Is TTIP a `normal` Trade Agreement?

Is TTIP a ‘normal’ Trade Agreement?
Institutional Requirements of 2nd Generation Market
Integration
‘Why TTIP?’ Workshop
Amsterdam, February 17, 2015
‪http://goo.gl/JpxQVc
David Kleimann
European University Institute
Department of Law
Email: [email protected]
Twitter: @davidkleimann
Web: http://goo.gl/rYXdBf
Is TTIP a ‘normal’ trade agreement?
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Public debate suggests:
TTIP is a very ‘extraordinary’ trade agreement, with an
‘extraordinary’ impact on domestic legal systems, consumers,
businesses, and other stakeholders
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Argument in this presentation:
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TTIP is a ‘normal’ 2nd generation trade accord in terms of its
comprehensive policy area coverage
follows the logic of progressive market integration over time
but breaks new ground in its institutional architecture to address
2nd generation trade challenges
Structure of Presentation
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What is a ‘normal’ trade agreement?
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What are the technical, institutional and political challenges
that modern trade accords must address to be effective?
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How can these challenges be addressed through the
institutional dimension of modern trade accords - and TTIP
specifically?
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What will the institutional/management structure of regulatory
cooperation under TTIP look like?
What is a ‘normal’ trade agreement?
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Common basic objective: Level the playing field for investors and
foreign competition in goods, services, and government
procurement markets to generate economic welfare benefits from
enhanced competition
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However, border and behind the border integration instruments/
mechanisms require very different government interventions and
rule design
What is a ‘normal’ trade agreement?
Two ‘types’ – Two generations
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1st generation ‘Vintage’ agreements
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Setting: De jure integration precedes de facto economic
integration: low levels of trade interdependence
Objective: Unleash untapped trade potential between
economies
Instruments: Dismantle traditional border protection (tariffs;
import quotas) and establish general rules of non-discrimination
for trade and investments
Institutional dimension: static
What is a ‘normal’ trade agreement?
Two Types – Two Generations
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2nd generation trade agreements
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Setting: De jure market integration follows already high levels of
sophisticated de facto economic integration: high levels of trade
interdependence (cross-country production networks; intra-industry
trade; raw materials; intermediate inputs; consumer end products; high
servicification of industries)
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Objectives: Decrease the transaction costs associated with crossborder trade along existing value chains and legally secure existing
trade and investments abroad
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Instruments: eliminate regulatory and enforcement redundancy for
goods and services (harmonisation; MRAs; equivalence; customs
procedures) and agree on minimum common standards for IPR and
investment protection, and competition laws.
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Institutional dimension: ideally dynamic
The 2nd Generation Trade Agenda:
The new ‘normal’
The new ‘Normal’ :
WTO-plus provisions in 2nd generation PTAs
WORLD TRADE REPORT 2011
Figure D.7: Number of agreements covering WTO+ provisions
100
90
80
Number of PTAs
70
60
50
40
30
20
10
Source: WTO Secretariat.
Figure D.8: Number of agreements covering WTO-X provisions
TRIMS
STEs
SPS
State aid
TRIPS
Legally enforceable
Public procurement
Sector covered
GATS
TBT
Export tax
CVM
AD
Customs
Agricultural tariffs
Industrial tariffs
0
Source: WTO Secretariat.
Competition policy
IPR
Investment
Movement of capital
Environmental laws
Agriculture
Research and technology
Regional cooperation
Education and training
Energy
Labour market regulation
Industrial cooperation
Visa and asylum
Cultural cooperation
Social matters
Financial assistance
Consumer protection
Information society
SME
Approximation of legislation
Statistics
Human rights
Political dialogue
Economic policy dialogue
Illicit drugs
Money laundering
Anti-corruption
Data protection
Audiovisual
Illegal immigration
Mining
Taxation
Health
Public administration
Terrorism
Nuclear safety
Innovation policies
Civil protection
Number of PTAs
Source: WTO Secretariat.
Industrial
Sector covered
Legally enforceable
Sector covered
T
Public procur
Sta
Exp
Cu
Agricultural
The new ‘Normal’:
WTO-extra provisions in 2nd generation PTAs
Figure D.8: Number of agreements covering WTO-X provisions
100
90
60
50
40
30
20
Legally enforceable
10
0
The EU External Trade Agenda
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Reduce market access barriers for EU goods, services, and
investment in the largest economies and key growth markets around
the world, including
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Enhance efficiency of global supply chains and production networks
through binding legal disciplines that lower trade / transaction costs
costs and secure investments abroad
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customs simplification and harmonization
SPS and TBT convergence (Mutual recognition; equivalence; and harmonization in
priority sectors)
public procurement markets at all levels of governance;
TRIPS+ IPR protection
Investment Protection
Competition Rules (including on SOEs)
Take ‘avantgarde’ position in regional and global trade rule design
Key EU non-economic interests:
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Policy Transparency
Sustainable Development (environmental standards and labor rights)
Essential elements (human rights)
Governance of 2nd Generation Market Integration
Policy Specific Challenges
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Complexity of ‘behind the border’ integration can render broad
or specific ex ante policy prescriptions impractical / impossible
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Uncertainty / imperfect information about…
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the regulatory areas where national policy preferences converge
across borders, now and in the future
the economic and social impact of adapting new approaches to
sectoral regulation and enforcement
the trade obstacles that a harmonized policy is supposed to remove
the impact of sectoral technological change on regulatory
requirements over time
Changing political economy: little mercantilistic reciprocity – how
to incentivize relatively autonomous and self-interested regulators
for continuous cross-border cooperation and progress?
