the discretion of each Member State.

5. What will France gain as regards the economy and employment?

At a microeconomic level, in concrete terms, the advantages of TTIP for businesses could be the lifting of certain restrictions, lower customs duties in sectors where they remain high, and easier trading operations (especially the export of textiles, fruit and vegetables, beef and veal, transport equipment, insurance services), which are likely to increase savings and competitiveness.

Several macroeconomic studies have been carried out on how TTIP could affect growth and employment. The agreement will only be beneficial to France if French companies gain better access to the American market. For there are still many barriers, especially with regard to procurement, services (particularly financial services) and certain industrial and agrifood goods. Removing these obstacles will have a positive impact on growth and employment for France.

6. Who is leading the negotiations and how do the negotiators report on their work?

Are the negotiations transparent?When it comes to trade policy, the European Commission negotiates on behalf of the European Union and its 28Member States. The Commission negotiates with the United States Trade Representative (USTR), meeting at regular intervals for rounds of negotiations that take place alternately in the United States and in Europe.

Within the Commission, the Directorate-General for Trade (DG Trade), under the authority of the Commissioner for Trade, Cecilia Malmström, leads the negotiations. This Directorate-General works closely with all other departments of the Commission, which participate in the negotiations as required.

The Commission negotiates on the basis of a mandate that was adopted unanimously by the Member States in June2013. It reports to the Member States in detail after each round of negotiations at Trade Policy Committee meetings in Brussels. Likewise, European negotiating positions are planned with the Member States before each round. In other words, the Commission is ultimately responsible for presenting the European positions, basing them on the Member States’ positions, which serve as essential building blocks. In this way, the Member States assist the Commission in its task, as stipulated in Article207 of the Treaty on the Functioning of the European Union.

The Commission also reports on the progress of the negotiations to the European Parliament, which voted in favour of starting the negotiations with a very large majority [link] and can adopt resolutions on the negotiations [link].

At the end of the negotiations, the text of the agreement will need to be submitted to the Member States, which will make a unanimous decision. As agreed by the Member States, this is a mixed-type agreement and will have to be ratified by each Member State. The French Parliament will therefore vote on TTIP once the negotiations are over.

To meet the need for information and communication on trade negotiations, the European Commission has made the following arrangements: civil society is invited to attend the feedback meetings for stakeholders that take place at the end of each round of negotiations; any interested parties can express their opinion to the Commission during public consultations (a consultation on investor-state arbitration is currently underway); an advisory committee of business representatives, unions, consumers and NGOs has been set up by the EU negotiator; and European position papers have been published online [link to the Documents and events section of the European Commission website]. For their part, the Member States are also trying, to varying degrees, to keep the general public and national representations informed through online consultations (in France, two consultations were organized in 2013 on the economic and regulatory aspects of TTIP) and dedicated information sessions. The French Government is determined to take further steps to keep the Parliament and civil society informed. A strategic monitoring committee has been set up for this purpose, initially formed of members of parliament and industry federations. It is chaired by the Minister of State for Foreign Trade, MrMatthias Fekl, who expanded it to include civil society (NGOs and unions). The Minister of State has made a commitment to this body to present a trade policy report to the Parliament. France will continue to call for Brussels and our American partner to demonstrate greater transparency, especially as regards national authorities’ access to the negotiating documents and the publication of documents on TTIP.

7. How long will the negotiations last?

The duration of negotiations of this kind cannot be determined in advance. The negotiators intended to move forward quickly, to make the most of the political momentum generated by the launch of the negotiations. However, progress can only be made when the two parties are able to move forward together. In this respect, 2014 was an election year in both the United States and Europe and little progress was made in 2015.

8. Is there reason for concern about the future of existing European standards on consumer protection, the environment and health?

Preserving the existing level of health, environmental and consumer protection is explicitly mentioned in the negotiating mandate of the Commission, which therefore has a duty to reject any proposal that would negatively affect the protection of European citizens. The Member States, including France, are particularly attentive to this.

The French Government sees the defence of Member States’ right to regulate as an inviolable principle. This attachment to preserving public action capacities, especially as regards public health, the environment, consumer protection and protection of personal data, is particularly strong in the negotiating chapters on regulatory cooperation and investor-state dispute settlement (ISDS).

9. The United States is aware that it cannot reasonably expect progress on very sensitive issues where regulations are based on political choices and value systems. Will the EU be forced to change its legislation on genetically modified organisms (GMOs)?

