Have the SPD and German unions endorsed TTIP? Not quite...

While the Labour Party's conference dominated the coverage in the UK over the past few days, its German sister party, the SPD, held its own 'mini' conference over the weekend. Opposition to TTIP - the EU-US free trade deal currently being negotiated - was a big factor at both, certainly we picked up on this in Manchester.

Ahead of the SPD's conference, several local and regional SPD associations tabled motions calling on the party leadership to suspend the negotiations due to concerns about investor-state dispute settlement (ISDS) - a mechanism which allows investors to sue governments - as well as the potential watering down of labour laws and environmental standards.

In order to head off the opposition, the Economy Ministry - headed by SPD leader Sigmar Gabriel - issued a joint position paper on TTIP along with the DGB - Germany's trade union confederation including the country's largest trade unions like IG Metall and Ver.di. The paper praises elements of TTIP but pledges that any moves to eliminate non-tariff barriers to trade (such as parallel regulatory regimes) will not threaten Europe's high employment, consumer and environmental standards, and calls on both parties to ensure "compliance with core ILO standards" - something which has little hope of getting past Congress.

On ISDS, they key passage reads:

“Investment protection provisions are generally not required… In any case, investor-state arbitration and unclear definitions of legal terms such as ‘fair and just treatment’ or ‘indirect expropriation’ must be rejected.” 

The SPD and German trade unions have therefore endorsed TTIP in principle, although the mass of caveats that made this possible will hugely complicate the negotiations and could wipe out many of its expected gains. It does however remain unclear to what extent the paper is binding on the SPD, as it includes the caveat that the German Economic Ministry and the DGB "do not have the same stance on TTIP on all points”.

Significantly, in approving the paper, party delegates insisted that its provisions should also be applied to the EU-Canada free trade deal (CETA) which has already been largely concluded and due to be signed off by Commission President Jose Manuel Barroso and Canadian PM Stephen Harper later this month pending implementation. CETA, which many see as the blueprint for TTIP, includes ISDS and could therefore face last-minute opposition having largely flown under the radar up until now.

In a separate development, which could delay CETA even further, the German government and the European Commission are at odds over whether national parliaments will need to ratify the deal alongside the European Parliament; the Commission says no, but Berlin argues that as a "mixed agreement" with some of the issues, goods and services covered by CETA falling outside of the EU's sole jurisdiction, the Bundestag and Bundesrat should also get to scrutinise the agreement and vote on it. The German government has said that it is willing to go all the way to the ECJ.

All in all, it looks like progress towards concluding ambitious trade agreements with Canada and the US will be rather rocky.

Is Germany emerging as the biggest obstacle to a liberal EU-US trade deal?

If you read our press summary, you will have noticed that the debate around the US-EU free trade deal (TTIP) is really picking up in Germany, with even the euro-critical AfD coming out against key elements of the deal ahead of the European elections.

Of all the mainstream newspapers in Europe, Süddeutsche Zeitung is the one that has devoted the most time and effort into covering the on-going negotiations over TTIP, and it has also published a number of comment pieces - both for and against.

In an opinion piece today, the paper's Economics correspondent Alexander Hagelücken argues that the debate around the EU-US free trade agreement (TTIP) has become “schizophrenic” amid mounting public opposition (as highlighted by the cartoon above). However, he argues that:

"European governments can escape the impasse by making it clear that they want to expand free trade via the TTIP principle while at the same time meeting the legitimate concerns of their citizens who do not want increased prosperity at the cost of losing environmental and health standards. GM foods? Only after passing the European approval procedure and with clear labeling. Investor lawsuits against environmental legislation such as Vattenfall’s legal challenge against the nuclear phase-out? Not before secret tribunals, but only in the ordinary courts."

He concludes that:

"Yes, such a path would not lead to unfettered capitalism with a neoliberal flavour but free trade with constraints. In other words, it would be the kind of social market economy which has given the [German] Federal Republic decades of prosperity after World War II, while tensions decreasing rather than increasing tensions between the social classes.” 

German public opinion will be a crucial factor in determining the success or failure of the TTIP negotiations. As with everything else these days, we suspect, on TTIP, as goes Germany, so goes Europe. 

Why France can hold up EU-US free trade talks

David Cameron wants to use the gathering of G8 leaders in Northern Ireland next week to launch formal negotiations on the planned EU-US free trade agreement. But progress depends on breaking the deadlock in talks today over France's insistence that any agreement must include protections for its film and TV industries against American imports. These talks are to give the European Commission a mandate to start negotiations.

The French, though, have a pretty strong bargaining position. The EU Treaties (Art 207) set out the procedures for opening and concluding free trade agreements under the so-called Common Commercial Policy.

The Commission makes recommendations to national governments, which authorise it to open negotiations. The Commission then conducts the negotiations in consultation with a special committee appointed by ministers.

