TUC Briefings on TTIP and CETA

3 September 2015

The TUC has released briefings on both the TTIP and CETA trade agreements. They are reproduced here.

TTIP Briefing

Introduction

The Transatlantic Trade and Investment Partnership (TTIP) between the EU and USA has been in negotiation for two years. While negotiators on both sides spoke hopefully of concluding talks quickly, it looks likely that talks will continue into 2016 and beyond as the US election adds delays.

Much of the content of TTIP has yet to be discussed. TTIP will be affected by the final shape of the EU-Canada trade agreement (CETA), as this is being used as a template for negotiations, but the content of this agreement is also in flux. CETA was finalised in 2013 but has yet to be ratified by the European or national parliaments. It may come before the European Parliament as early as the first half of 2016.

TUC key concerns with TTIP

On 10 September 2014, TUC Congress passed a composite motion which stated that ‘while there may be economic benefits in reducing trade tariffs and reviewing regulation for certain industrial sectors, Congress believes that the primary purpose of TTIP is to extend corporate investor rights’ and thus adopted a position of ‘outright opposition’ to TTIP.

1. Investor-State Dispute Settlement

The TUC believes Investor State Dispute Settlement (ISDS) is unacceptable in TTIP and any trade deal as it gives foreign investors the right to a special international court system to sue countries for compensation if they believe a policy would endanger their future profits. ISDS has been used on numerous occasions to overturn legitimate public policy and has had a ‘chilling effect’ on the introduction of new policies. This was the case in New Zealand where the government dropped plans to introduce plain packaging for cigarettes due to fears of litigation after Philip Morris sued Australia for similar legislation through the ISDS clause in the Hong Kong-Australia Bilateral Investment Treaty.

The provisions on Investor-State Dispute Settlement (ISDS) will be discussed at the next negotiating round in October. The EU trade Commissioner stated in July that these discussions would advance the proposals she announced in March for a slightly reformed version of ISDS. The TUC is opposed to this reformed version of ISDS as we are opposed to all forms of special courts for foreign investors in trade agreements as they provide a privileged route for investors to seek compensation from governments if they believe a policy would endanger their future profits.

Criticism of the ISDS provisions in CETA by the German, French and Greek governments as well as the Socialists and Democrats group in the European Parliament, among others, raises the possibility that the Investment chapter of CETA, and perhaps other parts of the deal, will be reopened for negotiation in the near future.

2. Public services

TTIP poses a threat to the National Health Service and the public sector that may be opened up to the privatisation through the ‘negative list’ approaches to service commitments taken in the deal. This approach means that all services are open to further privatisation unless they are explicitly exempted. In September 2014 the UK government confirmed that it has requested no explicit exemption for the NHS or public services in TTIP. This would mean that the privatisation in services such as health and education that have already been part-privatised would be locked in, preventing future governments from being able to bring these services back into public ownership. Furthermore ISDS would mean that foreign investors, such as US health companies, would have the power to sue the UK government for renationalising parts of the public service, leading to a ‘chilling effect’ on public policy. This is supported by an LSE study commissioned by the government which concluded that there were little or no economic benefits and high political costs of including ISDS in TTIP.

3. Jobs and wages

Some of the tariff reductions proposed in TTIP could be good news for British exporters, such as the chemicals and automotive industries – and even textiles, Scotch Whisky and farming. But instead of seeking an agreement with those limited but uncontentious objectives, politicians and business on both sides of the Atlantic have over-reached, seeking to sweep away ’non tariff barriers’ that contain a range of health and safety, environmental and consumer protections. The TUC is unconvinced by studies produced by the UK government and EU Commission promising job gains and growth, particularly as other studies produced using different modelling suggest potential job losses and wage depreciation. We believe negotiators, governments and businesses need to engage with trade unions on the potential outcomes for different sectors. The European Commission must make clear how funds would be provided through the Globalisation Adjustment Fund to areas losing jobs or income due to TTIP.

4. Labour standards

The TUC is concerned that TTIP may lead to a lowering of labour standards as the US refuses to ratify core ILO conventions, including those on freedom of association and collective bargaining and operates anti-union “right to work” policies in half of its states. We are concerned that labour chapters in EU trade agreements to date (such as in the EU-Korea FTA and CETA) have not contained enforceable language such as sanctions for violations of labour standards and that workers would therefore not have a route through TTIP to enforce their rights.

