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Transatlantic Free Trade: A Mistake for Canada and the United States

Article by Maude Barlow*, published by The Hufftington Post, 19 March 2013 – The United States and European Union have taken the free trade plunge.

President Obama announced in February that he will start talks with the EU on a transatlantic trade, investment, and regulatory pact. Last week, the European Commission sent a draft secret mandate to member states on how far they’re willing to go to clinch it. And the usual business lobbies have already begun to celebrate what they hope to be an important (for them) leap forward for corporate globalization.

The Mexican government is allegedly seeking a spot in the transatlantic talks with speculation Canada may join. But for all three NAFTA countries the pact would be a mistake, as Canadians are learning too late.

The groundwork for a U.S.-EU free trade zone can already be found in the four-year-old Canada-EU Comprehensive Economic and Trade Agreement (CETA) negotiations. Like that other big trade deal, the Trans-Pacific Partnership, the CETA hopes to eliminate about 98 per cent of tariffs on most products. But the broader goal is to reduce so-called non-tariff barriers in the form of domestic regulations, public services, government procurement, performance requirements on investment, and intellectual property rights.

In some areas, like public interest regulation, Europe has more to lose from transatlantic free trade than either the U.S. or Canada. Labelling schemes or outright bans on genetically modified organisms, stricter chemicals management policies, and an EU Fuel Quality Directive that will block Canadian exports of carbon-intensive tar sands oil are all targets for deregulation.

U.S. states and municipal governments should be concerned about Europe’s desire to export its procurement model to North America. In the CETA negotiations, Canadian provinces and municipalities have been asked to give up their right to buy locally (or buy Canadian) on public infrastructure projects and large goods or services purchases. Leaked documents suggest they will make this sacrifice in exchange for modest market access gains for Canadian meat products in Europe. Hardly a fair deal for local governments.

The EU investment protection model may also surprise some U.S. observers in how far it goes to protect the profits of foreign multinationals. Since signing NAFTA, Canada and the U.S. have re-written their model investment treaties to try to create more space for legitimate public regulations and policies. It’s debatable whether the reforms are much of an improvement. But an EU deal could wipe out what little policy space they created.

The EU is pushing Canada for far more pro-investor definitions of “fair and equitable treatment” and “standards of treatment.” This will expand opportunities for European firms to challenge non-discriminatory public policies that lower profit margins, even if the objective of the policy is to conserve natural resources, to protect the environment or public health, or for other legitimate purposes. This at a time when Canada is facing about $2.5 billion in NAFTA investor claims from U.S. firms, including one dispute by a U.S. energy company against a moratorium on hydraulic fracturing (or fracking) in Quebec.

U.S. firms frequently use bilateral investment treaties to challenge foreign government measures. But it is likely that Congressional support for these extreme investor rights treaties would vanish if the U.S. were to lose a case at home. A Transatlantic Trade and Investment Partnership agreement (TTIP) that includes an investor protection chapter like the one in the CETA will present far too many opportunities for powerful European multinationals to test that theory.

There are other problems to consider in a U.S.-EU pact. For example, the two largest exporters of brand name drugs could restrict access to cheap medicines globally if intellectual property rights are ramped up for patented pharmaceuticals. Global food security could be equally damaged if agricultural products received the same enhanced protection in the TTIP. The world’s poor cannot afford to pay more for drugs, seeds, or fertilizer.

The voices of those most impacted by these deals, however, are generally not heard in trade negotiations, which happen behind closed doors with no meaningful public participation. The Canada-EU free trade talks are off limits even to Canadian parliamentarians. Still, opposition to the CETA is growing across the country.

More than 80 Canadian municipalities have passed motions expressing concerns about the deal, with half of those asking to be excluded entirely. Provincial governments are wary of intellectual property rules that will increase the cost of public and private drug plans they administer.

Like the CETA, a U.S.-EU trade deal will not be about jobs or sustainable development. It will not look anything like a 21st century trade deal should. The TTIP will be about deregulating and disempowering communities to act in the public interest.

*Maude Barlow is the National Chairperson of the Council of Canadians and chairs the board of Washington-based Food and Water Watch.

