EU Partially Freezes Discussions Regarding Transatlantic Trade Agreement

Kegler Brown Global Business News

The U.S.-EU Free Trade Agreement has been put on hold by the EU amidst public concerns that provisions of the agreement could undermine European regulations. According to Der Spiegel, the EU Commission decided to put negotiations on hold citing concerns regarding provisions of the agreement that would allow corporations to sue governments over violations of the potential trade deal.

Since June 2013, the U.S. and EU have been discussing the creation of the biggest Free Trade Zone worldwide. The proposed trade zone could include all of Europe and the entire North American continent, if combined with current U.S. free trade agreements with Canada and Mexico. The U.S.-EU Free Trade Agreement would increase trade ties between the EU and the U.S., and would provide benefits for both American and European companies and workers.

Both regions have advanced economies, high national incomes, and well-developed legal and regulatory regimes designed to protect the environment and defend workers’ rights. The agreement is estimated to boost the U.S. economy by $130 billion, the EU's economy by $190 billion and the rest of the world by €100 billion. In addition, supporters of the agreement point to other significant economic benefits, including the creation of thousands of jobs and the simplification of transatlantic trade.

Despite the many advantages, there has been a lot of protest from European and American non-governmental organizations and environmental groups, especially in regard to transparency and consumer protection.

The EU Commission has now decided on a three-month suspension of its free trade negotiations specifically citing concerns related to provisions of the agreement that would allow corporations to sue governments. The main concern of European consumers, environmental groups and unions are the so-called investor-to-state dispute settlement (ISDS) agreements which could undermine regulations that protect the public good.

Under an ISDS, a corporation can sue a government in private court for allegedly violating the conditions of a trade deal. Even though European corporations regularly make use of ISDS agreements with other countries, critics of the free trade agreement have raised concerns that the regulatory scheme could be disturbed by the inclusion of Canada and especially the United States. Critics point to the U.S. "claim culture" and the likelihood that companies will expand the use of ISDS to challenge a broader range of policies or legislation, and also the possibility that companies could use this instrument to recover enormous damages.

More than 320,000 people have signed a petition that seeks to prevent this particular part of the Agreement. EU's Trade Commissioner Karel De Gucht’s decision to suspend discussions for three months is a reaction to the ongoing criticism of the proposed Free Trade Agreement. De Gucht is planning on publishing the suggested provisions in March, and will give EU citizens the chance to comment via online questionnaire or public forum.

According to EU officials, the broader free trade negotiations with the U.S. are being continued as planned and may be finalized by the end of 2014. Assuming the negotiations do not encounter further obstacles, the U.S. and European businesses might enjoy, among other things, reduction or elimination of trade tariffs and better IP protection as early as 2015.

Read more on the Free Trade Agreement in Deutsche Welle or Spiegel Online (German).