Term Paper, 2016
25 Pages, Grade: 1,7
List of Figures
List of Abbreviations
1.1 General Information about TTIP
1.2 Attitudes towards TTIP (Germany vs. United States)
2 Status Quo – Boundaries in Transatlantic Trade TTIP tackles
2.1 Market Access
2.2 Regulatory Cooperation
3.1 The Investment Court System and its consequences
3.2 Rules for banking supervision
3.3 Loss of working places
3.5 Antibiotics and hormones in groceries
3.6 Import of gentically changed food and softer labeling obligations
3.7 Consequences for small and local enterprises
3.8 REACH – If TTIP includes the chemistry sector
4 Why is the EU considering TTIP?
5.1 Impacts on European standards
5.2 Author’s Opinion
List of literature
Figure 1: TTIP effect on the level of EU GDP
illustration not visible in this excerpt
TTIP is a trade and investment agreement being negotiated between the United States and the European Union, since the 17thof June 2013.On that day,US-president Obama and former EU commission president Barrosso announced the beginning of negotiations, which currently are in the 13th round of negotiations.Trade commissioner Cecilia Malström and general director of trade Ignacio Garcia Bercero are leading the negotiation for the EU commission, whiletrade commissioner Michael Froman and main leader of negotiations Dan Mullaney represent the interests of the United States. Both – the EU as well as the US – are supported and monitored by several teams of consultants and experts from different industrial branches.
Objective is to increase access to markets on both sides of the atlantic, by dismantling customs and other trade barriers. Additionally, the agreement is supposed to minimize constraints for commercial services, improve investment safety and equality of competition, and facilitate the entry to public contracts on all governmental levels.
According to the Bertelsmann-Stiftung “all states would benefit from an agreement, and increases in trade with the USA of 20-30 percent per state are expected”. Furthermore, TTIP shall increase the turnover of companies, because of an increasing trading volume, which should positively affect job safety and quality. Studies have also shown that e.g. the german economy will save expenses for customs handling which then could be invested in companies and their work places. Thus, real wage is expected to increase for all educational groups. But also SMEs (small-medium enterprises) should profit, which nowadays cannot affort certification in the US.
The federal ministry of economy and energy in Germany promises, there will not be any negative consequences for sustainable development, since it is a prior aim for both parties. The improvement in trade shall not be at costs of social or environment standards, labour law or industrial safety.2
Regarding transparency, until the end of 2014 the negotiations had been held secretly. But since 1st of December 2014 - after Jean-Claude Juncker, president of the EU commission had promised transparency to gain trust and support - there is a transparency commitment. Negotiations still are not public, but reports are published on a regular basis to give general information about the negotiations’ motives and goals. “The final agreement would have 24 chapters, grouped together in 3 parts: Market access, regulatory cooperation and rules”.
The Bertelsmann Stiftung has also found that generally, the positive opinion of increased trade is decreasing in Germany. Two years ago, 88% of the interviewees had a positive opinion about it, whereas in 2016 only 56% consider trade with other countries to be a good thing. More specific, regarding TTIP, a majority of 33% consider it to be bad, while only 17% answer in favour of the agreement in Germany. Additionally, 30% of german survey participants do not feel sufficiently well-informed. Still, a majority is concerned that EU standards regarding consumer protection, environmental, labour and social standards could soften.
Also Google.com has observed this increasing disapproval. Throughout the last year, Germans have searched for the disadvantages of TTIP more than twice as much than for the advantages. Friedrich Merz, chairman of the US-friendly network “AtlantikBrücke” blames the secrecy of the negotiations. It would be the reason for speculations and uncertainty amongst german citizens.
In the US, opinions are split, with 15% in favour and 18% against the free trade and investment agreement. This indecision could be consequence of a lack of knowledge, since 46% feel they are not sufficiently well-informed. And also in the United States, the survey participants do expect negative effects for their country, regarding labour market conditions, worker’s rights and social standards.6
As a common denominator, Germans (52%) and US citizens (44%) find that there is great interest in TTIP, but both feel badly informed about the agreement.6
In the following, I will analyse and discuss the main arguments of TTIP opponents to discover what the impacts of the free trade and investment agreement would be for Europe.
Regarding the already mentioned three parts of the transatlantic agreement, first of all it is to analyse, how the situation is today.