In principle, trade agreements are negotiated and concluded by qualified majority voting. However, there are a number of exceptions where unanimity (and therefore national veto) still applies, including “in the field of trade in cultural and audiovisual services, where these agreements risk prejudicing the Union's cultural and linguistic diversity.”

In a bid to break the deadlock, the European Commission and the Irish EU Presidency have proposed asking EU member states to give unanimous approval to any parts of the draft agreement affecting the audio-visual industry once the negotiations on that specific sector are concluded. However, Le Figaro quotes a source from the office of French Trade Minister Nicole Bricq as saying, “We already have a veto on the conclusion of the agreement, so [the offer] doesn’t change anything for us.”
 
In a world where trade agreements are increasingly all-encompassing affairs, ranging across the entire economy, this gives France in particular a great deal of leverage.

Would an 'independent' UK get a better US trade deal than the EU?

Could the UK sucessfully negotiate a trade deal with the US?

Yesterday MEPs voted on a resolution to back defensive measures to exclude cultural and some agricultural products, such as genetically modified foods from a proposed free trade deal with the US (TTIP).

Understandably US farmers have already taken exception to what they see as EU protectionism. This raises concerns that the potential gain from an EU/US trade deal may be watered down, delayed or even blocked all together by vested interests on both sides of the Atlantic.

As a member of the EU the UK's foreign trade is governed by the EU's common commercial policy and so has to be done via an EU deal. After the EU the US is the UK's most important trading partner. Some involved in the UK-EU debate - particularly Outers - suggest that if the UK left the EU it could negotiate a deal with the US on better terms than it could potentially gain via the EU. But is that the case? Here are some of the factors that could be important.

UK exports to the US in £bn (ONS 2011) are big...

A mismatch in negotiating power. Although the UK exports a lot to the US, as a % of it's total exports, the US sends only 4% to the UK. So although a trade deal should be mutually beneficial, reaching a solution would be disproportionately in the UK's interests. Therefore, there would be an imbalance of negotiating power. For this the EU's weight could help on issues where the UK's interests are aligned with it.

Would the US want to go through the hassle? Given this asymmetry, and the relative small market the UK is for the US, one question is if the US would go through all the political hurdles -  approval in Congress, taking on the unions etc. Indeed, talk to people in Washington and there's some scepticism about this. (However, the US has signed agreements with 23 states, some very small, so perhaps it is more a matter of the terms you would get?)

But US exports to UK (US BEA 2011) are small...

Fewer protectionist hold ups. At the same time, the US and the UK are more compatible economies than are the US and EU. The UK negotiating on its own account would not be hindered by protectionist issues emanating largely from France and MEPs, that could hold up US agreement or require concessions, such as the protection of agriculture, genetically modified foods or geographical indicators. However the UK is still unlikely to wish to see the US allowed to subsidise its agricultural exports, so tough negotiations would still be required.

Access for financial services could be a tough negotiation. The UK negotiating with the US on financial services would come up against a powerful US lobby attempting to protect its banks from what is New York's main rival - London. However, the UK negotiating on its own would arguably have a better chance to strike a deal on 'reciprocity' with US funds, a more generous arrangement than that which currently exists under regulations such as the AIFM Directive or UCITS. Additionally the UK would not bear the burden of having risky eurozone banks getting in on the deal. In recent negotiations with Singapore the US gained a better deal than the EU on financial services, partly because while Singapore was happy with UK banks it was wary of giving access to all eurozone banks (a big untold story in all of this).

If the idea is that an 'independent' UK can automatically join some gigantic Transatlantic free trade zone, in place of its current EU membership, there will be plenty of hurdles and a good deal is by no means guaranteed. Added to that there's also the small matter of negotiating an equivalent free trade deal with the EU....

Guess who?

Here's a game for you. Guess who said the following: 

11 March (part one)

"We can't leave the management of migratory flows only to the technocrats and the courts. We need a common discipline for border controls. It must be possible to sanction, suspend or expel from [the EU's border-free area] a non-compliant country."

11 March (part two)

"Only firms which produce in Europe will benefit from Europe's public money."

23 April

"[We] don't want a 'colander Europe' anymore. This is the message I've heard. A Europe that doesn't control migratory flows is finished."

27 April

“I propose that, if we have not obtained reciprocity with our biggest [trade] partners at the European level within one year, we apply the following rule unilaterally: We will reserve all our public markets.”

29 April

"Europe has let the nation state weaken too much. Nowadays, the countries that believe in national spirit are the countries that make gains...Without borders, there's no nation, no state, no republic, no civilisation."

Pretty tough stuff. So who is it? Someone from the UK Independence Party? An activist form the (True) Finns? An MEP from Lega Nord? A eurosceptic socialist?

All wrong. It's Nicolas Sarkozy (in his efforts to fish in Le Pen waters).

But no one would dare call him 'anti-European' of course...

Beijing beating Brussels at its own game?

