TTIP and the erosion of environmental regulation

Marie Therese Power is a Master of Public Policy student in UCD. This blog was written for POL40160 Comparative Public Policy. The best blogs from this module were selected to enable talented graduate students in UCD to contribute to ongoing debates about contemporary policy issues affecting European societies. MT Power, MPP

There has been much discussion in recent times about the Transatlantic Trade and Investment Partnership (TTIP), arguably more than about any such trade agreement in history; and the popular discussion, at least, has been largely negative. In 2015 nearly 3 million people signed a petition across Europe calling for the negotiations to be scraped, while protest marches have drawn crowds of up to 250,000 people. The New Statesman claims that conspiracy theorists are inciting unfounded fears, incorrectly depicting the TTIP as a covert attempt by EU governments to deregulate. On the other hand, Nobel Prize-winning economist Joseph E. Stiglitz argues that such an agreement will effectively allow “rich corporations to use provisions hidden in so-called trade agreements to dictate how we will live in the twenty-first century.”

Strong words indeed! So what is the truth about TTIP – what exactly is it and what does it entail for environmental and other social protections?

In 2013 The European Commission, mandated by EU governments, began negotiations with the United States on what is to be the largest bilateral trade agreement in history, the Transatlantic Trade and Investment Partnership (TTIP) – a deal which they claim will create thousands of jobs and pump billions of euro into economies on both sides of the Atlantic. Put simply the TTIP will make it easier for companies on both sides of the Atlantic to access each other’s markets, cutting red tape and bureaucracy wherever possible. The agreement will have impacts across industry, trade, employment and workers’ rights and most significantly for our purposes, on regulation. This will take two forms: firstly, regulatory cooperation will require harmonisation across regulation (the source of much fear that the European food market will be flooded with American “frankenfood”); and secondly, investor state dispute settlement mechanisms (ISDS) will be strengthened. Sounds harmless right? Wrong!

According to the European Commission, the TTIP is an opportunity to enshrine ambitious commitments to sustainable development, providing global solutions to environmental issues. Yet the current proposals include no obligations on parties to ratify international environmental conventions, nor do they provide mechanisms for enforcing such environmental “commitments”. Greenpeace points out that while the EU may be keen for both parties to state their commitment to global environmental standards, the US has not ratified a number of multilateral environmental agreements to which the EU is party and that any stated commitments may diverge considerably from these. Yet the purpose of international trade agreements such as TTIP, involving increased regulatory cooperation, is to remove divergence and enhance harmonization across jurisdictions. The concern among environmentalists is that such harmonization of environmental policies between the US and the EU will effectively result in a situation where the lowest common denominator becomes the basis for environmental controls and standards.

Perhaps an more serious cause for concern is that as even if the EU regulators wished to propose meaningful environmental or other regulations, they may no longer be able to do so in practice due to the provision for ISDS mechanisms under TTIP. ISDS systems are intended to protect investors from rogue governments or from the danger that their companies, operations or profits might be invalidly expropriated. But as Joseph Stiglitz points out, the likelihood of such expropriations are extremely low in jurisdictions such as the EU and the US, where highly functioning judiciary and property rights can adequately protect companies’ interests. Rather Stiglitz argues these provisions are intended to “impede health, environmental, safety, and…even financial regulations”, which while protecting public interest considerations, may restrict companies’ activities. In effect, companies can sue governments for full compensation for any reduction in their future expected profits resulting from regulatory changes. (Joseph E. Stiglitz, 13 May 2015) Further, the obligation to compensate investors for losses of expected profits can and has been applied, even where the regulation introduced is non-discriminatory or the “expected profits” are made from causing public harm. (Stiglitz, J. & Hersh, A. 2 Oct 2015)

A clear if somewhat shocking example of such an ISDS in operation is the case of Chevron versus the Ecuadorian government. The company is currently pursuing a $9.5bn suit against Ecuador’s government at an ISDS court in the Hague for allowing indigenous people to sue the firm – for the same amount of money – over allegedly illegal practices dating back more than 20 years. Their case rests on a historical agreement with Ecuadorian government relieving them of any environmental liabilities. There are many other similar examples, including in the public health sector, where two cases were initiated by Philip Morris International against Australia and Ecuador respectively, after each introduced legislation on the packaging of cigarettes that was aimed at reducing cigarette consumption. Meanwhile, Canada reversed a ban on the toxic chemical MMT and agreed a $13m payment in 1998 as a result of an ISDS claim by Ethyl. The cases in themselves are a cause for concern; but just as worrying is the deterrent effect the possibility of such cases might have for national governments considering new regulation. In what is described as the chill effect “the mere threat of a multi-million dollar international arbitration lawsuit can make governments reluctant to implement social or environmental protection measures that could affect the interests of foreign investors.” (Celia Olivet) These ISDS tribunals have been described as a lobbying tool, whereby firms simply threaten to sue in response to the suggestion of or introduction of new legislation which threatens their interests. (Peter Kirby)

So what can we do to counter these impending threats? In a letter to Minister Bruton, An Taisce, the National Trust for Ireland, outlined a number of conditions aimed at tempering the more negative consequences of the agreement. They call on the European Commission:

to work to ensure that TTIP excludes mechanisms for Regulatory Cooperation, Investor State Dispute Settlement, fast track ratification as well as deeper reforms of regulatory cooperation in the field of energy, climate, chemicals, agriculture and food, and other areas where environmental policy risks being weakened. (An Taisce, May 2014)

If the Commission fails in this regard, the final text of the negotiations will have to be approved by the EU’s Member States through the Council, and ratified by the European Parliament. Depending on the policy areas covered in the final agreement, the 28 (as of 2016) individual national parliaments of the EU’s Member States might also have to approve the deal. In which case, let us hope, as Joseph Stiglitz does, that the citizens of Europe will mandate their representatives to respond with a resounding no.


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