5. Transparency and openness

Only two trade unionists (ETUC and IndustriALL representatives on the EU’s Advisory group on TTIP) have access to the negotiating texts- and this is in a locked Reading Room where copies cannot be made. We understand the need to keep certain aspects of negotiating strategies confidential but the TUC believes a more open approach is needed overall, based on the following key principles:

• whatever the negotiators show to employers, they should show to trade unionists;
• whatever the EU negotiators have given to the US negotiators, they should share with the people they allegedly represent; and
• the EU should operate on the assumption that documents should be public, unless there is a good reason to keep them secret – rather than the other way round.

6. European Parliament report on TTIP

On July 2 the European Parliament adopted a report on TTIP which contained a number of positive proposals, calling on the Commission to:

• ensure that there is ratification, implementation and enforcement of the eight fundamental International Labour Organisation (ILO) conventions and the ILO’s Decent Work Agenda – and that labour and environmental standards are included in other areas of the agreement such as investment, trade in services, regulatory cooperation and public procurement;
• include rules on corporate social responsibility based on OECD Guidelines for Multinational Enterprises and clearly structured dialogue with civil society;
• ensure that national and local authorities retain the full right to introduce, adopt, maintain or repeal any measures with regards to the commissioning, organisation, funding and provision of public services irrespective of how the services are provided and funded;
• a “positive list” for market access whereby services that are to be opened up to foreign companies are explicitly mentioned and new services are excluded – this would allow governments to retain policy space for services not explicitly included in negotiations.

However, the TUC did not support the report’s conclusions on Investor-State Dispute Settlement which stated the Commission should:

‘…replace the ISDS-system with a new system for resolving disputes between investors and states which is subject to democratic principles and scrutiny where potential cases are treated in a transparent manner by publicly appointed, independent professional judges in public hearings and which includes an appellate mechanism, where consistency of judicial decisions is ensured, the jurisdiction of courts of the EU and of the Member States is respected and where private interests cannot undermine public policy objectives.’

As stated above, although this criticism of the traditional version of ISDS may be useful for encouraging the Commission to reopen the investment chapter of CETA, the TUC does not support the proposal that a modified version of ISDS would be preferable to the traditional ISDS found in CETA. We are opposed in principle to foreign investors having a special court system to sue for compensation if they claim their rights have been violated – no equivalent exists for consumers, workers or domestic investors. The TUC believes there should be no ISDS or any variation of ISDS in CETA, TTIP or any trade agreement.

CETA Briefing

Introduction

On 8 August 2014 it was announced that Canada and the EU had ‘finalised’ the text on the EU-Canada Comprehensive Economic and Trade Agreement (CETA) and the text published online, first as a leaked document and then on the European Commission website.

On the basis of concerns raised by this text, on 4 September 2014 the TUC’s General Council adopted a position of outright opposition to CETA. This is in line with the Canadian Labour Congress (CLC) and the European Trade Union Confederation (ETUC)³ who are also opposed to the deal.

CETA will come to the European Parliament for ratification sooner than the Transatlantic Trade and Investment Partnership (TTIP)potentially early 2016 although it needs first to be translated into all the EU languages and reviewed by legal teams. Secondly, the European Commission is still awaiting the outcome of its request to the European Court of Justice to establish which provisions of the EU Free Trade Agreement with Singapore fall within the EU’s competence and which remain in the Member States’ remit.This is likely to clarify whether the provisions in CETA are an exclusive EU competence – and thus only need to be voted through by the European Parliament – or are ‘mixed’ and so would need to be approved both by MEPs and member states’ parliaments (however, the assumption everyone is working on is that national parliament votes will be needed.)

CETA will also have to be ratified by the ten Canadian provincial legislatures. There is pressure for Canada to ratify the agreement before its general election in October – which the current government is expected to lose – but this seems unlikely.

The TUC is calling on MPs to oppose the ratification of CETA if it does come to national parliaments and will be calling on MEPs to vote against the agreement as well.

TUC key concerns with CETA

1. Public services

CETA takes a ‘negative list’ approach to the listing of services in the Investment chapter which means that only specific listed services will be safeguarded from further liberalisation. There is a very narrow range of services listed which would not cover much of our part-privatised services such as health, education, transport etc. This opens the door for Canadian investors to make inroads into European public services.