No. Founding legislative texts, such as those on GMOs and those seeking to protect human life and health, the environment and consumer interests, are not up for negotiation.

In line with EU rules, certain GMOs that have been authorized for food and feed purposes or cultivation may be sold on the European market. Applications for authorization are examined by the European Food Safety Authority (EFSA), which issues scientific opinions on the safety of the GMOs and their use in food and feed and/or for cultivation. These authorization applications are then submitted to the Member States for their opinion. So far, no cultivation is authorized in France and 67GMOs, including two cut flowers, are authorized for import into the EU. The negotiations will not, in any way, change the safety evaluation of GMOs carried out by EFSA prior to marketing or the risk management procedures.

The EU and the United States have already exchanged information on policies, regulations and technical issues relating to GMOs. These exchanges of information seek to encourage cooperation but have no prescriptive impact: each party is in control of its legislation and regulations in this field, which are outside the scope of these negotiations.

10. Will EU and US standards be harmonized?

As regards regulatory cooperation, the negotiators are aiming for compatible standards rather than harmonization. The EU and the United States both have a large number of standards and regulations. The differences between them could result in additional costs for manufacturers, especially if they need to set up separate production lines. The main aim of the TTIP negotiators is not to convince one of the parties to change its system, but to achieve better coordination and cooperation measures that simplify procedures for businesses, or even a more open market, which SMEs would particularly welcome. Vehicles, medical devices and pharmaceuticals are three sectors in which greater regulatory cooperation could be envisaged in particular.

For example, French exporters of apples or pears must currently pay for controls carried out by an American inspector before export. Our exporters could be exempt from this procedure if the American and EU plant health systems were recognized as equivalent, as they already ensure the same degree of food safety, but through different standards. In addition, it is not possible to export certain dairy products such as crème fraiche to the United States due to the complexity of American regulations. Recognizing the equivalence of the European food safety system, which guarantees a very high level of food safety but in a different way to the American system, would lift this trade barrier. It is important to remember that regulatory cooperation is based on the principle of maintaining the same level of food safety.

Similar situations can be observed in many other industries, such as the standards that apply to textiles or cosmetics. It should be emphasized that regulatory cooperation can take several forms: convergence around a benchmark international standard, simplifying market access procedures, or mutual recognition of equivalent systems, which is the preferred method in these negotiations and does not require harmonization.

11. Could regulatory cooperation result in a lowering of standards?

France will reject any compromise that jeopardizes security, consumer protection or the environment.

The aim is not to level standards down. The aim is not to make our regulations more compatible by lowering our requirements to the lowest common denominator, but rather to identify areas where there is unnecessary divergence if, and only if, levels of protection are equivalent. In such cases, it makes sense to examine pragmatically whether things can be done better and in a more coordinated way. Each party will retain the right to regulate environmental, security and health issues at a level that it considers appropriate.

In theory, the standards that apply to products in the EU and in the United States have a common aim: to protect consumers or the environment. The level of precaution required may vary depending on how societies view particular risks, but the risks identified are generally the same and are often the subject of benchmark international standards approved in specialized forums. The United States does not always participate in these forums, however.

12. Will TTIP give the United States greater influence over the decisions made in the EU with regard to regulations?

In the negotiations, there is no question of allowing the United States to interfere in the European decision-making process. Interference of this kind, which would invite reciprocal interference by the EU in the United States, would be completely unacceptable for the negotiators of both parties.

The only option being considered is for regulators of both parties to consult one another before drawing up new regulations, to avoid consequences that might harm the other party. Cooperation of this kind would be purely consultative. Any amendment of current EU legislation, whether as a result of TTIP or subsequent European draft regulations, will need to be ratified or approved by the Member States within the Council and by the European Parliament, in accordance with the usual procedures. Lastly, the draft provides for the creation of a regulatory cooperation body, which would be the forum for dialogue between EU and US regulators in the future. The Commission’s stance, which is supported by France, is that this body could not, under any circumstances, be granted the power to make secondary legislation. The Member States would have to participate in it.

13. How will agriculture be affected?

The TTIP negotiations will also cover agriculture. Opening up agricultural markets needs to be a two-way process, to benefit both the EU and the United States. The United States wish to export more of their agricultural commodities, such as wheat and soybeans. EU exports to the United States mainly consist of high-end food products, such as spirits, wine, beer and processed food, including cheese, ham and chocolate.

