Profil

Marta Orosz

Reporterin
Internationaler Handel, sexuelle Belästigung, Pharma, Osteuropa, Neue Rechte

Es ist nicht ganz zufällig, dass Marta als erste entdeckte, wie das ungarische Fernsehen systematisch AfD-Politiker als vermeintlich normale deutsche Bürger ins Programm einbindet. Sieben Jahre lang hat sie für den ungarischen öffentlich-rechtlichen Rundfunk als freie Deutschlandkorrespondentin gearbeitet. 2017 kündigte sie, weil Ungarns Regierung in kritischen Journalisten keine notwendige Kontrollinstanz sieht, sondern eine Bedrohung. Bei CORRECTIV hat Marta zuletzt mit ihren Recherchen über sexuelle Belästigung beim WDR für Aufruhr gesorgt und die flächendeckende Aufarbeitung in Gang gesetzt. Am liebsten recherchiert sie zu Handels- und Wirtschaftsthemen, von lebensbedrohlichen Versorgungsengpässe durch Medikamentenhandel in der EU bis hin zum damals geplanten Freihandelsabkommen TTIP. Auch die Methoden der Populisten und die Verbreitung ihrer Politik behält sie europaweit im Auge. Zuvor arbeitete sie mehrere Jahre bei der Kurt Lewin Stiftung für Toleranz und Demokratie in verschiedenen Forschungsprojekten.

E-Mail: marta.orosz(at)correctiv.org
Twitter: @martiorosz

gte-thenewsgame
Grand Theft Europe

Grand Theft Europe – The News Game

Dive into the world of VAT fraudsters

read more 2 minutes

von Marta Orosz

Welcome to our Grand Theft Europe newsgame! Every year criminals steal 50 billion euro from European taxpayers with the so-called VAT carousel fraud. The scam is still going on today. Slip into the role of notorious VAT fraudsters with the online game we developed together with the interactive storytelling-platform NewsGamer. Do you have what it takes to build a VAT carousel? Do you know how to get rich with VAT fraud? Will you be busted by the tax man or eliminated by your competitors? Test the newsgame and learn the tricks of the trade!

 

Play now

 

 

stone_english
Rod Stone was tracking VAT carrousel criminals for 40 years. © Ivo Mayr
Grand Theft Europe

How the UK is combating VAT fraud

When it comes to combating VAT carousel fraud, the UK has been the EU’s most successful member. Rod Stone, a former tax investigator, explains.

read more 9 minutes

von Marta Orosz

Rod Stone is one of the leading experts on VAT carousel fraud worldwide. For 40 years, he battled fraud at the HMRC, the UK’s tax administration, and developed a comprehensive counter strategy. In 2015, he formed his own crime advisory company.

CORRECTIV: The UK managed to reduce the annual loss to the treasury through VAT carousels from £3 billion (€3.4 billion) to roughly £500 million. How was that possible?

Stone: In 2005, a number of VAT fraud prosecutions by the tax authorities failed. As a result, I developed something called the ‘abusive right’ principle, which allowed the customs service to disallow import tax claims with respect to people involved in carousel fraud. I was given about three months to see if I could come up with a civil law remedy. We first started using it in January 2006, and by June we had disallowed £3.2 billion worth of import tax claims associated with carousel fraud.

CORRECTIV: So that was it – stop the tax claims, and the fraud just stops?

Stone: Not quite. In the UK, we used a holistic strategy to combat the fraud. We had a tool box. We looked at all the ways of freezing money, because that also made the environment hostile for them. We would look at insolvency. With insolvency you would identify the missing trader, that’s the importer, and raise a debt against him with the amount of tax that was due. The insolvency practitioner would then take over the running of the missing trader and seek to recover the missing money from everyone else in the ‘supply chain’. The supply chain, of course, was totally contrived and the only person who had any money was the person at the top, the exporter. So most of the insolvency practitioner’s investigations would end up at that point and they would then seek to recover the money. They could also recover the money from the directors personally and they could use worldwide freezing orders to target bank accounts abroad, and that was quite a successful approach. We could obviously also use criminal investigations and prosecutions.

CORRECTIV: How were they different in the UK?

Stone: The attraction of carousel fraud in most countries is that it doesn’t carry the same penalties as drug trafficking or bank robbery. Criminals are looking at no more than five years in prison, and by half of that they’ll be out. In the UK, we charge people or indict them with cheating the public revenue, and that carries a life prison sentence. In fact, the longest prison sentence that has been handed out has been 17 years, but it has been quite common for people to be sentenced to between 12 and 14 years for carousel fraud. And if they don’t pay back the stolen money, they’re brought back before the court, and their sentence is increased.

CORRECTIV: How would you and your colleagues chase the fraudsters?

Stone: If I suspected that a company was involved in carousel fraud I could send in an officer the same day. That’s part of our UK legislation and doesn’t exist in many EU states. We would get all the sales and purchase records, and from those records we could see who they’ve been buying from. If it’s the first intermediary company above the missing trader, by going to that trader we will identify the missing trader. And at that point, we can go and visit the missing trader. Of course, there won’t be anyone there. It’s just a brass plate on an office block. But by establishing that it’s not a legitimate trading company, we would cancel the VAT registration. We had officers out visiting traders on a daily basis.

But you knew that as soon as you took out one company and cancelled the VAT registration, within three or four days another company would be registered in its place and ready to go. So you had to continually monitor new company registrations, and who was behind them. We set up a system where every company we suspected of being involved in VAT carousel fraud was asked to clear the details of their suppliers and customers with a special unit in the tax administration. I would come to your office and say, ”I’m instructing you to phone up this office, and tell them every time you’re going to buy from someone new or sell to someone new.” In that way, the tax administration built up a profile of all the companies that were involved — or probably involved — in carousel fraud.

In addition, if a VAT refund claim was submitted,it was submitted on a monthly basis, and those refund claims would be selected for verification. A verification meant that every transaction on which VAT was being claimed would be tracked down to the missing trader, and nobody got any money until we were satisfied that it wasn’t part of a missing trader scheme.

I have to say there were a lot of legal challenges and we had to go to court frequently to hold our ground, and the courts again were very supportive, because they were aware of the problem, they were aware of the complexities of the fraud and that the tax administration was putting a lot of resources into stopping illegal or illegitimate business without impacting on honest traders.

Tax administration HMRC in London. © Ivo Mayr

CORRECTIV: Why don’t other EU member states act the same way?

Stone: The problem is that some of the legislation that countries are using is antiquated. It’s designed to deal with tax evaders, perhaps a man on the street corner who evades a small amount of tax, and the law has never been updated to deal with organized crime. Most of Europe hasn’t kept up with the times. You have to put it through parliament, you have to get people to agree, and many European countries seem to have great difficulty in getting this process through.

Likewise, the courts have to understand what they’re dealing with. In our early prosecutions and our early civil cases, a lot of the judges had difficulty in understanding the issue. We actually had to devise a strategy for delivering the trial to the court case so that everybody understood how the fraud worked. We tried to simplify it. There were large tax companies that were trying to sell VAT carousel fraud as a tax avoidance scheme. Which of course it wasn’t. The tax authorities contacted all the large accountancy firms and re-educated them into what they were dealing with.

CORRECTIV: How can we imagine the prosecution process?

Stone: From the time you first become suspicious of the fraud to the date of conviction, you’re looking at between three and five years. In the UK, we have an exemplary prosecution process or strategy. We would only prosecute the cases that had the biggest impact. Some of the major fraud chains were never prosecuted. But they lost their money because we used civil law strategies. There’s only a limited number of investigators. When you conduct a raid and arrest everybody, you need 250 or 500 officers. So there is a big resource implication.

The prosecution – criminal law — strategy meant that the tax administration had a say in which ones it wanted to prosecute. Some EU member states insist that every identified case of carousel fraud is forwarded to the prosecutor. For that reason, the cases that have been investigated and prosecuted in some EU member countries are more than 10 years old before they come to the court. In the UK we didn’t want stale cases. You probably won’t get much money out of it and it doesn’t send a message to the people currently involved in the fraud. You want to try and do it in real time. As much in real time as you can.

After the UK introduced its strategy, the fraudsters looked at other countries in the EU. The VAT carousel fraud became so minimal in comparison with what it had been that we were able to move on to other things. That was until 2009, when the fraudsters moved into the carbon credit market.

CORRECTIV: What happened?

