Free Trade but No Free Vote


Up until the middle of last week, I was receiving two e-mails a minute. Sometimes they came in pulses ten or twenty strong. Sometimes they stopped, creating the illusion that the deluge was waning.  However like those B Movies of the 40s set in some jungled-land, it’s when the drums stop you have to worry. The e-mail monsoon would begin afresh, all the stronger for the respite.

So why the cyber deluge? Simple answer - a vote in the European Parliament on TTIP.  For the uninitiated TTIP is the Transatlantic Trade & Investment Package. Brussels does love its TLAs (Three Letter Acronyms) and its OFLAs (Or Four Letter Acronyms). TTIP is a Free Trade Agreement (or FTA; see how easily I can abbreviate) between the EU and the US. At its heart it is about removing tariffs and regulatory barriers to trade. For some, including myself, it is the logical extension of the EU single market beyond the shores of Europe. For others it is a licence for multinational companies to sue governments, and in the by-going overturn the democratic will of the people. I don't buy that.

Hands across the sea

The EU currently conducts €516 billion worth of business with the US; the UK some £135 billion; Scotland £3.9 billion. Last year the US was the largest single investor outside of the EU for Scotland, amounting to 41.6% of Foreign Direct Investment. We export whisky and salmon, textiles, and even Aberdeen Angus could soon be back on the shelves of US stores. We seem to be doing OK. In the last year, Scotland's current and previous First Ministers have made four trips to the US to promote Scottish business and to encourage trade and inward investment. So why the need for a trade agreement at all, especially one that is stirring so much controversy, judging by the e-mail jökulhlaup?

This is where the trade agreement could make a world of difference. Scotland is a leader in biotech. It has a game-changing software industry. Its universities have created innovation that is being realised by small start-ups. We are world leaders in insurance and investment management. We produce unique foods, from Arbroath smokies to Dunlop cheese (all protected by European geographical designations). It is in these areas that we begin to experience the challenges of exporting to the US. Sometimes it is a tariff (like a 25% tariff on wool clothes, or up to a 100% tariff on some European meats!), sometimes it is the cost of custom checks, sometimes it is differences in regulatory approach and the various compliance requirements and costs, which ultimately deter small and medium sized companies from even trying to break in to the market.

And then of course there are the discriminatory barriers. The ‘Buy America’ approach which though perhaps understandable if you are an American, certainly represents a challenge to any Scottish exporter. Next is the US Court system. From Perry Mason, through LA Law to Boston Legal we have all been exposed to US courtroom drama. However, step outside the celluloid world and things can be quite different.  In many US states, judges are elected (with all the risks of politicisation, and appealing to an electorate), so are the principal officers of the court (what will the DA make of a case involving a Scottish company claiming discrimination in the US market place?). And of course, we take it for granted in the UK and Scotland that if you win your case, the judge will also award you payment of legal costs. Not so in the US. You may win your case, be presented with your legal bill and all but declared bankrupt on the very same day.

Now none of these issues are a particular problem if you are a global multinational, with plenty of cash on hand, and a cadre of lawyers at your disposal. If on the other hand you are a small company, frankly even a large company, these factors can be a real deterrent.

It is these sorts of issues that can be addressed in a Free Trade Agreement.

The cause of concern

Although over the course of the last year, concerns have been expressed about several aspects of TTIP, in recent weeks opposition has been distilled to a single aspect: another OFLA, this time by the name of ISDS, the Investor State Dispute Settlement mechanism. ISDS has been around in trade agreements since the 50s in various permutations, with the aim of giving greater legal certainty to companies of all sizes operating in foreign jurisdictions. I have written on the ISDS issue previously - you can find my thoughts here. The one thing I would note is that the UK has negotiated over 90 Bilateral Investment Treaties since the 70s and not a single ISDS claim has ever succeeded against the British Government. Not one. Ever. However, British companies have on no less than 43 occasions successfully used ISDS to protect their investments overseas.

What is going on in the European Parliament?

Last week a vote on TTIP was scheduled to take place in the Parliament. Not a vote on the text being negotiated between the US and the EU - that is years away, with no agreement to date reached on any of the chapters - but rather a vote on the opinion of the Parliament’s Trade Committee.

Although I disagreed with some of the views expressed in the e-mails I received, on one issue we were in perfect accord. The vote was ‘a crucial opportunity for the European Parliament to hold the European Commission to account…’

However, no vote took place.

I have read several accounts explaining what happened, several of which suggested that the ‘EU’ stopped the vote, preventing MEPs from exercising their democratic right. As my old mother was wont to say: ‘pish’

So what did happen then? The night before the vote was scheduled, Martin Schulz, President of the European Parliament, informed MEPs by e-mail that he had decided to postpone the vote, and revert the dossier back to International Trade Committee for further deliberation. The justification for his action: too many amendments.

No consultation. No discussion.

President Schulz, an MEP himself from the Socialists & Democrats Group, decided unilaterally that there would be no vote.

What is really going on?

‘Too many amendments’? Eh? Amendments are bread and butter to the European Parliament. We deal with multiple amendments at every vote we take. Voting on a single law can often take forty minutes or more, and that's by using electronic voting, no marching through lobbies like the House of Commons. Complex laws and important laws are invariably amended, often heavily. For those of you who have seen the film Amadeus, the ‘Too many amendments’ line is akin to the Emperor’s criticism of a Mozart opera, ‘Too many notes’.

In reality the vote was pulled because of divisions within the Socialists & Democrats Group - President Schultz’s group. It was clear that having supported the compromise amendments (including the ISDS clause) in the International Trade Committee, the S&D group were now in two (or more) minds. A group unable to unite behind a single line loses its power in the chamber.

The truly bizarre thing was that having prompted the postponement of the vote, and forced the dossier back to the Trade Committee, the Socialists then wanted to debate it. Well about half of them did, the other half didn’t. Given that there will be only one debate on the Committee report; it makes no sense to have it months before the (potentially heavily revised) report returns to the chamber. What is the point in debating Amendment 27, as I was being beseeched to do by various e-mailers, when nobody knows whether the amendment will survive, be further amended, or indeed eliminated?

There is no doubt that the Socialists are in a mess on this. The Socialist chair of the International Trade Committee is likely to be deposed next week, since his support of the revised ISDS clause is anathema to a splinter group of Socialists. The Socialists Trade Committee Co-ordinator - the MEP who helps steer the group through the vote - submitted his resignation to the Socialist Group, only to have it rejected. Scotland’s David Martin MEP, for it is he, will have to struggle on in what must be one of the least pleasant roles in the parliament.

So what happens next?

Good question. To be honest I am not sure. The International Trade Committee struggled to achieve compromise on TTIP when it last considered the issue. It is far less likely to achieve compromise again. So they will debate, and debate, and with each passing month the Parliament’s influence will dim and diminish. Goodness knows when TTIP will return to the floor of the Parliament. But rest assured, I will be keeping a close eye on developments, regardless of whatever shenanigans certain MEPs get up to in the chamber.