Promises and Perils of the TTIP
Still reeling from the devastation of the global financial crisis, the EU and U.S have embarked on an ambitious set of trade talks for a Transatlantic Trade and Investment Partnership (TTIP), intended to jump-start fragile markets and spur economic growth and job creation in both regions.
Tariff barriers between the U.S. and EU are already low. The bigger challenge—and the real target—is the very different approaches of the U.S. and EU to regulation. Negotiators intend to overcome these barriers through efforts to achieve “regulatory coherence.” Regulatory coherence, like expanded trade, appears to be a neutral term, but the political context is not neutral at all. Industry lobby groups and their political allies continue to launch strident attacks on both sides of the Atlantic on rules that limit their ability to buy and sell goods and services. As leaders from both regions have made clear, the terms of this trade agreement will set the standard for future free trade agreements.
TTIP affect a broad range of issues, from energy to the environment, and intellectual property rights to labor rights. The agreement could also have a significant impact on the evolution of agricultural markets and food systems in the U.S. and EU. Unfortunately, little concrete information is known about the content of the TTIP proposals, since the governments involved have stated that they will not publish draft text.
It is likely that investor-state dispute resolution (ISDR), which gives investors the right to sue governments for compensation over rules that affect their expected profits, will be included in TTIP as well, despite the fact that there is no doubt that the U.S. and EU legal systems are entirely up to the task of resolving such complaints by foreign investors without resort to a trade mechanism. It is also reasonable to assume (based on numerous corporate submissions to USTR) that the EU’s reliance on the Precautionary Principle will be squarely on the agenda in discussions on food safety, environmental protection and public health.
In both the U.S. and EU, the time to influence the substance of the agreement is before it is completed and submitted to the relevant legislative bodies for their votes for or against ratification. That’s a tricky task, since the negotiations are happening behind closed doors, but it means that civil society groups and legislators need to pay close attention to what is on the agenda, even without complete information.
In this paper, we outline some of the concerns for healthier, more equitable and sustainable agriculture and food systems:
- Food safety: Differing food safety standards have been the subject of trade disputes between the U.S. and EU for years. Complaints lodged at the World Trade Organization (WTO) by the U.S. government have focused on EU restrictions on genetically modified organisms (GMOs) and veterinary growth hormones that are deemed safe in the U.S. but are banned in some EU member states. TTIP proposals on Sanitary and Phytosanitary standards (SPS) and Technical Barriers to Trade (TBT), such as product labeling, seek to go beyond WTO commitments and include pressure to subject SPS and TBT standards to Investor-State Dispute Resolution. There is also pressure to lower EU standards on meats and poultry, including those on hormone-treated beef, controversial growth promotion hormones, such as ractopamine and chlorinated rinses of poultry carcasses. The EU, for its part, is seeking to overturn limits on its exports of beef despite concerns over EU member state controls to prevent Mad Cow Disease.
This deregulatory approach could carry over into emerging technologies, such as the use of nanotechnology in food and agriculture, even though there are no clear U.S. regulatory definitions of nanomaterials, and much less risk assessment of the impacts of nanomaterials on human health and the environment. The TTIP negotiators are tasked to provide a least–trade restrictive framework for harmonizing SPS regulations on nanotechnology, when specific regulations do not yet exist.
- Chemical policy reforms: Rules on the use of potentially toxic chemicals will be negotiated in the TBT chapter. Of particular concern are chemicals that disrupt the delicate hormone balance in the human body. The EU’s Regulation on Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) is a process firmly grounded in the Precautionary Principle. To the contrary, in the U.S. the outdated Toxics Substance Control Act of 1976 (TSCA) puts pressure on the Environmental Protection Agency to prove that chemicals are unsafe, rather than on the industries producing the chemicals to prove that they are safe before they enter the market. USTR has been pushing back against REACH since its inception, citing its approach as TBT at the WTO.
- Procurement policies and local foods: As part of the global movement towards healthier foods, new governmental programs, such as the U.S. Farm to School programs and similar initiatives in Italy, Denmark and Austria, include bidding contract preferences for sustainable and locally grown foods in public procurement programs. Food Policy Councils are also bringing people together to generate locally grounded proposals for healthier, more sustainable foods and agriculture. One of the most ambitious, the Los Angeles Food Policy Council, has made procurement a central element of their programs. Both the U.S. and EU have criticized “localization barriers to trade.” The EU, in particular, has been insistent on the inclusion of procurement commitments in TTIP at all levels of government, for all goods, and in all sectors—potentially including commitments on these public feeding programs.
- Financial service reforms: The links between agriculture, food security, financial services and commodity market regulation are multifaceted. New rules being developed under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) in the U.S., and the EU’s revised Markets in Financial Instruments Directive (MiFID) process seek to increase the transparency and comprehensiveness of reporting to regulators by market participants and prevent market disruption by unregulated, dark-market trading. Efforts are underway to ensure that the rules on both sides of the Atlantic are consistent. Upward harmonization of financial and commodity market regulation could be derailed by proposals to include them in the TTIP financial services chapter and to make financial reform rules subject to investor-state dispute resolution.
While there may be legitimate reasons for and benefits from regulatory coherence between the U.S. and EU, those discussions of public rules need to happen under conditions of full transparency and should not be subsumed within a trade agreement. The TTIP negotiations should result in an agreement that prohibits—rather than promotes—efforts by corporations to play off regulatory standards in one jurisdiction against the other. Those dialogues should hold open the possibility that the best avenues for progress could be outside the constraints of trade rules, as happened with the recent U.S.-EU agreement on organic standards. Proposals to broaden the definition of investment to apply to SPS and financial market regulations, making them subject to challenge under investor-state dispute resolution, should be firmly rejected. If this is truly to be a “high standards” agreement, and if there is any hope that “harmonization” does not mean shifting standards towards the lowest common denominator, then the U.S. and EU governments need to start from a thorough redefinition of “regulatory coherence” that prioritizes human and environmental well-being over market openings. That seems entirely improbable given statements made by the governments up to this point. Improbable isn’t the same thing as impossible though. The current approach is a political choice; alternatives are entirely possible. If not, and the talks are to continue along the lines of other recent trade agreements, then civil society and policymakers should seriously consider putting a halt to the TTIP