On TTIP, the EU must choose between ambition and momentum, but make sure it secures a deal it can ratify at home.
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Two years after negotiations began, the European view on TTIP has toned down to realism. Overly optimistic projections about the gains for European business have given way to a more sober view on the possible gains and losses and their spread across the EU economies. Likewise, the high running opposition to the agreement receded as a result of greater transparency of the process and better access to negotiations documents for members of Parliament and EU governments. With Cecilia Malmström as new Trade Commissioner, a more balanced approach to the negotiations now has a publicly credible face. Regarding the wider political meaning of TTIP, much of the high talk of the earlier stages is gone. In light of the Ukraine war and Russia’s policy, in the face of an ever more ascertained role of China in its neighbourhood, a TTIP deal could hardly become the glue of the West, an “economic NATO” or the “gold standard” of international trade negotiations.
TTIP is back to basics: eliminating tariffs across the Atlantic doesn’t sound like much, but could still provide some tailwind for Europe’s economy, in the centre and in select sectors of the EU’s periphery. Scrapping some non-tariff barriers (NTBs) seems feasible, for example on safety standards for automobiles, while many other areas will require a longer process of regulatory convergence. A structured process designed to include various stakeholders under a “living agreement” promises better progress compared to similar attempts over the past decade. Policy makers now sense that while TTIP won’t guarantee the West’s primacy, a failure to conclude an agreement would be seen as an invitation to further test the cohesion of Western democracies. Therefore, Europeans want an agreement, and they believe they need an agreement strategically to maintain a link to the US in the emerging mega-regional trade environment of east and southeast Asia. In the European view, the EU needs to be connected to all its major competitors on global markets.
Still, however, European negotiators keep the bar high on TTIP. They insist on an ambitious comprehensive agreement in order to make progress on issues where the playing field is tilted in Europe’s disadvantage, notably in the fields of services or public procurement. This approach may be good negotiation tactics, but it could mean negotiations are drawn out well beyond 2016. At the same time, in domestic terms the commitment not to compromise on European norms and standards is stronger than ever, as a response to criticism and in light of a ratification process involving all EU national parliaments. On the controversial issue of investor-state dispute settlement (ISDS), EU negotiators have politically bound themselves to demanding the highest standards of any such agreement, if indeed ISDS were to be included in an agreement at all.
In the months ahead, Europe will need to square the circle of securing potential gains in light of domestic constraints and of reaching an agreement while maintaining specific demands. In all negotiations, difficult matters tend to be kept open until the final stage of the process. This puts pressure on Europe to choose between ambition and momentum: by aiming high, key issues would likely be addressed only after the next presidential administration in the US has become fully operative. Keeping the momentum, on the other hand, means aiming for results before the US electoral campaign crowds out all other concerns in 2016. There’s a risk that a Europe that wants much while excluding much may not end up with a deal at all.
The EU’s best option may be to aim for agreement by the end of 2015 or early 2016, to secure the consensus for a framework agreement establishing a structured and inclusive review of NTBs in a “living agreement”. Europeans seek to deepen economic ties with North America as the US is deepening its own ties across the Pacific, but they also need an agreement that could be ratified at home. That is ambitious enough in itself.
The European Council on Foreign Relations does not take collective positions. This commentary, like all publications of the European Council on Foreign Relations, represents only the views of its authors.