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Putting the I in TTIP: The Necessity of a Strong Investment Chapter

 

Shaun Donnelly, USCIB

The second round of Transatlantic Trade and Investment Partnership (TTIP) talks that would have kicked off this week in Brussels, and that will presumably take place after the U.S. Government shutdown relents, represent the first substantive discussions and tabling of negotiating texts. Accordingly, observers and stakeholders alike are beginning to opine on which issues may or may not fit into a final U.S.-EU agreement. Most concerning for me is the question of whether TTIP should include an investment chapter. My answer, the United States Council for International Business’ answer, and the answer of our partner organizations, is an emphatic yes. Here’s why.

TTIP is regarded as a groundbreaking measure for both sides of the Atlantic: the U.S. and the EU economies together churn out nearly 50 percent of global GDP and global Foreign Direct Investment (FDI) flows. TTIP could secure the two entities as the world’s largest trading bloc if the product is far-reaching enough.

But the U.S. and the EU already enjoy extensive and rich two-way transatlantic investment flows, as well as open investment regimes and strong traditions of rule-of-law. What is the added benefit of writing an investment chapter into TTIP?

If TTIP is to be as ambitious as politicians and stakeholders would like, its creators must ensure that a final TTIP agreement has gold standard, precedential investment provisions. They, and other provisions, must be precedential because third countries will look to TTIP as a model for future free trade agreements (FTAs). Thus, business groups on both sides of the Atlantic are united in calling on governments to ensure that TTIP is ambitious, comprehensive, and addresses all emerging ‘21st century trade issues,’ to match the “changing face of trade” as USCIB’s Peter Robinson wrote in July.

For me, TTIP must include:

1.       broad definitions of investment to capture the full range of investment vehicles and global supply chains being used in today’s, and tomorrow’s, globalized economy;
2.       strong, comprehensive investor protections;
3.       “pre-establishment” provisions to minimize protectionism, increase competition, maximize consumer welfare, and provide real investment market access;
4.       minimal exceptions, reservations, or “non-conforming measures” to secure a high level of ambition among all parties;  
5.       a carefully-drawn “national security” exception to minimize risk of abuse; and
6.       strong, transparent dispute settlement provisions, including “investor-state” provisions, to ensure enforcement by efficiently and fairly resolving disputes on the merits of each case.

The good news is that both the U.S. and major EU member state governments have been negotiating strong investment agreements, either in the form of FTAs or bilateral investment treaties (BITs) featuring these key provisions with other trading partners, often emerging and developing economies or regions.  Why would we settle for less with each other?

The U.S. and the EU have already established shared investment principles, a critical step in aligning mutual goals and strengthening the basis upon which TTIP will be built. This is our collective opportunity to form the template for high-standard investment protections that both the U.S. and the EU can utilize in other agreements. Hopefully, before too long, the U.S. -EU model will provide the basis for a future multilateral investment agreement.  We’re certainly not there yet, but a strong U.S-EU investment agreement is probably the best step available to provide a basis for future high-quality bilateral, regional, and multilateral investment policies around the world going forward.

A strong U.S.-EU investment chapter in a gold standard TTIP agreement will be good for the U.S. and for the EU – for American companies, workers, consumers, and tax revenues and for the world economy.  USCIB and our partners encourage U.S. and EU negotiators to get to work and pledge our support for that endeavor.    

Shaun Donnelly is the Vice President for Investment and Financial Affairs at the United States Council for International Business (USCIB), a leading industry association representing the views of American business around the world. USCIB serves as the American affiliate of the Business and Industry Advisory Committee (BIAC) to the OECD, the International Chamber of Commerce (ICC) and the International Organization of Employers (IOE). The views expressed in this blog post are those of the author.

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