Trans-Atlantic Tussle

Uphill Battle for Trade

Malmström-Gabriel-ActionPress-DPA higher res
E.U. Trade Commissioner Cecilia Malmström will have to work hard to keep Germany's Economics Minister Sigmar Gabriel on board.
  • Why it matters

    Why it matters

    If the new E.U. trade commissioner, Cecilia Malmström, can overcome German objections, a U.S.-E.U. trans-Atlantic free-trade deal could dramatically kick-start economies on both sides of the Atlantic.

  • Facts

    Facts

    • Cecilia Malmström became E.U. trade commissioner on November 1. She is leading negotiations between the European Union and United States over a proposed trans-Atlantic free-trade deal.
    • German Social Democrats are wary of the deal, although their leader, Sigmar Gabriel, is supportive.
    • Most Germans want a free-trade deal with the United States, according to a recent poll.
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    Audio

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Cecilia Malmström received a warning from her staff when she took over the post of European trade commissioner this month: Watch out for the Social Democrats.

The cautionary note referred to ongoing negotiations between the United States and the European Union over a ground-breaking trans-Atlantic free-trade deal. Europe’s left-leaning political parties could well decide whether the deal passes muster, and many members have been openly skeptical.

“Our (European) standards in areas such as consumer rights, workers’ rights, cultural policies and public sector programs cannot be lowered,” Ralf Stegner, the deputy parliamentary party leader of the SPD in Germany’s Bundestag, told Handelsblatt.

Social Democrats hold “a much more important role than previously, as it will be impossible to get a majority in parliament without their approval,” Ms. Malmström was warned in an internal paper prepared by her staff. “This could require a shift in policy.”

Perhaps that is why Ms. Malmström has made Berlin her first destination since taking over as trade commissioner. She will meet on Monday afternoon with some key people she needs if the trade deal, known as the Trans-Atlantic Trade and Investment Partnership, or TTIP, has any hope of surviving.

“Our standards in areas such as consumer rights, workers’ rights, cultural policies and public sector programs cannot be lowered.”

Ralf Stegner, SPD parliamentarian

At the top of the list is Germany’s economics minister, Sigmar Gabriel, who is also the leader of Germany’s Social Democratic party, the SPD. A meeting is also planned with the head of Germany’s largest trade union association, Reiner Hoffmann of the DGB.

In public statements, Mr. Gabriel has backed the free trade deal as a one-time opportunity for Germany and Europe: “It is about whether Europeans and Americans can succeed one more time in setting the standards for global trade,” he said in October on a trip to the United States.

But the SPD leader faces an uphill battle: A parliamentary majority for the free-trade deal looks unlikely in Berlin. In smaller and larger party groupings, Mr. Gabriel has reportedly set about confronting the rumors opponents raise to scuttle the deal, arguing that neither the regulation of book prices nor cultural subsidies in Germany are in danger.

Nor will TTIP limit employees’ right to have a voice on company policies, which is the norm in Germany, Mr. Gabriel has said. But the skepticism has persisted.

The degree of stubborn opposition to TTIP has struck alarm bells within Mr. Gabriel’s inner circle. SPD party members opposing the agreement seem to be as hysterical in their assessments as the labor unions, said a leading member of the SPD, who declined to be named.

Opposition to TTIP has generally been strongest in Germany, where some left-leaning politicians like Mr. Stegner fear the deal could erode European legal standards on everything from consumer and agricultural goods to social programs. Chancellor Angela Merkel’s Christian Democratic party, which rules together with Mr. Gabriel’s SPD, is supporting the deal for its potential to inject new life into trade with one of Germany’s largest overseas partners.

“The critical views of a portion of the population are hard to follow.”

Werner Brandt, President, International Chamber of Commerce in Germany

Despite the negative publicity in Germany, the German public remains sober and supportive: a recent poll found that 48 percent consider TTIP to be a good thing, compared to 32 percent who view it negatively.

Daniel Caspers, a European parliamentarian for the CDU, said the mood has shifted since earlier this year, when anti-TTIP rhetoric inflamed European parliamentary elections.

“The aggressiveness is gone” from the debate, Mr. Caspers told Handelsblatt Global Edition. He said he was confident the Social Democrats in the European Parliament can be won over.

This is where Ms. Malmström comes in. Her task in Berlin will simply be to listen.

The new trade commissioner’s willingness to open a dialogue has been welcomed by skeptics: “Ms. Malmström has already put herself above her predecessor with this promise of more transparency,” said Bernd Lange, a member of the SPD party in the European Parliament. “She knows from her own experience how important it is to work with the European Parliament.”

Business voices are also starting to push back against criticism of the deal. The country’s four largest business associations on Monday issued a joint statement urging support for TTIP, including the use of supra-national arbitration panels for foreign investors, one of the stumbling blocks in the talks.

The arbitration panels known as ISDS, designed to settle disputes between governments and companies, have come under fire from left-leaning groups in Europe that fear they could allow multinational U.S. companies to sue over government policies they don’t like.

Supporters strongly deny this, and point to the fact that ISDS protections have been a part of free-trade deals around the globe for half a century. In fact, German companies have turned to ISDS more than most.

“The critical views of a portion of the population are hard to follow,” Werner Brandt, who heads the International Chamber of Commerce in Germany, told Handelsblatt. Even between developed economies like the United States and Europe, arbitration panels can help avoid discrimination against foreign companies, he said.

Mr. Gabriel, who has been openly skeptical of ISDS, will still need some convincing. On a trip to the United States last month, he met with Caroll Neubauer of the German-American Chamber of Commerce, who pressed the argument that Germany’s businesses could themselves benefit from being protected from U.S. courts.

The U.S. legal system is “completely broken, a total catastrophe,” Mr. Neubauer told Handelsblatt, warning that costs for legal disputes can quickly get out of control. A supranational arbitration panel would therefore “operate as a force field for German small- and medium-sized businesses,” he said.

 

Christopher Cermak, a U.S. and Austrian citizen, who has lived on both continents, is an editor for the Handelsblatt Global Edition in Berlin. Klaus Stratmann has been a reporter on politics and energy for Handelsblatt in Berlin since 2005. Thomas Ludwig spearheads Handelsblatt’s coverage of trade issues out of Brussels, where he has been based since 2010. To contact the authors: cermak@handelsblatt.com; Stratmann@handelsblatt.com; Ludwig@handelsblatt.com.

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