The first topic TTIP focusses on,is “trade in goods and customs duties”. Tariffs make trade in goods and consequently goods themselves more expensive, which makes it hard for EU firms to sell their products in the US nowadays. The average of 2% customs duties might be misleading, because there are tariffs in the amount of 30% for goods like clothes and also prohibitively high customs duties amounting to e.g. 130% for peanuts, which make transatlantic trade almost impossible.
Secondly, TTIP should influence services. Those have become more and more important and today account for as much as 60% of the economy and jobs in the EU. Still there are barriers for EU firms e.g. for the telecommunications sector tryingto sell services in the US.
Furthermore, the agreement tackles public procurement, since currently companies face obstacles in winning public contracts and sometimes are not even allowed to bid for one across the Atlantic.
Ultimately, the chapter “Market Access” deals with rules of origin (ROO). ROOs are part of every trade agreement and determine the national source of a product. They are usedso that only the country of origin benefits from TTIP e.g. by not having to pay customs duties.
By these means access to the other market should be enabled and facilitated on both sides of the Atlantic.
Chapter 2 “Regulatory Cooperation” starts with regulatory coherence itself. Today, to export to the US, EU firms have to meet certain regulations, as well as the other way around. This can be too expensive, especially for SMEs, if EU and US rules are very different. The EU commission wants to cut these costs, possibly without lowering health or ecology standards, etc.
Additionally, the agreement tackles Technical Barriers to Trade (TBTs), which result from technical requirements in all sectors of the economy. Most products have to satisfy those standards which influence design and size, labelling/packaging and function. Through product testing, inspection and certification the government can protect human, animal and plant health and safety, environmental protection etc.. Sometimes actual standards differ here widely which again hampers trade.
Another noteworthy topic is food safety and animal and plant health. Here, Sanitary and Phytosanitary Measures (SPS) are crucial to ensure protection of humans in the EU as well as the United States. But sometimes different means are used which can lead to costly duplication. With TTIP, the EU aims at working together with the US while protecting EU standards.
On top of the above mentioned regulatory cooperation plans, there are regulations for specific industries to be negotiated affecting chemicals, cosmetics, engineering, medical devices, pesticides, information and communication technology, pharmaceuticals, textiles and vehicles.
The third part of the agreement deals with rules. Beginning with the chapter sustainable development, TTIP wants to ensure that worker’s rights and environment standards are protected. Today, e.g. the ILO is responsible for people’s rights at work.
Another challenge in sustainability is the topic energy and raw materials which also not always have the same standards, as for example fracking is not allowed in the EU. TTIP aims at agreeing on rules to access energy and raw materials, eliminating existing limits and promoting the development of green energy.
Furthermore, trade should be facilitated by agreeing on new rules for customs procedures. Checking products at the border to make sure they meet regulations and rules is necessary to stop illegal goods and also to make sure companies pay their customs duties. The EU invests in new customs rules, that increase efficiency in trade, by e.g. identifying certain countries of origin as safe.
Also SMEs are taken into account in the agreement. Those face the same trade barriers like big enterprises with the difference that they have difficulties in overcoming them, because of fewer employees and less money. With TTIP they shall take full advantage of improvements, like the removal of customs duties or the simplification of customs procedures to help grow their business.
The I in TTIP stands for investment, which is an important chapter to be negotiated. The EU pleads for increased facilitation and certainty for investing transatlantically. In fact, the European Commission wants to create a new way of protecting investments – the Investment Court System (ICS). It should ensure that governments respect basic guarantees and enable governments and investors to resolve any potential disputes. The ICS would replace the existing Investor-State Dispute Settlement System (ISDS).
Moreover, TTIP wants to promote free and fair competition. Today, there are certain issues regarding that topic, namely state owned enterprises (SOEs) and subsidies. SOEs are controlled by the government and sometimes enjoy advantages private companies miss, while subsidies are credits by the government given to certain companies e.g. to support innovation. Both create inequality which is why the EU wants to develop rules on competition and cooperation, ensuring SEOs do not discriminate against private businesses and agree on rules for increased transparency – all through TTIP.
Second to last, the transatlantic agreement includes intellectual property rights (IPR) which include patents, trademarks and designs, copyright and geographical indications. In the EU, as well as the US, there are IPR that protect inventions from unauthorised use. Those are broadly similar, still TTIP should raise awareness of the role of IPR, protect people’s and firms’ ideas and encourage investment in research and development.
The last chapter of the agreement contains the Government-to-government dispute settlement (GGDS). It should resolve disputes between the EU and US governments with a clear structure, when there are differences in interpreting and implementing TTIP.
