Will TTIP ever be formally agreed?

TTIP – the proposed Transatlantic Trade and Investment Partnership – is the flagship of the European Union’s approach to developing reciprocal free trade and investment arrangements with other leading trading blocs. TTIP is being negotiated with the United States of America.

Between October 2013 and June 2017, fifteen formal negotiation meetings have been held between representatives of the European Union and the United States. In January 2017 and again in early June 2017, update meetings have been held to review progress between the European Union and the new administration of President Trump.

Jean-Claude Juncker, Donald Trump, Donald Tusk © European Union 2017

Prior to the UK referendum on membership of the European Union, TTIP negotiations were believed to be progressing well. After the Brexit vote in the UK, the European Commission could not have foreseen the impact that the US presidential election in November 2016 would have on the future of TTIP.

Despite several statements from President Trump and a report by the European Union on the state of play for a final TTIP agreement, the current position on TTIP is unclear. There have been contradictory reports on the Trump administration’s approach to TTIP since January 2017.

All evidence points to a stalling of the negotiations and uncertainty on when further progress will be made.

The fundamental question about TTIP – a question that can only be answered by President Trump, is whether he favours starting from scratch; restarting the protracted negotiations that have been ongoing since 2013, or abandoning the whole idea of a new US-EU trade partnership in its current form.

The stark reality is that the evidence of President Trump’s attitude to the European Union since he took office, and indeed during the presidential campaign, points to the strong possibility that TTIP could be completely abandoned.

Our analysis of the key components of the TTIP negotiations points to two key issues that are tied into the aims of any final agreement that have the potential to encourage President Trump to make demands for changes to TTIP that are likely to be unpalatable to the European Union.

© European Union 2017

The first issue is environmental protection. Negotiations conducted to date have favoured the European Union’s clear objective that trade agreements must reflect the EU’s broader ambitions to protect the environment, including climate change:

“[The EU and US] agreed that T-TIP must include strong obligations to protect the environment and fundamental labor rights and should encourage cooperation to support strong labor and environmental standards in our trade partners.”

The second issue is the common position agreed between the negotiators on the regulatory environment for physical standards for products, inspection arrangements and the commitment to boost resources for regulators in sectors such as pharmaceuticals, medical products and more broadly, product safety.

On the first issue, President Trump’s withdrawal from the Paris Climate Agreement, was couched in terms that provide clarity on his thinking about linking environmental ambitions to stronger regulation that impinges, in his view, on the ability of American business and industry to grow and create jobs. For the same reasons, the second issue of stronger regulation for product standards and safety standards for consumers as part of a TTIP agreement, will doubtless reinforce President Trump’s fears that stronger regulation equals higher costs which are not in the best interest of American companies.

This is not to suggest that President Trump lacks a pragmatic approach to trade policy. It does not mean that the negotiations conducted between the EU and the United States will be completely wasted. A new trade model, a new type of agreement and a new name for a trade partnership might emerge.

It is still possible that TTIP will be revived with key amendments. However, businesses, financial markets, governments, the EU and those concerned about some of the proposed impacts of TTIP, are advised to consider a fundamental principle of President Trump’s approach to trade.

His administration will not view any trade deal in isolation. He promised the American people that he would agree new trade deals if they were in the best interests of American business and industry and, crucially, if such deals would protect American jobs.

This approach is the polar opposite of how individual countries or supranational organisations on the other side of trade agreements with the US tend to view them.  They are promoted as providing special status with the United States. TTIP provides a clear example of the European Union’s approach in linking agreements with the wider ambitions of the union, such as consumer protection and reducing the impact of business and trade on the environment.

As a bargaining tool, a threat to revisit America’s trading relationship with the EU could place the new President in a strong position in the short-term.

In the longer-term, this approach risks alienating America’s key allies and strategic partners around the world. This strategy, if adopted in the way Mr Trump described his approach during the presidential election, may lead to a break-down of trust in international diplomacy. It has the potential to lead to instability in international trade, a slowing of global economic growth and new divisions in the international community.