Irish PM Raises Numerous Sectors As Possible Difficulties In U.S.-EU Talks

Article on Inside US Trade, 19 March 2013 –

Irish Prime Minister Enda Kenny yesterday (March 18) identified multiple areas where he believed the U.S.-EU trade and investment negotiations would face difficulties, but said the talks could still possibly conclude in the next 18 months to two years.

“There will be difficult bridges to cross in the areas of health and safety standards, public procurement and agriculture,” Kenny said at an event hosted by the U.S. Chamber of Commerce. He also identified government policies that promote the audiovisual sector in certain countries, such as France, as a potential problem area, along with information technology. Policies in the audiovisual sector are aimed at promoting cultural diversity.

Kenny, whose country currently holds the rotating council presidency of the European Union, said the draft mandate submitted by the European Commission last week “may not be perfect, but it takes into account some of the little concerns that individual countries at the European level might have.” Separately, an EU source said that the draft mandate says that member states maintain a right to pursue policies that maintain cultural diversity.

He noted that despite those sensitivities that countries seek to protect, “there’s certainly the backing of the vast majority of governments.”

“Yes, you will have difficulties in the agricultural sector, in the audiovisual sector – some countries in Europe have particular areas that they would focus on – but by and large, I have to say, there seems to be a very real understanding that this is going to be part of the future of Europe,” the prime minister said.

Kenny said the focus right now is to work on building approval for the draft mandate submitted by the commission last week, “so those discussions and negotiations can actually start.” He said Ireland in its role as the presidency is focused on ensuring that a final mandate approved by member states will not demand any carveouts upfront.

Kenny said all he wants in a final mandate is “a platform where these discussions can start.” He added that he could “actually see [the talks] being possibly concluded in 18 months to two years.”

Ireland is aiming to obtain a negotiating mandate from the member states by the conclusion of its presidency at the end of June. Kenny did not indicate how likely it would be for the final mandate to be approved by then, but he noted more than once that there was a high level of support for the negotiations among the EU heads of state, who meet under the auspices of the European Council.

“So, by the end of June, hopefully [the mandate is] done, negotiations can start, and if everything went well that could be concluded sometime next year, but then I can’t predict what the nature of, how technical the discussions might get at one part or another,” he said.

He stressed the potential benefits of a trans-Atlantic deal, saying he was “convinced that an ambitious, comprehensive and far-reaching agreement on trade and investment between the EU and the U.S. will not only trigger economic growth in our respective economies, but will also send a strong signal of leadership to other economic powers.”

“I am convinced that if both sides take an open and flexible approach, we will be able to agree on convergence on regulatory issues, effectively setting the standard for world trade,” the prime minister said.

He also pointed to his government’s openness and willingness to work with business, “so if you have a concern or an anxiety or an opportunity that you see, a potential that you want followed through on, you’re talking to the right people.”

Kenny also met today (March 19) with President Obama at the White House, where the two leaders discussed the forthcoming negotiations. After that, they both attended a “Friends of Ireland” luncheon on Capitol Hill with members of Congress.

Kenny said at the Chamber event that he expected the domestic process for launching negotiations in the United States to “happen very quickly.” The Office of the U.S. Trade Representative may send up its formal notification to Congress on its intent to enter into new negotiations with the EU this week.

The two sides are trying to move through their procedural requirements in tandem, which is why it may make sense for USTR to move ahead with its notification this week.

Germany Backs Broad Mandate For U.S.-EU FTA, But Talks Still Ongoing

Article on Inside US Trade, 18 March 2013 – Germany’s most senior economic official in the United States said late last week that his government will make the case for covering all issues in a mandate for the European Commission to negotiate a U.S.-European Union trade deal.

Talk among EU member states on the details of the mandate are just getting underway in the EU with an informal discussion on March 15, and a more formal session scheduled for next Friday, according to an EU source.

At the same time, the official strongly hinted that a final deal may ultimately exclude some agricultural issues, such as genetically modified organisms (GMOs) and beef raised with artificial growth hormones, both of which are sensitive topics among EU member states.

“Germany is in favor of a broad mandate” that is not limited “unnaturally,” said Peter Fischer, head of the economic section in the German embassy at a March 15 event organized by Georgetown University. He said Germany “will argue the merits of [its] case” with other member states. The commission also favors as broad a mandate as possible because that preserves its flexibility in the negotiations.

