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Trade Secrets – Draft EU documents reveal trade agenda with U.S

Article by Karen Hansen Kuhn, published on http://www.iatp.org/ on July 3, 2013

Transparency and trade negotiations don’t seem to go together these days. Recent revelations in Spiegel disclosed that the U.S. government had been spying on its EU “partners” connected to negotiations on the Transatlantic Trade and Investment Partnership (TTIP, probably better stated as the Trans Atlantic Free Trade agreement, or TAFTA, which very much rhymes with NAFTA). The French and German governments are outraged, with some parliamentarians calling for a suspension of the talks, slated to start next week in Washington, D.C.

Unfortunately, the only way civil society groups find out about the negotiations are through basically one-way conversations, where we express our concerns to trade officials, or through leaked negotiating documents. One such text came our way over the weekend, a set of position papers summarizing some of the EU’s initial goals on regulatory harmonization, which would be sent to the U.S. ahead of the talks. It includes initial proposals on regulatory issues involving the automotive sector, chemicals, pharmaceuticals, Sanitary and Phytosanitary issues (SPS), competition policy, a proposal for a chapter on trade and sustainable development, trade in raw materials and energy, and an ambitious proposal for cross-cutting disciplines on regulatory issues. It starts out by asserting that, “the TTIP offers a unique chance to give new momentum to the development and implementation of international regulations and standards (multilateral or otherwise plurilateral). This should reduce the risk of countries resorting to unilateral and purely national solutions, leading to regulatory segmentation that could have an adverse effect on international trade and investment.”

Consistent multilateral rules on difficult issues make sense, but let’s make sure trade is put in its place. Rules that provide for a safe workplace, protect public health and the environment, and promote energy and food security have been lost in trade agreements of the past. And the fact is that many advances in standards start at the local level and work their way to the national and, ideally, international levels. The recent votes for GMO labeling in Connecticut and Maine are a good example of this. To be fair, the proposal highlights the “importance of regulatory action to achieve public policy objectives” and states that it should not be used to lower standards in either country. But many regulations on difficult issues such as GMOs, questionable food additives like ractopamine, and emerging technologies such as engineered nano materials in food, need extensive public debate with a bias towards raising standards. The paper proposes steps to increase cooperation among regulatory authorities on both sides of the Atlantic, but makes no mention of public participation in that process. Sadly, the precautionary principle, which is the basis of EU law on many of these issues and is enshrined in the Treaty of Lisbon, is entirely absent from the document.

The document also includes a first informal discussion draft, a “non paper,” on public procurement. The EU has expressed its intention in other fora to include procurement commitments at all levels, i.e., including state and municipal governments. That goal is repeated here, along with the aspiration to include procurement commitments in all goods and all sectors. This could mean that programs that support local and sustainable foods, like local farm to school programs, could be on the table in the trade talks. The U.S. has excluded procurement commitments on food from other trade agreements, but it seems that this, along with possible commitments on living wage laws and Buy America programs, could be up for grabs.

Taken together, this agreement and the Trans Pacific Partnership (TPP) would regulate a vast share of global trade. They would undoubtedly set the standards for rules in other bilateral or regional agreements too, and could eventually circle back to set the rules at the WTO. And they matter because, especially in the case of TAFTA, they are not so much about trade in goods and services per se, but about “regulatory cooperation.” That term means a lot of things in different sectors. In our food system, it has the potential to set public health and environmental standards at the lowest possible level in order to resolve pesky “trade irritants” like food safety laws and regulations on new food technologies and questionable food additives.

The new GMO labeling laws, public preference programs for local foods and countless local environmental rules were developed in the light of day and through a vigorous public debate. Unfortunately, the Obama Administration has so far shown little inclination to take the trade talks out of the shadows, either during the talks or when the resulting deals go to Congress. Despite leading secret negotiations, it is expected to push for Fast Track negotiating authority this summer, which would limit Congress to an up or down vote on any trade deal (with no amendments) and put strict limits on debate.

In the wake of the spying scandal, EU trade officials are calling for greater transparency in the trade talks, especially on just what information the US obtained. Officials on both sides of the Atlantic should commit to open the talks, and listen to proposals on fair trade and better food systems. Some 34 civil society groups from the U.S. and EU issued this letter last week, calling on trade negotiators to negotiate higher standards or abandon the talks. Other calls for transparency and against unfair provisions on investment, intellectual property rights and energy exports are on the way. That is what really should be on the agenda next week in D.C.

No to a corporate driven agreement!

