TRADE NEGOTIATIONS Race to the Finish Line

With Washington and Brussels still at loggerheads over key aspects of TTIP, Handelsblatt sources say negotiators are aiming to hammer out a watered-down framework for the trade deal before U.S. President Obama leaves office.
Race against the clock for TTIP.

Time is running out for American and European negotiators. With the United States presidential election looming, it has become near impossible to finalize a trans-Atlantic free trade agreement this year.

As a stop-gap measure, many European diplomats are now aiming to hammer out a rough framework before President Barack Obama leaves office in January 2017, according to Handelsblatt's sources.

It's unclear what exactly such a framework agreement would like. One possibility is to unify the trade deal's rubrics in a single document and fill in the details later.

Under this model, the Trans-Atlantic Trade and Investment Partnership (TTIP) would become a "living document" that evolves and changes over time.

But Reinhard Bütikofer, the Green Party's industry expert in the European Parliament, warned that this evolution would occur "without parliamentary control."

When U.S. and European diplomats open their 12th round of negotiations this week in Brussels, even agreeing on "TTIP light" - as the slimmed down version is known - will face major obstacles.

If the U.S. president and the chancellor use this opportunity to make TTIP the focus, they could give the negotiations a decisive push. Ulrich Grillo, German Federation of Industries

But one issue in particular threatens to scuttle the negotiations altogether. Washington wants ad-hoc arbitration panels to mediate trans-Atlantic trade and regulatory disputes. Multinational corporations could sue sovereign governments in these panels for violating the terms of the trans-Atlantic trade deal.

Europeans have cast a wary eye on arbitration panels, due to concerns that large U.S. companies could leverage the panels to undermine the national regulations of E.U. member states.

As a compromise measure, the European Commission proposed a permanent system of investment courts. The system would protect the right of states to regulate in the public interest, while providing investors with an avenue to appeal cases of expropriation without compensation, as well as discrimination.

Brussels' reform proposals, however, are a potential deal breaker for the United States, which views another permanent international court with suspicion.

In a 36-page study obtained by Handelsblatt, the German parliament has cast doubt on the legality of all such tribunals, whether it's Washington's arbitration panels or Brussels' investment courts.

According to the study, the European Court of Justice has the final say on how E.U. law is interpreted, but special tribunals could undermine this function. The European Association of Judges has already said there's no legal basis for establishing an investment court system.

European consumer and environmental advocacy groups, such as Foodwatch and BUND, view investment courts with the same suspicion as arbitration panels.

"An investment court would dangerously concede special rights to investors," Lena Blanken, an economist with Foodwatch, told Handelsblatt. "They could sue states for billions, if they don't get compensation from the normal courts."

Special tribunals aren't the only sticking point. The push to harmonize engineering standards, a relatively uncontroversial provision of the trade deal, has also stalled.

In a letter obtained by Handelsblatt, the German Engineering Federation warned European Trade Commissioner Cecilia Malmström against overlooking important details in the rush to conclude an agreement this year.

In Europe, for example, the neutral wire in circuit boards is blue, whereas in the United States the same wire is white or light gray. When European companies export to the United States, adjusting for these small regulatory differences creates additional costs that can range between 5 and 20 percent.

Beyond regulatory harmonization, Brussels wants the United States to open its market more to European exports, particularly when it comes to services and public procurement. European negotiators have called on Washington to repeal protectionist legislation such as the Buy American Act.

Ulrich Grillo, the head of the German Federation of Industries, hopes U.S. President Obama and German Chancellor Angela Merkel will spotlight TTIP when they meet at the Hanover Messe in April.

According to Mr. Grillo, the U.S. side hasn't given up on the negotiations and wants to do everything possible to produce some sort of result this year.

"If the U.S. president and the chancellor use this opportunity to make TTIP the focus," Mr. Grillo said, "they could give the negotiations a decisive push."

 

Thomas Ludwig is one of Handelsblatt's European Union correspondents in Brussels. Thomas Sigmund is the bureau chief in Berlin. Klaus Stratmann focuses on energy policy. Dana Heide is a Berlin-based correspondent for Handelsblatt and writes about energy policies. To contact the authors: ludwig@handelsblatt.com, sigmund@handelsblatt.com, stratmann@handelsblatt.com, or d.heide@vhb.de.

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