Trade Agreement

Seven Deadly Myths

Aufmacher TTIP montage M
How well-founded are the fears around TTIP? Sources: Corbis, reuters, ullstein, Getty, Laif, Sipa, Imago [M]. For individual listing, see end of article.
  • Why it matters

    Why it matters

    Vocal opposition among the German public to the planned trans-Atlantic trade partnership centers around seven issues, from data protection to workers’ rights.

  • Facts

    Facts

    • The TTIP negotiations started in 2013, are held weekly and will continue through 2015.
    • The United States and the European Union sees economic gains from TTIP.
    • Together, the United States and European Union make up 60 percent of global GDP, 33 percent of world trade in goods and 42 percent of world trade in services.
  • Audio

    Audio

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Vocal public opposition to a planned trade partnership between the United States and the European Union, known as TTIP, focuses on seven areas where regulation could be affected by new rules. People are fearful that large businesses will shape the regulations about data and the financial markets and they worry that Germany’s environmental protection and food standard regulation could be weakened. Handelsblatt staff looked at whether or not these fears are well-founded.

 

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Goodbye to the environment, hello to fracking

“Saudi America” is one of the terms that have been used to describe the United States’ spectacular rise in recent years to a world energy power. Exploration methods like fracking and horizontal drilling have unleashed the boom in oil and gas exploration in North America that reminds of the gold rush days of the Wild West.

Such methods, which involve pumping a mix of water, sand and chemicals into the ground to force out the fossil fuels, remain unthinkable in much of Europe. Fracking has been largely banned out of environmental concerns, in part because the continent is far more densely populated than the United States.

Could TTIP change that? Opponents will tell you the free-trade deal has already been hijacked by energy companies that are determined to turn northern Germany’s low-lying lands into a fracking bonanza of horizontal drilling platforms.

The reality is much more complex: Fracking is not directly part of the negotiations between the United States and Europe. The European Commission says it’s a matter for individual European countries.

In Germany, the practice is not explicitly banned. Lawmakers are considering introducing legislation that would allow fracking in principle, but each proposed project would have to be approved by an expert commission.

Critics, including the activist group Attac, argue that U.S. companies will be able to muscle their way into fracking in Germany and Europe under the guise of TTIP. They point to investor protections that could be granted to U.S. companies as part of the deal. An American gas company, for example, could sue before an international court if it embarked on a fracking project that was later banned unexpectedly by new legislation.

There is precedent. Swedish utility Vattenfall, for example, is suing Germany for €4.7 billion, or $5 billion, over its decision to abandon the use of nuclear power following the Japanese Fukushima disaster.

The Swedish case is often held up as an example by anti-TTIP activists for what could happen if U.S. companies are given the same rights. What activists leave out is that negotiators are working hard at narrowing down a legal framework for exactly when companies could bring an investor dispute before international courts. The “right to regulate” is expected to be clearly enshrined.

The upshot: Fracking is not part of the TTIP negotiations. U.S. companies might in theory have some recourse to challenge laws on fracking in German courts. However, both the U.S. and Europe are determined to include a “right to regulate” in any investor protections that are granted under TTIP.

 

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Goodbye consumer rights, hi genetically-modified food and hormone-injected beef

It is Europe’s worst nightmare, but Texan beef farmers can dream all they want. Beef injected with growth hormones will not be coming to tables in Berlin or Paris any time soon. The same holds true for genetically-modified foods or seeds. All of this is either banned or at the very least strictly regulated in the European Union.

The European Commission insists that such strict standards will not be watered down by free-trade negotiations with the United States. Anti-TTIP campaigners might not be convinced but a recently-signed free-trade deal with Canada would suggest the European Union really does mean business here. It makes abundantly clear that Canada can only export hormone-free beef to European Union.

The European Parliament, which would have to approve any TTIP deal, provides another check on the negotiators. Markus Pieper, a European parliamentarian from Germany’s CDU party, insists the chamber would never approve a deal that “weakens the rights of the citizens.” That would amount to “political suicide,” he noted. There is precedent for this: In 2012, the European Parliament torpedoed an Anti-Counterfeiting Trade Agreement on copyright law.

Regulation of genetic technology also differs wildly between the U.S. and Europe. In Europe, genetically-modified foods must be clearly marked as such. Consumers are more risk-averse, though some E.U. countries are considering opening the door to their farmers. The United States, by contrast, has been happy to take the risk so long as there has been no scientific proof of negative side-effects.

