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Glyn Moody

Glyn Moody's look at all levels of the enterprise open source stack. The blog will look at the organisations that are embracing open source, old and new alike (start-ups welcome), and the communities of users and developers that have formed around them (or not, as the case may be).

TTIP Update VIII

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Even the European Commission admits that TAFTA/TTIP is not, primarily, a trade agreeement, because the trade barriers between the EU and the US are already so low that removing them will add little to the EU economy. According to a study [.pdf] put together for the European Commission, the uplift in 2027 would be only 24 billion euros on a GDP that was already 12,900 billion euros in 2012; that compares with the most favourable outcome touted by the report, which is 119 billion euros GDP uplift in 2027. However, that is predicated on massive deregulation – although the European Commission prefers to use the euphemism of "removing non-tariff barriers."

Actually, it is now framing the process as “regulatory harmonisation” - making the EU and US systems more compatible. But there’s a problem here: when the two systems flatly contradict each other – for example, over whether chickens can be washed in chlorine, or cattle injected with growth hormone – there is no possible “harmonisation”: they are fundamentally incompatible.

The US side is quite frank about this: among its many demands is that the EU dismantles its strict health and safety regulations and allows chlorine-washed chickens and beef pumped up with growth hormones in EU supermarkets and thus on EU plates. So the interesting question is how the European Commission will manage to pull this off, given the spotlight that is being shone on possible deregulation: how can it somehow accommodate the US demands without being seen to lower EU standards it has pledged to defend in the negotiations?

The latest leak from the TTIP talks gives us a clue. Corporate Europe Observatory has obtained a position paper on "regulatory coherence" [.pdf], which explains “how TTIP could establish an effective system of transatlantic regulatory co-operation”. It lays out how the major problems of regulatory incompatibility – the chlorine chickens and growth hormone beef, for example – won’t be solved now, in the full glare of public scrutiny, but will be shuffled off to the future, where a new and powerful body will be established to “smooth out” those tricky regulatory bumps. Here’s how it would work, as explained by Corporate Europe Observatory:

Business interests on both sides of the Atlantic are pushing hard to get an institutional structure, an “oversight body”, into the agreement, mostly referred to as an EU-US “Regulatory Council”. This would be based on a set of rules for regulatory cooperation that would enable the parties to deal with their differences in a more long-term fashion, through procedures that will give business the upper hand. It might very well be that the final TTIP text will not include immediate concessions on public health and environmental regulation. But it could include an approach for the future, giving the basic message to citizens that regulation is none of their business, but first and foremost the business of business.

Regulatory cooperation is a long term project. It is meant to deal with differences that could not be settled at the negotiating table at the highest level and also to respond to new regulations as they occur. In the course of the negotiations, the parties will see to what extent they can agree on common standards, or recognise each others' standards as basically similar. But in those areas where this is not possible in the short term, they will set up procedures to deal with them in the future. The idea is to make TTIP a “living agreement”, not confined to what they can agree on in the first place, but a continuous process of ever deeper integration . That raises the prospect of the parties reaching a conclusion on even the most difficult issues, such as food safety. For corporations from the EU and US, it raises hopes for better access to each other’s markets including in sectors that meet obstacles today, and for that reason it is being promoted vigorously by the business lobbies on both sides of the Atlantic.

The key phrase there is “living agreement”. Actually, a better description would be “zombie treaty”. The idea here is that TAFTA/TTIP never dies, and is constantly re-negotiated behind closed doors by the same elite that are discussing it currently – that is, unelected politicians and big business. Through the constant dripping of regulatory adjustment on the stone of EU laws, in time the inconvenient rough edges of health and safety, environmental and social protection, would be worn away.

Here’s why this approach is problematic:

Business should have the right to be involved in the first stage when new regulation is prepared. And let us remember that when we are talking about regulation we mean rules intended to prevent the food industry from marketing foodstuffs which include dangerous substances, or to keep energy companies from destroying the climate, or regulations to combat pollution and to protect consumers.

New regulations should be investigated via a “regulatory compatibility analysis” (RCA). During this investigation, seven questions would have to be answered. The questions are clearly tilted towards the interests of business, as they are mainly about the impact on business and on trade, including what the costs or savings would be to the private sector, how much regulatory authorities would “save” by down-scaling measures, and whether measures are outdated and should thus be eliminated or modernised. In other words, a business-friendly agenda is to constitute the backbone of regulatory assessments, if the business lobby has it its way.