Governance of 2nd Generation Market Integration
Country Specific Challenges
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Weak Institutions
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Economic / business environment
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Inadequate or non-existent administrative structures;
Limited, poorly trained, poorly paid, or corrupt personnel;
Outdated management and inter-institutional cooperation
mechanisms;
Limited access to information technology;
Insufficient available resources for capacity building
E.g. oligopolistic competitive structure of the economy;
Lack of capacity of businesses to respond to regulatory reform.
Political Environment
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Domestic political economy dynamics; beneficiaries of status quo
Governance 2nd Generation Market Integration
Changing Institutional Requirements
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Little success of many 2nd generation agreements due to
inappropriate PTA institutional architecture and mandate
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Understand and design 2nd generation trade pacts as incomplete
contracts and living agreements that produce joint policy solutions
over time
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Need for a dynamic and continuous management of built-in
integration agendas through a solid bilateral institutional
infrastructure
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“Experimentalist Governance” & “Knowledge Platforms”:
address imperfect information problems, uncertainty, and regulatory
incentives in bilateral economic governance
Institutional Architecture of 2nd Generation Market
Integration
Establish bilateral fora and/or joint institutions that…
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create technical dialogues and consultations among
regulators and stakeholders of the partner countries on
existing and future regulation and standard setting
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frequently update available information on existing and
potential best policy solutions, reform progress and obstacles
thereto;
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draft joint action plans and strategies for domestic
implementation;
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respond to progress and obstacles on through complementary
rule-making, (re) definition of policy priorities, customized
resource dedication, and the design capacity building programs;
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settle bilateral disputes informally where they occur.
2nd Generation Market Integration
Challenges related to Democratic Accountability
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De jure regulatory convergence requires de facto convergence or
similarity of regulatory systems to some degree
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Regulations, standards & enforcement reflect distinct societal
choices expressed through the channels of democratic multi-level
governance systems
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Mandate regulatory convergence only where…
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political preferences and regulatory objectives are similar or equivalent
enforcement instruments are similarly effective
administrative and commercial efficiency gains of convergence are
sizable
Commission Proposal for TTIP Regulatory
Cooperation Body (02/2015)
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Composed of senior regulators of both parties (Art. 16)
Scope: central and (member) state regulation (Art. 3)
Prepare regulatory cooperation initiatives (Harmonisation, MRAs,
equivalence, dialogues, ) put proposed by the parties (Art. 14 (2) (b))
Prepare Annual Regulatory Cooperation Programme (Art. 14 (2)
(a))
Create Sectoral Working Groups (reflecting sectoral Annexes)
(Art.14 (4))
Proposals for the modification, update, and addition of sectoral
provisions (Art.14 (2) (c))
“Early warning” mechanism for planned legislation at central level
(Art. 5)
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Right to comment (Art. 6)
Impact assessments (Art. 7)
Exchange of information on policy analysis methods (Art.7 (3) (b))
Questions On TTIP Regulatory Cooperation
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What will the parties’ delegations to the RCB be composed?
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What will the substantive content of ‘Annual Regulatory
Cooperation Programme’ look like? Who sets the agenda? How
are cooperation initiatives funded?
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Decision-making procedure applicable to modification, update,
and addition of sectoral provisions?
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What EU legislative procedures apply to ratification of future
amendments? How will democratic control be ensured?
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In what way is the new institutional structure different from
existing regulatory dialogues? Will it increase incentives for
parties to achieve what has not been achieved in decades, and
how?
References
Chauffour, J-P. & D. Kleimann (2013): The Challenge of Implementing Preferential Trade Agreements in
Developing Countries, in: Kleimann, David (ed): “EU Preferential Trade Agreements – Commerce, Foreign
Policy, and Development Aspects”, EUI ebook, Robert Schuman Centre for Advanced Studies, Global
Governance Programme, Florence.
European Commission (2015): Textual Proposal on ‘Regulatory Cooperation’ in TTIP, Brussels, 10 February
2015.
Gerstetter, C. (2014): Regulatory Cooperation under TTIP – A Risk for Democracy and National Regulation?
Heinrich Boell Foundation TTIP Series, Ecologic Institute, Berlin.
Hoekman, B. (2014): Trade Agreements and International Regulatory Cooperation in a Supply Chain World,
EUI Global Governance Working Paper, Florence.
Kleimann, D. (2013): ‘Global Europe’ – Quo Vadis?, in: Kleimann, David (ed): “EU Preferential Trade
Agreements – Commerce, Foreign Policy, and Development Aspects”, EUI ebook, Robert Schuman Centre for
Advanced Studies, Global Governance Programme, Florence, 2013.
Messerlin, P. (2013): The Domestic Political Economy of Preferential Trade Agreements, in: Kleimann, David
(ed): “EU Preferential Trade Agreements – Commerce, Foreign Policy, and Development Aspects”, EUI ebook,
Robert Schuman Centre for Advanced Studies, Global Governance Programme, Florence.
Sabel, C. and J. Zeitlin (2012) “Experimentalist Governance,” in D. Levi-Faur (ed.), The Oxford Handbook of
Governance. Oxford: Oxford University Press.
Steger, Debra (2012): Institutions for Regulatory Cooperation in ‘New Generation’ Economic and Trade
Agreements, (38) 4 Legal Issues of Economic Integration (109), Kluwer Law International.
WTO (2011): The WTO and Preferential Trade Agreements – From Coexistence to Coherence, World Trade
Report 2011, Geneva.
Thank you!