The right of European authorities to determine what should and shouldn’t be labelled in supermarkets is not part of TTIP. Negotiators in Brussels and Washington are instead primarily focused on breaking down market barriers in the food industry, for example, by accepting each other’s standards.

As always, the devil is in the details. Which practice is really more worrisome when it comes to treating a chicken for bacteria – a chlorine bath as is done by the United States, or feeding them antibiotics in their food as is done in Europe, or simply hot water as purists recommend?

The European Commission complains that such debates have become more about ideology than about science. One compromise here would be to have clearly defined exceptions to common standards. A list of exemptions provided by the World Trade Organization will likely be a starting point.

The upshot: Genetically-modified foods will not be more freely available in Europe because of TTIP. Some countries are more open to these than others. The European Commission recently strengthened the rights of the 28 nations in the E.U. to decide themselves whether they want to allow farmers to grow them.

 

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Goodbye to collective bargaining; workers will lose power

The United States and Europe are the areas with the highest social standard in the world and there has been a minimum wage in the United States for longer than in Germany. However, the laws protecting German workers against dismissal and legal framework for payoffs are unheard of in the United States, as are worker participation on boards of management, workers’ councils and the welfare state. Trade union leaders in Germany fear competing companies will put pressure on German standards for workers and erode wages, rights and social security.

In response to questions from the Left Party, the German government said it would ensure the trade partnership would not only protect standards but also give actors space to extend workers’ rights. However, some of the phrases in the government’s statement, such as “social standards will have to be able to be reconciled with international standards and agreements” have led to concern.

Trade agreement opponents are calling for the TTIP agreement to comply with eight standards set by the International Labor Organization. These extend from protecting employees from discrimination to allowing people to establish trade unions, and also leave room for collective bargaining between trade unions and employers.

So far, not all parts of the agreement have been ratified by Washington, and politicians in the European Parliament are watching the issue closely.

The upshot: According to its mandate, the European Union cannot sacrifice standards for workers or welfare, though there is still widespread concern about the issue.

 

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Data protection laws will only serve companies and governments

Last August, at the height of the Ebola crisis, experts from IBM worked together with government officials from West Africa to use data to work out how far the epidemic had spread. Their research helped bring the epidemic under control. Today, this example is often touted as proof that Big Data can save lives. Supporters of the free movement of data say the Nigerian government’s plans to prevent such sharing of national data, arguing that moves to nationalize the Internet would hinder efforts to contain future epidemics.

Nonetheless, the European Union is considering proposals for companies based in economic bloc to store data on local servers. The U.S. view of data protection is a huge source of mistrust in Europe. Since the revelations about the National Security Agency, Germans have feared that the Internet is less about sharing information than about extending user surveillance. Trade partnership opponents fear the end of protection of their personal data.

Responding to these fears, the European Union’s committee on internal affairs has called for the TTIP agreement not to include any regulations on data security.  “TTIP cannot undermine European data protection regulations,” said Jan Philipp Albrecht, a European Parliament politician and a member of the Green Party. Mr. Albrecht is deputy chairman of the civil liberties and justice committee and has long been involved in negotiations to reach a data protection agreement between the United States and the European Union that goes beyond TTIP.

Negotiators in the United States seek a trade agreement that contains legislation to protect the unity of the Internet. “The aim is to avoid regionalization,” said Edward Gerwin of Washington’s Progressive Policy Institute. U.S. politicians aim to create laws to govern the exchange of data.

It would make sense for Europeans to be involved in creating laws to shape this area, given the push of their industries to digitize and network their operations through developments such as the “Internet of Things.”

The upshot: Concerns over data protection are justified. The NSA has tarnished the U.S. reputation in Europe. But there are good reasons to use TTIP for to create regulations on “Big Data”. The “Internet of Things” is, after all, the future of the industry.

 

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Businesses will gain special legal rights, undermining governments and democracy

In the past, if a government thought the country’s business interests were being attacked, they send in the navy. Nowadays, such conflicts are resolved in court.

TTIP critics fear that private arbitration courts known as ISDS , which are dedicated to settling disputes between governments and investors, will resolve issues behind closed doors that are of public interest. European politicians from the green, left- and social democrat parties are calling for the free-trade partnership to prevent such courts from playing a role in U.S.-E.U. disputes.

