EU/US FTA: Draft mandate suggests the big game

EU/US FTA talks will prove to be ambitious In the upcoming EU-US free trade pact talks, the European Commission plans to go all out for what would be the biggest trade agreement in the EU’s history. According to the negotiating mandate it has proposed to the EU 27 member states, “The Agreement will be very ambitious, going beyond existing WTO commitments.”  A three-pillar structure is envisioned for the accord, called the Transatlantic Trade and Investment Partnership (TTIP). There will be a chapter on market access, one on ‘regulatory issues’ and one on ‘rules’. Although each component will be negotiated in parallel, the TTIP will be a “single undertaking”.
The draft mandate still needs the approval of the Council before the talks can start. On the US side, President Barack Obama has now taken all the necessary preliminary procedural steps, having notified Congress and requested public stakeholders’ input. The expectation is that the talks will start around late June or July, possibly coinciding with a trip by Obama to Europe. Possibly the biggest nut to crack in the talks will be the trade barriers that exist, notably in the agricultural sector, due to divergent EU and US Sanitary and Phytosanitary (SPS) standards. The draft mandate requires “each side’s SPS measures be based on science and on international standards or scientific risk assessments”. Standards should be “developed in a transparent manner, without undue delay” and a “co-operation mechanism on animal welfare” should be established, it says. Food sectors affected by these divergences are vast, ranging from genetically modified corn and soy, to hormone-treated beef, to chlorine-washed chicken to ractopaminetreated pork. This is more of an “offensive” area for the US as the EU will be defending its SPS regime, for example the ban on giving hormones to animals intended for human consumption. But the US has its own defensive areas too, notably its ban on EU beef dating from the days of the mad cow disease scare. As for industrial goods, this is a less sensitive area than agriculture. The draft mandate says the goal will be to “reduce redundant and burdensome testing and certification requirements”. The two sides are expected to tackle things like crash test dummies for cars and the testing of electrical appliances. The Commission says the TTIP may provide for sectoral agreements in areas such as cars, chemicals and pharmaceuticals. Under the ‘rules’ chapter, the Commission has highlighted the EU’s Geographical Indications protections as a priority in terms of upholding Intellectual Property (IP) rights. These will come under fire from the US, where there is considerable irritation with the EU’s efforts to maintain IP protection for terms the US says have become generic, such as parmesan cheese. Customs facilitation will be broached in the talks, the goal being to go beyond commitments made at the World Trade Organisation (WTO). The Commission says that the talks should cover competition policy, including mergers, subsidies, state monopolies and stateowned enterprises. For almost a decade, the EU and US have locked horns at the WTO in a dispute over subsidies to Airbus and Boeing, which came about after the US withdrew from a 1992 bilateral agreement on aerospace industry subsidies. The draft mandate also says that trade in energy and raw materials will be included. One open question here is whether the US will ease restrictions that it has had in place since the 1930s on exporting energy products. Given the current shale gas boom in the US, there could be great interest in Europe in importing liquefied natural gas from across the pond.

Eliminating duties on good will be broached, the goal being to have “substantial” elimination when the agreement enters into force and a phasing out of “all but the most sensitive tariffs in a short time frame”. On investment, the Commission plans to address “remaining longstanding market access barriers”. One of those barriers is in the aviation industry, where European airlines are still barred from taking over US airlines. The draft mandate also makes a pledge to uphold the EU’s “cultural and linguistic diversity, namely in the audiovisual sector”. Quotas on national content in the audiovisual sector are likely to come under scrutiny. On government procurement, the draft mandate promises “maximum ambition”. The EU wants to open more of the US
market by chipping away at ‘Buy American’ provisions. And the Commission says
it would like TTIP to create “an effective and state of the art investor-to-state dispute settlement mechanism”. (Source: Europolitics)


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