EESC Sustainable Development Observatory

EESC Sustainable Development Observatory

EESC Sustainable Development Observatory,

Public Debate on "Trade and Sustainability"2 April 2014, VMA 3 - EESC, Brussels

REPORT FROM THE DEBATE

  1. Background

Trade can support development by opening new markets, increasing access to products and services, creating jobs and stimulating innovation. At the same time, trade policy and agreements should integrate environmental and social sustainability criteria to ensure that trade activities preserve natural resources and maintain environmental protection and social standards.

In line with its objective of integrating sustainability into EU policies, the EESC Sustainable Development Observatory organised, in the framework of its regular meeting on 2 April, a discussion on Trade and Sustainability with a special focus on the ongoing negotiations on the Transatlantic Trade and Investment Partnership (TTIP). Participants discussed the EU trade and sustainability policy, the tools it has to promote environmental and social standards within the EU and in third countries, and the opportunities and challenges that would need to be addressed in the current negotiations on the TTIP.

  1. EU Trade and Sustainable Development Policy

Mr Perioni (DG TRADE)presented the EU policy objectives regarding sustainability and trade, emphasizing the fact that trade is an important part of sustainable development because it generates economic growth and has an impact on other policies. He outlined the multilateral and bilateral levels of trade negotiations and possible support for sustainable trade initiatives (such as fair trade certification, CSR policies, liberalising trade in green goods, or the new GSP+ scheme of preferences for developing countries). Following the Commission's Global Europe Communication in 2006, a new generation of Free Trade Agreements (FTAs) include a chapter on trade and sustainable development. These chapters are structured to include:

  • References tointernationally agreedprinciples to provide a framework of shared values
  • Maintaining the right to regulate for all parties
  • Support for trade and investment initiatives in different sectors
  • Transparent implementation and oversight mechanisms:

The Trade and Sustainable Development Committee: a government-to-government body meeting annually, responsible for the implementation of TSD chapter

Domestic Advisory Groups (DAGs) for each party with a balanced representation of interests according to the 3 pillars of sustainability. National DAGs maintain a working dialogue with the TSD Committee and may also have joint meetings at certain stages.

Dispute-settlement mechanism involving an independent panel of experts who analyse problems and issue recommendations.

Mr. Perioni referred to experiences in implementing the trade and sustainability chapter within ongoing or recently negotiated FTAs (e.g. with Korea, Colombia and Peru). He pointed out that the mechanism for civil society participation is well developed on paper, but that the practical implementation still needs to be improved.

The Commissioncarries outSustainability Impact Assessments (SIAs)before, or in parallel with,the negotiation process. These ex-ante assessments look at the expected economic, environmental and social impacts and put forward flanking measures and recommendations to minimise the identified risks. Information contained in the SIAs, as well as the Commission's response to the flanking measures and mitigations suggestions, are made available to civil society.

There is an ongoing public consultation on the Inception Report for the TTIP Sustainability Impact Assessmentand on the ISDS clause (open until 8 April).

The following questions and concerns were raised in the debate with the audience:

  • The possible side effects of trade agreements on other countries (e.g. the impact of tariff reductions under the Peru/ColombiaFTA with the EU on market prices, and subsequently on smallholder sustainable banana producers in the Caribbean). This is an area gaining more focus in FTA discussions and one (limited) option is offering compensation to smallholders.
  • Concern about the ability of large trade associations to have a stronger impact on the outcomes – resulting in a more corporate oriented policy;
  • The sustainability chapter is very important but its current content may not be sufficient:
  • References to ILO conventions are not enough sincesome countries have not ratified some of the conventions,resulting in different levels of demand on them. There should be binding provisions regarding a country's ratification of ILO conventions;
  • References to basic human rights and environmental conventions are also very important.
  • There are issues related to the methodology of the TTIP SIA, in particular to the flanking measures. It is still an open questionwhich of them the Commission would take on board. However there is progress being made on the methodology of SIAs and there is more pressure to include dialogue with civil society.
  • Participants also debated whether sustainability chapters should be based on voluntary action or on obligatory standards, with a view of promoting trade rather than creating barriers. It was pointed out that the sustainability chapters are intended to provide a set of shared values, rather than impose barriers.
  • The EU – US TTIP was cited as the most current and transparent example of TSIA.

3. Sustainability Aspects in the Trans-Atlantic Trade and Investment Partnership

3.1. Macro-and microeconomic impacts

Ulrich Schoofintroduced a study of the Bertelsmann Foundation on the possible macro- and micro-economic impacts of the Trans-Atlantic Trade and Investment Partnership (TTIP) on the EU, the US and third countries (128 countries studied in total). He noted the emergence of "mega-regionals" such as the TTIP and Trans Pacific Partnership (TPP) in recent FTA negotiations. These mega-regionals cover larger areas and have a broader scope and major impacts. Combined, they make up 30-50% of world trade. With regard to the TTIP study, two scenarios were considered from the viewpoint of their economic impact: the removal of only tariffs, and the removal of tariffs + non-tariff barriers to trade (regulatory harmonisation).

