Despite the new wave of neo-mercantilist trade policies induced by the Trump administration; the great majority of the economic analysts continue to consider international trade as one of the main engines of the global economic growth. In particular, the European economy depends largely on raw materials and food imports and it has to finance them through industrial and services exports. That’s why Europe is still the largest trade power in the world. The negotiation of the international bilateral and multilateral trade deals is, by law, an exclusive competence of the European Commission. However, in the last years, new limitations and boundaries upon the Commission’s activity changed the European Union negotiation outcomes in the international trade arena. Two emerging actors must be taken into consideration. In this regard, a brief analysis of the increasing role of the European Parliament and the emerging activism of the civil society is presented below, with particular attention on the TTIP negotiation as it could represent a turning point of the EU debate on trade. This institutional development has changed the approach of the Commission during the negotiation, having as the ultimate consequence an increase of the bargaining power of the EU.
The increasing role of the European Parliament from the 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 expect that the commission will pursue a deal that is not far from the provisions that the EU Parliament has given during the negotiations. Furthermore, many informal practices have developed to supplement these formal competences including writing resolutions and exchange of technical expertise to participate in discussions of negotiation.
The turning point for the Parliament’s attitude: The assembly pressure 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 reducing the already low duties, but also cutting down the non-tariff barriers to trade and conforming the rules and standards of several sectors. A treaty that would go far beyond the existing rules of the WTO, especially regarding the trade of services, the intellectual propriety rights (ex. the rules of origin) and the tutelage of the international investments. The deal could represent the biggest free trade agreement in the history, covering 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 the economic growth creating 1,8 million new jobs and increasing average household income of 500€ 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 the responsibility of ensuring that the talks on TTIP are transparent and that the final outcome is a “good deal. 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), the rules of origin and the protection of the workers and the environment.
From the beginning of the negotiations the Parliament started an internal conflict with the other institutions to have more influence. As a result of this pressure, the European Commission introduced a “transparency initiative”, during the TTIP talks, which made an unprecedented number of documents available to the public. The EP has been closely following the negotiations involving many committees and it often questioned the assumptions of the Commission presenting alternative studies. After less than two years from the beginning of the negotiations MEPs presented 116 amendments to the Parliament’s draft recommendation on TTIP as a demonstration of the high activism of the EP, leaving the Commission without political and ‘’democratic’’ support.
After 15 rounds (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 the European standards and the Union’s tutelages on the altar of the international trade.
A new player: the emerging activism of the civil society during the TTIP negotiations
While, before the TTIP, the trade deals remained confined to technicians and out from the public debate; during the talks with the U.S., 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. In 2015 a self-organised European Citizens Initiative against TTIP acquired over 3.2 million signatures within a year and one of the promoters was the then-EP president Martin Schulz.
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 and manifestations.
As Leif Johan Eliasson of the East Stroudsburg University asserted: “civil society groups have both shaped public opinion and influenced the trajectory in TTIP […] the major reason of the failure of the TTIP was the extensive and professionally structured public mobilisation campaign conducted by European civil society organisations. This shifted public opinion across Europe, which in turn impacted policy’’.
Game-theoretic consequences of the new institutional equilibrium
As Thomas Schelling notes in The Strategy of Conflict; during a negotiation, having one’s hands tied internally can be useful for extracting concessions externally (the so-called Schelling conjecture). 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 the European civil society are mobilizing, the Commission can use its institutional constraints as a valid and credible reason for not coming up with enough concessions. Schelling’s intuition states that the constraints imposed by domestic institutions could prove a bargaining asset in international negotiations but on the other side, if new conservative actors are added to the game, the effect of restricting the concessions decreases the likelihood that an agreement will be reached. Below two examples of this intuition.
1. Consequence: the failure of the TTIP
The failure of the TTIP is a result of the empowerment of the European Parliament and the activism of the civil society.
As the former trade commissioner Karel De Gucht said: “with the TTIP and the deep involvement of the EP and the civil society, trade has become much more political rather than just an economic issue’’. This enlarges significantly 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.
The TTIP negotiations showed that the Commission somehow must take into consideration the will of the Parliament and the civil society. The EP indeed is formally a veto player and the civil society, despite it’s not a unitary body, can be considered a de facto veto player because it seems unlikely that the commission would conclude a negotiation against the public opinion. Considering that in most of the cases the EP and the civil society are more conservative than the Commission; the need of their approval reduces the set of possible outcomes for the Commission. In other terms, the status quo becomes more difficult to reform and therefore the trade negotiations are more likely to fail, as it happened with the TTIP.
Not macroeconomic data or models but politics will determine the fate of TTIP.
2. Effect: CETA is EU’s “most ambitious trade agreement ever concluded”
The Comprehensive Economic and Trade Agreement with Canada is a free trade and economic cooperation agreement between the EU and Canada 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 it will harmonize the regulation removing a great part of the non-tariff barriers. A common dispute settlement mechanism will be instituted together with the equating of the legislatures on intellectual property rights. While the agreement is subject to ratification by the national Parliaments, it has been provisionally applied.
Europe obtained from the negotiation great concessions: the ISDS mechanism has been reformed with more transparency and the tutelage for the legislations that protect public interests, such as the food security standards and the social protection. Canada conceded the conformity of its intellectual property rights legislation also recognizing and protecting from imitations to 179 products the rules of origin (from the Italian cheese Grana Padano to the Greek olives Kalamatas). Canada accepted the 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 are maintained.
Between 2013 and 2014 when the public awareness on the TTIP and CETA negotiations increased in Europe, the original draft of CETA was deeply reviewed with adjustments in accordance with the European requests. This could be a demonstration of how internal conservative institutions and civil society opposition can give to the EU the credible threat of leaving the talks.
After 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 the agri-food products while the imports from Canada remained substantially unchanged thanks to the strict standard on glyphosate treated wheat and meat with hormones. EU balance of trade after CETA touched its highest historical point in favour of the EU with 10,4 billion € of net exports.
Europe faces new challenges in international trade like the emergence of developing countries and demographic powers like India and Brazil, the neo-protectionism threat of the American administration and challenge from an assertive China. With the increasing role of the Parliament and the civil society, the Commission can gain a fundamental bargaining asset. Indeed, real political ambition of Brussels goes beyond a mere economic gain, the strategic long-term objective is to export European standards through bilateral and regional trade agreements.
Image credit: Amio Cajander. This file is licensed under the Creative Commons Attribution Share-Alike 2.0 [Via Wikimedia Commons]
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of The Geopolitics.
The author completed the Master of Science program in Economics and Political Science at the University of Milan. He worked as a project-employee for the Crime Against Children division at the INTERPOL General Secretariat in Lyon. His main academic interests include Political Economics, Global Governance and International Trade.