On the trade front, the Trans-Pacific Partnership (TPP) has held the spotlight in recent months, garnering plenty of attention in Washington and out on the presidential campaign circuit. While that deal is vastly important, it’s not the only major trade agreement in the works right now. The Transatlantic Trade and Investment Partnership (TTIP), a similar accord being discussed with our country’s partners in Europe, holds similarly game-changing potential for U.S. businesses and, as we learned recently, it’s a deal that could be forged sooner than many expected.
In what was the 12th round of negotiations since talks began in the summer of 2013, representatives from the U.S. and the European Union spent the better part of the past week working out more details of the agreement. A few days ago, they announced that the negotiations were accelerating and that they were optimistic that an agreement could be finalized by the end of the year.
While that may prove a heavy lift amid a presidential election year on one side of the Atlantic and some potential shakeup on the other (see: Brexit), it’s a sign that progress is being made on a deal that could expand trade and investment among nations responsible for nearly half of global GDP.
There are a number of important questions that have yet to be answered, some of which were front and center during the discussions this past week. In a call with several journalists on Wednesday, U.S. Chamber of Commerce experts touched on some of those issues. Here are three things they say the business community should keep a close eye on as the TTIP negotiations keep moving forward.
Can negotiators thread the needle on regulatory cooperation?
One of the most important elements of any deal will be the way it handles the fundamental relationship between trade and regulation; that is, where the deal is structured to support good regulations and facilitate regulatory cooperation between the two sides. That second part (regulatory cooperation) is imperative, as starkly different or even conflicting sets of government rules on the two sides of the Atlantic could stymie efforts to expand trade between the U.S. and Europe.
At the same time, it’s vital that any efforts to encourage conversation and collaboration between the two sides cannot overreach by limiting either the EU’s or the U.S.’s ability to independently establish rules and regulations that work best for their respective constituents.
As Sean Heather, vice president of the U.S. Chamber’s Center for global Regulatory Cooperation, explained: “I don’t believe either the United States or Europe, and certainly not the U.S. business community, have suggested that an oversight body should actually have rulemaking authority… to make choices for how regulations will be developed or how regulations will be developed in the European Union.” Instead, “what’s envisioned is a regulatory body that organizes conversations between regulators… and provides accountability and prioritization to those conversations.”
In other words, he added, rather than actually making rules themselves, the members of any TTIP regulatory cooperation board should help ensure that those making the rules in the U.S. and in the EU “are better informed about the international impact of their decisions” and that, when possible, they’re looking for ways to make the regulatory frameworks in the U.S. and EU “more interoperable.”
How do the two sides come together on investment protection?
One of the persistent areas of contention between American and European negotiators since the beginning has to do with the deal’s mechanisms for handling cross-border investment disputes. To supplement state-to-state efforts to settle disputes, the U.S. government and the American business community have strongly favored a system that has worked for more than a half century, known as the Investor-State-Dispute Settlement (ISDS) system, under which the parties involved in a dispute can select an arbitrator with expertise in the issue at hand.
In a recent blog post, Heather underscored that “American investors need investment protection and a meaningful ISDS mechanism to be at the core of any transatlantic agreement.”
Even though ISDS was devised in Europe more than four decades ago,, EU officials have pushed for a new and starkly different system, in which a permanent investment court with judges selected by the U.S. and EU would be randomly appointed to handle any given case. Heather described that system as “flawed” and “not well-thought-out”, adding that it raises serious questions “about whether a roster of arbitrators is really the way to ensure we have qualified people in place to make these determinations” and has therefore raised concerns among many in the U.S. business community.
Those concerns may only be heightened with recent news that Canada and Vietnam have in their own ongoing trade negotiations with Europe agreed to the new permanent investment court system.
At the end of the day, Heather said, “the U.S. business community’s interest is to not see the fundamental levels of protection for foreign investment undermined.”
What would a “Brexit” mean for the trade talks?
The TTIP negotiations are taking place amid a potential shakeup in the EU, as the United Kingdom prepares to vote on June 23 on whether to split from the European Union. The “Brexit” decision has raised some questions about the agreement, as the U.K. currently represents one of the U.S.’s largest trading partners in Europe. In fact, more American-made goods are exported to British buyers every year than to any other nation across the Atlantic.
So would a British departure from the EU impact the trade negotiations moving forward?
“Obviously, the European Union is more than just the U.K., and the negotiations are with the EU as a whole,” U.S. Chamber Vice President for European Affairs Marjorie Chorlins responded. “So, I think the questions that the business community has about the negotiations aren’t necessarily colored by what may happen in this June 23 vote in the U.K.”
That said, it’s certainly something to keep an eye on in the months ahead.
“It’s not lost on people that there is substantial American investment in the U.K. and that a lot of that investment is driven by using the U.K. as a platform to access the continent,” Chorlins said. “Obviously, we’re watching carefully.”