But other member states may seek to exclude agriculture entirely from the negotiating mandate, Fischer conceded, while refusing to speculate on any other areas that some member states may seek to exclude. All 27 member states support the talks moving forward, although some may seek to protect their sensitivities in the talks on a mandate.

In the context of discussing potential exclusions from a final deal, Fischer noted that both sides can produce examples where the other does not follow a rigid scientific approach. He was responding to criticism from U.S. stakeholders that EU policy in areas like GMOs or beef hormones does not strictly follow scientific findings.

The German official conceded that consumer behavior is at times driven by cultural preferences that exist regardless of the relevant scientific information. Food issues are “very important” for consumers in a “cultural” sense, he said, hinting that it may be difficult to alter these perceptions in Europe through trade negotiations.

At the same time, Fischer downplayed the economic importance of these narrow food-related issues. From an economic point of view, they are minor compared to overall U.S.-EU trade flows, he said, and the two sides should maintain that perspective. He urged that such exclusions should not be “the spoiler of the gains we have in other areas” of the negotiations.

Fischer also noted that a potential solution to the trade dispute over artificial growth hormones would be to set up a production line in the U.S. for beef that will be raised without them.

Separately, European Council President Herman Van Rompuy on March 15 hinted that the beef issues will be one of the sensitive issues in the U.S.-EU negotiations, which he said the EU was “impatient” to get started. “We must seize the moment,” he told the Brussels forum of the German Marshall Fund, according to a copy of his prepared remarks.

EU Take On ISDS In Canada Talks Could Pose Hurdle for U.S.-EU Talks

Article from Inside US Trade, March 14, 2013 –

In the ongoing trade negotiations between the European Union and Canada on elements of an investor-state dispute settlement (ISDS) mechanism, the EU is taking a position on what government measures constitute indirect expropriation that would put it at odds with the United States if it were maintained in potential U.S.-EU trade negotiations.

The EU position would allow investors a relatively easier process for arguing that even measures applied to achieve legitimate policy objectives may constitute indirect expropriation. In contrast, Canada has proposed language that would provide the government with a stronger shield against investors seeking to make an indirect expropriation claim.

A direct expropriation is an affirmative taking of property wherein the government acquires title to or dominion over the property or enables someone else to do so. An indirect expropriation has the same effect but without the affirmative, deliberate expropriatory act.

Canada’s proposed language on what measures are safeguarded from indirect expropriation claims is closer to the relevant language in the U.S. model BIT than the text advanced by the EU.

These differences on indirect expropriation are evident in the investment chapter of the EU-Canada free trade agreement, according to a leaked copy first acquired by the Canadian newspaper La Presse and later obtained by Inside U.S. Trade. The investment chapter contains a multitude of bracketed text on a range of investment issues, denoting areas where the two parties disagree.

One U.S. investment expert said that if the EU were to bring this indirect expropriation language to the table with the U.S. as part of a U.S.-EU trade negotiation, the difference to the U.S. model bilateral investment treaty (BIT) language would be “more than technical.”

Another source went so far as to say the difference would constitute a “significant hurdle” in the talks. This source added that the EU is likely taking this investor-friendly approach because the European Commission only attained the competency to negotiate investment agreements under the Lisbon Treaty, which entered into force in 2009. Thus, it has little experience with litigation by investors charging indirect expropriation, according to the source. But there is an internal debate within the EU on whether the commission should maintain the stance it is currently taken or seek more protection from indirect expropriation law suits, one informed source said.

One expert also noted that the U.S. considers its model BIT language “quasi-sacred,” and speculated it would likely take a firm line to keep it intact in any negotiation with the EU. Another source predicted the U.S. would make a “hard sell” to retain its model BIT language in most areas.

But these sources cautioned that it is difficult to forecast U.S.-EU negotiating dynamics when the negotiations have not even been launched.

However, this source noted that it could be possible that U.S. business associations could create added pressure on the U.S. government to adopt the EU’s more investor-friendly language on indirect expropriation.

Stuart Trew, trade campaigner for the civil society group The Council of Canadians, noted that indirect expropriation is “one of the most used and abused of the substantive rights granted to corporations and investors” in both the North American Free Trade Agreement and most other bilateral investment treaties.”

