[CTC] EU Official: TTIP Negotiations Hardest On Procurement, Services, Ag, GIs

[Arthur Stamoulis]

Inside U.S. Trade
EU Official: TTIP Negotiations Hardest On Procurement, Services, Ag, GIs
March 24, 2016

A senior European Commission official last week told the European Parliament that negotiators are dealing with the most difficult part of the negotiations for a Transatlantic Trade and Investment Partnership (TTIP), which he identified as market access for government procurement, services, geographical indications (GIs), and agriculture.

Deputy Chief TTIP negotiator Hiddo Houben told a European Parliament committee that the U.S. is a "very strong" trading partner, which makes the negotiations difficult. "We are in permanent four-wheel drive," he testified in a March 14 hearing before EP's International Trade (INTA) committee.

He made clear that the difficulties in the agriculture negotiations are not related to trying to deal with the sensitive agriculture items for which the European Commission wants "other treatment." For those items, which are largely meat, the EU is expected to seek tariff-rate quotas that provide controlled additional market access for the U.S.

However, Houben said these issues are only to be discussed in the final stages of the negotiations. "When we are talking volumes, that's the end game," he testified. He delivered a similar message at a hearing before the Environment, Public Health and Food Safety (ENVI) committee on March 16 on the TTIP negotiations.

In that hearing, he said the overall discussions on tariffs are at an advanced stage and are very close to the so-called "end game."

At the INTA hearing, Houben said the EU and U.S. have consolidated 13 TTIP chapters, which amount to roughly half of the total chapters. He reiterated that the two sides must consolidate texts for all of the chapters by the end of summer to begin the final phase of the negotiations.

Houben at the ENVI hearing also endorsed the concept of concluding the TTIP talks in 2016, as the Obama administration has sought. But he emphasized that substance will prevail over speed, which one EU business source said can be understood as a signal to the U.S. that it must offer more concessions if it wants to do a deal this year.

Negotiators did the "first substantial review" of the EU agriculture proposal at the 12th round of TTIP negotiations in Brussels in February, according to a European Commission report on the negotiations. The text shows the EU is seeking disciplines on export subsidies and potentially on domestic subsidies that impact market access, according to a text published by the commission on March 21.

As part of the agriculture text review, the commission told the U.S. it is seeking to include rules on wines and spirits that would renegotiate the 2006 Wine Agreement between the U.S. and EU in the TTIP, according to the report.

The two sides are also far apart on government procurement and are arguing over who has the most open procurement market, and subsequently which side will have to give the other more concessions in that area, sources said.

This argument seems like a rehash of U.S. and EU talking points during the renegotiation of the plurilateral Government Procurement Agreement (GPA), except with different methodologies that led to different data sets.

In the GPA, the EU claimed that $467 billion out of the EU's $553 billion per year procurement market is open to GPA parties -- roughly 85 percent -- compared to the U.S. market that opens $236 billion out of $732 billion per year, which amounts to 32 percent.

In contrast, the U.S. at the time claimed that it offered more than $400 billion annually in procurement market access to foreign bidders (Inside U.S. Trade, March 30, 2012). Last week, U.S. ambassador to the EU Anthony Gardener said the EU government procurement market of $333 billion has a limited opening of 1.6 percent for other member states and foreign firms. Of that, 88 percent goes to the other member state firms, leaving the U.S. firms with 0.016 percent, he said.

During the 12th round, the EU reiterated its stance that it is seeking increased procurement market access from the U.S. on both the federal and state level, according to the commission report. According to the report, the EU "continued to pursue" the shared EU-U.S. objectives developed by the High-Level Working Group on Jobs and Growth, which said the objective of the negotiations is to create substantially improved access at all levels of government on the basis of national treatment.

"In general, discussions on the text proposal allowed to further clarify positions and to identify areas for common ground with a view toward next steps," the report said.

The EU and U.S. are also at odds over the quality of each other's services market access offers, and the discrepancy is taking up a "significant amount of time" at the level of EU Trade Commissioner Cecilia Malmstrom and U.S. Trade Representative Michael Froman, Houben said.

The U.S. is pushing the EU to improve its offer to at least reach the level of what it offered in its trade agreement with Canada. However, Malmstrom said on March 9 that the EU would not better its services offer unless it received other concessions from the U.S.

The tough U.S. negotiating stance has led to speculation among business sources that Froman hopes he will ultimately persuade the EU to accept a TTIP deal that does not meet its initial ambition under the Obama administration because the future prospects of a deal are uncertain under a new administration.

Another EU business source said the commission now says it does not want a "TTIP light" deal, but said such an agreement could also result in less opposition from EU civil society groups, but that it must not include an investor-state dispute settlement (ISDS) mechanism in its current form.

Herbert Dorfmann, a member of parliament's largest group the European People's Party, said at the ENVI hearing that he does not want a worse deal than initially envisioned because of pressure to conclude the talks with the Obama administration. At the same time, Dorfmann acknowledged that the two leading U.S. presidential candidates have been critical of current U.S. trade policy.

Houben responded by pointing out that comments by Democratic frontrunner former Secretary of State Hillary Clinton and Republican frontrunner Donald Trump have been focused mainly on criticizing the Trans-Pacific Partnership, not TTIP. The relationship between the U.S. presidential election and the negotiations is also more of an issue for the U.S., Houben said.

The discussions on investment protections are still in their preliminary stages as the commission spent February explaining to the U.S. why its proposal on an investment court system is the best approach, Houben told the ENVI committee. This echoes Malmstrom's March 9 comments that the discussions on investment protection have not yet advanced to the "negotiating" stage.

Negotiators did not engage in substantive negotiations over their respective investor protection proposals during the February round, according to the commission report. Instead, the U.S. "asked factual and exploratory questions" about the EU proposal, the commission report said. Similarly, the U.S. further explained its approach to investment protections.

The commission report said that negotiators made "good progress" toward understanding each other's objectives and that the two sides would continue to exchange views in preparation for the next negotiating round in April. That round will take place in the week of April 25 in New York City.

Several MEPs accused the commission proposal of being nothing more than a "cosmetic" change because it still elevates the rights of investors over those of other citizens. In response, Houben noted the changes the commission made in its proposal: an appeals mechanism and a new way to select judges. The commission proposal, tabled in November 2015, would allow the U.S. and EU to select a pool of potential judges, but the selection of which judges would hear a case would be random.

Progress on TTIP is also likely to influence the upcoming referendum in the United Kingdom over its membership in the EU, according to British MEP Julie Girling, a member of the European Conservatives and Reformists group. Girling pointed out that one of the benefits of UK membership in the EU is the access the UK gets to export markets and that she would like to see a TTIP deal get done as soon as possible.

The commission also proposed specific rules on animal welfare in the context of the sanitary and phytosanitary (SPS) chapter, Houben said, noting that the EU and U.S. have divergent views on the issue. One EU official speculated that although the U.S. and EU have similar standards on processing in slaughterhouses, standards differ greatly on the housing and transportation of animals. -- Brett Fortnam
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