In order to speculate on the possible development of the European Union negotiations in the international trade arena, two emerging actors must be taken into consideration. In this regard, a brief analysis of the role of the European Parliament and the emerging activism of civil society is presented below with particular attention to TTIP negotiations, as it could represent a turning point of the EU debate on trade. Then, applying the Schelling conjecture theory we try to figure out which consequences those new actors may induce.
The increasing role of the European Parliament post-Lisbon treaty
The Lisbon treaty has granted the European Parliament legislative power on EU trade and enhanced the Parliament’s role in bilateral and multilateral negotiations. While the EP is not directly involved in the negotiations, which are conducted by the European Commission, it has the rights: to be regularly informed about the negotiations; to issue resolutions and state its position and recommendations during any stage of the negotiations and to provide or decline its consent to the final text of the agreement. This latter right, in particular, means that the Parliament now has the ultimate power of veto on trade agreements influencing indirectly the negotiations: we can thus expect that the commission will pursue a deal that is not far from the provisions that the EU Parliament has given during the negotiations.
‘’The Lisbon treaty has strengthened the Parliament’s voice in international trade matters by making it a co-legislative body along with the Council of Ministers. For instance, the rejection of the Anti-Counterfeiting Trade Agreement (ACTA) in 2012 enhanced Parliament’s credibility as a veto actor but also increased its influence on trade negotiation mandates.’’ According to Antoine Ripoll, Director EU Parliament Liaison Office with the U.S. Congress
A study of the Policy Department for External Relations requested by the International Trade committee of the EU Parliament (INTA) analyzed the parliamentary scrutiny procedures of trade policies across the western World, comparing the role and the influence on international trade negotiations of the EU Parliament with the national legislative organs of Canada, USA and Australia.
The EP formally has the right to be informed at all the stages of the mandating and negotiating process, as well as veto power at the ratification stage. This means that its formal powers are reasonably significant compared to other democracies. Furthermore, many informal practices have developed to supplement these formal competences including writing resolutions and exchanges of technical expertise to participate in negotiation discussions. In the United States, the Congress has constitutional competence over international trade policy; for practical reasons however, it delegates the power to negotiate to the executive under the ‘fast-track’ procedure. Under this procedure, Congress rights are similar to those of the EP: the formal right to be informed and notified of all stages of negotiation, and a simple yes or no vote on the final procedure. The picture for parliamentary involvement is quite different in Canada and Australia, where international treaties were formally a royal prerogative and now fall entirely under the competences of the executive. In Canada, sub-federal (provincial) parliaments can play a role. For instance, provincial parliaments had a strong role during the negotiation of the Comprehensive Economic and Trade Agreement (CETA), partly because of the EU’s insistence on covering government outcomes at the parliamentary level. In Australia, territorial governments are consulted during trade negotiations and they are informed by national and state ministers; however, due to a lack of expertise at these levels, parliamentary involvement is minimal.
Therefore, Parliament could be like a stakeholder that must be consulted for transparency (as in Canada and Australia) or having official power over trade policy. From a comparative perspective the EP plays a significant role. In Canada, however, the parliament has seen some of its competences eroded since the sixties, indicating that the process is not unidirectional. Informal practices developed during CETA and TTIP should thus be codified in order to reduce the risk of losing these powers.
The assembly debate on the TTIP
The Transatlantic Trade and Investment Partnership is an ambitious proposed trade and investment agreement between the European Union and the United States. With the explicit aim of integrating the two markets, not only by reducing the already low duties but also cutting down the non-tariff barriers to trade and harmonizing the rules and standards of several sectors. A treaty that would go far behind the existing rules of the WTO especially regarding the trade of services, intellectual propriety rights (eg. the rules of origin) and the tutelage of international investments. The deal could represent the biggest free trade agreement in history, covering the 45% of the global GDP, more than 30% of the world trade in goods and 42% of the World trade in services. The treaty, according to the European Commission, has the fundamental scope of boosting economic growth by creating 1.8 million new jobs and increasing average household income by 500 euro per year. According to Karel de Gucht, European Commissioner for Trade between 2010 and 2014, the TTIP is the largest bilateral trade initiative ever negotiated, not only because it involves the two largest economies in the world but also “because of its potential global reach in setting an example for future partners and agreements.”
The 1st round of negotiations took place in 2013 in Washington DC. From the beginning, the Parliament has taken responsibility for ensuring that talks on TTIP are transparent and that the final outcome is a “good deal.” As Parliament’s TTIP spokesperson and rapporteur, Bernd Lange (S&D, DE) said this means: “an agreement which respects European values stimulates sustainable growth and contributes to the wellbeing of all citizens.”
