When Germany’s center-left Social Democrats, the SPD, gather for a party convention later this week, the major free-trade deal between the United States and Europe is likely to be among the most passionate discussion topics.
The SPD party, which is the junior coalition partner in Chancellor Angela Merkel’s government, arguably holds the future of the deal in its hands. If it votes to reject it, Ms. Merkel likely won’t get it through the German parliament.
While party leader Sigmar Gabrial has been a vocal supporter, the SPD is facing serious pressure from its base and from activists to reject the agreement, known as the Trans-Atlantic Trade and Investment Partnership, or TTIP, which would create the largest economic free-trade zone in the world.
The anti-TTIP group Campact, in an open letter to the SPD, warned that the free-trade deal being negotiated between Brussels and Washington DC goes against the fundamental values the party holds dear. It called on the party not to give up its red lines – such as on protecting employee rights.
For U.S. trade officials, the push-back against a free-trade deal in Europe, led by Germany, has been surprising. It is also alarming – both Brussels and Washington are starting to view the intense opposition on both sides of the Atlantic as a threat to the odds of actually agreeing an ambitious deal.
“I think that TTIP is drifting. It needs to be reframed and re-explained, particularly in Germany and in Europe,” Robert Zoellick, the former chief U.S. negotiator and World Bank chief, said in an interview with Handelsblatt and select other European publications.
“Transparency should be a two-way street. Our TTIP critics seem remarkably well financed. They need to step out of the shadows.”
For Anthony Gardner, the United States ambassador to the European Union, the German skepticism misses the point: Globalization is here to stay. The only question is: Who is going to shape it in the years to come.
“If we fail, other countries who do not share our values, and whose weight in the international trading system is growing fast, will set the agenda themselves,” he said in a separate interview with Handelsblatt and other European publications.
And yet, he too acknowledges that opponents of the free-trade deal have been extremely effective. A majority of Germans are skeptical of the deal, fearing that their own higher standards on employment protections, consumer protections and the environment could be eroded. Supporters reject these allegations, and Mr. Gardner suggested opponents weren’t always playing fair.
“These negotiations are by far the most transparent either side has ever conducted and for good reason, because we are seeking an ambitious agreement. But transparency should be a two-way street. Our TTIP critics seem remarkably well financed. These rallies, publications, social media activities do not come cheap. Our NGO critics also need to be transparent including about, who they speak for and by whom they are financed. That’s not the case in Europe today. They need to step out of the shadows,” he said.
In the United States, the worry is that presidential elections are about to kick into high gear. Mr. Gardner stressed however that the U.S. government remains committed to bringing the free-trade talks to a conclusion before President Barack Obama leaves office in January 2007.
He shrugged off suggestions that the U.S. election campaign would get in the way of the talks: “We’re committed to getting this done. Is it ambitious? Yes. Is it impossible? Absolutely not,” he said.
There’s still plenty to get done, though it’s true that some progress was made at a last negotiating round in October: 97 percent of customs tariffs are set to fall away if TTIP is agreed, including about 87.5 percent as soon as it comes into effect.
But some of the toughest topics have yet to be discussed. Among them is the controversial idea of an international arbitration panel to settle disputes between companies and governments.
Such courts, long a part of free-trade deals, give companies the right to sue governments if they believe that their rights under the deal have been infringed. For critics, the process has been opaque and is a means of undermining national sovereignty. They fear U.S. multinationals could endanger the environmental and social policies of Europe.
“I think that TTIP is drifting. It needs to be reframed and re-explained, particularly in Germany and in Europe.”
Supporters, including Robert Zoellick, strongly dispute this, and yet he agrees that the U.S. ambitions may have to be scaled back if a free-trade deal is to be reached. Opposition to the courts is simply too strong, he said.
“Frankly, the U.S. and Europe can rely on their own courts,” Mr. Zoellick said, adding that he had reached a similar free-trade deal with Australia – excluding investor-state dispute settlement – when he was the chief U.S. trade negotiator under President George W. Bush.
What you lose, according to Mr. Zoellick, is the opportunity to set standards for investor-state relations across the world. He pointed to China and other countries that could be looking to the United States and Europe to upgrade their own standards for investor protections.
The European Union has called for a new trans-Atlantic appeals court to be created, answering European critics who believe the current international arbitration panels that exist are far too opaque. The United States has rejected the idea of a new court, but insists that investor-state dispute settlement must remain part of the deal.
Mr. Zoellick also rejects the European alternative. He argued that such an appeals court would actually mean surrendering more sovereignty than the current international panels, because it would actually involve judges creating a new body of law rather than arbitration panels that are merely settling disputes under existing law.
“In some ways, I think that’s more dangerous,” he said.
In February, the two sides will sit down for a twelfth round of negotiations. Some of the most contentious issues yet to be discussed are likely to be finally opened up for debate.
One key bone of contention between the two sides involves bidding for public procurement projects in the United States. The European Union has argued that its own companies, particularly small and medium-sized firms, are at a disadvantage when it comes to bidding for public contracts in the United States.
Mr. Gardner rejected the allegations and challenged the Europeans to provide proof. He offered examples of major companies including German players like Siemens and Hochtief winning contracts for rail projects, but also major companies from France, Spain and Britain.
Smaller European firms have it harder, however, as companies often need to set up a U.S. subsidiary to bid for public contracts, and in many cases have to source manufacturing goods locally under the U.S. “Buy American” law passed in the aftermath of the financial crisis.
“We understand it is an important ask by the European side….but we don’t believe that there’s an imbalance on government procurement, an imbalance that needs correcting as alleged by the E.U.,” Mr. Gardner said. “The E.U. does not provide greater guaranteed access to U.S. suppliers than the U.S. provides to European suppliers.”
More broadly, Mr. Zoellick argued that U.S. and European relations need to get back on track after being severely tested in recent months and years, including by scandals over spying by the U.S. NSA agency.
“I feel we are drifting,” he said of U.S.-European relations. “I believe some stronger and deeper trans-Atlantic cooperation would be good for the future of the European project.”
Mr. Zoellick, who has been tipped to join a Republican administration should their candidate win the 2016 presidential elections, said part of a problem may be President Obama himself, a man revered by many Europeans when he entered office in 2009 but who has not seemed to engage with Brussels as much as Europeans may have hoped.
“President Obama is somewhat a cold, distant figure. So Europeans are uncertain of his commitment. They don’t feel the emotional warmth they would have felt with Bush or Clinton. That’s not a function of Europe as much as a function of his style.”
Moritz Koch is Handelsblatt’s bureau chief in Washington, Thomas Ludwig is a Handelsblatt correspondent in Brussels and Christopher Cermak is an editor with Handelsblatt Global Edition in Berlin. To contact the authors: firstname.lastname@example.org, email@example.com and firstname.lastname@example.org