The fifth round of negotiations between the United States and the European Union for the Transatlantic Trade and Investment Partnership (TTIP) concluded last week in Washington. The two sides are pursuing an ambitious, high-standard agreement, though the negotiations are still at an early stage. One of key issues will be how the TTIP addresses the “I” in its name.
Transatlantic investment is widely recognized as the engine of the U.S.-EU economic relationship. Transatlantic trade in goods and services tops $1 trillion annually, but the European affiliates of U.S. multinationals generate more than five times that sum in sales every year (as do the U.S. affiliates of European multinationals). EU-headquartered companies employ hundreds of thousands of Americans, as U.S.-based firms do Europeans.
Does a commercial agreement between two parties that already boast the world’s largest and most successful two-way investment relationship need to include rules on investment? Our answer is an emphatic yes, for these reasons:
The incomplete network of U.S.-European investment treaties leaves gaps in investment protections. The United States has modern bilateral investment treaties (BITs) with nine EU member states: Bulgaria, Croatia, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania, and Slovakia. U.S. companies have every right to expect that their investments will receive a basic level of international protection throughout Europe, including in countries with which the United States never entered into a modern BIT.
And that’s the issue. Investors from more than 100 countries have protections under BITs with Germany, the United Kingdom, and many other EU member states — but the United States has no BIT with those countries. Protections for U.S. investors under our Treaties of Friendship, Commerce and Navigation are often dated and fail to reflect modern commercial realities: Many of these treaties date from the 1950s. TTIP offers the opportunity to fill in these gaps and formally put the entire U.S.-EU investment relationship on an even footing.
Keeping the “I” in TTIP will help the United States and the EU strengthen investment ties to other countries. The rule of law is generally upheld in the European Union and the United States, but that’s not necessarily the case in other parts of the world. In this sense, the TTIP is an opportunity for America and Europe to lead by example.
If the United States and the EU forego strong, enforceable investment protections in TTIP, it would be extraordinarily difficult to ask other countries to agree to such protections and enforcement remedies in an investment treaty or trade agreement. Ongoing U.S. and EU investment treaty negotiations with China are a hugely consequential case in point.
Investment must be a part of any final TTIP precisely because of the vast breadth and depth of the transatlantic investment relationship. TTIP will codify and extend protections for U.S.-EU investments and provide a sterling example of the importance of these vital investment protections.