Following a three-pronged definition of what government actions constitute indirect expropriation, the EU and Canada offer their language of what government actions are carved out and not considered to be indirect expropriation, according to the leaked draft text.

Canada’s paragraph is as follows: “Except in rare circumstances, such as when a measure or series of measures is so severe in the light of its purpose that it cannot be reasonably viewed as having been adopted and applied in good faith, non-discriminatory measures by a Party that are designed and applied to protect legitimate public welfare objectives, such as health, safety and the environment, do not constitute indirect expropriations.”

By contrast, the EU language takes a different approach. “Subject to the principle of proportionality, non-discriminatory measures of general application taken by a Party that are designed to protect legitimate public policy objectives do not constitute indirect expropriation if they are necessary and are applied in such a way that they genuinely meet the public policy objectives for which they are designed.”

The critical difference between the two bracketed proposals is the existence of the “necessary” requirement in the EU text that does not appear in Canada’s.

Investment experts predicted that a dispute settlement tribunal would likely view the necessity provision as an affirmative defense and place the burden of proof on the government to show that a given measure or series of measures were necessary to achieve a stated objective.

The term necessary has long proven to be a high hurdle to meet in the course of trade litigation, Trew and other investment experts agreed.

The inclusion of the necessity provision in the agreement stems from the EU’s “principle of proportionality.” That principle, enshrined in Article 5 of the Lisbon Treaty, dictates that any government involvement by the EU must be limited to what is necessary to achieve the objectives of that government action.

This creates a substantive difference between the EU and the U.S. model BIT, sources noted, which does not require the government to prove a measure is “necessary” to defend itself from indirect expropriation litigation.

The U.S. model BIT language defines government measures that do not constitute indirect expropriation as follows: “Except in rare circumstances, non-discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety and the environment do not constitute indirect expropriations.”

The only substantive difference between the U.S. model BIT language and the Canadian proposed language on indirect expropriation is that Canada cites an example of the “rare circumstances” under which even a measure that is meant to achieve legitimate policy objectives could be considered indirect expropriation.

In contrast, the U.S. model simply includes the “rare circumstances” exemption without elaborating what that would constitute.

Canada defines this exemption as non-discriminatory measures so severe in the light of its purpose that it cannot be reasonably viewed as having been adopted and applied in good faith. Experts agreed that Canada’s wording on “good faith” imposes a high standard for a rare circumstance, given that it would be difficult to prove malicious intent on the part of a government.

But they disagreed on whether its inclusion would create a significant negotiating rift between the U.S. and Canada in the course of the Trans-Pacific Partnership (TPP) negotiations.

Experts that saw little problem pointed out that Canada’s good faith example of rare circumstances is preceded by the phrase “such as,” meaning that there could be other rare circumstances in which a measure would not be considered indirect expropriation.

Another expert noted that panels could consider the good faith test just one of several rare circumstances, ostensibly making that definition as broad as the U.S. model BIT, which does not enumerate any instances of rare circumstances.

But another source disagreed and said that the significance of the “such as” language would largely be determined in the course of arbitration. He said that tribunals tend to consider such language in context, meaning that the fact that Canada felt compelled to give one definition of rare circumstances could in essence make this example the standard.

In any case, several experts agreed that to the extent there are any differences between the U.S. and Canadian language on indirect expropriation, Canada is unlikely to press the issue against the U.S. in the course of the TPP talks. They said Canada is much more focused on policy issues like procurement.

Trew did note that Canada and the EU are seeking to make the ISDS more transparent. If they are successful in reaching an agreement, it is conceivable that Canada could persuade the U.S. to adopt those changes in an effort win over TPP countries that are skeptical of ISDS, such as Australia.

Obama Expresses Guarded Optimism On U.S.-EU Trade Deal, But Sees No Guarantee

Article from Inside Trade, 12 March 2013 – President Obama today (March 12) said he was “modestly optimistic” that the U.S. and European Union can successfully conclude a trade deal but emphasized that there is no guarantee it can be done.

“There is no guarantee that in the end some of the countries that have been hard cases in the past won’t block [a trade agreement] again, but I think that you’re going to see more pressure from more countries on the other side of the Atlantic to get this done than we have seen in the past,” Obama told the President’s Export Council (PEC).