The main concerns of the European Parliament, which reflected the preoccupations of the population, the national parties and interest groups were: the transparency of the negotiations, the ISDS mechanism for the international dispute settlement on foreign investments, the precaution principle (absent in the US legislation), rules of origin, and the protection of workers and the environment.
From the beginning of the negotiations, Parliament engaged in internal conflict with other institutions to gain more influence. As a result of that pressure, the European Commission introduced a “transparency initiative” during the TTIP talks, which made an unprecedented number of documents available to the public. It was the first time that the Commission had enabled all members of the European Parliament to follow the specific negotiations areas of an international agreement.
The EP has been closely following the negotiations involving a large number of committees, and it often questioned the assumptions of the Commission by presenting alternative studies (for instance a study of the employment and social affairs committee estimated a potential loss of jobs in contrast with the Commission’s models). After less than two years from the beginning of the negotiations, MEPs presented 116 amendments to Parliament’s draft recommendation on the TTIP as a demonstration of the high activism of the EP.
After 15 rounds of negotiations (the last hosted in New York in October 2016) the talks failed over the profound regulation differences of the two economic blocks, from the food security rules to the dispute settlement private tribunals. Despite the initial enthusiasm of the Commission, Strasburg appeared reluctant to sacrifice European standards and the Union’s tutelages on the altar of international trade.
Speculation about the role of the EP in the interruption of TTIP talks can be legitimated by the fact that, after a proposal of member countries for starting new trade talks with US President Donald Trump to remove tariffs and progress on standards alignment, the European Parliament on March 14th of 2019 voted to reject the possibility of a new Trans-Atlantic agreement de facto, leaving the Commission without political and ‘’democratic’’ support.
A new conservative player: the emerging activism of the civil society during the TTIP negotiations
The EP delivered to the Commission a series of concerns that reflected what the MEPs received from civil society. Indeed, hard protests organized by NGOs, environmentalists, charities, and specific interest groups spread all over Europe. In October 2015, more than 300 thousand participants marched on the street of Berlin against the on-going negotiations with the US, despite the Trade Commissioner Cecilia Malmström describing the negotiations as “the most transparent trade talks ever conducted by the EU.” In 2015, a self-organized European Citizens Initiative against TTIP acquired over 3.2 million signatures within a year; one of its promoters was the then EP president Martin Schulz.
A large part of the European media criticized the deal. For instance, The Independent described it as a “reduction of the regulatory barriers to trade for big business, things like food safety law, environmental legislation, banking regulations, and the sovereign powers of individual nations.” On May 2nd of 2016, Greenpeace Netherlands published part of the negotiated drafts “to provide much needed transparency and trigger an informed debate on the treaty” followed by a series of petitions.
A vast activism awoke the attention of public opinion and academic research on the TTIP; German people alone were responsible for more than one third of the global Google searches for ISDS and in 2014-2015 more than 1500 scientific publications were issued on the TTIP. As Leif Johan Eliasson of the East Stroudsburg University asserted: “civil society groups have both shaped public opinion and influenced the trajectory in TTIP… TTIP has generated unprecedented attention, and the Commission’s communication has been largely unsuccessful in countering the perception that TTIP will benefit big business but not average citizens… the major reason of the failure of the TTIP was the extensive and professionally structured public mobilization campaign conducted by European civil society organizations. This shifted public opinion across Europe, which in turn impacted policy.”
The consequences according to the Schelling Conjecture
As Thomas Schelling notes in The Strategy of Conflict, having one’s hands tied internally can be useful for extracting concessions externally. For instance, inflexible negotiating instructions by the EP and a deep involvement of the civil society highly visible to the opposite party can confer strength in negotiations. The power of a negotiator often rests on a manifest inability to make concessions and to meet demands. U.S. negotiators have often employed this tactic, obtaining bargaining leverage by reminding their opponents of the likelihood that Congress will reject the agreement being negotiated. When the negotiating opponent knows that the EU Parliament and European civil society are mobilizing, the Commission can use its institutional constraints as an excuse for not coming up with sufficient concessions. Schelling’s intuition states that the constraints imposed by domestic institutions could prove a bargaining asset in international negotiations, but on the other hand, if new conservative actors are added to the game, the effect of restricting the international “winset” decreases the likelihood that an agreement will be reached.