Stone: The fraudsters started forming companies in France, and in the last quarter of 2007 they started trading large amounts of carbon credits through the BlueNext exchange in Paris. In January 2009, we became aware of a particular company in the UK selling tens of millions of euros of carbon credits to companies in France. We notified our French colleagues of the trader in France who received the carbon credits. We know from the audit that was carried out by the French audit office that the information wasn’t acted on. In fact, I don’t think the French visited the missing trader for about 5 months. This was largely because French legislation didn’t allow the tax administration to make a visit to a trader until after that trader’s tax return is due. It allowed the fraud to grow and continue in France.

Once we became aware of the carbon credit fraud in France, it was only a matter of time before it moved to the UK. These things are like the sea. They go across Europe in waves. So we were ready for when the fraud moved. On the day after the French introduced a measure that stopped the carousel, our officers went out and visited something like 30 or 40 traders and cancelled their VAT registration. That doesn’t mean we stopped it. The UK lost about £250 million between May and July 2009, but I suspect we recovered at least half of that through insolvency law and tax law.

CORRECTIV: From the UK, the carbon credit fraud then moved on to Germany where it was only stopped in July 2010. Was the German government not aware of the problem?

Stone: In 2009, every EU member state knew about the carbon fraud, certainly by July 2009. There were discussions on it in the Eurofisc and the Europol networks, and there were bilateral exchanges of information. It then became the responsibility of individual member states to take steps to stop it in their country.

CORRECTIV: Why do some member states have so much more difficulty in combatting the fraud than others?

Stone: I worked with tax administration throughout Europe, and everybody at the workface was determined to stop the fraud. But they were hampered by the processes and the legislation. Most of it seemed to be antiquated and disjointed, quite frankly. They were unable to act in real time, they lacked the resources in terms of the number of staff with the skills, and it appeared that most EU member states had great difficulty in introducing new legislation.

Take for example the ‘abuse of rights’ principle. It requires the tax administration to demonstrate that the businesses knew or should have known about the fraudulent schemes they were involved in. In the UK, this is an accepted principle. You argue that there is an abuse of the VAT system, and that’s not what the system’s set up for. The UK civil courts do not require that to be written into legislation. In France, there was a requirement for that same argument to be written into the tax code, and that takes time. [In in the UK] I didn’t have to wait for it to go through parliament. As soon as I thought of that as a method of stopping the fraud, we could implement it the next day.

CORRECTIV: Is there a way to stop this kind of fraud entirely?

Stone: The only thing that would probably stop it would be to have the same rate of tax throughout Europe on the same commodities. And that wouldn’t be accepted nationally by each individual member state. I suppose that if you end up with a federal Europe, where Brussels has the central European bank and then decides what money is going to be divided up to each individual country and organizes all the collection of the taxes, that would work. But many countries don’t want to be part of a federal Europe.

Rod Stone in the interview with CORRECTIV-reporter Marta Orosz © Ivo Mayr

CORRECTIV: The EU Commission has proposed a new VAT tax scheme, the so-called definitive VAT system. Under the new rules, commodities traded between member states would be taxed in the country where they were sold, and the tax administrations would transfer the taxes between each other. Would that at least reduce the fraud?

Stone: Not really. Again, you go back to different tax rates on different goods [as the basis of] carousel fraud. I also know that it doesn’t stop at cross-border trade in the EU. Let’s assume the UK leaves the EU and we become a third country. We, and other countries within the EU, have suddenly introduced postponed accounting on imports from third countries. So what that basically means is that VAT is not collected at the border, it’s going to be deferred. That means that missing trader fraud can start up with countries outside the European Union. So you will get the fraud still operating, potentially, from EU member states to the UK, back into the EU member states. In an effort to ease the burden on business, they’ve actually created other opportunities for carousel fraud.

CORRECTIV: You are saying that the door for fraud will always remain open?

Stone: Yes. All you can do is deter people from becoming involved. If people are going to be locked up for 15, 16 years and lose all their revenue, they soon stop doing it. So, to my mind, strengthening the ability to collect the money at the earliest opportunity, taking away the assets that the fraudsters have purchased with the money they’ve stolen, and sending them to prison for a very long time, are the only deterrents that exists at the moment.

CORRECTIV: So every member state should create this hostile environment?

Stone: There is a responsibility on the European tax directorate to encourage member states to do so and change their legislation. But you’re coming up against cultural barriers. Countries will say, ”But we’ve done it this way for the last hundred years. This is the way our taxpayers expect it to be.” You have to re-educate the taxpayers and say ”the legislation that’s been introduced isn’t targeted at you, the taxpayer, it’s targeted at organized crime”. So, again, it’s all about re-education. You have to re-educate your taxpayers, so that they understand why things are changing, you have to re-educate the judiciary, you need politicians that will change the legislation.

One of the things the UK did was try to be more proactive to people who don’t put in their tax returns or their VAT returns. We’re now moving to making tax digital in the UK. People will have to start to use the tax digital. That in turn might highlight missing traders more quickly. But you only need to be a missing trader for a day to make £10 million.

TTIP

Why we investigate TTIP

There are many rumors about the Free Trade between the EU and the USA. We want to know more because the negotiations have an impact on all of us. This website explains the Free Trade and shows the dealer in an interactive network analysis. But this is just the starting point for us. We will observe the negotiations on the long term, we will investigate and analyze what is important about TTIP.

von Justus von Daniels , Marta Orosz

The free trade agreement TTIP is a hot political issue. In the future, the USA and Europe want to form a zone in which goods and services can be bought and sold freely. In theory that sounds great: more competition will lower prices for consumers. Corruption will become more difficult and industry will have access to new markets when standards are harmonized. That means: more growth, more profits and more jobs.

But there are also significant concerns: will companies be able to undermine laws and impose their own interests against democratic decisions when TTIP establishes arbitration tribunals? Could local authorities be forced to sell their property? Will consumers be sold unsafe products?

Most discussions revolve around the question: are you for or against TTIP? We think thats too simplistic. If TTIP is signed, it will affect us all. For that reason we need to know what the agreement is about. Who is negotiating what? Who influences whom and in what way? Which interests are represented?

We want to monitor what is changing for the worse and for the better. We want to follow the negotiations and examine how various lobby groups are trying to influence them. We want to analyze the news as it comes in and see which issues are controversial and which ones are blown out of proportion. 

For that reason we want to go back to the beginning. We will explain in a comprehensible way what is being negotiated in TTIP, what free trade means and how it developed historically. On this TTIP website by CORRECTIV we collect documents, give updates on the latest developments and investigate everything that concerns the public. 

Unterstützen Sie unabhängigen Journalismus!

CORRECTIV ist das erste gemeinnützige Recherchezentrum im deutschsprachigen Raum. Unser Ziel ist eine aufgeklärte Gesellschaft. Denn nur gut informierte Bürgerinnen und Bürger können auf demokratischem Weg Probleme lösen und Verbesserungen herbeiführen. Diese Recherche wurde mit der Unterstützung unserer Fördermitglieder realisiert. Jetzt spenden!

At the same time we want to make transparent who is negotiating in our name. We have gathered the resumes of the negotiators from both the USA and Europe as far as it was possible. We want to know the backgrounds of the people determining our future. Who have they worked for? To whom do they have obligations? The task is difficult. The EU but also the US are trying to keep this information secret. Several requests for information and resumes were denied or not answered. Nobody should know who speaks for hundreds of millions of Europeans. We were able to clear up some issues, on others we are still in the dark.

That is why we need your help: if you have any further information about the negotiators, send it to us. We review everything und publicize what we can responsibly release. Send us an email at: ttip@correctiv.org

If this is not secure enough or if you want to send us confidential documents, you can use our anonymous secure mailbox.

Our goal is that everyone should know what is being negotiated in TTIP. That way we can all be satisfied with the result. 