Last week in Brussels, we organised a very interesting event looking at trade between the EU and Asia - the importance of which can hardly be over-stated given Europe's, shall we say, current economic predicament.

At the event, Conservative MEP Syed Kamall warned against the EU pursuing an “anti-business agenda” in trade talks, including excessive environmental standards, as “we end up with everything but trade.”

Today, we received another reminder of the dangers involved in the EU pursing green protectionism: other trading blocs may do the same.

From PA we learn that the EU, the US and Japan have launched a complaint at the World Trade Organisation, claiming that China is limiting its export of rare earths. This is a pretty bad situation, as these minerals are vital to the production of high-tech goods, such as hybrid cars, weapons, flat-screen TVs, mobile phones, mercury-vapour lights and camera lenses. And as China accounts for more than 90% of global production of 17 rare earth minerals that are used to make this stuff, Europe is pretty dependent on the trade.

But here's the intricate part, China says it's 'only protecting the environment'. The country's Commerce Ministry said in a statement:

"The Chinese policy objective is to achieve sustainable development in order to protect resources and the environment, and this is not a trade-distorting way of protecting domestic industries."

Tricky. Now, we're certainly not siding with China here, but merely making the humble observation that if Europe continues to flirt with Non Trade Barriers of various sorts, including 'green' ones, others may start to play it at its own game.

Perhaps something to keep in mind when certain EU leaders call for a "buy European act." Sooner or later, chickens could come home to roost.

Keep on moving?

For those of us obsessing about EU politics, 2011 is likely to be remembered as the year when the EU's two flagship projects - the Single Currency and free movement - came under unparalleled strains.

The former is based on utterly flawed economics, while the latter - albeit on balance benefitting Europe - remains a difficult sell to electorates, particularly during times of low growth and unemployment. Denmark has made headlines for seeking to restrict free movement this year (though only by re-introducing some tighter customs checks).

With the rise of populist parties around Europe, there's a clear risk that the mood is turning against the idea of open borders in Europe. In this context, yesterday's remarks from Labour peer Lord Glasman - described by the Fabian Review as a "leading policy adviser and Ed Miliband’s magus" - are very interesting. Lord Glasman seems to have some strong things to say about New Labour's immigration policy, and in an interview with the the Fabian Society, he outlines how he wants to see the UK renegotiate its free movement arrangement with the EU:

“We’ve got to re-interrogate our relationship with the EU on the movement of labour. The EU has gone from being a sort of pig farm subsidised bloc ... to the free movement of labour and capital. It’s legalistic, it’s administrative, and it’s no good. So I think we’ve got to renegotiate with the EU.”

If he means what he says, this is pretty radical stuff. It would be very interesting to know exactly how Lord Glasman envisions a re-ordered EU-UK relationship on labour movement. Is he talking changes to the Posted Workers Directive, for example, which was the source of contention during the strikes in Lincolnshire in 2009? Such a move, while symbolically hugely significant, would actually only affect a few ten thousand workers in Britain (we've looked at the Directive and the related ECJ rulings here)? Is he discussing other measures to ensure 'British jobs for British workers', such as changes to the Procurement Directive, to ensure that UK firms - and therefore workers - get the jobs (there have been some calls to that effect in the wake of the Bombardier controversy)? Or is he suggesting that the UK should completely repatriate control over labour market entry in the UK, meaning a whole new EU-UK relationship?

The good news here is that a key Labour player is discussing EU reform. The bad news is that - while somewhat vague - there could be an implicit suggestion here that Britain should jump on the slippery slope towards protectionism, undermining one of the actual benefits of European cooperation: the Single Market.

The debate itself is much welcome though.

Sarko? Just say no.

More from France's leading economic liberal...

There is another possible policy. That is the policy of reciprocity – our markets are open to those who open theirs, but are closed to those who close theirs. It is the policy of refusing unfair competition, and putting up barriers to monetary, social and ecological dumping. It makes economic sense – it is morally normal that the products which do not respect environmental rules should have compensatory taxes. If a country produces while creating a lot of pollution, while in Europe the rules are strict, it is normal to tax the pollution contained in the imports coming from these countries.

If competition is unfair it is normal to put in place safeguard clauses as a way of putting on pressure in trade negotiation. It is why we absolutely need a Europe with a ‘community preference’.

The others say that agriculture is finished. A European Commissioner even took it upon herself at the beginning of last week to advise farmers to take a second job in order to survive in the future. I’ll say what I think: this declaration is perfectly scandalous. A farmer wants to make a living from his job as a farmer, and Europe needs its agriculture to ensure its food independence. Madame le commissaire would have done better to keep quiet.

Agriculture is the future… If I am elected I will not let the CAP serve as a bargaining chip in the WTO negotiations. The future of the Third World is not in the defeat of the European agricultural market. “

http://www.u-m-p.org/site/index.php/ump/s_informer/discours/nicolas_sarkozy_a_lille