This Policy Brief is co-authored with Bob Vastine and J Bradford Jensen
The Transatlantic Trade and Investment Partnership (TTIP) was launched with highest of ambitions. Yet after more than 500 days of negotiations, the results are plainly discouraging. The EU and the US misunderstood each other’s intention on market access, and deteriorated into retaliatory behaviour. Each side has also its set of politically sensitive issues, but TTIP negotiations stimulate sensitive issues when European governments are at their weakest. The revelations of US electronic surveillance and wiretapping coincided with the first round of TTIP talks; Europe’s decision to open up public consultations on ISDS gave the opposition space to congeal public opinion, and the anti-trade forces appear better organized and possibly even better funded than business groups.
It is in the interest of the US and EU to fashion a new, open and fair global trading system for the 21st century. But time is running out. Getting TTIP back on course will require, three elements. First, the EU and the US need a common understanding of ambitions. Are the parties negotiating a regular FTA, or a new form of an economic partnership going beyond any existing precedent? The second element concerns political leadership and mobilizing support – in the end, this question comes down to: Who is willing to pay for TTIP? The last element concerns the overarching objective of TTIP, which must be approached as strategic in its purpose. TTIP could be the third pillar of a new global economic governance together with TPP and EU-Asia agreements. TTIP should be the most comprehensive and sturdiest of these three pillars – not the weakest.
TTIP was destined to get stuck in a ditch almost from the start. Like all standard FTAs the negotiations began with an exchange of offers. The EU made a strong tariff offer covering 95% of its tariff lines. The US answered with an offer covering 67% of its tariff lines. Commission officials reacted with shock, openly taking the US move as a blatant affront. To the US, this offer was a standard opening move in goods negotiations, simply a usual practice in an FTA negotiation. US officials pointed out that starting ‘low’ would give it leverage to obtain higher quality in the EU offer. In a ‘partnership’ that trumpeted the goal of zero tariffs, the US approach seemed chary, though it makes sense in the context of a traditional FTA parley. Moreover, the European side had refused to agree to a benchmark – a pre-agreement between the negotiators to give an offer a certain threshold, presumably over fears of being bound by a benchmark that would force it to open up EU agriculture tariffs in the first round.
EU vexation at this contretemps on goods was shortly reflected in its stance on services. The EU announced that it would not table offers on financial services as ‘retaliation’ for US refusal to bring financial services regulation into the discussion. To this day, the EU has not tabled a text for services negotiations, though the EU has agreed to a solid services element in its other FTAs. Overall on services, the US and EU market access offers were based on those the parties tabled in their previous bilateral FTAs and the Doha Round. It is a tired, familiar list: the US must remove barriers to coastal maritime trade, civilian aviation markets; the EU must remove cultural barriers. Despite these limited openings, services accounts for almost 40% of transatlantic trade, an extraordinarily high volume that reflects the naked fact that in the service sectors the actual trade barriers are few, and services trade is robust – in the vast majority of the sectors where trade is open.