If you want to help us, twitter using #TTIP

Schiedsgerichte TTIP Investorenschutz

TTIP

EU Plan for TTIP Arbitration Tribunals

The EU’s plan to introduce private arbitration tribunals for the free trade agreement TTIP has met harsh criticism. Now the EU Trade Commissioner Cecilia Malmström (Liberals, Sweden) has made a new proposal to calm her critics. It would give the states a greater power of influence over TTIP arbitration tribunals. And it seeks to end the current dispute.

von Justus von Daniels , Marta Orosz

The EU Trade Commissioner Cecilia Malmström has released a concept paper that proposes handling private arbitration proceedings in line with regular court proceedings. Arbitration tribunals are an aspect of the free trade agreement, their function is to protect companies that see their rights threatened. Malmström also proposed to establish an international court to deal with investor protection, which the German Economics Minister Sigmar Gabriel (Social Democrats) demanded several days ago. These proposals seek to reduce the possibility of companies misusing such proceedings for their own ends. Private arbitration tribunals, which are supposed to give companies special protection, are an issue in negotiations for the free trade agreement TTIP between the EU and USA which have been running since 2013. Among other things, they would allow companies to sue for compensation if they lose their investments due to legislative changes or nationalization.

The Commission’s proposal is a reaction to persistent public criticism of arbitration tribunals. Almost 150,000 EU citizens spoke out against the tribunals in an online questionnaire that the EU Commission released last year. The leftist group in the European Parliament also opposes arbitration tribunals. They fear that companies can use the tribunals to undermine laws approved within the EU that go against their interests. That would threaten democracy in Europe.

Arbitration tribunals are well-established

Arbitration tribunals set the framework for arbitration proceedings, which have been a standard aspect of trade agreements between states since 1959. They are supposed to regulate relations between companies and states in the context of foreign direct investment. The idea first arose through a German initiative. Germany had negotiated a trade agreement with Pakistan. The countries agreed that companies could sue for compensation before an international tribunal if they were dispossessed. This measure aimed to create legal security and foster investment. These mechanisms were aimed in particular at countries with badly functioning legal systems, preventing them from seizing foreign companies’ factories on their territory without cause. Since then, over 1300 trade agreements have been approved worldwide that include this type of protection for foreign investors.

Until the 1990s arbitration proceedings were rare. Around 500 lawsuits were launched against states. Germany has only been sued twice, both times by the energy company Vattenfall. The first case ended with a settlement, the second case is ongoing. It concerns the German nuclear energy phase-out that was approved in 2011, which required Vattenfall to shut down two nuclear power plants. In the worst case, Germany will have to pay the company compensation for lost profits – when Vattenfall bought the nuclear plants, it assumed that they could run until the operation license expired. So far, most arbitration tribunal cases have been carried by EU companies against states on other continents.

Companies cannot annul laws or regulations through arbitration proceedings. They can only demand compensation if new regulations lead to a loss of investments. But critics argue that the possibility of compensation demands could prevent states from increasing environmental or health standards if they fear that foreign investors could sue them.
Those who oppose arbitration tribunals say that these proceedings are not necessary in states where the rule of law is well-established. They argue that national courts in the USA and EU offer enough protection because expropriation without cause is illegal. Opponents hope to eliminate these proceedings entirely.

Arbitration tribunals have also come under fire for lack of transparency. The parties in dispute usually name an arbitrator to decide on the claims. Business lawyers often take on this task. Before negotiations for TTIP began, the EU already announced that they would increase transparency in these proceedings. There have been no plans to eliminate private arbitration proceedings.

Unterstützen Sie unabhängigen Journalismus!

CORRECTIV ist das erste gemeinnützige Recherchezentrum im deutschsprachigen Raum. Unser Ziel ist eine aufgeklärte Gesellschaft. Denn nur gut informierte Bürgerinnen und Bürger können auf demokratischem Weg Probleme lösen und Verbesserungen herbeiführen. Diese Recherche wurde mit der Unterstützung unserer Fördermitglieder realisiert. Jetzt spenden!

In her concept paper, Trade Commissioner Malmström has now proposed to make arbitration similar to court proceedings. The EU Commission plans to publish a fixed list of arbitrators named by the states. Ideally, these arbitrators should be professional judges. The initial plan was that companies and states could freely determine the arbitrators. There are also plans to introduce a system of appeals for arbitration judgements – another novel measure. Furthermore, the free trade agreement TTIP should stipulate that every state has the right to pass laws in the general public interest. No company should be able to launch a claim against these „public good laws“. „Publicly appointed independent judges are a stepping stone towards a permanent public commercial court“, says Viviane Reding, the former EU Justice Commissioner (Conservatives, Luxembourg).

According to critics, the Commission is still on the wrong path. Pia Eberhardt, a researcher at Corporate Europe Observatory (CEO), a non-governmental organization in Brussels, critizises the new proposal. „The fundamental question remains: why would we give extra rights to foreign investors in TTIP, threatening democracy, public budgets and our court system?“ National courts would provide enough protection for foreign investors.

Gabriel wants a public investment court

In February, the German Economics Minister Gabriel and six trade ministers from EU countries proposed a new model. Instead of improving private arbitration tribunals, they sought to establish an international investment court. Last week Gabriel presented a concrete plan. Initially, the investment court would deal with disputes between Europe and the US within the framework of TTIP if companies feel disadvantaged by new laws. Other countries that are not party to TTIP could later join the investment court.

Gabriel has support from the Social Democrats in the European Parliament. According to sources in the parliamentary Trade Committee, the parliament is currently preparing a resolution in which lawmakers reject EU plans for investment protection. Initial votes in various parliamentary committees have not produced majorities for the Commission’s plans.
EU Commissioner Malmström has described Gabriel’s idea of establishing an investment court as „interesting“. Malmström does not see a realistic chance of establishing a public court within the framework of TTIP. Accordingly, the Commission continues to support a private arbitration tribunal that would have new elements. In her position paper, she writes that these proceedings should be moved „closer to an established court“.

With her new proposal, Malmström seeks to achieve a compromise within the EU. She has set the long-term goal of establishing an international investment court. According to the Commission’s paper, the work towards that end „has already begun“. At the same time, she wants to prevent the TTIP negotiations from collapsing over the question of arbitration tribunals. The USA favors the well-tried solution of using private arbitrators. With this proposal, the Commission wants to regain the initiative in the debate on investment protection.

The EU wants to regain the initiative

It is unclear whether Malmström can convince the European Parliament with her initiative and whether lawmakers will support the Commission’s plans in a resolution they plan to pass in July. „So far, it appears the Commission is playing for time. If it made a serious effort now to establish a proper court with the USA, there could be a large majority“, says MEP Joachim Schuster (Social Democrats). Schuster is one of the lawmakers preparing the resolution in the Trade Committee. He remains skeptical as the Commission continues to support private investment protection outside of national legal processes. The Commission also does not want to change this in the trade agreement with Canada (CETA). The position paper only includes a vague reference to the idea of establishing an international investment court.

There has been no reaction from the US to these proposals within the EU. The US is negotiating on the basis of its own model treaties, which all stipulate private arbitration proceedings. But even there critics are beginning to voice their opinions. In a letter to President Barack Obama, several Democratic members of Congress spoke out against including investor arbitration proceedings in future trade agreements. 

rs155_150714_correctiv_im-7792-1

TTIP

Exclusive: TTIP-Leak

Prompted by the release of over 100 secret TTIP negotiating documents by CORRECT!V earlier this summer, trade commissioner Cecilia Malmström ruled that the detailed report of the 10th round of negotiations should be available only in a special reading room in Brussels. Barely anyone has seen it. In spite of this, we were able to acquire a copy of an official report on the 10th round of negotiations concluded in July. We are publishing the original document – because we still believe that transparency is essential for TTIP.

von Marta Orosz

The Commission’s report summing up the 10th round of negotiations is nine pages long. 

The main points are:

  •  many member states are concerned about the “tough negotiations”
  • most areas under negotiation are at a standstill. The US and EU are moving forward at a snail’s pace. One of the main areas of contention, public procurement, is not even on the table yet. 
  • the issue of sustainability is not on the agenda.
  • the Commission is very concerned about the leak of 100 documents by CORRECTIV, which, it claims, is weakening its own negotiating position.

But let´s take them one by one.

First: The “tough negotiatons”

EU member states such as France, Italy, Poland and Ireland expressed concerns about the “tough negotiations in all essential areas”, quotes the report.

This summer, EU and US negotiators had hoped to finish a draft of the treaty by the end of 2015, planning to have it ratified by the end of 2016, while Obama is still in office. In view of the many fundamental differences remaining, it is becoming increasingly doubtful, whether this ambitious time plan can be achieved.

Second: Standstill

The report also says that the key area of public procurement was not discussed: “Discussion in this area will take place at the level of chief negotiators or higher”. The Europeans, especially Germany and France, want EU firms to have access to public sector contracts in the USA. But the US has made no firm commitments in this area.

