EU-US Transatlantic Trade and Investment Partnership – Update

The most recent round of negotiations between the European Union (the EU) and the United States (the US) on a Transatlantic Trade and Investment Partnership (TTIP), took place in New York between April 25 and 29, 2016. On April 27, the European Commission (Commission) released a report on the state of play of the TTIP negotiations, which shows the progress that has been made so far (state of play report). Now that proposed agreements are on the table in almost all negotiating areas, both sides’ efforts are currently focused on resolving areas of disagreement.

Previously, on March 21, the Commission published a detailed report on the outcome of the twelfth round of negotiations which took place in Brussels between February 22 and 26, 2016. During this round, the EU presented, for the first time, its new approach to investment protection and investment dispute resolution.

This briefing summarizes these developments.

State of play of TTIP negotiating areas

The thirteen negotiating rounds that have been completed so far covered the full range of areas under negotiation. The thirteenth and most recent round was a bridging round between the technical work that has already been done and the task of creating joint texts and finding compromises where necessary, in particular in the regulatory and rule pillars.

Market access

With regard to trade in goods, both sides have tabled proposals for provisions on trade in goods, agriculture and related non-tariff issues. These are currently in the process of being consolidated. Consolidated texts reflect each side’s negotiating position but are not final or agreed texts. With regard to agricultural goods, the EU proposed specific regulatory provisions on labelling for spirits and drinks.

On public procurement the EU and US exchanged first offers on government procurement, which deal with procurement procedures in addition to market access issues. A consolidated chapter has been created and is currently subject to further discussions. According to the state of play report, the EU was disappointed with the US’ initial offer.

On services, the EU and US covered cross-border trade in services (movement of natural persons and maritime transport and aviation), liberalization of investment and rules related to financial services, postal and express delivery services, direct selling, recognition of professional qualifications, domestic regulation, telecoms and e-commerce. In relation to financial services, the parties are working on a consolidated text.

Regulatory cluster

During the twelfth round, the EU and the US exchanged new proposals on regulatory cooperation and discussed the EU’s revised draft chapter on good regulatory practices. The current EU proposal on regulatory cooperation focuses on the following aspects:

• enhancing or at least maintaining the existing level of protection (protecting public policy objectives including public health, safety and the environment);
• cooperating at a non-central level and sharing information on legislative proposals;
• allowing stronger involvement of stakeholders and the public; and
• setting the criteria for an effective institutional mechanism.

Additional regulatory issues were discussed during the last two rounds, i.e. technical barriers to trade (TBT), sanitary and phytosanitary issues (food safety and plant health) and the nine industry sectors under consideration (pharmaceuticals, cosmetics, textiles, cars, medical devices, ICT, engineering, chemicals and pesticides). Both sides identified common objectives for each of these sectors and began to exchange and discuss draft texts. The EU presented its first proposal on the nine sectors, in this case for pharmaceuticals, which will be published shortly. A common objective with respect to pharmaceuticals is to achieve mutual recognition of both sides’ respective inspection regimes to avoid duplicative inspections. On TBT, significant differences remain in the EU standard-setting and conformity assessment proposals for which solutions are being explored.

Rules

Following the EU’s proposal for a chapter on trade and sustainable development, which was tabled during the eleventh round and focused on substantive labour and environment issues of relevance in a trade and investment context, the US tabled a first proposal for labour and environment.

On Small and Medium-sized Enterprises (SMEs), the EU and US agreed to include a separate chapter in TTIP focused specifically on SMEs. This will be the first EU trade agreement including a specific SME chapter. Significant progress has been made in advising on the consolidation of the existing proposals in this area.

On energy and raw materials,  the possible introduction of an energy chapter is still under discussion.

In the twelfth round, the EU presented new proposals on customs and trade facilitation, in particular, a proposal relating to activities that would benefit from an enhanced customs cooperation process between the EU and US (such as data harmonisation, trusted trader programmes, single window systems, binding information or international standards).

As regards intellectual property rights (IPRs), the US presented two text proposals during the twelfth round: (i) a reaction to the EU initial text on IP-related international agreements; and (ii) a first draft on common provisions, broadly in line with the equivalent text in the Trans-Pacific Partnership agreement  (TPP).

The EU and US continued to explore further possibilities to find common ground on competition matters and have identified a number of areas where their respective positions have come closer. These areas include: the general principles, reference to the legal framework and anti-competitive conduct, cooperation, the review clause, and dispute settlement. The main area where further work is still needed is procedural rules, such as transparency and rights of defence.

On investment protection, following substantial changes in the EU’s proposal as a result of the consultation process with civil society, Member States and the European Parliament carried out through 2014 and most 2015, the EU adopted a new and reformed approach to investment protection and investment dispute resolution for TTIP, which it presented to the US in detail for the first time during the twelfth round.

The key principles of this proposal are safeguarding the right to regulate and create a court-like system with an appeal mechanism based on clearly defined rules, with qualified judges and transparent proceedings. The proposal also includes additional improvements on access to the new system by small and medium sized companies.

During the twelfth round, discussions focused on definitions and the articles of the substantive rules. On resolution of investment disputes, both sides worked on understanding the respective approaches and identifying areas of convergence.

Prospects for 2016

The next negotiation round will most likely take place in July 2016. Both sides have agreed to ensure that by the summer textual proposals have been made on all negotiating areas and that these have been largely consolidated, with only the most sensitive outstanding issues remaining.

The EU and US have confirmed their willingness to do their utmost to conclude negotiations by the end of the year. Such agreement will require approval from the Council of the EU and the European Parliament as well as of the US Congress.