According to the study, there would be significantly more economic growth for both the EU and the US if non-tariff barriers to trade are removed with the agreement. He pointed out that the economic benefits would be uneven across the EU, with e.g. the UK deriving strong benefits, while it is unclear what the outcome would be for some other EU countries. He also pointed out the importance of ensuring that the EU single market will not be weakened, and to take into consideration possible trade divergence and the effects on the EU neighbours, unless they negotiate their own FTAs with either the US or the EU.

The following questions and concerns were raised in the debate with the audience:

  • The basis for the calculations used in the study: these are educated guesses based on the classical CEPR/ECORYSeconometric (bottom-up) model, as well as a top-down model that considersthe actual impacts ofpast FTAs. The impacts of the removal of non-tariff barriers are best assessed using the top-down model. Both methods indicate an overall positive impact.
  • The problems with the old econometric were highlighted, as well as the need to propose measures for alleviating the identified negative economic impacts.
  • A Bertelsmann Foundation survey that looks at compensation for third countries that would be affected by TTIP is currently under way and should be ready in October. Compensation is difficult to factor into the economic model when forming educated guesses on economic growth.
  • Political implications of the fact that there would be winners and losers.
  • Significance of TTIP for other multilateral agreements: it should pave the way for other discussions, especially concerning policy coherence. The possible impact on preferences should be taken into account. It is also important to keep in mind that there are other negotiations in progress, and these will continue no matter what the outcome is of TTIP.

3.2. Environmental aspects of the TTIP and the risks of ISDS

Christianne Gerstetter from the Ecologic Institute in Berlin presented a study about the environmental implications of a possible ISDS clause in the TTIP. She explained the difference between ISDS and state-to-state or foreign investor to national court disputes, and illustrated how ISDS works by citing examples such as Vattenfall vs. Germany and Lone Pine Resources vs. Canada. After further explaining procedural features and specific clauses relevant for environmental regulation, Ms. Gerstetter rebutted some of the common pros argued for the inclusion of ISDS in TTIP, with a final summation that ISDS would give foreign investors more rights than member states, and that an ISDS clause could have a "chilling effect" on new environmental regulation.

Ms Gerstetter further referred to a study of the Ecologic Institute on the potential impacts of the TTIP on the EU environmental acquis.

3.3. Social protection aspects of the TTIP

Daniele Bassopresented ETUC's central concerns about TTIP. He noted that ETUC does not support free trade that does not account for labour rights. He pointed to concerns about the difficulty in calculating actual job loss and economic growth, and called for concrete measures to compensate those who would lose out fromthe TTIP. Further important concerns include social standards (lack of ILO conventions, labour rights in US vs. EU, right-to-work status) and the Commission's focus on incentives instead of sanctions.

The following questions and concerns were raised in the debate with the audience:

  • The need for more international trade considering sustainability goals and short chains;
  • The difficulty in convergence between the radically different systems in the US and EU
  • The risk that mutual recognition within TTIP could lead to the lowest common denominator in environmental, social and consumer protection standards.
  • The inclusion of ILO texts in the agreement (because the US will not ratify the ILO conventions).

4. Presentation of the main points of the draft Opinion REX/390 on the TTIP

REX/390 Study Group President Evelyne Pichenot presented the work in the study group and the key points of thedraft opinion. She referred to the challenges of negotiating theTTIP: a partnership between developed countries, in the context of a fragile economic situation. The Committee's draft opinion contains the following main points:

  • The document seeks to achieve a shared vision between the three Groups representing major interests in the Committee – Employers, Social Partners and Various Interests.
  • There is general support for the TTIP and its potential to create growth and jobs.
  • The partnership should be extended beyond trade issues to cover the challenges for the 21 century, in particular sustainable development. The EESC supports including in the Sustainability Chapter strong references to social protection, employment, economic and social rights, human rights, environmental policies, good governance and civil society participation.
  • Cooperation and coherence in regulatory terms are especially important. Harmonising shared rules would be key to the globalisation process, and therefore of strategic importance for Europe. Ms Pichenot underlined the need to protect the EU acquis and standards, while improving the current system and finding solutions to important points of disagreement (e.g. ISDS).
  • The monitoring provisions under the sustainable development chapter should include the possibility for civil society to report a breach and to initiate a complaint procedure. The ISDS clause should include a transparent and impartial arbitrage mechanism according to the guiding principles of the OECD.
  • The supervisory mechanism should also monitor the implementation of measures to offset identified negative impacts, by sectors or regions.
  • Voluntary social and environmental commitments should be encouraged, as well as transparency in corporate reporting. The EESC proposes inviting major European and US companies to develop a transatlantic dialogue and promote regulatory convergence.

Questions and comments that followed Ms. Pichenot's presentation highlighted the importance of transparency in the negotiations, the protection of consumers and environmental and social standards (preventing their deterioration to the lowest common denominator), and the implications of recent political events on energy security and trade in energy.

Ms Pichenot noted that the opinion would be adopted at the June Plenary, and that the EESC might follow-up with further opinions elaborating on key issues.

Top View