With regard to regulatory cooperation – the harmonisation of regulations in certain industrial areas – “negotiations are tough”. As we know from previous rounds, the US is unwilling to make commitments with regard to financial services. European negotiators want to cooperate with the US in the regulation of finance markets, but the US rejects this, claiming that their laws in this area are stricter than those of the EU.

There was progress in areas where both sides foresee gains – cars, pharmaceuticals, cosmetics and engineering, and also on the mutual recognition of professional qualifications.

Unterstützen Sie unabhängigen Journalismus!

CORRECTIV ist das erste gemeinnützige Recherchezentrum im deutschsprachigen Raum. Unser Ziel ist eine aufgeklärte Gesellschaft. Denn nur gut informierte Bürgerinnen und Bürger können auf demokratischem Weg Probleme lösen und Verbesserungen herbeiführen. Diese Recherche wurde mit der Unterstützung unserer Fördermitglieder realisiert. Jetzt spenden!

The tenth round was devoted mostly to the services chapter. Again, both sides exchanged market access offers, which means that they presented the economic sectors  where they are willing to open their markets, as well as listed relevant exceptions.

Hoewever, the Commission thought that “US offers did not contain any essential improvements”. The EU is familiar with the American endgame strategy: the best offer is laid on then table right at the beginning and it is only close to the end that the EU partner can hope for concessions.

There was no movement in other areas: “The US was defensive especially in the areas of marine services, air transport and mobility”. The US was also not forthcoming with regard to geographical indications, i.e. the protection of regional products (e.g.: can Camembert be produced in Kentucky?). 

There was also no coming together on the question of energy. The US wants this to be negotiated under the chapter on services. The EU, pressured by member states such as Poland, Lithuania, Croatia and the Czech Republic, wants to have a special chapter on energy in the treaty. Background to this is the desire from EU member states to be able to import oil and gas from the US where energy costs are half what they are in the EU. But the Americans are reluctant to open their energy market.

Prompted by Germany, the Commission approved a “general discussion of patents”. This is an important issue for the German pharmaceuticals industry because a stronger patent law guarantees profits over a longer period.

Third: Sustainability

The negotiators have not discussed the theme of sustainability. According to the Commission’s report: “In the run-up to the negotiations both parties agreed to postpone a discussion of sustainability”. Critics of TTIP are missing a strong sustainability chapter from the treaty. 

Fourth: The Leaks

There was a lot of discussion in this session of the Trade Policy Committee on the #openTTIP leaks by the CORRECTIV. The Commission called the publishing of around 100 original documents in July as “a breach of trust with the US partner”. In addition, this had weakened the EU’s negotiating position. Trade Commissioner Malmström directed afterwards directed that the protocol of negotiations from the 10th round should be viewed exclusively in the Reading Room of the EU Commission and would no longer be sent to national parliaments.

The original Protokol (in German) is available here.

We thank Gus Fagan for his contribution on the English translation.

EU-Handelskommissarin Cecilia Malmström, BDI-Chef Ulrich Grillo und Wirtschaftsminister Sigmar Gabriel an einer Veranstaltung im Februar 2015© dpa Picture-Alliance

TTIP

35 square meters of transparency

German MPs can now read the secret TTIP consolidated texts but are not allowed talk about what they read. A restraint document obtained by correctiv.org shows the harsh penalties in case of disclosure.

von Justus von Daniels , Marta Orosz

This article was published in cooperation with the Brussels based eu observer.

“It is not a milestone for transparency. It’s just a reading room“, said German economy minister Sigmar Gabriel at the much-awaited opening of a special reading room last Thursday (28 January) in Berlin.

The room that has been set up in the ministry of economy, is the first of its kind offering members of national parliaments the opportunity to read the texts on the EU-US Transatlantic Trade and Investment Partnership (TTIP).

Over the past year transparency has been a key issue in the German debate on TTIP. MPs regardless of their political affiliation demanded bigger insight into the consolidated texts of the planned agreement.

Consolidated TTIP texts have been available so far only in the European Commission in Brussels for a limited number of EU officials involved in the negotiations.

In Germany, the country thought to be one of the biggest beneficiaries of the trade deal, the US embassy in Berlin offered 140 accredited government officials a chance to read the secret documents. Only one German MP was granted entrance.

“Finally, parliamentarians get their right to read“, Gabriel said.

But the rules for reading the documents are quite strict. MPs have to schedule an appointment as the room opens only twice a day for two hours. Before entering the room, they have to leave their mobile phones and any electronic device in a secure locker.

They can read the documents only on a computer screen which is not connected to the Internet. They may take notes but are not allowed to copy any quotes from the consolidated texts.

The room, reminiscent of an internet cafe, hosts up to eight MPs at a time guarded throughout their visit by a security officer.

Unterstützen Sie unabhängigen Journalismus!

CORRECTIV ist das erste gemeinnützige Recherchezentrum im deutschsprachigen Raum. Unser Ziel ist eine aufgeklärte Gesellschaft. Denn nur gut informierte Bürgerinnen und Bürger können auf demokratischem Weg Probleme lösen und Verbesserungen herbeiführen. Diese Recherche wurde mit der Unterstützung unserer Fördermitglieder realisiert. Jetzt spenden!

There is also an English-German dictionary provided for MPs with difficulties understanding the complex trade texts in English.

On her last visit to Berlin, EU trade commissioner Cecilia Malmstroem was asked by German MPs to provide translated versions of the texts, too. Some MPs expressed that they felt disadvantaged by not getting the texts in German.

Malmstroem replied that the commission would provide a translation of the final draft of the agreement, but no consolidated texts will be translated.

Gabriel announced that the ministry would try to assist with translators if a member of parliament wished.

It was the US and the EU which agreed to these rules mainly to control the amount of information becoming public on the ongoing negotiations.

MPs may finally find out what the different positions are in the chapters negotiated on, but they are not allowed to speak publicly about the content or quote any information in the Bundestag debates.

Open on trial basis

A restraint document from the commission shows the consequences of disclosing information.The document, obtained by correctiv.org, lays out the detailed agreement between the US and the EU about access to the consolidated texts.

The US indicates that the availability of the TTIP texts will be on „a trial basis, pending demonstration of the integrity and reliability of the approach“.

In the case of unauthorised disclosure of information, the US „may withdraw its consent to the placement of TTIP consolidated texts in any or all of the member states reading rooms“. This means if an MP leaks or quotes any sensitive information, the parliament may be denied access to the documents.

Gabriel said to the press that it was the joint decision of the EU and the US to set the rules. He would have preferred to have had the reading room in the Bundestag. „I would also prefer to have more transparency“, he said.

The room opens Monday (1 February) at 10am local time. The first MP scheduled for an appointment is Klaus Ernst from the leftist party Die Linke.

obstschale

TTIP

Tariffs dropped to zero

The EU had offered to eliminate most of the tariff lines entirely during the trade negotiations with the US. CORRECTIV has now published a confidential document: the detailed list of the tariff offer. It shows which products could become cheaper for consumers – some industries on the other hand fear competition from cheaper US goods. Some firms will profit from continued protective tariffs.

von Justus von Daniels , Marta Orosz

This article is also published by EUobserver and opendemocracy.

The TTIP negotiations entered a decisive phase on October 15, 2015. That’s when US and EU negotiators laid their cards on the table, exchanging offers for tariff reductions. Up until then, the US had only broached hypothetical reductions; now they were openly offering to remove 87.5 percent of tariffs completely.

That was more than the EU expected. European negotiators had to come up with a better offer or risk derailing the deal. A week later, they came up with a new deal: reductions in 97 percent of tariff categories.

The EU’s secret offer, which CORRECTIV has seen in its entirety, is made up of 181 pages of densely-printed text and can be found online at correctiv.org. It’s got almost 8,000 categories: Every species of fish, every chemical has its own tariff category. Importing a parka? Wool, or polyester?



EU offer to US as excell-file (704.2 KB)



New offer for chemical products as excell-file (58.9 KB)

Poker game

Trade deals are like poker games. Europe’s big offer comes with a big hope: That the US will open up its public bidding process to European firms. That way, European construction companies like Hochtief could bid on contracts to build US highways, or BMW could sell cop cars to American sheriffs. They also indicated in the document that the reduction on certain agricultural products depends on the acceptance of the extension of Geographical Indications by the US side.

