Trump election affects mega-regional negotiations including TTIP, TPP and RCEP
In September, EU officials recognized that the negotiations on the EU–U.S. Transatlantic Trade and Investment Partnership (TTIP) were unlikely to be concluded before the end of U.S. President Barack Obama’s mandate. After November 9, when protectionist Republican candidate Donald Trump won the U.S. presidential elections, the future of TTIP negotiations became even less clear. EU Trade Commissioner Cecilia Malmström said on November 11: “TTIP will probably be in the freezer for quite some time and then what will happen when it is defrosted, I think we will need to wait and see.”
While Trump’s position on TTIP may be unclear, he strongly campaigned against existing multilateral trade deals, including the Trans-Pacific Partnership (TPP) signed earlier this year and even the North American Free Trade Agreement (NAFTA), in force since 1994. On November 22, the President-elect announced that among his actions on his first day in office (January 20, 2017) would be the full withdrawal of the United States from the TPP, characterizing it as “a potential disaster” for the country. “Instead, we will negotiate fair, bilateral trade deals that bring jobs and industry back onto American shores,” he added.
In response, Japanese Prime Minister Shinzo Abe stated that “the TPP would be meaningless without the United States.” The TPP—concluded by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam—includes a clause preventing entry into force without U.S. ratification. Peruvian Trade Minister Eduardo Ferreyros proposed new talks: “We can modify that clause and also take advantage to modify other clauses that might be uncomfortable for us.” Australian Trade Minister Steven Ciobo also said that countries could push ahead by amending the agreement and possibly adding new members.
Analysts see in the U.S. withdrawal from the TPP an opportunity for China to assume leadership in Asia-Pacific trade and investment negotiations. China is negotiating the Free Trade Area of the Asia Pacific (FTAAP) and the Regional Comprehensive Economic Partnership (RCEP). The latter excludes the United States, but includes Australia, India, Japan, New Zealand and South Korea, as well as the ten member states of the Association of Southeast Asian Nations (ASEAN). During the Asia–Pacific Economic Cooperation (APEC) summit in Peru on November 19 and 20, Tan Jian, a senior Chinese delegate, said that Chile, Peru and other countries now intend to join RCEP negotiations, and that current negotiating partners aim at concluding the deal as soon as possible to counter protectionism.
Brazil and India initial bilateral investment treaty (BIT); text yet to be published
During the 10th Annual Forum of Developing Country Investment Negotiators, held in Colombo, Sri Lanka, from November 7 to 10, representatives from Brazil and India announced that they had recently initialled a bilateral investment agreement (BIT).
Since 2015, Brazil has concluded seven BITs (with Angola, Chile, Colombia, Malawi, Mexico, Mozambique and Peru) based on its new model Agreement on Cooperation and Facilitation of Investments (ACFI), which focuses on investment facilitation and dispute prevention through the creation of ombudsmen in each contracting state and a joint committee. In December 2015, India approved a revised model BIT, which—while including a provision on the standard of treatment—avoids the term “fair and equitable treatment” (FET) and the most-favoured-nation (MFN) treatment clause, and includes investor obligations.
It is reported that the Brazil–India BIT incorporates elements from both approaches. For example, in line with Brazil’s approach, it includes elements of investment cooperation and facilitation, and focuses on dispute prevention rather than providing for investor–state arbitration; in line with the Indian model, it does not refer to FET and does not include an MFN clause.
CETA signed; Canada and European Union to “work expeditiously” on creating a Multilateral Investment Court
On October 30, during the 16th European Union–Canada Summit held in Brussels, the two negotiating partners signed the Comprehensive Economic and Trade Agreement (CETA), after seven years of negotiations. European Commission President Jean-Claude Juncker hailed it as “the best trade agreement the European Commission has ever negotiated” and added that it will set global standards for other trade agreements.
Canadian and EU leaders have also signed a Joint Interpretative Instrument in which they recognize “the right to regulate in the public interest” as a fundamental value. The instrument characterizes CETA as “an important and radical change in investment rules and dispute resolution” and as the basis for a Multilateral Investment Court, which Canada and the European Union have committed to “work expeditiously” to create.
The signing of the agreement had been thrown into doubt just a few weeks before. On October 18, the sub-national parliament of the Belgian region of Wallonia voted not to give powers to the Belgian federal government to sign CETA. The signing ceremony that had been scheduled for October 27 was cancelled as a result. On the same day, Belgian political leaders reached an agreement to support CETA.
In the agreement, Wallonia is reported to have obtained assurances that CETA would not harm local farmers, that states’ participation in the Investment Court System (ICS) mechanism would depend on specific approval by individual EU member states, and that Belgium would ask the Court of Justice of the European Union (CJEU) for an advisory opinion on the compatibility of the ICS mechanism with EU law.
Ratification by the European Parliament will be required for CETA to apply provisionally to the European Union. However, reportedly due to the Wallonia deal, ICS will be left out of the scope of provisional application. Accordingly, ICS will only be implemented after ratification by individual EU member states. In the meantime, Canadian and EU officials will elaborate on the details of the system, including the selection of judges, access to ICS by smaller businesses and the appellate mechanism.