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EU-US Free Trade Deal Chances of Survival Closing

Posted on August 1st, 2016 by in Chemical R&D

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The Transatlantic Trade and Investment Partnership (TTIP), the proposed free trade deal between the EU and US, is at risk of failure as the support of key German groups might be pulled.  This withdrawal would be in-line with German public opinion for the TTIP as indicated by a study published by consultancy firm Bertelsmann, in which nearly 50% of the public thought he trade deal would have negative impact on consumer protection standards in the EU.  Though the decision is ultimately made by the European Parliament, it is doubtful that they will ratify the trade deal without the support of key German social and trade groups.

By Jonathan Lopez

The controversial free trade deal between the EU and the US might suffer its final blow in coming weeks as the German social democrats – SPD, coalition partners in Angela Merkel’s government – are reportedly considering withdrawing their support for the agreement.

The chief economist at the German chemical trade group, Henrik Meincke, has said in effect the “window of opportunity is closing” to finalise negotiations on the Transatlantic Trade and Investment Partnership (TTIP).

When negotiations started three years ago, most German political parties, as well as trade unions, and the public opinion were supportive of the free trade deal between the US and the EU. And together with them, the other 27 EU national governments.

However, the mood has changed over the course of the secret negotiations. Moreover, the European Commission – the EU’s executive body, in charge of negotiating trade deals for the whole bloc – intends to sign a “new generation” free trade deal, which goes beyond trade barriers and has increased scepticism about the final TTIP text.

“I actually haven’t spoken to the SPD but some of its leaders have said so [TTIP support withdrawal] and I have read it on the newspapers. What we can observe is that the window of opportunity to have TTIP is closing,” said the chief economist at Germany’s chemical trade group VCI, Henrik Meincke.

“There are a lot of arguments out there. The TTIP debate has become a bit like the Brexit vote, where in the end people voted having a lot of things in mind, and not only for remain or leave [the EU]. It is a very broad mix of scepticism but what people do not like is that their opinion might not be counting in the negotiations.”

The SPD did not respond to requests for comment at the time of writing.

Although a common practice when negotiating free trade deals, political parties in the European left, as well as trade unions and NGOs, have stepped up their criticism to the European Commission for holding secret negotiations on TTIP, with the Dutch arm of an environmentalist group even leaking US negotiating positions on 1 May.

The leak caused an angry response from Germany’s VCI the following day, although some point to Greenpeace’s action as the tipping point when German public opinion shifted towards opposing the deal.

Nevertheless, Germany’s general positive opinion for TTIP was already in trouble even before that. In late April, German consultancy Bertelsmann published a survey showing almost half of the German public were concerned about negative consequences for consumer protection standards if the free trade deal came into force.

“Only 12% believe that the agreement could have a positive impact on consumer protection [and] 26% anticipate positive consequences for economic growth [but] 27% of those surveyed feel they will be negative,” said Bertelsmann.

Certainly, within two and a half months the whole debate has changed.

“Some [German citizens] are sceptical about globalisation, others about the US or the EU administration, and others say TTIP will mean we’ll have in the EU GMOs [genetically modified organisms, widely used in the US but forbidden in most of the EU]. Not everybody is an economist and people might not understand we [Germans] are the beneficiaries of free trade,” said VCI’s Meincke.

The EU-wide chemical trade group, the European Chemical Industry Council (Cefic), which has been a full supporter of TTIP, is still optimistic about the prospects of TIP. Cefic’s support has caused some chemical players to say the trade group is representing the interests of major companies who, they said, would be the clear beneficiaries of free trade while small- and medium-size (SMEs) companies would be negatively affected.

Cefic’s executive director for industrial policy, Rene van Sloten, conceded however the timeframe intended to conclude negotiations – January 2017, before US President Barack Obama leaves office – might need to be extended as the two parties have still sharp differences on how to approach key issues like the energy markets, a concern also raised by the Spanish chemical trade group FEIQUE in June.

“The impression we have is that TTIP won’t be concluded this year. Negotiators claim they are making good progress though. I wouldn’t say TTIP is dead – it may take longer to conclude, as there are still many open issues,” conceded Van Sloten.

The possibility of Donald Trump taking over at the White House in January 2017 is only speculation, added the Cefic executive, but if latest polls are confirmed and the real estate tycoon holds chances of making into the Oval Office the final blow to TTIP could come then.

The US Republican candidate, opposing the traditional line of his party and its biggest donors, opposes free trade deals per se – he has promised to scrap the North American Free Trade Agreement (NAFTA), which includes Canada, the US and Mexico – because, he claims, companies have had it too easy in being able to move production to Mexico while leaving US workers worse off.

In the EU, opposition to TTIP has also come from the Commission’s promise to deliver a “new generation” of free trade deals, which might have acted as its final blow. By not only lifting tariffs between the two jurisdictions but also affecting non-tariff measures, a new proposed settlement dispute system for TTIP would affect national legislative frameworks and trade considerations would take centre stage when approving laws, say the critics.

“This means you start interfering with law-making with the single objective to reduce trade barriers. In practical terms it means next time laws are made, the impact of that law in trade with the US will be given a heavy weight through impact assessments,” said the policy director at the European Environmental Bureau (EEB), Pieter de Pous in June.

“If the Parliament wants to amend legislations, for instance, it will always be under pressure to look at how that will not lead to trade barriers with the US,” he added.

The EU’s spree of trade deals was supposed to reach this year a new high when the Comprehensive Economic Trade Agreement (CETA) with Canada was scheduled to be approved, after five years in the making.

However, while the ratification of a trade deal is a competency for the European Parliament (EP), the Commission has given in to pressure from national parliaments and the 28 countries will have a say about CETA, after some EU members said their voice had to be heard.

Although not legally binding, ignoring a veto from a national parliament would only place the EU under more pressure to listen more, and act in consequence. Germany’s VCI had asked for the ratification to go only through the EP, but soon after the Commission announced it would be give a vote to national parliaments.

“The EP’s ratification has to do with the principle of subsidiarity within the EU. If we have a single market and we agree the EU to negotiate and sign free trade deals with other regions, this should mean the EP is the right place to ratify a trade deal,” said the VCI’s economist.

“What would happen, for example, if just 23 countries out of the 28 ratified the deal but another five countries opposed it? Could we have different trade deals for different countries? All European people voted on elections for the EP, to deal with their European interests and this is the right place to do so [deal’s ratification].”

Elections to the EP are notoriously marked by low turnouts, however. The EP still sounds a faraway chamber where their interests are not really represented. The dysfunctionality of this has been heavily exposed with the CETA and TTIP debates.

According to data from the EP, turnout in the 2015 elections across the 28 EU members stood at 43%, the same as in the 2009 elections. The turnout in the European election sharply decreased when the EU expanded to the east to reach its actual 28 members.

“There are people within the EU who feel they are not very well represented on the institutions and their opinion is not taken into account. If this is a problem, we have to think how this can be improved.”

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All opinions shared in this post are the author’s own.

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