For the first time, the tariff offer makes clear what TTIP might do for consumers. Remove duties, and prices tend to drop. With tariffs on parts gone, cars could get cheaper. Per part, tariffs add just a few cents on the euro, but altogether European car manufacturers could save a billion Euro each year, according to German Association of the Automotive Industry calculations. Manufacturers could then pass the savings on to consumers.

Farmers are worried

Some duties are levied on foodstuffs. Right now, peppers from the US have up to 14 percent import tariff. Fish caught on US coastlines are charged up to 25 percent; raspberries 9 percent. Take those away, and it could make economic sense for American food producers to export to the EU – putting domestic farmers under pressure.

Grain and meat, on the other hand, are largely left out of the cuts for now. „The meat industry would definitely loose“, says Pekka Pesonen, general secretary of the European Farmers Association (COPA-COGECA). Animal feed is produced much more cheaply in the US than in the EU. And for products like meat, „there are a lot of reasons it’s complicated to fully liberalize trade“, Pesonen says – animal welfare is more regulated in Europe, and using growth hormones is forbidden.

Opening the agricultural market completely would be difficult for Europe’s small family farms in particular, as they already struggle to compete against industrial-scale farms. That means the back-and-forth over grain and meat is likely to continue.

But the EU has to make a few offers here, too, because the US is eager to see the European agricultural market open up a bit. Pork or seed corn, for example, could be offered up for tariff cuts. The EU has yet to decide when the tariff cuts come into effect. The process is alarming for farmers, who aren’t eager to have their products used as negotiation tools.

Unterstützen Sie unabhängigen Journalismus!

CORRECTIV ist das erste gemeinnützige Recherchezentrum im deutschsprachigen Raum. Unser Ziel ist eine aufgeklärte Gesellschaft. Denn nur gut informierte Bürgerinnen und Bürger können auf demokratischem Weg Probleme lösen und Verbesserungen herbeiführen. Diese Recherche wurde mit der Unterstützung unserer Fördermitglieder realisiert. Jetzt spenden!

Butter vs. Electronics

Both sides have placed conditions on their offers. There are 19 pages of tariffs on clothing, for everything from parkas to shoes, coveralls and yarn. Tariffs hover between 9 and 12 percent, but the EU is offering total cuts, with an „R“ for „reciprocity.“ In other words, we’ll cut ours only if you cut yours. The US, on the other hand, has made clear that cuts on textiles depend on opening a discussion over country-of-origin labels.

For example, if a shirt is sewn in Vietnam but packaged in the US, is it „Made in Vietnam“ or „Made in the USA“? Once that’s worked out, it’ll be possible to discuss whether the new duties apply to that shirt or not.

Take a look at the EU’s confidential offer and it’s clear some industries have been privileged. Next to the many zeroes on the list are phase-in periods of three or seven years. Some aluminum products, for example, won’t be allowed into the EU duty-free for seven years. Hydraulic motors, too, have a grace period. Duties on LCD monitors won’t go down immediately; consumers will have to wait seven years for import duties to drop. That, in theory, will give these industries time to adjust to competition. It has to be seen if these lines are still being negotiated.

Thus far, access to the specifics of the TTIP deal was limited to a small circle: Negotiators, government officials, the US Congress, the EU Parliament and 600-odd „trade advisors“ in the US. Publishing the tariff schedule lets citizens and the representatives of small industry associations or companies without lobbyists in Brussels or Washington see what will change for them – or at least what the EU has proposed. That’s fair for everyone.

A milestone

The tariff offer is a milestone for TTIP. Without concrete tariff reductions, concluding a trade deal would be impossible. In theory, such arrangements have to be handled by the World Trade Organization (WTO); bilateral deals are, technically, forbidden by the WTO. Other states could file to have the deal overturned.

But there’s an exception in the WTO rules: Article 24 of the General Agreement on Trade and Tariffs (GATT) states that a deal like TTIP is allowed when both sides drop their tariffs substantially and show that they’re making trade easier. Both the EU and the US have just done that.

The EU is now waiting for the US to offer a substantial deal on public procurement. In a September 15 report obtained by CORRECTIV, the EU Commission says „it definitely expects that the US will offer to open public procurement at a future point in time, in exchange for the revised tariff offer.“

That report also indicated that the US „promised to make a proposal regarding public procurement for the first time“ when the EU and US put forth their symmetrical tariff reductions, eliminating 97 percent of all tariffs.

Public bids are a major TTIP sticking point. The EU wants the US to finally open its markets to allow firms like Hochtief or BMW to compete when cities put out a call for bids on a new building or fleet of cars. The US is less than eager, because that would subject domestic companies – which are already allowed to bid on projects in the EU – to increased competition.

Four days before the next negotiation round starts, the EU Commission has now indicated that they don’t expect a comprehensive offer from the US side. Sources said, that the US haven’t sent their offer yet and that talks about public procurement will be held after the official negotiation week. The 12th round of negotiations started this Monday in Brussels.


Note on the document:

The tariff offer contains two documents. The main offer of the EU and the revised offer on chemicals. We publish a transcript of the original document in order to protect the sources. There are certain details missing which couldn’t be read. We welcome support for completing the few missing parts.

The tariff offer of the EU and the revised offer for chemicals

 

© Ivo Mayr

TTIP

TTIP: EU exporters worry about US harmonisation issues

TTIP is supposed to harmonise standards to avoid unnecessary double testing, but in the US standards and norms are often set locally and not on a federal level. For Europe, this means that the central promise of the Transatlantic Trade and Investment Partnership (TTIP) might not be kept because US negotiators are not actually in a position to decide on these regulatory issues.

read more 4 minutes

von Justus von Daniels , Marta Orosz

This text has been published in cooperation with EUobserver.com.

On 15 March, the TTIP advisory board for Germany’s economy minister Sigmar Gabriel discussed this problem. 

According to information obtained by Correctiv, Gabriel was informed about the issue shortly afterwards and thought it was „highly interesting“. 

It became clear to the German ministry that instead of one central testing and certifying organisation like the German TUV, in the US there are 17 so-called Nationally Recognised Testing Laboratories (NRTLs) issuing technical certifications. 

Moreover, a certificate from one of these 17 laboratories does not automatically mean the product in question may actually go in use – this decision belongs to local authorities. This way it might be the local sheriff or the fire marshal deciding whether a grinder may eventually go into industrial use.

It is not only the certificates that are different, but the norms as well. 

Volker Treier of the German Chambers of Commerce gives an example: „For machinery there is a different colour regulation in every US state for power, aerial and water cables, which makes it costly to adapt for exporting companies.“

If a European manufacturer wants to export machinery in the US, it has to dig deep to pay for additional certifications. Products have to be tested again on the other side of the Atlantic. 

These barriers should be eliminated with TTIP – at least this is one of the main arguments European governments try to win small and medium enterprises with (SMEs) for the trade agreement.

But as mentioned above, US negotiators are not able to control these regulatory issues. The 17 NRTLs are accredited by a federal agency — Occupational Safety and Health Administration — but they are not under its control.

While an EU regulation provides consistency and harmonisation among the national accreditation bodies across the member states, there is no such comprehensive guideline in the US. 

Some of the US regulations on testing, verifying and authorising an engineering product were taken on a federal level, but many of these are state or local regulatory provisions defined by local NRTLs.

Unterstützen Sie unabhängigen Journalismus!

CORRECTIV ist das erste gemeinnützige Recherchezentrum im deutschsprachigen Raum. Unser Ziel ist eine aufgeklärte Gesellschaft. Denn nur gut informierte Bürgerinnen und Bürger können auf demokratischem Weg Probleme lösen und Verbesserungen herbeiführen. Diese Recherche wurde mit der Unterstützung unserer Fördermitglieder realisiert. Jetzt spenden!

Commission’s concern

A major problem with these testing laboratories (NRTLs) is that they do not recognise each other’s test results. 

This means that if a European manufacturer certifies its product at one of these NRTLs this does not automatically mean that it can be sold or put into operation in every federal state. 

This mainly concerns electronic machinery, but the lack of an internal market in the US poses a costly obstacle for European exports in other areas too.

This fragmented market has been causing serious concerns for European manufacturers for decades. 

