As regular readers will have noticed, so far the dominant theme of these TAFTA/TTIP updates has been investor-state dispute settlement (ISDS). That’s largely because it represents such a clear threat to national sovereignty, that it’s the most pressing issue, even this early in the negotiations. Naturally, I’m not the only person to think that, and many others, including leading civil society organisations, have expressed their grave misgivings about the inclusion of what amounts to a chapter placing foreign corporations above nations.
It seems that crescendo of concern has had an effect. In a rather surprising turn of events, the European Commission has just published the following:
EU Trade Commissioner Karel De Gucht today announced his decision to consult the public on the investment provisions of a future EU-US trade deal, known as the Transatlantic Trade and Investment Partnership (TTIP). The decision follows unprecedented public interest in the talks. It also reflects the Commissioner’s determination to secure the right balance between protecting European investment interests and upholding governments’ right to regulate in the public interest. In early March, he will publish a proposed EU text for the investment part of the talks which will include sections on investment protection and on investor-to-state dispute settlement, or ISDS. This draft text will be accompanied by clear explanations for the non-expert. People across the EU will then have three months to comment.
Against a background of a dogged refusal to release any texts, or to ask the public in any way about its opinion, that’s a startling U-turn. It’s clearly taken place because the European Commission has finally realised that trying to re-gain control of the narrative by releasing a few “fact sheets” - like the one I discussed in a previous update - just isn’t working. Unfortunately for the Commission, it doesn’t seem to have come up with any new, compelling arguments why ISDS must be part of TTIP:
EU Trade Commissioner Karel De Gucht said: "Governments must always be free to regulate so they can protect people and the environment. But they must also find the right balance and treat investors fairly, so they can attract investment. International investment agreements like TTIP should ensure they do both. But some existing arrangements have caused problems in practice, allowing companies to exploit loopholes where the legal text has been vague. I know some people in Europe have genuine concerns about this part of the EU-US deal. Now I want them to have their say. I have been tasked by the EU Member States to fix the problems that exist in current investment arrangements and I’m determined to make the investment protection system more transparent and impartial, and to close these legal loopholes once and for all. TTIP will firmly uphold EU member states' right to regulate in the public interest."
As you can see, that is still assuming that the question is how to make ISDS better, rather than asking whether we need it. Making it better will be hard (assuming it’s even possible), because it will requires the US to agree to any new measures. Luckily, we don’t need to hold those discussions, since any form of ISDS is completely unnecessary. We know that because the Europe Commission’s own figures prove it:
Total US investment in the EU is three times higher than in all of Asia.
EU investment in the US is around eight times the amount of EU investment in India and China together.
EU and US investments are the real driver of the transatlantic relationship, contributing to growth and jobs on both sidesof the Atlantic. It is estimated that a third of the trade across the Atlantic actually consists of intra-company transfers.
Transatlantic investment is not just flourishing, it is flourishing like nowhere else on earth. So there is basically no problem to solve, and ISDS will add nothing but costs, both economic and political. But you don’t have to take my word for that. I recently came across a fascinating document on the UK government’s main gov.uk site entitled "Costs and benefits to the UK of an EU-US investment protection treaty" that explores precisely this issue of whether it is worth adding ISDS to TTIP.
Its genesis looks slightly complicated. It is branded “LSE Enterprise”, and its three authors come from the London School of Economics (LSE), University of Oxford and University of Wisconsin. So it seems to be an independent report commissioned by the Department for Business, Innovation & Skills. That means it can’t be regarded as official UK government policy, but the fact that it appears on gov.uk means that it is still an official document. It was published on 22 November, but I’ve only just come across it. I imagine that’s partly because the UK government didn’t want to publicise it too much, given its findings.
It runs to some 44 pages, but the final section sums things up neatly. Its main conclusion is as follows:
There is little reason to think that an EU-US investment chapter will provide the UK with significant economic benefits. No two countries in the world exchange more investment than the UK and the US, and there is no evidence that US or UK investors view either country as suffering from the kinds of political risks against which investment treaties are supposed to protect. Moreover, existing evidence suggests that the presence of an EU-US investment chapter is highly unlikely to encourage investment above and beyond what would otherwise take place. US investors have generally not taken much notice of investment treaties in the past when deciding where, and how much, to invest abroad – even when dealing with far more questionable jurisdictions than the UK.
It also points out that:
There is little reason to think that an EU-US investment chapter will provide the UK with significant political benefits. The political relationship between Washington and Whitehall is exceptionally strong, and we are aware of no evidence that it is vulnerable to a meaningful risk of investor-state disputes that would become undesirably “politicized” in the absence of an investment treaty. Secondly, we find it unlikely that an EU-US agreement would make significant negotiating partners – like India and China – more or less willing to agree to an investment treaty with the EU. Finally, it is unclear whether the US is particularly keen on an investment protection chapter with the EU, which means the Commission may not be able to use such a chapter as an effective ‘bargaining chip’ in other trade and/or investment negotiations with Washington.
That point about China and India is crucially important: one of the reasons that the European Commission likes to claim we “must” have ISDS in TAFTA/TTIP is that it will set a precedent for future agreements with China and elsewhere. The LSE team believes that this would be unlikely to make any difference.
The LSE report then goes on to say:
There is some reason to expect an EU-US investment chapter will impose meaningful economic costs on the UK.
There is some reason to expect an EU-US investment chapter to impose meaningful political costs on the UK.
Its final judgement is as follows:
In sum, an EU-US investment chapter is likely to provide the UK with few or no benefits.
This is the key idea that we need to get across when Mr De Gucht’s consultation opens in March: that ISDS has few if any benefits for the EU’s member states, many huge potential costs and problems for European citizens, and is totally unnecessary. It should be dropped completely from TAFTA/TTIP.
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