Reach to remain intact under EU-US free trade deal – Commission

LONDON (ICIS)–The European Commission has promised to maintain chemicals regulatory framework Reach unchanged whilst negotiating the controversial free trade deal between the EU and the US, according to a Commission spokesperson for trade this week.

The Commission recognised there is growing public concern about how the Transatlantic Trade and Investment Partnership (TTIP) could affect the environment and human health on the back less stringent chemical regulations in the US, but promised Reach will stand as it is if in the end the TTIP is approved.

“Many citizens are worried about effects of globalisation,” the spokesperson noted.

The Commission – which acts as the EU’s executive body – announced on 31 May it will ask the European Council to reconfirm the TTIP mandate at the end of June following growing criticism from EU politicians, trade unions and consumer organisations about the TTIP content.

“The Commission has stressed many times that the EU will not lower any environmental or health standards. This means that Reach won’t change in TTIP negotiations,” the spokesperson said.

“The Commission is very proud of setting a high level of environmental and health protection, and, as it is also clarified in our sustainable development chapter in TTIP, trade agreements won’t undermine this; on the contrary, we aim to uphold it and broaden it to other part of the world.”

Free trade has become a key contentious issue in the US presidential elections to be held in November. Two of the three potential candidates – Bernie Sanders and Donal Trump – have criticised the content of other trade deals the US has approved like the Trans-Pacific Partnership (TPP), arguing it has facilitated delocalisation of jobs outside the US, with the country’s workers’ salaries and jobs being put at risk.

The third potential candidate, Hillary Clinton – who served under Barack Obama’s administration and is fighting against Bernie Sanders for the Democratic nomination for November’s elections – has argued some trade deals approved under Barack Obama’s administration will need amendments.

The European Commission, however, remains convinced negotiations on TTIP could conclude before Obama’s presidency ends in January 2017.

“TTIP is one of the priorities of the Commission, because EU trade agreements can contribute to more economic growth. Our trade to South Korea, five years after this trade agreement is in place, grew by 50% – EU trade agreements work,” he said.

“We have a window of opportunity to do it now with the Obama administration [signing TTIP]. But more importantly, we will finish these negotiations only when we get a good deal for Europe. Quality and substance come over speed.”

Regarding chemicals within TTIP, the Commission’s spokesperson said the sector remains a key industry in the EU scoring as the second largest traded product between the EU and the US and argued the large trade surplus the EU enjoys in chemicals exports to the US.

“This [trade surplus] also includes SMEs, as they account for 30% of the EU’s chemical exports and would benefit from removing US customs duties by TTIP. SMEs in the chemicals sector would also benefit from regulatory cooperation on classification and labelling, for example,” it said.

The spokesperson was responding to concerns from chemicals SMEs in Europe who have warned their competitive disadvantages would increase under TTIP, taking into account they face higher regulatory and energy costs.

“They [SMEs] would also gain from a lifting of US restrictions on energy exports to the EU, which may help to address energy cost differences between Europe and the US.”

Even large EU companies like Poland’s Grupa Azoty and Spain’s CEPSA have said TTIP will represent a challenge for European chemical companies.

The CEO of Austria’s polymers and fertilizers major Borealis, Mark Garrett, went further in May arguing the Commission is “working against the will” of European citizens regarding TTIP negotiations. 

While trade unions and members of the European Parliament (MEPs) have complained the information they receive about the TTIP negotiations is scarce and subject to secrecy, the Commission’s spokesperson denied those statements.

“MEPs have a very easy access to the EU documents and can use secured reading room to access documents which include positions of the US. Basically, they have the same information as EU governments. In sum, they can have a full and detailed picture of the negotiations,” he said.

According to him, chemicals’ trade between the EU and the US is covered by around 1,100 tariff lines with duties from 5.5% to 6.5%, while a large number of chemicals used as ingredients for pharmaceutical would be duty free.

By proposing in a first tariff offer letter issued in 2014 to scrap most tariffs on chemicals, the Commission would have put at risk many European chemical players who would not be able to compete against US companies on regulatory and energy cost, according to sources, who criticised how the Commission was only following guidance from the European Chemical Industry Council (Cefic) but left behind smaller players’ interests.

“Before exchanging tariff offers with the US the Commission analysed EU export and import performance vis-a-vis the US on a detailed product level and used input from stakeholders, ranging from individual companies, trade associations to submissions from EU Member States,” said the spokesperson.

“A few chemical products where signalled to the Commission as sensitive vis-a-vis the US and our latest offer [issued in 2015] reflects this. This could hardly come as a surprise to a large number of producers being. Our doors are always open and we didn’t and don’t receive these signals [concerns about smaller players’ interest being put at risk], neither from the companies, nor from EU governments.”

The spokesperson went on to say that care has been taken to shelter products which the Commission deemed sensitive due to US comparative advantages from immediate tariff liberalisation, especially those products for which the cost of production affected the US advantage of having access to much cheaper natural gas.

However, the spokesperson did not clarify why the Commission’s first tariff offer letter did not include products which were finally included in the second offer after lobbying from individual companies who felt Cefic did not represent their interests.

“The TTIP debate in some [EU] member state is much wider and goes way beyond trade agreements. Indeed, many citizens are worried about effects of globalisation. But globalisation is a force from which we can’t afford to cut ourselves off and EU trade agreements are one of the tools that we have to shape it,” he said.

“We need a debate in Europe on what sort of role we want to play in it. This [TTIP negotiations] is a team effort and all EU member states are in favour of gaining access to the new markets. Thirty-one million jobs in Europe depends on exports to third countries and these jobs are on average better paid than jobs in other sectors of the economy.”

Focus article by Jonathan Lopez