An internal meeting report of the European Commission obtained by CORRECTIV quotes the concerns of the European engineering industry: „They noted strong divergences in regulatory approach, especially regarding liability issues.“ 

“Their main concerns are the local element (local inspections and regulations), complexity of the US regulatory system, tariffs and certification its related costs – for instance number of audits by NRTLs.“ 

The meeting report concludes: „The US certification industry is a key player; It will prove difficult to change the status quo.“

The German Association for Small and Medium-sized Businesses representing over 270.000 German businesses is also concerned about the issue.

“Mutual recognition of norms is a one-way road“, says the association’s president Mario Ohoven, who fears a distortion of competition causing disadvantages for the European industry. 

While for US companies exporting to the EU there is a unitary EU guideline for standards and norms, European SMEs have to find their way in the US through the above mentioned maze of norms and certificates.

The German Electrical and Electronic Manufacturers Association suggests that the US should recognise the internationally accepted ISO and IEC standards. Big companies like Siemens support this claim.

Up to now the US is one of the countries adopting only a few of the international norms. This explains why the issue of standards and norms plays such a crucial role in the EU-US free trade agreement negotiations.

© Ivo Mayr

TTIP

Small business still waiting for TTIP breakthrough

The US and EU are making the same claim: a free-trade deal would improve conditions for medium-sized companies. But the progress in negotiations is very slow.

read more 8 minutes

von Justus von Daniels , Marta Orosz

This article was also published in the EUobserver (April 26)

The company Code Mercenaries can be found in the south of Berlin, several miles outside city limits. 

This is where Guido Koerber and his eight employees produce microprocessor chips for keyboards. Not for PC or Apple computers, but personalised orders for industrial machines. 

Koerber’s company does exactly what Germany’s small and medium-sized enterprises are praised for: offering a highly specialised niche product that is successful overseas. Roughly 90 percent of Koerber’s merchandise stays in the EU, the other 10 percent goes to customers in the US.

But when it comes to exporting across the Atlantic, there is significant room for improvement. For Koerber, the biggest problem is various regulatory standards in America. 

Patchwork in the US

When it comes to permits and product licensing, the US is a patchwork of different rules and regulations. Each of the 50 states of the US sets its own safety standards. 

When selling within Europe, it is straightforward. Koerber’s company produces its microprocessors according to CE-standards, which are accepted by all of the EU member states. He can bring his product to market anywhere in the EU as long as he complies with these regulations. 

If he wants to sell a product in the US, he first needs to be certified by a US institute, despite already meeting the CE-standard of approval.

„In the US, there are multiple certification institutes, but not all certifications are recognised everywhere in the country. This can cost me upwards of €10,000“, Koerber said.

Seatbelts and headlights

There is no single industry standard in the US and there are 17 competing certifiers. What is approved in Arizona might not be accepted in Florida. This regulatory chaos isn’t only bad for international companies, but for American companies as well.

Ideally, this is where TTIP, the transatlantic trade pact, would step in. For example, indicators for cars have been proven safe in both regions of the world; US thermometer safety has been recognised and EU machines have proven to be fire-safe. The companies that produce these products were promised that the quality and safety standards would be recognised by both sides, thanks to TTIP. Meaning these businesses could export their products without dealing with the extra bureaucracy. 

This has been one of the main pillars of argument in support of TTIP.

But it looks like this promise will go unfulfilled.

On Monday (25 April), the Hannover Fair, one of the world’s leading trade fairs for industrial technology, kicked off. President Barack Obama and German chancellor Angela Merkel opened the event. Other senior TTIP negotiators and European Commission President Jean-Claude Juncker will also visit the fair.

World leaders will be watching closely and looking for signs as to whether TTIP will be adopted by the end of 2016. 

But what kind of TTIP will be adopted? Who stands to benefit from this trade pact?

Slow progress

After the last round of negotiations in February, EU trade commissioner Cecilia Malmstroem announced that progress had been made regarding car standards. „We have reached an agreement on seatbelts and headlights“, Malmstroem said. 

Seatbelts and headlights. Nothing else after nearly three years of negotiations? Surely it should have been possible to address blinkers, rear view mirrors and crash tests during this same time period?

Apparently not.

Public records from the last round of negotiations in Brussels show that things move slowly: „The parties exchanged detailed information on each of the issues, agreeing that more detailed inter-sessional work on technical details would be needed“, the chapter on cars read.

In other words: Nothing was accomplished.

Crumbling support

This is also true in other areas. In many cases, progress is negligible. Take engineering for example. At an internal meeting, the European Commission cautiously suggested excluding this chapter from the negotiations due to the lack of progress made so far.

In an internal report from February 2016 obtained by Correctiv, the commission stated that negotiations related to the TTIP-Annex on machinery and engineering „failed to make substantive progress“ and should be resumed, but „some member states have responded by demanding negotiations to continue“.

So far, German businesses associations are still supportive and standing behind TTIP. But the front is crumbling. There are growing doubts even within the larger organisations. The Federal Association of Medium-Sized Enterprises (BVMW) is less sure of the benefits.

According to the association, 62 percent of small or medium-sized enterprises had a „rather negative“ or „very negative“ view of the proposed agreement. Many companies feel like the wool is being pulled over their eyes.

The mutual recognition of standards was always a benefit of the trade agreement. The Federation of German Industries (BDI) even produced campaign videos featuring production managers explaining the cost savings that will follow if they no longer have to worry about the extra inspections and certifications when exporting to the US.

Even critics of TTIP agree this makes sense. But it is becoming more and more clear that these benefits are not likely to be included when the agreement is accepted.

Unterstützen Sie unabhängigen Journalismus!

CORRECTIV ist das erste gemeinnützige Recherchezentrum im deutschsprachigen Raum. Unser Ziel ist eine aufgeklärte Gesellschaft. Denn nur gut informierte Bürgerinnen und Bürger können auf demokratischem Weg Probleme lösen und Verbesserungen herbeiführen. Diese Recherche wurde mit der Unterstützung unserer Fördermitglieder realisiert. Jetzt spenden!

Neither the negotiators nor other stakeholders will publicly state that the American side is unwilling to negotiate the removal of these extra inspections, but that is what it boils down to. The American side cannot mandate the removal because each individual state decides how products are approved.

According to an internal report obtained by CORRECTIV a commission official warned member states already in 2014 that „the US negotiation partners referred to the lack of legal opportunities“ that would empower them to enforce the 17 testing laboratories to adopt unified norms.

Safety and truck standards

“Normalising standards has played a smaller role in free trade agreements because most countries move products within the international standardisation system“, said Sybille Gabler of the German Institute for Standardisation (DIN).

“This is not the case in the United States where international standards are used less, if at all. That is why this issue in TTIP is particularly important.“

But there are areas where the US government can negotiate, like motor vehicles. 

The German Automotive Industry Association (VDA) estimates that German car manufacturers would save the equivalent of a 26 percent custom duty if vehicles from both sides of the Atlantic had the same standards.

However, given differences in road conditions, equivalence could be dangerous for motor industry. This is why the sides are miles away from coming to a consensus.

In 2014, the US motor industry commissioned a study by the University of Michigan, among others, that suggested the risk of accidents in Europe and the US varied. European roads are more winding and narrower than US roads and cars in Europe go at a higher speed.

Furthermore, recognising one another’s standards would raise the risk of accidents on the respective countries’ roads, the study said. „In more than one way, these vehicles are not equal. Simply recognising them is not advisable“, said Carol Flannagan, one of the lead researcher of the study.

Negotiators are also facing other difficulties. Sorting out the details that would allow recognition is extremely tricky.

The EU negotiators have done case studies in which they compared both governments’ protocols for seatbelt and headlight approval. The results after more than two years? 

Approval can be met, but only after both sides make adjustments. To date, other car-related issues like crash tests, brakes and car frames have yet to be negotiated in detail.

Even the industry issues occasional warnings. The Association of European Auto Suppliers (CLEPA) is for TTIP, but has still voiced concern and issued warnings about recognising certain safety standards. They are concerned that doing so could reduce the overall safety of vehicles.

In an email sent February 2014, the association wrote to the EU Commission about brakes for heavy-duty transport trucks: „From a European perspective it must be asked if the EU Commission and the Member States would support what is seen as a reduction in safety standards if vehicles approved to FMVSS-121 were allowed to operate within the European Union.“

The email goes on to say: „Drivers would be faced with the different options which in an emergency situation could cause problems.“ The association is of the opinion that the practical application of recognising US standards „would in our opinion be zero“.

TTIP light?

After nearly three years of negotiations, it is becoming clear that there are no easy answers. When it comes to testing methods, admission procedures and safety precautions, the markets are too different. 