However, production conditions in the EU and France are not the same as in the United States, due to differences in regulations, regarding animal welfare and the environment for example, and differences in costs such as labour and energy costs. The resulting difference in the production cost of certain “sensitive” farming products needs to be taken into account in the TTIP negotiations, for example through a specific approach to these products. That means that they cannot undergo full liberalization, as this would excessively disrupt European production.

The EU would gain from exporting more of the high-quality foodstuffs that it produces to the US. At the moment, certain European food products, such as apples and several cheeses, are not authorized on the American market. US plant health regulations heavily penalize European apples for example, and America’s costly rules in terms of manufacturing and control standards effectively prevent exports of dairy and meat-based products by deterring exporters. In terms of food safety, certain regulations prevent the export of various European cheeses, particularly unpasteurized ones. In many cases, Europe’s main aim would be a simplification of these procedures.

Although US customs duties on European agricultural products are generally low, some remain high (up to 112% for whey). Removing these duties and other trade barriers would help to increase the volume of EU exports to the United States.

14. Will European supermarkets be filled with American hormone-treated meat?

No. The EU’s founding legislative texts, such as those banning hormone-treated meat and, more generally, those seeking to protect human life and health, the environment and consumer interests, are not up for negotiation. As the European negotiators themselves have explained to the United States, the aim of TTIP is not to make trading profits at the expense of consumer health, and their mandate prohibits them from lowering the level of health protection for trade purposes.

15. Will the European film industry be jeopardized?

No. In the mandate, the Member States clearly stated to the Commission that the audiovisual sector should be excluded from the negotiations concerning services and freedom of establishment.

Europe is not closed to American films now and it has no reason to be. Our cinemas and television channels already broadcast many American productions.

However, it is worth noting that the EU has rules to preserve European cultural diversity, especially the wealth of different languages on our continent. There is legislation at EU and national level that aims to protect and promote cultural diversity, for example in the field of film production and television programming - the audiovisual sector. The EU will not compromise on this legislation or this capacity to protect European cultural heritage.

16. Will TTIP affect public services?

TTIP will not affect European public services. At the WTO and in its bilateral agreements, the EU has always preserved its capacity to set up and maintain public services at national and local level. It systematically negotiates a clause to preserve public services, which can be found in all existing agreements. In practice, this clause authorizes the EU to grant exclusive rights or create public monopolies over public services. The general nature of this clause very clearly allows for major exclusions, at the discretion of each Member State. The EU does not intend to give up this practice for TTIP.

17. Will TTIP allow for recognition of geographical indications (GIs)?

France wants an agreement between the EU and the US to enable full recognition of Europe’s major geographical indications (protected designations of origin and protected geographical indications) in the United States. Protecting geographical indications in this way would help combat unauthorized use of names and genericity, which in turn would increase the export of these products. This would mean that the GIs of French wines such as Champagne or Chablis would be fully protected and American wines could no longer use these names. The negotiations will need to overcome the fact that the US does not recognize this system, beyond what it has agreed to in WTO agreements, and feels that its trademark law provides sufficient protection.

18. How will TTIP enable progress in the energy sector?

TTIP should enable better market access and a more transparent and non-discriminatory legal framework governing supply. For example, the EU should be able to purchase American gas without going through a complicated procedure to obtain export authorization for this gas as it currently does. This should ultimately lead to greater diversification of supply.

TTIP cannot lead to a review of the ban on fracking, which was established by the act of 13July2011 in France. This issue is not being negotiated.

19. Will TTIP introduce a disguised form of ACTA?

No. The aim of ACTA, the Anti-Counterfeiting Trade Agreement, was to prevent the trade of counterfeit goods. The European Parliament’s decision to reject this agreement will be fully respected. ACTA will not be reintroduced in a disguised form.

The EU and the United States both have effective systems for protecting intellectual property, although their approaches sometimes differ. There is no question of harmonizing European and American legislation on intellectual property rights. The TTIP negotiations will address only a limited range of subjects that are of common interest for the EU and the US, while aiming to preserve the strength of the current protection systems in place on either side of the Atlantic.

20. Will TTIP lead to the deregulation of financial services?

No. The main aim of TTIP with regard to financial services is to establish a common framework for prudential cooperation, to enable advance consultation on the rules governing financial services and trade in them within an integrated global market, but not to replace regulators and supervisors in their own area of competence. In particular, the idea would be to introduce mutual recognition procedures, when regulations are equivalent on both sides of the Atlantic.