The creation of more investment opportunities in the EU and the US is one of the main goals of TTIP. It should be acomplishedby, inter alia, setting up a new Investment Court System. The ICS should replace the currently operative ISDS, facilitating investments and increasing certainty on both sides of the Atlantic.
Regarding this topic, concerns are rising from many parties, including the “German Federation of Judges and Lawyers”. Germany’s largest association of judges and public prosecutors explicitly rejects the implementation of an ICS with TTIP. The “deutsche Richterbund” is questioning the competence of the European Union to establish an investment court and points out that the EU as well as its member states would have to bow to a certain international code of procedure, with all decisions of the ICS being legally binding. Additionally, not only the legislation authorisation of the EU and the member states would be limited, but also the established legal system would be changed, wherefore there would be no legal basis. Moreover, the ICS would distort responsibilities of the Union Right and the European Court of Justice.
Similarly, the CCPA, CEO, FoE Europe, Forum UE, and the TNI allied and published a detailed analysis about the planned investment court system. Several lawsuits were considered in which in the past the ISDS has been functioning. These include e.g. the case of Philip Morris demanding US$25 million in compensation from Uruguay or the case of Vattenfall in Germany demanding €1.4 billion from the city of Hamburg. Shocking about the outcome of the analysis is not the amount of money the governments had been indicted for, but the fact that by an ISDS or ICS, companies can sue states for legitimate standards concerning public health or the environment.
Furthermore, the statement of the European Commission, saying its “proposal includes a specific article upholding the governments’ right to regulate” is being declared as untrue. “Had the Commission wanted to preserve governments’ right to regulate, it would have stated that governments have discretion to determine what is in the public interest and that measures taken in the public interest would not constitute a breach of the investors’ rights and nothing in the agreement could be construed as requiring the government to compensate the investor.” An “Investor-state dispute settlement – whatever it is called – is undemocratic, dangerous, unfair, and one-sided.”
The European Commission has stated that TTIP should “discipline” financial regulation to avoid barriers to trade.
First, TTIP rules on “market access” prohibit necessary financial regulation, which is e.g. to limit the total value of operations to prevent too much speculation.
Regulations, in general, should be allowed if in interest of clients and financial stability, but the deliberate measures should “not be more burdensome than necessary”. Consequently, preventive measures as precaution against financial crisis would be considered rather detaining.
Additionally, the European Commission proposes that regulatory cooperation framework would hold behind closed doors before a financial regulation is being proposed to the parliamentary bodies. Thus, financial lobby would have large influence, while citizens and parliamentarians would have no voting power.
On top of that, the EC wants the ICS to be applied to financial regulation. Consequently, the financial sector could attack financial reforms, which is already happening in the US.
In Germany the European Commission is backing up TTIP by citing a study by the ifo institute in Munich, which expects 110,000 additional working places in the following 15 years after the agreement. The problem about this optimistic number is that the ifo calculates it by assuming the US would join the European domestic market. And also if this requirement would be fulfilled the market growth would amount to only 0,34% in Germany and 0,9% in the US. But, if only the elimination of customs and the harmonisation of several standards are considered, TTIP would lead to less than 5,000 working places more in the US and 1,800 more in Germany.Additionally, the experience with the free trade agreement NAFTA has to be considered, where similar expectations did not occur. Neither the expected GDP growth nor the up to 16% higher wages were proven to be true. Contrariwise, the working place losses account to a total of 600,000 to 1,2 million in the USA and approximately one million in Mexico.
 cf. Bundesministerium für Wirtschaft und Energie 2014
 cf.BundesministeriumfürWirtschaft und Energie 2015
 J. Felbermayr et al. 2013
 cf. European Commission 2014
 European Commission 2016
 cf. Bluth 2016
 cf. Neuhann2016
 cf. European Commission 2015o
 cf. European Commission 2015k
 cf. European Commission 2015h
 cf. European Commission 2015j
 cf. European Commission 2015i
 cf. European Commission 2015m
 cf. European Commission 2015d
 cf. European Commission 2016
 cf. European Commission 2015n
 cf. European Commission 2015c
 cf. European Commission 2015b
 cf. European Commission 2015l
 cf. European Commission 2015g
 cf. European Commission 2015a
 cf. European Commission 2015f
 cf. European Commission 2015e
 cf. European Commission 2015g
 cf. Schneiderhan2016
 cf. Cingotti et al. 2016
 Cingotti et al. 2016
 cf. SOMO 2015
 cf.Bund für Umwelt und Naturschutz Deutschland e.v. 2014
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