The invested agencies are almost at a standstill. We would need 10 years to make any real progress, said an EU negotiator to CORRECTIV during the last round of negotiations in Brussels.

Didn’t the negotiators know this before? Koerber thinks that they were naive and „underestimated the difficulties associated with regulating the standards“. In any case, TTIP negotiators should put in extra effort to try to improve the sluggish collaboration with the US.

From the industry perspective, there is a very specific dilemma when it comes to working with the US. The reason for the differing systems is that the US does not accept the internationally approved standards, such as those issued for the motor industry or the ISO standards for appliances. 

US doesn’t like worldwide standards

Around the world, most countries have agreed to adopt the ISO committee’s common standards. Although the US is officially a part of this committee, they have yet to change rules at home to allow for acceptance of these standards.

“Harmonisation can and must be carried out by the international ISO and IEC standards organisation“, said the German Electrical and Electronics Industry. Companies like Siemens also stand behind this demand. 

The European negotiators are therefore trying to convince the US to particulate at the international level, but before the Americans can join in, they first need to change the internal structure. 

Future cooperation

Does this mean that corporations are losing their interest in TTIP?

Most corporations retain interest, despite the likelihood many of their concerns will remain unresolved after TTIP is adopted. This is partly because within the TTIP framework, an „expert panel“, the so-called joint regulatory body will be formed. Comprised of officials and stakeholders, together they will discuss and prepare future standards and go on to present these standards to policy makers. Once a major concern, this could now be the most influential factor for both regions’ economies.

Some critics see this panel as a potential threat to democracy.

When it comes to safety or all around health, preliminary decisions could fall to the TTIP panel. This would be very difficult for parliaments to prevent, said Klaus Mueller, Chairman of the Federation of Consumer Organisations. 

And once industrial lobbyists join the mix, their ability to influence policy makers’ decisions will only grow.

Ultimately, TTIP could now simply become an agreement that focuses strictly on developing standards and appropriate approval mechanisms for future trade between the EU and the US. And while negotiators reject the term “TTIP light“, because it implies there is not enough benefit for either side, when it comes to the direct effects on businesses, the only way to describe the impacts is, in fact, light.

papier

TTIP

openTTIP – Share your comments

The published drafts of the planned TTIP chapters give us the opportunity to understand and make an impact on the free trade agreement. We invite both experts and the public to leave public comments on the TTIP-drafts on our openTTIP site.

von Justus von Daniels , Marta Orosz

The top secret TTIP drafts are now available for everyone. We want to take the opportunity and assess with you the positions of the US and the EU and what should be improved. So that everyone sees what TTIP is all about – because, if concluded, TTIP will change our future.

13 out of 24 planned chapters were first released in May as the #TTIPLeaks. We now want to take a step forward combining the knowledge, criticism and suggestions that we´ve collected. We think, this should have been done by the governments in the first place. Now, we created a tool for everyone involved to leave their comments and contribute suggestions.

Unterstützen Sie unabhängigen Journalismus!

CORRECTIV ist das erste gemeinnützige Recherchezentrum im deutschsprachigen Raum. Unser Ziel ist eine aufgeklärte Gesellschaft. Denn nur gut informierte Bürgerinnen und Bürger können auf demokratischem Weg Probleme lösen und Verbesserungen herbeiführen. Diese Recherche wurde mit der Unterstützung unserer Fördermitglieder realisiert. Jetzt spenden!

We invite you to make TTIP more transparent. We would be glad if you would register with your name and organization. You can easily leave your comments on the TTIP chapters here:

For the annotations we use the OpenSource software hypothes.is. Here is a short tutorial:

EU-Ratspräsident Tusk, der kanadische Premier Justin Trudeau und EU-Kommissionspräsident Junker nach der Unterzeichnung von CETA© dpa/Stephanie Lecocq

TTIP

Inside CETA

Together with the French daily "Le Monde" we looked into the 1500-page treaty to see if criticism still holds and whether governments are just playing down risks.

read more 10 minutes

von Justus von Daniels , Maxime Vaudano , Marta Orosz

They finally got the deal. The EU and the Canadian government concluded the CETA last Sunday. This was possible after the Wallonian government made some concessions and decided not to stand in the way of the treaty. As a next step CETA will be applied provisionally as soon as the European Parliament appoves it – most probably by January 2017.

But criticism that CETA is solely a gift for corporations or that it´s a threat to democracy did not cease. The EU and Canada claim the opposite. 

Our CETA review

The aim of the 1500-page treaty is to liberalize the economies. For this, unnecessary barriers to trade need to be lifted. But market liberalization also evokes fears about losing control in a more globalized world.

Together with the French daily Le Monde, we review some of the most debated issues of the trade deal in detail. Are the arguments of protesters still accurate? Do governments play down shortcomings of the treaty?


The tribunals – A threat to democracy?

Private arbitration courts became the main symbol of anti-trade protests. Usually, if a state enacts a law that reduces profitability of foreign companies in a discriminatory way, businesses can sue these states in a private tribunal if there is a trade agreement in place. This might have been useful in the past, when it came to investments in states with poor or unpredictable legal structures. The tribunals were ad-hoc, organized by private arbitrators – mostly lawyers – and secret. The new court system proposed by the European Commission, however, should overcome the flaws of the traditional arbitration courts.

The idea that these courts should be established parallel to the national courts of France, Germany or Canada was strongly criticized. The counter-argument suggested that courts favor the interests of the big corporate lobbies. Protests were successful and the European Commission changed the original plans introducing safeguards. Now the current system looks a bit more like a traditional court. But again, the text provides a lot of uncertainties.

For example, CETA generally excludes claims of financial firms in case of debt cuts in a financial crisis (e.g. Greece). This should be a safeguard for states who don’t have to fear claims by private funds for any restructuring. The language of the text leaves room for interpretation, say legal experts. Companies could use this to threaten or even actually to sue governments.

The European Commission did improve the old defective system and could be an important example for future trade deals. Some barriers were included to avoid claims meant to chill governments´ decisions – in case a state aims to raise health or environmental standards. The Wallonians now reached an important goal: the European Court of Justice will scrutinize whether or nor these courts are compatible with EU law.

The treaty, however, cannot fully prevent that companies from occurring legal loopholes. All in all, this court system is still close to a private arbitration with judges paid case by case than a permanent court even if its risks are lower than publicly stated. Several NGOs demanded to completely exclude these courts from CETA and TTIP. This would have dissolved remaining fears of companies using possible loopholes for legal remedies.


Environment as a trade barrier – Are higher standards possible?

On the request of the European Commission experts clearly proved that oil obtained from tar sands is 23 per cent more carbon intensive than conventional oil. After these figures were out, the EU had to act. Oil from tar sands was attributed a higher value of CO2 emissions — thus „dirtier“ than other oils and creating more damage to the environment. In the so-called Clean Fuel Directive of 2011 the status of this unconventional oil was reviewed. For the EU this would have been a step towards its goals to reduce greenhouse gas emissions.

This regulation, however, thwarted Canadas plans of exporting tar sand oils to the EU. Lobbies rushed to hinder a stricter regulation on tar sands. Whether it was the result of skilled Canadian lobbies or the concerns related to Europe´s energy security, at the end of 2014 the European Parliament scrapped the labelling on tar sands. Canada started its exports to the EU in the same year.

Expert and environmental groups hope that the EU regulators will review their decision and will not give up on their environmental goals. A crucial question on CETA is related to the right to regulate: Will the EU or its member states be willing to improve their environmental standards while these might negatively affect Canadian corporations´exports? The treaty itself guarantees the „right to regulate“.

Meanwhile, CETA includes protection for investors also in the field of fossile energy and raw materials. The possibility of Canadian Natural Resources Ltd or other major companies claiming their losses because of stricter EU restrictions is a realistic scenario. Canadian mining companies, for instance, are already claiming the loss of their expected profits after their mining concessions were rejected. The European Commission, however, sticks to the argument, that neither CETA, nor any free trade agreement will stand in the way of future regulations.


Does democracy vanish in CETA committees?

CETA will enable Canadian and EU industries´regulators to work together in the future on harmonizing standards. The goal for the chemical, electric or pharmaceutical industries is to agree in the future on product standards that would apply in both economies. A hair dryer or a painkiller produced in Canada should be also easily marketed  in the EU and vice versa  – something that the industry has been aiming for for a long time. How exactly these joint regulatory bodies will work, is still largely unknown. Fears arose that corporations will have an easier access to regulators once they pursue their work without parliamentary control.

