News in Brief

Brexit and contentious topics complicate TTIP negotiations; public opposition continues

The 14th round of Transatlantic Trade and Investment Partnership (TTIP) negotiations was held in Brussels from July 11 to 15, 2016. Chief negotiators from the European Union, Ignacio Bercero, and United States, Dan Mullaney, admitted the need to overcome significant differences regarding services and procurement, despite progress on tariff elimination and regulatory cooperation.

Another factor holding back negotiations is Britain’s June 23 vote to leave the European Union. Mullaney emphasized the need to reflect on this development: “Imagine if the United States said, for instance, ‘Well, maybe TTIP will not apply to California’.” Europe’s second-largest economy, the United Kingdom is the largest market for U.S. services worldwide and accounts for 25 per cent of U.S. exports to the European Union.

As reported by The Guardian on July 20, certain U.S. officials suggest pushing for a “potentially swift bilateral trade and investment deal” with the United Kingdom as soon as it formally exits the European Union. This would serve to consolidate British–American economic relations as well as to expedite TTIP negotiations.

Opposition by civil society to the TTIP continues on many fronts. Outside the closed doors of the 14th round of negotiations, 40 protesters were escorted away by Brussels police after “attacking” officials with confetti. Opinion polls in Germany and Luxembourg indicate that people in both countries believe the agreement will bring more disadvantages than advantages. Civil society organizations from both countries and 18 other EU states signed a letter to Council of Europe President Donald Tusk demanding the immediate withdrawal of the European Commission’s mandate to negotiate the TTIP.

Lack of transparency and of opportunities for public participation in negotiations is among the reasons for opposition. On May 2, Greenpeace Netherlands leaked several negotiating documents, and called for debate before any further negotiations. The European Commission furthered its commitment to transparency by publishing nine of its proposals during the 14th round.

In February the chief EU and U.S. negotiators had announced their intention to produce a consolidated draft by the end of July. At the end of the 14th round, Bercero affirmed this was more likely to occur by the end of September.

EU negotiation agenda to continue despite Brexit; MERCOSUR and Indonesia at sight

Despite the uncertainties in TTIP negotiations, EU Trade Commissioner Cecilia Malmström said they would survive Brexit, and is pushing to conclude negotiations before U.S. President Barack Obama leaves office in early 2017. Malmström recalled that the European Commission would continue to negotiate the TTIP and other trade and investment agreements on behalf of the United Kingdom as an EU member state until Brexit is formalized.

Among these are EU negotiations with MERCOSUR, which resumed on June 23, and with Indonesia, formally launched on July 18. Negotiating rounds with both partners are expected to take place sometime in the second semester. The 17th round of negotiations of a free trade agreement with Japan is scheduled for September 2016 in Brussels.

In launching negotiations with Indonesia, the Commission recalled the recently completed agreements with Singapore (2014) and Vietnam (2015), and indicated that agreements with member states of the Association of Southeast Asian Nations (ASEAN) “will serve as building blocks toward a future EU–ASEAN agreement, which remains the EU’s ultimate objective.”

United Kingdom makes trade and investment negotiation moves for post-Brexit era

On July 8, 2016, Sajid Javid, former Business Secretary for the United Kingdom, launched preliminary talks with India on a future trade relationship between the two countries as soon as Britain formally leaves the European Union. “Following the referendum result,” Javid stated, “my absolute priority is making sure the UK has the tools it needs to continue to compete on the global stage. That is why I am in India today to launch these initial trade discussions.”

Before taking a different office within the British government on July 14, Javid expressed the British government’s intention to build its trade capacity by hiring up to 300 staff, including trade negotiators, and to visit other key trade partners, including China, Japan, South Korea and the United States.

British Trade and Investment Minister Lord Price concluded his first official trip to China and Hong Kong on July 11, where he also focused on strengthening trade and investment relationships. He said he was optimistic about the future and added that “a number of countries have already expressed interest in the idea of trade talks with the UK.”

On the same day, Chancellor of the Exchequer George Osborne went to New York to speak with leading figures on Wall Street, and would continue in missions to China and Singapore to discuss trade and investment. In a statement, he said: “Britain may be leaving the EU, but we are not quitting the world.‎ We will continue to be a beacon for free trade.”