21. Will TTIP include an investor-state arbitration mechanism?

The mandate given to the European Commission by the Member States provides for the negotiation of an investor-state dispute settlement (ISDS) mechanism in the framework of TTIP. France expressed reservations on this chapter very early on and did not request for it to be included. The inclusion of such a mechanism will ultimately depend on whether there is satisfactory protection of states’ right to regulate, on the transparency and fairness of the procedures, and on the impartiality and independence of the arbitrators. The negotiators will highlight the need to comply with these requirements during the discussions.

In view of the risks posed by the inclusion of an ISDS mechanism in TTIP, the Commission held a public consultation in 2014, which received a record 150,000responses. France then worked together with several European partners to outline some reforms based on the concerns of civil society, particularly regarding transparency and preserving the right to regulate. A joint statement was published by France and Germany on 22January2015.

As a result of this work, on 2June2015 a French proposal entitled “Towards a new way to settle disputes between states and investors” was submitted to the Commission. This proposal highlights the need to preserve the capacity of states to make sovereign and democratically legitimate decisions and suggests creating a new mechanism guaranteeing states’ right to regulate. Several fundamental concepts are clarified, such as investors’ “legitimate expectations” and “indirect expropriation”. The proposed mechanism includes strict rules on transparency, ethics and preventing conflicts of interest, including a quarantine period for arbitrators. Abusive claims by investors could also be sanctioned with deterrent penalties.

The proposal also includes an institutional innovation: the creation of a permanent court for all future agreements signed by the EU. The court would manage a pre-established list of legal professionals who act as investor-state arbitrators and review all of their decisions. Setting up this court would be a step towards a future multilateral court of investments, which is something still lacking at international level even though globalization has led to a major increase in international investment flows. The proposed European permanent court would form the backbone of this multilateral court.

22. Does TTIP mark the end of multilateralism and the Doha Round?

It is true that the Doha Round stalemate led the major actors in international trade to favour bilateral solutions in order to open up new markets to their exporters and promote a regulated framework for international trade. As the number of bilateral agreements increases, there is a greater risk of trade fragmentation, which we need to be wary of.

However, we need to consider these agreements as complementary, with bilateral agreements taking over from multilateral ones if they stall, without preventing the reopening of ambitious multilateral or plurilateral negotiations once the conditions are right (as for services at the moment, for example). The recent agreement between the United States and India is an encouraging sign that it may be possible to resume multilateral negotiations. Further positive signs include the internal progress of Economic Partnership Agreement (EPA) and Information Technology Agreement (ITA) negotiations.

23. Will TTIP result in American rules on data protection replacing or weakening EU rules in this field?

No. The EU and the United States are aware that they do not regulate data protection in the same way. However, the TTIP negotiations are not the right platform to address these differences. The level of personal data protection is not one of the issues being negotiated.

We have already established appropriate methods to manage transatlantic data flows, such as the Safe Harbour Agreement. The EU is also currently in talks with the United States on competent authorities’ access to data. The aim is to reach a framework agreement on data protection that strengthens our joint efforts to combat terrorism and serious crime, while effectively and credibly protecting private lives and personal data. These negotiations will take place separately from those on TTIP.

24. What impact will TTIP have on the digital sector?

So far, international trade negotiations have not really addressed digital issues. TTIP would be an opportunity to start defining international trade rules that are tailored to this sector and its new challenges. As the French Digital Council said in the opinion it submitted in April2014, when defining these rules, the EU needs to draw on its values (protecting citizens’ private lives, respect for cultural diversity, regulated competition in the digital sector, etc.). At the same time, TTIP will need to preserve the capacity of both partners to regulate and shape the digital market in the future.

25. Will the French Parliament have its say?

As agreed by the EU Member States, TTIP will be a mixed-type agreement, that is, some parts will come under the jurisdiction of the EU and others under the national jurisdiction of the Member States. The European negotiating mandate of June2013 is organized in that way.

The final outcome of the negotiations will be submitted to the Member States within the Council of the EU, which will need to make a unanimous decision, then to the European Parliament, which will also need to make a decision, but by a simple majority. Finally, since it is a mixed-type agreement, national parliaments will also need to make a decision on it, in accordance with their national procedures. The French Parliament will therefore have the last word, as the ratification of trade agreements in our country requires a law to be passed, under Article53 of the Constitution.

Last updated: 09/10/2015

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