This internal pushback in the EU is one of three reasons that Obama cited for why a deal is possible when it has not been in the past.

The second reason he cited is a recognition throughout Europe that it is hard for them to find a recipe for growth in an era of austerity measures. “So I think they are hungrier for a deal than they have been in the past,” Obama said.

The third reason he cited is the fact that the two sides have already made progress on resolving some difficult issues., “thanks to the work of good people like [Deputy National Security Adviser] Mike Froman.”

“We’ve identified on the regulatory side, customs side, areas where we can synchronize without hurting either side, but simply lubricating more effective trade between the two countries,” Obama said. Nevertheless, he said, the negotiations will still be “a heavy slog.”

In the past, the EU had to pursue agreements that were lowest common denominator given the differences among its member states, Obama said. “There are certain countries whose agricultural sector is very strong, who tended to block at critical junctures the kinds of broad-based trade agreements that would make it a good deal for us,” he said.

He made clear that it is unacceptable for the U.S. to keep agriculture out of the agreement. “If one of the areas where we’ve got the greatest comparative advantage is cordoned off from an overall trade deal, it’s very hard to get something going,” he said.

Obama laid out the benefits of completing an agreement with the EU, particularly in the regulatory area, saying an agreement could expand trade with Europe substantially. He called on business and labor to support these efforts.

“In order for us to do this, we’re going to need the help of industry and labor and all the parties that are represented here [at the PEC],” he said.

The president also highlighted the importance of the ongoing Trans-Pacific Partnership negotiations, once again touting it as a high standards agreement that would set the bar for ensuring that trade is fair.

“And for those of us who abide by high labor standards and high environmental standards, obviously being able to lock in those kinds of high standards in the fastest-growing region of the world and the most populous region of the world can yield enormous benefits and help to generate billions of dollars in trade and millions of jobs,” Obama said.

He said that exports and trade are “one brick in the broader economic foundation that we’re trying to build.”

The president’s appearance coincided with the European Commission approving a draft negotiating mandate and sending it to the member states for approval in the hopes that the negotiations will begin before summer break.

Transatlantic Trade and Investment Partnership: Opening free trade negotiations with the United States

Speech of Karel De Gucht, European Commissioner for Trade, in the Committee on International Trade (INTA) of the European Parliament/ Brussels (21 February 2013)

Source: http://europa.eu/rapid/press-release_SPEECH-13-147_en.htm

The importance of the agreement

The word historic is often abused, used for each and every occasion. However, today I would like to use it in its full right: we are going to launch the biggest bilateral trade negotiations ever undertaken.

A future deal between the world’s two most important economic powers will be a game-changer. Together, we will form the largest free trade zone in the world. This deal will set the standard – not only for our future bilateral trade and investment but also for the development of global rules.

It will create a tremendous impact on jobs and growth on both sides of the Atlantic.

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Alert! Call for mobilisation

President Barack Obama, EU Council President Van Rompuy and EU Commission President Barroso committed on Feb 13 to start EU-US trade and investment negotiations, which may strongly affect social, labor and environmental rights in both sides of the Atlantic and deepen global trade and investment liberalization. Indeed, elites from both sides explicitly aim at greater transatlantic regulatory convergence and harmonization of future regulations between the EU and the US, in the only interests of transnational corporations and financial industry. Join us to oppose this “free trade” agenda (…). 

Read or download the full statement in English or French

US and EU governments aiming to agree transatlantic free trade pact

Herman Van Rompuy, Jose Manuel Barroso

Moves within US Congress and 27 member governments to eliminate or minimise barriers to unfettered imports and exports

Source: in Brussels – The Guardian, Wednesday 13 February 2013

The US and the European Union on Wednesday launched their most ambitious attempt to liberalise transatlantic trade following Barack Obama’s commitment to a new pact outlined in his state of the union address.

A joint statement from Obama and the presidents of the European council and commission, Herman Van Rompuy and José Manuel Barroso, said they would kickstart moves in the US Congress and among the 27 EU governments to open negotiations on a new free trade pact seeking to eliminate or minimise barriers everywhere from the car to the pharmaceuticals industries, to services, agriculture and investment.

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