Canadian Trade Minister Chrystia Freeland told the media that her team has been having “technical exchanges” with the United Kingdom on the Canada–European Union Comprehensive Economic and Trade Agreement (CETA), indicating that Britain is seeking Canada’s advice on negotiations for a post-Brexit trade and investment agreement with the European Union. CETA is Brexit Minister David Davis’s preferred model for a post-Brexit relationship with the bloc.

CETA to be concluded as a mixed agreement; Commission hopes for signing in October

On July 5, 2016, the European Commission proposed to the Council that the Canada–European Union CETA—agreed to in 2014 and re-concluded in February 2016—be signed as a “mixed agreement,” requiring signature and ratification by each of the EU member states. The Commission thus hopes for “a swift signature and provisional application.” Formal signing would take place in the Canada–European Union Summit, to be held in Brussels in late October.

The move comes one week after Commission President Jean-Claude Juncker reportedly said the opposite—that the CETA would be subjected to a simple approval procedure involving the European Parliament only—even against the preference of French President François Hollande, German Chancellor Angela Merkel and other EU member state leaders.

EU Trade Commissioner Cecilia Malmström clarified that “the open issue of competence for such trade agreements will be for the European Court of Justice to clarify, in the near future. From a strict legal standpoint, the Commission considers this agreement to fall under exclusive EU competence. However, the political situation in the Council is clear, and we understand the need for proposing it as a ‘mixed’ agreement, in order to allow for a speedy signature.”

She again praised CETA’s “new investment court system and enhanced rules on investment protection,” which represent “an important step towards the EU’s ultimate goal of a global investment court.”

Bulgaria and Romania stated they would veto the agreement because Canada failed to lift the visa requirement for their nationals. Earlier this year, the Dutch Parliament rejected provisional application of the deal, and Belgium’s Walloon Parliament opposes signature.

RCEP partners conclude 13th negotiating round in Auckland; three further rounds in 2016

The 13th round of negotiations for a Regional Comprehensive Economic Partnership (RCEP) was held in Auckland, New Zealand, from June 12 to 18, 2016.

The International Centre for Trade and Sustainable Development (ICTSD) reports that all countries have now submitted initial offers for trade in goods and services, and initial lists of reservations for investment. Negotiations—with further rounds scheduled for August, October and December—are expected to go beyond the 2016 deadline.

In April 2016, Knowledge Ecology International leaked an October 16, 2015 version of the investment chapter. The leaked draft includes 14 articles covering provisions frequently included in trade and investment agreements, including most-favoured-nation (MFN) treatment, minimum standard of treatment and prohibitions of performance requirements and expropriation. The negotiating partners also aim at creating an investor–state dispute settlement mechanism.

RCEP is a mega-regional trade and investment agreement being negotiated since 2012 between Australia, China, India, Japan, New Zealand and South Korea, as well as the negotiating bloc of ASEAN member states: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Participating countries account for roughly 50 per cent of global population, 30 per cent of global GDP and 25 per cent of global exports.

India takes steps to reform its investment policy framework after approving new model BIT

India has started to send official notices to terminate bilateral investment treaties (BITs) to 57 partner countries with which it has BITs that have already expired or will expire in the near future.

Moreover, to the 25 countries with which India has BITs with initial durations expiring from July 2017 onward, India has started to propose signing joint interpretative statements to clarify ambiguities in treaty texts, for example, with respect to the definitions of investor and investment and the exclusion of taxation matters.

These bold steps follow the approval of India’s new model BIT in December 2015, which narrows the scope of the standard of treatment of investors (avoiding the term “fair and equitable treatment”), leaves out the MFN clause and includes investor obligations. While retaining investor–state arbitration, the model requires investors to exhaust local remedies before commencing international arbitration against the host state.

India’s foreign investment policy has shifted in response to an increased number of challenges to government measures and policies by foreign investors under investment treaties: seven arbitration cases are known to have been initiated against India since 2012.

Renegotiating investment treaties pursuant to the new model and embedding its revised policy in ongoing trade and investment negotiations—with partners such as Canada, European Union and the United States, and in the context of RCEP—will be India’s next political challenge.

A despondent letter sent on May 25, 2016 by EU Trade Commissioner Cecilia Malmström to India’s commerce and finance ministers illustrates the challenge. She warned that India’s notices of termination to “a significant number” of EU member states could “have serious consequences” if replacement treaties are not in place. According to her, it could “create a gap in investment protection and consequently discourage EU enterprises from further investing in India,” as investors “may perceive the investment climate as deteriorating.”