Concerns of CETA giving birth to undemocratic bodies reached recently the German Constitutional Court (Bundesverfassungsgericht). German petitioners supported by a significant number of citizens demanded that the Court verifies these claims. While the Court did not give its final verdict on CETA yet, a preliminary assessment was taken. According to this, it is the responsibility of the German Government to make sure that the joint regulators are not free to take legally binding decisions. This means, that the EU-Canada joint board should not be able to regulate without being backed by an unanimous vote of the EU governments.

This preliminary note of the Constitutional Court also guarantees, that the judges in Germany will be keeping an eye on the developments of this committee. Should the Court have any doubts that these conditions are not fulfilled after CETA is applied, they can urge the German Federal Government to opt out of the deal.


Does CETA force privatization?

Whether certain services, like energy or water supplies, are public or run by private companies, is decided by states. Other than in the US and in Canada, in Europe public services have a strong tradition. CETA, the trade deal aiming to liberalize the economy, seems to threaten this public control. The treaty contains a so-called negative list: Both Canada and the EU had to exclude the specific branches they want to leave open to be privatized or later re-communalized in the future. Thus, all other services missing from this list, would be up for the market once they´re open to privatization.

Public water suppliers were shocked. Their fight to prevent the European Commission from privatizing water ended not just some years ago. Now it is in form of the Canada-EU trade deal that public utilities might be liberalized. A binding joint declaration of the European Commission and Canada promises that this will not happen. Even the German Public Companies´Association, earlier severely criticising this issue, now toned down its worries. It becomes increasingly clear, that public services will not be forced into private hands. Nevertheless, it´s the little uncertainties in the text of the treaty and  the longterm aim of more liberalization that creates unease.

Water, for example, is definitely excluded from CETA, but is waste disposal, too? It is not mentioned in the German translation of the text. Such details (or the lack of them) make the treaty unforeseeable for the future. If a city wants to re-communalize a service, this will be possible if the state put this service on the so-called negative list. The Commission is confident, however, that states made all important reservations.

In this sense CETA will not mean an immediate threat to public utilities. But municipalities have to be cautious when framing a privatization, so that they are able to draw back a concession in the future. Otherwise the liberalization might not be reversible.


Feta, Champagne und Parma ham: Are European regional products protected?

The EU has a special tradition to protect produce with a geographical indication. Regional names like Champagne, Bavarian beer or Feta cheese are bound to the region where these products traditionally come from. The goal of this protection is to preserve the quality of certain products but also to indirectly promote regional economies. The EU aimed to preserve this protection in the EU-Canadian Free Trade zone. So far, Canada only applied some basic geographical indications. A Canadian company could thus register for a trade mark „Parma ham“ or „Prosciutto di Parma“ and prevent italian imports of Parma ham.

Especially these european particularity of protection for traditional produce, made the negotiations very complicated. Both sides agreed in the end on a list of 145 european products, from wine to cheesse, which will be protected in Canada as well. There were complaints on the European side that this list contains only a small part of all products protected in the EU. The EU has registered 1500 products which can only be marketed it they are produced in a certain region.

In CETA, the list contains the most imported produce to Canada: for example Feta cheese, Camembert, Champagne and parma ham. Those Companies don’t have to fear the competitors from Canada. It remains to be seen how this agreement will affect the products which didn’t make it on the list. In the end, it is the consumer who decides if she buys the Blackforest Ham or the canadian ham „blackforest style.“


Beef hormones and genetic engineering: Is the precautionary principle at risk?

A main goal of the CETA is to align standards in the EU and in Canada. Instead of harmonizing all standards, both parties should decide in every single case whether safety standards for electronic appliances, foodstuffs or drugs are equivalent. For instance technical safety standards will not be harmonized by CETA. Authorities will verify instead in special committees whether the Canadian safety standard for a certain appliance can be acknowledged as being equivalent to the EU norm. All this should facilitate exports. Critics, however, fear that this could lead to the acceptance of standards currently not in line with EU regulations. According to them the so-called precautionary priniciple related to foodstuffs is at stake in case Canadian standards will be tolerated.

The precautionary prinicple says, that a produce cannot be approved if there is a chance that it might imply health risks. Contrary to the EU, in Canada and in the US produce can be banned only if these health risks are scientifically accounted for. Critics of the EU-Canada trade deal are worried because the precautionary priniciple is not mentioned in the treaty. They want to make sure that it will not be possible for companies to challenge a regulation which prevents risks.

Experts, on the other hand, do not acknowledge these risks. They say that CETA does not force the EU or Canada to give up their own regulatory practices. “Europe and Canada are and will remain free to define their benchmarks on safety standards,” says Alberto Alemanno, professor of law in Paris. In case the precuationary principle will be violated, it´s up to European authorities to deal with it.

What does this mean for imports of hormone-treated meat? Even after CETA the EU bans hormone-treated meat and chlorinated chicken. Canadian meat producers may export a certain amount of meat in the EU, but they have to constrain to these rules. Meanwhile, Canadians are free to produce hormone-treated meat for their own markets.


It´s a patchwork

Revisions in CETA came only after the secret negotiations were finished and the draft text was made public so that parliamentarians and civil society groups had the chance to look at it. Immediate criticism emerged and protesters across the EU demanded changes or even calling off the treaty. Finally, governments, coordinated by Germany and the Netherlands, agreed to change the defective system of the tribunals and to include changes in the treaty in accordance with Canada.

Not every improvement made it into the actual CETA text. Canada and the EU agreed on a Joint Decleration which states that CETA doesn’t force privatization of public utilities. This means that states would be able to regulate and set envirmonmental or labour standards. Both sides wanted to send a clear message about CETA not freezing in future policy-making in favor of corporations. The question, however, remains on whether or not this declaration is binding? What is the actual legal value of such papers?

According to the EU Commission the Joint Declaration solely confirms what is already in the treaty. If this is true, many fears will prove to be unsubstantiated. But the Commission´s point of view is ambiguous, mainly because the ample treaty leaves in many cases room for interpretation. Pundits demand that the Joint Declaration be a regular part of the treaty in order to guarantee it has a clear binding character.

Furthermore, the German Constitutional Court made an important reservation to secure democratic rights just two weeks before the EU-Canada summit. According to this decisions to amendments by CETA committees have to backed by an unanimous vote of the EU governments. These committees will be established to foster future cooperation. Currently the Court assessed the competencies of such committees to be quite unclear. They also missed that the EU didn’t meet proper standards to make sure that national governments still have a say on new rules. But again, this claim is not part of the treaty itself.

CETA today looks much better than a year ago due to last-minute-improvements. Nevertheless, what we have here is a patchwork text: the German Constitutional Court´s claims, a declaration as an annex and so on. There are still many unclear wordings in the 1500-page package which are not backed by the general guarantees.

Minimum standard

Late improvements, no time to discuss real changes, unwillingnes to reopen the treaty: the hasty finishing of the treaty demands a new mandate for future trade deals, especially TTIP:

  • Negotiations must be transparent. Civil society groups must be informed about the positions and first drafts in order to properly review results and be able to make their own suggestions in an earlier phase of the negotiations.
  • Guarantees laid down in the Joint Declaration are minimum requirements for any future trade deal. They need to be formulated as binding principles which guide any interpretation of the text. It must be clear that changes of the treaty have to be backed by democratic institutions and are not primarily in the hand of a committee easily influenced by lobby groups.

Dismissal still possible

Most parts of CETA will be applied provisionally after the European Parliament approved the trade deal. But CETA has to be ratified by all national and some regional parliaments – in Germany by the Bundesrat as well. This process could still lead to new concessions – or in the end to a failure of the deal. The German government expects for this process to take years.

Our cooperation with Le Monde in more detail (English version):

on arbitration tribunals

on agriculture

Unterstützen Sie unabhängigen Journalismus!

CORRECTIV ist das erste gemeinnützige Recherchezentrum im deutschsprachigen Raum. Unser Ziel ist eine aufgeklärte Gesellschaft. Denn nur gut informierte Bürgerinnen und Bürger können auf demokratischem Weg Probleme lösen und Verbesserungen herbeiführen. Diese Recherche wurde mit der Unterstützung unserer Fördermitglieder realisiert. Jetzt spenden!