8 July, 2013 – Remained unheard the demands to stop the negotiations, which arose after the scandal of the spying activities of the NSA on European representatives, the first round of negotiations of the Transatlantic Trade and Investment Agreement (TTIP, aka TAFTA) is starting today, Monday 8th July in Washington, DC. With an open letter to President Obama, EU Commission President Barroso and EU Council President Van Rompuy, more than 60 organisations from Europe and the US have raised their voice. The letter shows their concerns about the coming negotiations and state their opposition to the use of behind-closed-door trade negotiations to change and lower public interest measures for the sake of commercial interests (Read or download the letter and the list of signing organisations)

France threatens US trade veto over culture

Article written by Benjamin Fox and published by www.euobserver.com

BRUSSELS – The French government has dismissed as “naive” suggestions that a transatlantic trade deal with the US could substantially benefit the EU economy and take it out of crisis.

Speaking on Thursday (18 April) following a meeting of EU trade ministers to discuss the draft negotiating mandate, French trade minister Nicole Bricq said “it would be naive to think that the discussions, which will be long and difficult … will really save Europe from the current anaemia.”

EU ministers are expected to sign off on the commission’s negotiating mandate in mid-June. The talks are then expected to take up to two years, although trade commissioner Karel de Gucht is hoping to strike a deal in time for next May’s European elections.

Bricq also said that Paris would insist on the exclusion of Europe’s audiovisual sector from the talks.

“The position of France is that we want exclusion from discussion of cultural items. This is non-negotiable. It is not a surprise. I have said it and if we don’t have exclusion, we will have no agreement,” she said.

The French demands – with the traditional focus on cultural issues – indicate the delicate balance EU negotiators will need to strike to broker a deal. Officials and other EU governments are concerned that keeping certain sectors away from talks could encourage the US to draft its own ‘red lines’.

Irish business and employment minister, John Bruton, who chaired the meeting, struck a more optimistic tone. Ministers had made “real progress towards achieving an agreement,” he said.

De Gucht and Mike Froman, International trade advisor to Barack Obama, were also present at Thursday’s talks. Froman’s presence marks the first time that a US government representative has discussed EU-US trade policy directly with trade ministers.

Officials in Brussels have been talking up the Transatlantic Trade and Investment Partnership with the US which they say could be worth as much as 0.5 per cent of EU GDP and create 400,000 jobs.

A recent paper by the Centre for Economic Policy Research (CEPR), a London-based think tank, indicating that a US trade deal could increase EU economic output by up to €119 billion a year, the equivalent of €545 a year for the average family of four.

But failure to go beyond agreement on tariff barriers would lead to economic gains of no more than €23.7 billion, according to the CEPR. Liberalising the services market and public procurement rules would be worth an additional €5.3 billion and €6.4 billion.

European Activists Could Thwart US-EU Trade Deal

Article by By Christoph Pauly and Christop Shult from Spigel Online, 26 februar 2013 – Consumer watchdogs, Internet activists and European farmers are gearing up to fight the planned trade agreement between Europe and the United States. Many in Europe are worried that politicians will make backroom deals at the expense of consumers.

When it comes to face-to-face meetings, German Chancellor Angela Merkel and United States President Barack Obama have had a somewhat one-sided relationship so far. The chancellor has been to Washington several times, but Obama has never been to Berlin as president, despite several invitations.

It could finally happen in June. Obama’s advisors are mulling whether the president should visit Berlin during his trip to Europe. There would be two reasons to do so. First, this year marks the 50th anniversary of former President John F. Kennedy’s legendary Berlin speech, in which he proclaimed: “Ich bin ein Berliner.” And negotiations are set to begin this summer over a trans-Atlantic free trade agreement between Europe and the United States, which the president announced two weeks ago.

Industry representatives are already waxing lyrical about the prospect of the free world, with its 800 million consumers, joining forces to form a gigantic trading bloc with common rules. The American Chamber of Commerce in Germany sees the agreement as a promise of more growth, while officials at the Federal Chancellery call it the cheapest way to stimulate the economy. The old industrialized countries intend to confront China’s expanding economic might by creating a shared market of common standards, patents and laws.

But the planned trading union isn’t going to be an overnight success. Europe and the United States face years of painful negotiations, and many critics see the whole thing as a flight of fancy. Consumer advocates, as well as environmental and Internet activists, are preparing to fight the treaty with all means at their disposal. They fear that bad compromises will be made at the expense of consumers in secret negotiations between the European Commission and the Obama administration.

“The treaty cannot fail because of chlorinated chickens this time,” says German Foreign Minister Guido Westerwelle. He is referring to the Europeans’ distaste for US meat products that are disinfected in chlorine baths, products that are currently banned from importation to Europe.