2.Investor State Dispute Settlement (ISDS)

Canadian investors will be able to challenge public policy through an unaccountable closed court system that Investor State Dispute Settlement (ISDS) provisions in the deal will establish. ISDS has been used numerous times by investors to challenge public policy decisions by suing for compensation, imposing legal costs as well as any settlement. Slovakia, for example, was sued through ISDS under its bilateral trade deal with the Netherlands when it renationalised its health service. It had to pay $22 billion dollars in compensation to the Dutch insurance company Achmea. The TUC outlined in detail its opposition to the inclusion of ISDS in trade deals in its submission to the European Commission’s consultation on the Investment chapter of TTIP.

US investors will also be able to use ISDS in CETA to sue the UK government for bringing public services back in-house. This is a real threat as 80% of US companies operating in the EU also have bases in Canada.

3. State sovereignty

CETA will include a ‘ratchet clause’ which prevents governments reversing certain liberalisation commitments made in the deal. CETA gives investors – either directly through ISDS or indirectly through a state-to-state dispute they could pressure governments to trigger – wide-ranging powers to challenge government actions. This is due to CETA’s broad definitions of what counts as a breach of ‘fair and equitable treatment’ and ‘indirect expropriation’. International trade lawyers will be able to use such wording as grounds for cases against the government for any policies that threaten company’s future profits – allowing them to challenge decisions to bring public services back in-house and other public policies affecting public services.

4. Labour standards

While CETA commits the EU and Canada to uphold core ILO standards, there are no sanctions if labour rights are violated. Instead, trade unions will only be able to raise concern through advisory groups similar to those established in the EU-Korea and EU-Colombia/Peru free trade agreements, which might lead to reports from experts – in contrast with the multi-million dollar compensation available to foreign investors. The labour rights sections of other trade agreements have so far proved ineffective. In Korea, the government was merely issued with a letter of concern by the EU in January 2014 when police raided the headquarters of one of the national trade union centres.

Parliamentary opposition

The Socialists and Democrats in the European Parliament, while stating that ultimately they reserve their judgement on CETA until the final text comes before the European Parliament, have recently adopted a position paper which raises concerns with ISDS in CETA and other trade agreements. The paper states that any investor protection measures in these agreements must guarantee public services and public policy making.

Opposition to ISDS in CETA has been raised by France and Germany, and the Syriza government in Greece has said it would vote against CETA should it come to national parliaments.

Members of the European Parliament in July adopted a report on TTIP which called on the Commission to decisively reject the traditional version of ISDS currently contained in CETA. It stated the Commission should;

‘…replace the ISDS-system with a new system for resolving disputes between investors and states which is subject to democratic principles and scrutiny where potential cases are treated in a transparent manner by publicly appointed, independent professional judges in public hearings and which includes an appellate mechanism, where consistency of judicial decisions is ensured, the jurisdiction of courts of the EU and of the Member States is respected and where private interests cannot undermine public policy objectives.’

Gianni Pittella, President of the Socialists & Democrats group in the European Parliament commented in July that this means:

‘ISDS is dead. It must be replaced by a new public and transparent system of investment protection, in which private interests cannot undermine public policy and which is subject to public law. For us, a new system means publicly appointed judges. No to private arbitrators. Yes to full transparency during the court cases. Yes to an appellate mechanism. These are the conditions for a new system. If these conditions are not met, it’s not good enough for us.’

He went on to state that the Socialist and Democrats would ‘fight for a review’ of the ISDS provisions in CETA so that they can be amended.

The TUC does not support the report’s proposal that a modified version of ISDS would be preferable to the traditional ISDS found in CETA, however. We are opposed in principle to foreign investors having a special court system to sue for compensation if they claim their rights have been violated – no equivalent exists for consumers, workers or domestic investors. The TUC believes there should be no ISDS or modified variation of ISDS in CETA, TTIP or any trade agreement.

The TUC supported the amendment tabled by Labour MEP Judith Kirton-Darling for report which called for ISDS to be removed from TTIP entirely; unfortunately this amendment was not voted through.

The report also called for enforcement of labour standards and a broad carve-out for public services in TTIP. Unions are calling on the Commission to apply these standards also to CETA, as well.

Originally published on the TUC website..