What is going on? This the most frequent question one reads and hears after German economy minister Sigmar Gabriel stated that TTIP negotiations had in effect failed, and after on Tuesday (30 August) French secretary of state in charge of trade Matthias Fekl announced that he wanted to see the TTIP negotiations stopped altogether. But this doesn’t mean TTIP talks will stop. European leaders are having a debate on what to do next with a negotiation that has entered a decisive moment ahead of a rather artificial 2016 deadline.
So: what indeed is going on?
Several dynamics are at play.
Firstly, the TTIP negotiations themselves are reaching an inflexion point. After not being dynamic in their first two years, TTIP talks have reached an unprecedented level of intensity in the run-up to this year’s summer. But now the – predictably – difficult topics for both sides start needing addressing. Both sides need to make difficult concessions. Fundamentally, the disagreement is about market access:
- the EU wants the US to open up its public procurement markets more (it seeks in particular some waivers to US Buy American provisions on federally funded highway, railway and airport infrastructure). The US can’t move on this in an election year.
- the EU wants the US to sign on to EU geographical indications. US is dead-set against.
- the US wants the EU to fully eliminate tariffs, in particular in agriculture. This is a no-go area for the French, as they want to keep some tariff rate quotas on beef and dairy, this the more so as difficult general elections are looming next spring. So far negotiators have agreed on full elimination of tariffs on 97% of tariff lines. The EU applies higher tariffs than the US on average.
- the US wants guarantees on data flows and internet platforms (“so-called new services”)
France and Germany also want the US to accept the EU’s new model investor-state dispute settlement system based on pre-appointed judges – the international court system, or ICS. The US don’t like it. Germany is interested in the procurement bit of TTIP (a major topic for France), is protective on data/platform issues, and also not happy that regulatory cooperation in engineering isn’t moving forward.
In the current political climate in the United States, Washington is in no position to make serious concessions to the Europeans. Something similar can be said about the EU. Liberalising agriculture remains a very tough sell in the EU, not only in France, but also in many parts of Southern and Central and Eastern Europe.
Secondly, the political calendar in the United States is seen by many as a deadline. The Obama administration has tried to push hard for an early conclusion of TTIP, in 2016. Though this appears technically and politically almost impossible (see here) and the talks simply not ripe for an early conclusion, many politicians on both sides of the Atlantic feel that, given that given the big uncertainty over what will be US trade policy after Obama leaves office, the time to conclude TTIP is now.
Doing so would however entail cutting corners significantly on commercial ambition: this, Europeans tend to feel, would not play out in their favour. A small TTIP deal would focus mostly on tariffs and leave many other crucial market access and regulatory questions unresolved. But on tariffs, the EU has to do the ‘heavy lifting’ in the negotiation given its higher average import tariffs. No wonder the French are balking at the seeming lack of progress on procurement or geographical indications.
Many observers and players reckon that, even if TTIP is not concluded in 2016, given the time constraints (better have a deal before Trump comes to power!), TTIP must be well advanced enough so that the next administration and new politicians in the EU after the French and German elections next year can pick up the talks where they were left and wrap up some time after 2017.
It is now ‘crunch time’ for TTIP. After the summer recess, there are basically two to four months left for the transatlantic trade negotiations before they either fail, or go into a more or less well prepared slumber. Europeans need to come to an agreement and consensus on what to do with the negotiations now. After an intensive month of negotiations in July, and a slowdown of trade and routine political activity in August, it is not surprising that statements from the capitals are heard now when everyone’s back from holidays.
All member states – including France and Germany – want TTIP. They see it as in their strategic interest to have a deal. The question is: at what domestic political price? The current French and German behaviour has to do with partisan politics at home (explained here for Sigmar Gabriel), and ruling social-democrats fighting their left leaning party base. It looks like the calculus for the French government, which has moved to a pro-business stance in the last two years, and of Sigmar Gabriel, who is perceived as a rather centrist social-democrat back home, is to prioritise the ratification of the Canada agreement CETA, which is awaiting signature this autumn.
While opponents of TTIP see CETA as a stepping stone to TTIP, proponents, like notably France, see CETA as a good template to offer the US government (Washington itself seeing the TPP as a model for TTIP) in the TTIP talks. At this stage in the negotiation and political cycle, it is a rather expedient political move to put TTIP aside to keep the sceptics happy, and focus political energy on getting CETA through in national parliaments in the spring 2017.
But for German and French social democrats, the appetite for TTIP is less strong than in other countries, not least because public opinion is very sceptical of the deal. The last Eurobarometer shows support for TTIP at a mere 26 percent in Germany, though it is much higher in France (50 percent of polled in favour of TTIP).
Why TTIP negotiations won’t just stop this autumn
The EU Commission is not letting its behaviour be dictated by Paris. On Tuesday (30 August) Commissioner Cecilia Malmström cheekily tweeted “Video conference with
@MikeFroman about #TTIP today. Negotiations continue.”. Margaritis Schinas, the EU spokesman at the ritual daily mid-day press briefing said: “For us nothing has changed because there is a structured process based on a unanimous mandate that has been validated by the heads of government during the last Council meeting (NB in July 2016)”. On The Commission said that the negotiations have to the contrary reached “a crucial stage”, and that “provided the conditions are right, the commission stands ready to close this deal by the end of the year”.
Of course Washington is determined to continue negotiating too, though Washington has its hands tied by the fact that the Transpacific Partnership process is not really moving forward in Congress.
France must find sufficient support for its position in the Council to order the Commission to induce a full halt to talks. Fekl himself said that nothing would stop the Commission from continuing to negotiate. And it is clear that Paris will find it difficult to garner sufficient support for such a radical move as suggested by Fekl, which is to simply walk away from the negotiating table.
Berlin is certainly not likely to go down the French route. If Sigmar Gabriel has his views, Chancellor Angela Merkel carries more weight. On Monday her spokesman Steffen Seibert said “It is right to continue to negotiate”.
France will also not find support in Rome – a frequent ally in agricultural protectionism – this time round. Carlo Calenda, Italy’s economic ministry told the Corriere della Serra on Monday, in reaction to Gabriel’s statements on the week-end: “The United States are our main economic and political partner. If we don’t negotiate with them, with who else should we do it?”. Italians are desperate to be able export their fashion and food and wine on better terms on the US market.
France is not expected to find much support in Central and Eastern Europe nor in Northern Europe. Sweden’s trade minister Ann Linde is reported to have said on Tuesday (30 August): “No, TTIP is not dead. We need more trade, not less”.
What is happening is a fundamental discussion on what to do next about TTIP in a time of tight calendars and during an unfortunate electoral cycle. We will know more on how the EU will want to approach this crucial next phase of TTIP end September. A bilateral meeting between USTR Michael Froman and Commissioner Cecilia Malmström is expected. Most importantly, the member states will discuss TTIP ahead and during the Bratislava council meeting on 22 and 23 September and advise on the way forward. In the end it will have to be the Commission that needs to come up with a strategy and build consensus with the capitals.