Major Differences Over GM Foods

Contentious issues like this have brought down many a trans-Atlantic agreement. They may sound petty, but elementary questions of consumer and citizen’s rights are at stake. What do we want to eat? How are our personal data treated in the Internet? In recent years, very different traditions have developed in the United States and Europe in this regard, creating considerable potential for conflict. For instance, there are much greater restrictions on the sale of genetically modified food products in Europe, while most Americans have no problem with such products, as long as they are cheap and look good.

The technology is now used by most US farmers, enabling them to grow plants that are resistant to insects and produce higher yields per hectare. Last year, 88 percent of corn, 93 percent of soybeans and 95 percent of beets grown in the United States were from genetically modified seed. “Transparency, freedom of choice and the principle of foresight cannot be sacrificed to the free movement of goods in Europe,” says Christoph Then, managing director of Testbiotech, a non-profit association opposed to genetic engineering.

The American farm lobby has long fought against European trade barriers for genetically modified potatoes and hormone-treated beef. Now the free trade treaty will provide them with considerable leverage for cracking the European front.

In a letter to US Trade Representative Ron Kirk, Max Baucas, a Democrat senator from Montana, outlined what he hopes to achieve in the upcoming negotiations. His list includes EU restrictions on genetically modified grain, the use of hormones in cattle and “unscientific restrictions on the use of safe feed additives like ractopamine in beef and porks,” all positions that are anathema to European consumer advocates.

For example, American farmers use the hormone rBST, developed by the agricultural corporation Monsanto. The drug is intended to increase milk production by up to 20 percent and meat yield by up to 30 percent. But it is also suspected of causing cancer in human beings. In addition, high-performance cows require additional antibiotic treatment, because their mammary glands are more likely to become infected.

European Farmers Fear Competitive Disadvantage

“If American hormone meat reaches Europe, it will have a considerable impact on European producers,” warns Lutz Ribbe, an agricultural expert with the environmental organization Euronatur. Because production is cheaper in the United States, says Ribbe, European farmers are at a clear competitive disadvantage.

Free trade agreements with other countries show how justified the concerns are. In ongoing talks with India, the EU wanted to include a section on “sustainable development” in the agreement, but the Indians refused. Negotiations with Canada also stalled, partly because of disputes over agricultural issues.

In addition to free trade for agricultural products, the Americans want to place intellectual property rights at the center of the upcoming trans-Atlantic poker game. The business interests of Hollywood and Silicon Valley are behind the effort. They produce movies and software that are coveted worldwide but can often be copied easily. To address the problem, the Americans already negotiated a trade agreement with international partners and the EU in recent years, but then the European Parliament thwarted the effort.

The failure of the Anti-Counterfeiting Trade Agreement (ACTA) was the first major victory for an international web public that had organized a major campaign on the Internet and major demonstrations in Warsaw, Berlin and Paris. The activists felt that ACTA would threaten freedom on the Internet.

Jérémie Zimmermann, one of the organizers of the anti-ACTA movement, believes the time will soon come for new protests. The spokesman for the Paris-based organization La Quadrature du Net can prove that old paragraphs from the failed ACTA were inserted into a preliminary version of the proposed Comprehensive Economic and Trade Agreement (CETA), which the European Commission is currently negotiating with the Canadians and whch could serve as a blueprint for the treaty with the Americans.

Rift on Data Protection

“It’s a favorite game of the entertainment industry to hijack free trade agreements for their own purposes,” says Zimmermann. He sees democracy at risk when negotiations concerning the future of all people are conducted behind closed doors. “Millions of citizens can be mobilized if their freedoms are threatened,” he says.

Jan Philipp Albrecht, a Green Party member of the European Parliament, who opposed ACTA from the start, is also pessimistic about the trans-Atlantic free trade deal, unless national parliaments are brought in early on. “Otherwise the free trade agreement will collapse under opposition from ordinary Europeans.”

Albrecht, the European Parliament’s rapporteur for the proposed Data Protection Regulation, sees considerable potential for conflict. While US companies can use their customers’ personal data with almost no restrictions, Europeans are protected by minimum standards. Finding a compromise on this issue is virtually impossible, says Albrecht.

US companies like Facebook and Google see European data privacy as a potential threat to their billions in profits. Indeed, European authorities have just threatened, once again, to penalize Internet giant Google for its treatment of the personal data of European customers.Another option is to exclude contentious issues like agriculture and data protection from the free trade negotiations. But if that happened, there wouldn’t be much of a trade deal left and the whole project would be redundant. Customs duties, for example, are already so low today, at about 3 percent on average, that they play a relatively minor role.

The free trade agreement is “by far our most important project for the future,” says Chancellor Merkel. It appears that not everyone in Europe agrees.

Translated from the German by Christopher Sultan

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.