The Transatlantic Trade and Investment Partnership (TTIP): Extending Trade Policy to Domestic Markets

In: Revue internationale de droit économique, Vol. 30, Issue 4, 2016, pp. 421-453

Max Planck Institute for Innovation & Competition Research Paper No. 17-01

39 Pages Posted: 18 Jan 2017 Last revised: 22 Feb 2018

See all articles by Hanns Ullrich

Hanns Ullrich

Max Planck Institute for Innovation and Competition

Date Written: December 15, 2016

Abstract

While, due to the outcome of the presidential elections in the United States, the negotiations of an Agreement on a “Transatlantic Trade and Investment Partnership (TTIP)” between the European Union and the United States have been suspended sine die, the general political discussion and more particularly academic inquiry into the fundamental economic and legal issues TTIP raises will and must go on. The EU’s commercial policy continues to rely on bilateral free trade agreements (FTAs) as a pillar of its international trade relations. The main feature of these new generation or “deep trade” agreements is that, in addition to the virtually complete elimination of customs tariffs and the reinforcement of trade facilitation measures at state borders, they institutionalize, intensify and expand regulatory cooperation between the parties as a way of reducing the trade restricting operation and effects of non-tariff, border-unspecific “technical barriers to trade” (TBT) in goods and services. Typically, they also complement such FTAs by an agreement on standards regarding the protection of matters of public policy, such as the protection of consumers or of the environment. As indicated by the name of the Canada – EU “Comprehensive Economic and Trade Agreement” (CETA), these FTAs thus become “comprehensive” in that they extend “behind the borders” and embrace the parties’ domestic market regulations, meaning that they aim at making the regulation of the parties’ internal markets “compatible” with a view to facilitating international trade or even at integrating these markets into a “deep integration” free trade area.

The reason for examining the legal issues that these new generation of free trade agreements raise by taking TTIP as an illustration is, that if concluded and put into operation as proposed by the EU, it would represent both the most advanced example of such FTAs and the first to have been agreed upon by economically equal and internationally competing “partners”. Therefore, it may be assumed that TTIP will be a model FTA functioning effectively, symmetrically and dynamically not only to the reciprocal advantage of the parties, but as a free trade area integrating the domestic markets concerned under the joint control by the parties. It is precisely this “deep integration” effect and the concomitant loss of sovereign and independent regulatory control by each party over the development of its domestic market and of democratic self-determination of the exercise of such autonomous control that triggered the broad public discussion of the political and legal desirability of TTIP or CETA and the likes.

However, the paper is not, at least not directly, concerned with the controversial issues of constitutional law and public policy underlying that general discussion. Rather, its focus is on understanding the preliminary question of what really constitutes the deep trade or integration character of an FTA. To this effect, the paper examines the mechanism and reach of regulatory cooperation, the tension existing between the reciprocity principle of trade agreements and the collaborative nature of regulatory cooperation, including the latter’s complementary rules on the protection of public interests, and, given the indivisibility of external and internal trade, the inherent conflict between a state’s sovereignty as regards the independent choice and the terms of its regulatory control over its domestic market on the one hand, and, on the other, the extension of an FTA’s regime to that domestic market regulation. Ultimately, by promoting deep trade FTAs and by multiplying them, a party’s commercial policy may come not only to pre-determine, but to dominate the definition of its domestic market regulation. Thus, as regards the EU, its commercial policy powers may tend to become themselves transformed into internal policy powers. In addition, the EU might become the victim of its own commercial strategy as it will increasingly be bound itself by the regime to which it binds its trade partners. Therefore, the adjournment of the TTIP project should not be seen as a loss of precious time, but as providing a period of reflection on the goals, terms and limits of the EU’s commercial policy regarding comprehensive free trade agreements.

Keywords: European Union, commercial policy, TTIP, CETA, deep free trade agreements, technical barriers to trade, regulatory cooperation, trade in services, mutual recognition agreements, domestic market regulation, public policy, proportionality

Suggested Citation

Ullrich, Hanns, The Transatlantic Trade and Investment Partnership (TTIP): Extending Trade Policy to Domestic Markets (December 15, 2016). In: Revue internationale de droit économique, Vol. 30, Issue 4, 2016, pp. 421-453, Max Planck Institute for Innovation & Competition Research Paper No. 17-01, Available at SSRN: https://ssrn.com/abstract=2900083

Hanns Ullrich (Contact Author)

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

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