Below are two examples:
The failure of the TTIP
Is the failure of the TTIP a result of the empowerment of the European Parliament and the activism of civil society?
As stated by the former trade commissioner Karel De Gucht: “with the TTIP and the deep involvement of the EP and civil society, trade has become much more political rather than just an economic issue.” This significantly enlarges the number of actors to be convinced in order to change the status quo, especially since players such as the civil society are composed by interest groups that typically are more conservative than the Commission and the Consilium.
TTIP negotiations showed that the Commission somehow must take into consideration the will of the Parliament and civil society. The EP indeed is formally a veto player and civil society, despite it not being a unitary body, can be considered a de facto veto player because it seems unlikely that the commission would conclude a negotiation against public opinion. Applying the George Tsebelis theory of the veto players and considering that, in most of the cases, the EP and civil society are more conservative compared to the Commission, the need for their approval reduces the winset of possible bargaining solutions for the Commission itself. In other words, the status quo becomes more difficult to reform and therefore the trade negotiations are more likely to fail, as happened with the TTIP.
As US Ambassador to the EU, Mr. Gardner, recognized: “The deal will not collapse because of differences in standards or regulations, but rather from the perception that there is not enough upside for key constituencies.” Not macroeconomic data or models but politics will determine the fate of the TTIP.
The Comprehensive Economic and Trade Agreement with Canada
CETA is a free trade and economic cooperation agreement between the EU and Canada for which negotiations, started in 2009, ended positively in 2014. The ambitious treaty not only will eliminate the 98% of duties between the two economies but will harmonize the regulations, removing a great part of the non-tariff barriers. A common dispute settlement mechanism will be instituted together with the equiparation of the legislatures on intellectual property rights. Justin Trudeau, prime minister of Canada, travelled to Brussels on 30 October 2016 to sign on behalf of Canada. The European Parliament approved the deal on 15 February 2017. While the agreement is subject to ratification by the national parliaments, it has been provisionally applied.
Europe obtained great concessions from the negotiation: the ISDS mechanism has been reformed with more transparency and the tutelage for the legislations, eventually against the interests of the foreign investor, that protect public interests (such as the food security and the social protection). Canada conceded the conformity of its intellectual property rights legislation also recognizing the rules of origin for 179 products (from Italian cheeses to Greek olives) protecting them from imitations. Canada also accepted European regulation on the protection of consumers and the environment; the EU borders restrictions on the import of GMOs and other chemical-treated food products were maintained (therefore the much-debated meat with hormones will not enter the European market).
Between 2013 and 2014, when public awareness over the TTIP and CETA negotiations increased in Europe, the original draft of CETA was deeply reviewed with adjustments introduced in a phase of legal revision that usually does not bring heavy modifications. The ISDS mechanism in particular was completely reformed in accordance with the European requests. This could be a demonstration of how internal conservative institutions and civil society opposition can in some way give the EU a credible threat of leaving the talks.
While a great part of Canada exports in Europe are commodities (mainly cereals and oil derivatives) which already had low duties thanks to WTO multilateral agreements, EU exports to Canada are largely composed of manufactured products with high value-added, industries that were strongly protected before the deal. On September 2018, the commissioner for trade Cecilia Malmström said: “I’m pleased with the progress made so far. The preliminary data shows there is plenty to celebrate, even at this stage. Exports are up overall, and many sectors have seen impressive increases. This is great news for European businesses, big and small.”
One year from the provisional entry into force of CETA, European exports to Canada increased from 37.7 to 41.4 billion € (+10%) driven by agri-food products while imports from Canada remained substantially unchanged thanks to the strict standard on glyphosate-treated wheat and meat with hormones. The EU balance of trade after CETA touched its highest historical point in favor of the EU with 10.4 billion euros of net exports.
Apparently CETA was good business for the EU thanks to the concessions from Ottawa. At least a part of the bargaining power of the Commission might have originated in the increasing involvement of European Parliament and civil society.
Europe now must face new challenges in the international trade arena: the emergence of developing countries like India, Brazil, and Nigeria characterized by cheap labor forces that guarantee a higher degree of competitiveness. The neo-protectionism of the American administration which can be a credible threat because the U.S. can count on a large and rich internal market; a threat that can be used to squeeze better bargaining conditions. But above all, the threat/opportunity of the growing commercial power of China.
Trade is a critical issue over the next decades for the EU, not only for economic reasons, but also because the real political ambition of Brussels goes beyond the protection of its citizens. The strategic long-run objective is to export its standards through bilateral and regional trade agreements.