De Gucht Warns EU That U.S. May Cut Off Free-Trade Talks

Europe’s outgoing trade chief said the U.S. may break off talks on a commercial accord in early 2015 unless Europeans show a firmer willingness to include investment-protection provisions in any deal.

European Union Trade Commissioner Karel De Gucht said the EU would weaken U.S. interest in achieving the planned Trans-Atlantic Trade and Investment Partnership by carving out the investment-protection clause. He warned the EU against making the Americans feel as if they must “give in” on the matter.

The clause would allow foreign investors to use arbitration panels instead of domestic courts to make claims against a national government when an investment is harmed, for example through expropriation. Some politicians in the EU oppose the clause, known as Investor-State Dispute Settlement or ISDS, because of the potential limits it places on governments’ ability to regulate in the public interest.

“If we don’t want ISDS in the agreement with the United Sates, I doubt that the United States is even going to restart the discussions beginning of next year,” De Gucht, whose five-year term ends on Oct. 31, told reporters late yesterday in Brussels. “This is practice in international trade.”

The comments by De Gucht, a Belgian who belongs to the EU’s pro-business Liberal alliance, highlight the balancing act to be faced by his successor, fellow Liberal Cecilia Malmstroem of Sweden, when she tries to keep on track negotiations begun last year to expand the world’s biggest economic relationship. De Gucht has frozen talks on investment protection with the U.S. pending the outcome of a public consultation on the matter.

ISDS Provisions

In her confirmation hearing last month for the top EU trade job, Malmstroem defended ISDS provisions in a draft accord that De Gucht struck with Canada while refusing to speculate about whether any pact with the U.S. would exclude them. That stance followed criticism of ISDS by mainly Socialist representatives of the European Parliament and the German government.

U.S. Trade Representative Michael Froman said earlier this month in Rome that both sides have the opportunity to take their relationship to the “next level” by completing TTIP as a whole. Froman said Malmstroem and the other members of the new team at the European Commission, the 28-nation EU’s executive arm, could help provide “fresh energy” to the trade negotiations.

Jean-Claude Juncker, the incoming commission president who is a Christian Democrat from Luxembourg, sought to ease concerns over the ISDS matter last week by saying any such clause in TTIP would have to be acceptable to a Dutch Socialist -- Frans Timmermans -- whom Juncker has appointed as his main vice president.

Exact Position

Juncker’s move amounts to “tasking Frans Timmermans to convince the Socialists,” De Gucht said yesterday.

“I don’t know the exact position of Frans Timmermans on this, but he is Dutch and the Dutch are in favor of these kinds of arrangements,” said De Gucht.

More broadly, he said the TTIP talks risk faltering because the EU is more keen on access to the American market than the U.S. is on access to the European market.

De Gucht said that “offensive” EU negotiating interests include tariffs, services, public procurement and investment in such companies as airlines, whereas similar U.S. goals are limited mainly to the agricultural business.

“It is not a naturally balanced agreement,” he said. “Both of us have a lot of defensives. But Europe has many more offensives than the United States has.”

In addition, he said, the U.S. is in a more favorable economic cycle with “considerable growth” than is Europe, where the economy is stagnating.

“Why would they do it?” De Gucht said. “That’s I think not a completely ridiculous question.”