There has been criticism that the UN body regulating trade issues, UNCTAD, constrains governments in disputes with multi-national companies. But a look at the numbers shows that, in a third of the cases resolved this way last year, the court found in favor of the governments rather than investors. In the remainder of cases, a compromise was found. There are also debates in the United States about the courts and the extent of their jurisdiction. Politicians in the United States have also acknowledged the need to improve regulation of the courts and aim to achieve this within the TTIP negotiations.

Cecilia Malmström, the European Union’s trade commissioner, has laid out her plans before the European Parliament to ensure that disputes are arbitrated in a modern, transparent way. Currently, the discussions with Washington over the issue of investor protections has been postponed; this will be resolved after the summer.

The aim on both sides of the Atlantic is to create secure conditions for investment. Brussels and Washington are working to modernize the investor protection agreement and ensure there will be more discussion about future regulation.

The upshot: Additional rights for large companies do not necessarily endanger the common good. In contrast to the fears,  TTIP could make the work of international arbitration courts more transparent.

 

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Big U.S. banks will block regulation of the financial market

Europeans just don’t give up. Every few months, the European Commission sends an emissary to Washington to encourage the Americans to include discussions of financial regulations in the TTIP negotiations. But the government of the United States keeps on saying no, arguing that the G20, an international body, is the right place to resolve questions about how capital and standards should be regulated.

But the idea that massive Wall Street banks will hijack European financial regulation is wrong. In fact, U.S. President Barack Obama’s administration has taken far-reaching steps to regulate the financial industry. In the United States, there is the opposite suspicion that Europe is a crisis-riddled region with a troubled currency that fails to go far enough to fix problems in the financial industry.

European banking lobbies are in fact the main group pushing this issue, in large part because European banks feel mistreated by U.S. authorities. Foreign banks operating in the United States are, for example, required to create holding companies that allow them to be regulated as if they were a U.S. bank. This is not the case for U.S. banks in Europe.

Still, some U.S. banking critics have looked on with skepticism as U.S. banking lobbies have lined up behind their European counterparts in pushing for financial regulation to be a part of TTIP. There are concerns that a Trans-Atlantic body to discuss financial regulation could water down existing rules. The Obama administration however is determined that this not happen. Keeping existing regulations in place is a matter of credibility, after all.

The upshot: The widespread fear that big Wall Street banks will block further financial regulation is unfounded. The United States is blocking European attempts to include financial regulation in the TTIP negotiations. The fear that Washington is acting in the interests of Wall Street is unfounded; whereas the banking lobby is behind the Europeans’ demands.

 

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Goodbye European cultural diversity, hello Globalization

European cultural diversity is not in danger. There are worries that, without government subsidies, many German films could not be made and even public radio would be in danger. Concerns that Washington demand these subsidies end are shared by other European nations including France. Many fear that TTIP could mean the end of public subsidies.

The mandate, which is the basis of the European Commission’s negotiations with Washington, is clear: The agreement should not include any aspects that would restrict the cultural and linguistic diversity of the European Union and its member states, it states, adding “in particular in terms of culture”.

Under TTIP, it is true that firms from the entertainment and cultural industries from the United States could have greater access to the European market, but they will not be allowed to impinge on cultural diversity.

Nonetheless, the fears remain. Christian Höppner, president of Germany’s cultural council, said he believed financing of culture by the government was in danger. Opponents say believers in the free market might argue this public financing impinges on competition. Might books become more expensive? Will theater subsidies still be allowed? Will public support end for movies and television?

The European Commission’s answer is no. The mandate for the negotiations clearly states that sector has a special status and still can be supported.

The upshot: Europe’s culture is not about to be eroded by TTIP. UNESCO’s convention to protect cultural diversity has also been included in the preamble to TTIP. However, there should be more encouragement of the United States to ratify the paper defending the rights of all states to set their own cultural policy.

 

Picture sources: 1: Corbis, 2: Reuters, 3: Ullstein, 4: Getty Images, 5: Laif, 6: Sipa, 7: Imago

Thomas Ludwig, Moritz Koch, Dana Heide, Frank Specht, Frank Wiebe, Allison Williams and Christopher Cermak contributed to this article. To contact the authors: ludwig@handelsblatt.com  

 

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