Print PDF

Practice Areas

TTIP Talks Inch Ahead Amid Disagreements on Tariffs, Investment, Other Issues

Wednesday, April 09, 2014
Sandler, Travis & Rosenberg Trade Report

The U.S. and the European Union recently held another round of negotiations on a bilateral free trade agreement, but progress in the talks has been slower than anticipated amid difficulties reaching agreement on tariff elimination, investment protection measures and other issues. The next round is expected to be held this spring in Washington, with two or three more rounds likely to follow later this year. However, there appears to be little possibility that a deal will be concluded by the Dec. 31 goal, and a joint statement issued at the conclusion of a March 26 summit said only that the two sides are committed to wrapping up the talks “expeditiously.”

An EU press release indicates that the fourth round of Transatlantic Trade and Investment Partnership talks in Brussels in March covered issues such as market access for goods, services and public procurement; increasing regulatory compatibility in the pharmaceutical, cosmetic, medical device, automotive and chemical industries; technical barriers to trade and sanitary and phytosanitary measures; customs and trade facilitation; trade in energy and raw materials; and assisting small and medium-sized enterprises. U.S. Trade Representative Mike Froman said he was “generally pleased” with the progress made “in the major areas of the negotiations” and said each side has “a good understanding of the key issues that need to be resolved.” It could be argued, however, that the two trade partners have had such an understanding for some time and that the problem thus far is an inability to muster the political will to start finding solutions.

This might be due in part to the fact that negotiators appear to be struggling in areas in which common ground was expected to be relatively easy to find. One example is the elimination of tariffs on two-way trade. The High-Level Working Group report that forms the basis for the TTIP negotiations recommended that the goal should be “to eliminate all duties on bilateral trade, with a substantial elimination of tariffs upon entry into force, and a phasing out of all but the most sensitive tariffs in a short time frame.” EU officials have cited this passage in defending their insistence on maintaining tariffs on a small number of agricultural goods, while U.S. officials have been just as adamant in asserting that there should be no exceptions. In addition, the EU has complained that the initial U.S. tariff elimination offer is not ambitious enough and must match the EU’s offer before talks can proceed, but U.S. officials responded that “the main focus is the end point of the negotiations, not its initial steps.”

Another key issue, but one that finds the U.S. and EU on the same side against increasingly vocal opponents, is investor-state dispute settlement. ISDS allows private companies to sue governments before an independent arbitral panel for economic damages caused by the government’s violation of a trade agreement provision. Business groups on both sides are supportive of ISDS, but public interest groups (particularly in the EU) worry that it could be used to weaken protections for consumers, workers and the environment.

In response to what has become a sustained opposition campaign, both governments have gone to great lengths to explain what ISDS is and is not and to emphasize that they would never allow it to be used to weaken their standards or limit their ability to regulate in the public interest. President Obama has urged “everybody to wait until they actually see what has been negotiated before they engage in all these speculations” about ISDS. The EU has gone a step further and put the investment portion of the TTIP talks on hold while it conducts a public consultation on investment protection that is expected to run through the end of June. Brussels says it will use the comments received to help determine its position on the issue going forward. Chief EU negotiator Ignacio Garcia Bercero emphasized that the negotiating mandate given by EU member states includes discussion of ISDS, but press sources indicate that some EU members are already saying they will not support its inclusion in a final agreement.

The TTIP faces other hurdles as well. Many negotiating groups are still working to lay the conceptual groundwork for eventual concessions and only a few have advanced to consideration of actual textual proposals. Each side has signaled its intention to resist going beyond a certain point in some areas, though they have been careful to say that nothing is off the table. Further, public support has suffered from suspicions about trade liberalization in general as well as specific concerns about transparency into the negotiations , U.S. electronic eavesdropping in the EU, genetically modified food and financial regulation.

To get news like this in your inbox daily, subscribe to the Sandler, Travis & Rosenberg Trade Report.

Customs & International Headlines