As that makes clear, the Regulatory Council would embed not just business more deeply in the process of drawing up (and amending) regulations, it would allow US corporations to argue against EU practices from within the citadel. This would give them an immense power to interfere with what are inherently European matters, and to subvert them for their own purposes.

They will be aided by the “regulatory compatibility analysis” (RCA). That’s because this is all about the impact on “business and trade”: there is no mention of the adverse social impact, say, or the environmental harms, that new regulations might cause. That’s of a piece with the European Commission’s current claims about TAFTA/TTIP: even if you accept the wildly implausible 119 billion euros GDP uplift in 2027, nowhere is any account taken of the negative externalities the required changes will cause.

For example, reducing the EU’s high food, health and safety standards will inevitably cause more people to become ill, placing a greater burden on the European health system. Similar, lowering environmental protections will lead to a degradation of our surroundings. That has a real value to many people, even if it can’t be quantified in monetary terms. None of this is captured in the European Commission’s TAFTA/TTIP report.

Interestingly, the position paper on Regulatory Coherence has a couple of fig leaves. First, we have the following, significantly stated right at the start:

The TTIP provides a historic opportunity for the EU and the US to substantially enhance regulatory co-operation. Such co-operation should be guided by both Parties’ right to develop and maintain, policies and measures ensuring a high level of environmental, health, safety, consumer and labour protection, fully respecting the right of each side to regulate in accordance with the level of protection it deems appropriate.

To which I can only say: well, yes... But having a “right” to develop and maintain those policies, and actually using that right, are two quite different things. In particular, once US companies are inside the regulatory development process, they will simply use its machinery – notably the “regulatory compatibility analysis” - to justify why certain regulations should or should not be adopted. Those that would use that right to stand up for EU citizens – for example, the European Parliament – will have no way of doing so under the new scheme. Moreover, as Corporate Europe Observatory explains:

If we add to this the fact that the Commission is the only EU body allowed to table legislative proposals, we have a recipe for disaster: the Commission would presumably be easily persuaded by US authorities or the US business lobby to refrain from tabling a proposal if it would cause a stir in the EU-US trade relationship.

The other fig leaf addresses some of these issues – in theory:

Each Party would undertake stakeholder consultations on regulatory and legislative measures in the areas that will be covered by this Chapter, according to their respective consultation framework.

Each Party should establish or maintain appropriate mechanisms for responding to enquiries from any interested person regarding any measures of general application covered by this Chapter. Upon request each Party should provide information on any existing or proposed measure that theother Party considers might affect the operation of this Agreement, regardless of whether it was notified.

Each Party should endeavour to identify or create enquiry or contact points for interested persons of the other Party with the task of seeking to effectively resolve problems for them that may rise from the application of measures of general application. Such process should be easily accessible, time-bound, result-oriented and transparent. They should be without prejudice to any appeal or review procedures, which the Parties establish or maintain.

Sounds great, no? Transparency and access for everyone. Well, may be not. What the Regulatory Council will create is simply another forum where the rich and powerful will find it easier to make their voices heard. In particular, lobbyists will swarm to this new locus of power and ensure that public concerns are drowned out even more than already happens in Brussels.

The key thing to underline about the proposed Regulatory Council is that it is not some minor side issue, but central to the European Commission’s approach to TTIP and achieving its long-term aims with it. The European Commission probably knows that it could never get through an agreement that explicitly tried to level European protections downwards. Instead, it will negotiate a far more reasonable document, with a few important exceptions.

One is the investor-state dispute settlement (ISDS) mechanism that I’ve already discussed at some length. In fact, I think the European Commission would be prepared to “sacrifice” that chapter for the sake of getting TAFTA/TTIP through the European Parliament, given the growing outrage over the ability of ISDS to place corporation above nations.

That’s because it now has a back-up plan in the shape of the Regulatory Council, which will effectively allow the European Commission to postpone the more difficult deregulation and elimination of EU health and safety protection, and to spread it out over many years. It will be able to wrap them up with other changes that the European Parliament is keen to pass, and so as a compromise the things that would never be accepted in the main TAFTA/TTIP document will slip through the legislative process in dribs and drabs. Clever.

Full list of previous TTIP Updates.

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