First Round of TTIP Trade Agreement Negotiations Concludes in Washington D.C. With Both Sides Affirming Their Commitment to a 2014 Completion -Second Round Set for Brussels in October

The first round of negotiations between the United States and the European Union leading to a Transatlantic Trade and Investment Partnership (known in trade circles as TTIP) concluded on Friday, July 12, with formal statements by both sides reiterating their commitment to conclude the agreements by the end of 2014.  The negotiating schedule seems improbable to us, considering that the next meeting of the TTIP negotiators is not until October, 2013, in Brussels, and in light of the fact that the Transpacific Partnership Agreement negotiations which began in March of 2010 have not yet concluded after seventeen such sessions.

At the conclusion of the opening round, both sides issued press statements, but they were distinctly different.  The United States issued a single paragraph, 115 word statement describing the discussions as "productive" and looking forward to "increased substantive engagement" in the future.

The EU release was substantially more detailed and noted that as many as twenty areas for consideration were placed on the agenda, including market access for agricultural and industrial goods, customs and trade facilitation (which includes tariff reduction and elimination); government procurement, investment, energy and raw materials, regulatory issues, sanitary and phytosanitary measures, trade in services, intellectual property rights, sustainable development, small and medium sized enterprises, dispute settlement, competition, and state owned enterprises. [1] These are issues that have historically been dealt with in trade negotiations that the U.S. and European Union have concluded with other countries, so it is reasonable to assume that both sides will likely rely on the framework of other trade agreements that have served both sides well in the past.

The EU Statement was far more specific as to the benefits accruing to every EU citizen under a likely Agreement.  It noted, for example, that:

• the U.S. and EU constitute up to 40% of the global economic output;
• t he TTIP could bring as much as €119billion in economic gains annually to the EU;
• a successfully concluded TTIP could increase EU exports to the U.S. by 28% annually; and
• TTIP could put as much as €554 in disposable income annually into the collective pocket of a European family of four.

The EU statement almost made it appear that an elimination of tariffs was virtually a done deal and that the real prize in these negotiations is (a term we will hear more often in the future) "converging regulations", as opposed to adaptive regulations.  It said:

"The European Union and the United States have their eyes on more than just removing tariffs.  …[T]he main hurdles to trade lie 'behind the border' in regulations, non-tariff barriers and red tape.  Estimates show that 80% of the overall potential wealth gains of a trade deal will come from cutting administrative costs…" That's why the two trading giants will reinforce their regulatory cooperation, so as to create converging regulations rather than have to try to adapt them at a later stage."

The European statement, coupled with the U.S. Trade Representative's comments at the Opening Plenary Session ("We want you to avoid unnecessary delays, but we also recognize that the most important thing is to get the substance right.  We need to resist the temptation to downsize our ambitions or avoid tough issues just for the sake of getting a deal") lead one to conclude that the real focus in terms of trade in goods agenda is the harmonization of regulations.

What are the hurdles?  Will Edward Snowden end up being the U.S. Chief Trade Negotiator?

Two issues appear to have emerged from what are now known as the "stakeholder sessions" – those opportunities afforded corporate and individual citizens, NGOs and members of academia to present their views in person or in writing either in advance of, or during, the sessions.

The first is transparency. This is a conflicting notion evolving of the State's view of its inherent right to conduct its diplomacy (including trade diplomacy) in secret and the public citizens' view (both corporate and individual) of their right to participate in those decisions which directly impact them.  Some TTIP stakeholders are not simply requesting that their views be heard in advance; they are insisting on their right to actively participate in the negotiations.  They want to see drafts of the proposed treaty texts and to review them before the text is finalized.  They argue, with some justification, that such transparency has been used in other negotiations without adversely affecting outcome. [2] Traditionally our government has considered trade agreement negotiations (as any other diplomatic negotiation) secret and would argue that an excess of transparency runs a risk of impairing the very objective of the negotiations – i.e. to concede what is in the nation's interest, but no more.  This issue is greatly complicated by the fact that in Europe the European Anticounterfeiting Trade Agreement was defeated because, in part, it was perceived as having been negotiated in an atmosphere of unacceptable secrecy.

The second is the treatment of digital commerce.  Prior to the release of NSA material by Edward Snowden, issues of digital commerce were expected to play a prominent role in the TTIP negotiations because of the anticipated growth of ecommerce. The TTIP was expected to provide a valuable framework for addressing the conflicting issues of ecommerce growth on the one hand (the U.S. interest) and security and privacy on the other (the European interest).  A broad range of interest groups had submitted comments suggesting that significant attention be given to ecommerce in the trade talks. [3] The issue now will be whether the NSA revelations are so serious as to take all ecommerce issues off the table.  Shortly after the Snowden disclosures, and in part to prevent a complete stall to the TTIP Opening Round, the U.S. and the EU collectively decided to move the TTIP talks forward, but to establish a parallel working group to address the conflicting issues of cyber security; cyber intelligence and personal privacy. [4] At least one group has called for the removal of ecommerce issues from the TTIP agenda until the work of the U.S.-EU working group is completed. [5] That position appears unlikely to prevail but, predictably, neither the U.S. nor the EU statements at the conclusion of the opening round referenced the complications to the negotiations created by the Snowden disclosures.

We will continue to monitor the progress of the TTIP talks and will keep our clients informed.  For any questions on the TTIP or other Trade Agreement issues, contact John P. Donohue at the Philadelphia office of the firm (215-640-8528; jdonohue@clarkhill.com ) or Tom O'Donnell at the firm's Chicago office (312-985-5570; todonnell@clarkhill.com ).