Richard Bruton (Dublin North Central, Fine Gael) | Oireachtas source

I thank the Co-Chairman. At the outset I wish to state how pleased I am to be here. From my point of view I have never participated in a joint meeting of three committees. This meeting presents me with an excellent opportunity and I thank those concerned for organising it.

To give members the backdrop to why trade negotiations are an important concern in Europe, it stems from the fact that if one considers global growth, 90% of it will occur outside the European Union in the coming years. As one looks from a European context, where growth has been subdued for many years, one must be aware that the potential for trade with these fast-growing economies is an area that should not be missed. This is why Europe has identified bilateral trade discussions with numerous different countries as a major potential growth source.

It has been estimated that it would have a growth potential of approximately 2.5% of European GDP if all of those agreements were put in place. That is the backdrop.

From the point of view of the US, and why it is so prominent, one third of all global trade among major regions occurs between Europe and the US. It is, therefore, a very significant area of investment. In fact, 50% of US foreign direct investment, FDI, comes to Europe and a similar proportion of European overseas investment goes to the US. These economies are quite closely interlinked. Ireland probably has the highest exposure to the US of any European economy. US companies in Ireland employ approximately 135,000 people and have been a source of significant growth, particularly in the past couple of years, as the country has emerged from a very difficult period. It is interesting that Irish companies involved in exporting - they are supported by Enterprise Ireland in this regard - have targeted the US market to a great degree in recent years. This market has shown remarkable growth in recent years, with the relevant rate averaging out at approximately 20% in the past four years. So it is a significant growth market and is particularly important for Irish service producers. The potential for Ireland of a trade agreement that will reduce tariffs, removes non-tariff barriers and increases the capacity to remove unnecessary costs for those involved in trading - for example, pharmaceutical companies - is very significant. There is no doubt about that. We tend to gain, on a per capitabasis, approximately double what would be the typical gain. As a result, the potential gains for this country would be significant.

From where do the gains come? If tariffs are removed, the prices Irish exporters would receive in return for their goods in the marketplace would rise. Similarly, if we remove tariffs, consumers obtain better value for goods they purchase. There are a number of routes through which the benefits occur. By and large, however, tariffs are not the big element. Average tariffs between the US and the EU are running at approximately 3% to 4% and higher in the case of some agricultural produce. The latter is because there are larger barriers in the context of agriculture. The largest barriers are to be found in the non-tariff area and, on average, they stand at over 20%. In some areas, such as the dairy sector, these barriers are very significant and keep Irish dairy exports to the US to very low levels. They are also very substantial in areas such as pharmaceuticals. Effectively, as a result of the fact that there is no regulatory co-operation, virtually the same tests often have to be carried out in both jurisdictions in order for products to be approved for sale. This imposes a cost. That is the backdrop to this aspect of the matter.

During Ireland's Presidency of the EU, the mandate was agreed. This mandate is very ambitious but it also lays down some important markers. One of these relates to the fact that there will be no interference with the right to uphold high standards, particularly in Europe but on both sides in general, in the context of protecting labour, environmental standards and food standards. Explicit statements were made to the effect that there would be no change to the European rules on genetically modified organisms, GMOs. There was also an explicit statement to the effect that there would be no question of this agreement being used to privatise public services. The legitimacy of running such services how one chooses is absolutely recognised. In addition, it was stated that there will be no interference with the right to make new regulations if, as and when the public demands this. The mandate was agreed and, at this stage, we are entering into the negotiation period.

An investor dispute settlement mechanism, ISDS, was included in that mandate but only if it met Europe's interests and the reason it was included was that in the US, there are 50 different states and they do not automatically incorporate treaty agreements into their law. An Irish company wanting to trade in different states will benefit from having a single mechanism whereby issues that arise under the agreement can be resolved without having to, separately, take their chance in different states. In the same way, the US sees the same benefits in not having to have separate rules applied in different courts across the EU. In principle, one can see the advantage of this. Many people hoping to engage in negotiations with Asian countries would recognise the merit of having an agreement that would protect investment and that is the backdrop to this.

Poor investor-state dispute settlement agreements have been put in place over the years and many of them have given rise to legitimate public concern that they did not sufficiently protect the government's right to regulate and that they have been managed in a way that has been too secretive and so on. The committee has probably heard many of these objections. During the negotiations in recent times, Europe has been keen to make sure the design of an investor dispute settlement approach would be robust and meet the public needs that have been expressed in various consultations that have occurred, which has been done. There are two source documents, if members want to inform themselves of the protections that have been put into the investor settlement structure. One is the existing Canadian agreement. There is an investor dispute settlement mechanism in the agreement between Europe and Canada, which sets out clearly the limited circumstances where there is blatant discrimination. It is only in such cases that a dispute can arise and they are set out in the agreement.

The second document is Commissioner Malmström's recent paper in which she set out an additional set of protections that she intends to ensure. They set out the absolute right of governments to regulate; the transparency of the mechanism for any adjudication; the fact that the adjudicators must be qualified to be judges and be selected by the governments, that is, the EU and the US - they are not selected by industry; an appeals mechanism; and a provision to either choose to go to the courts or to the dispute mechanism in either jurisdiction whereby one cannot be played against the other. The dispute mechanism cannot be used to overturn domestic court decisions. Many protections have been included to deal with the concerns that have been raised and that is the backdrop.

In an Irish context, we have conducted an evaluation of the potential impact of the agreement. It depends on what is put into a model and we have only speculated on what might be agreed. To allow us to prepare for the agreement we considered where the threats and opportunities might arise and how we should prepare ourselves for those. We had this done by Copenhagen Economics, which is the most reputable source for such modelling. They assumed a 100% tariff reduction, a 50% non-tariff reduction and so on. They made a series of assumptions on what could be achieved and then they ran a model. It gave information, which members will have had access to, on where the potential gains and threats might be.

Overall, it shows that we could see a gain somewhere in the order of €2 billion from a successful agreement. It represents an increase of around 1.1% in GDP, 4% in investment, 1.5% in real wages and the creation of between 5,000 and 10,000 additional exports-based jobs. These are only models and one can dispute the assumptions upon which they are based, but they are helpful in that they show there are significant opportunities in the dairy sector, for example, but there may be what are termed "defensive interests" in the beef area and so forth. The report suggests there could be significant gains in the pharmaceutical sector but other areas could be a cause for concern.

We are a small, open trading economy and we depend on exporting. I am old enough to remember the Anglo-Irish trade agreement of the 1960s and the opening up of EU markets and how these developments transformed and modernised our economy. We employ twice as many people now as we did when we joined the EU, which is a remarkable statistic. That has occurred because we have been an open trading economy and have taken the opportunities presented to us. That said, I agree with those who argue that we cannot be naive. We must view this as a give and take process and protect our interests. In that context, we are determined to ensure we arm ourselves to deal with the threats and to exploit the opportunities which range across different areas. Regulatory co-operation is one area of opportunity which is about trying to take out unnecessary costs that might stand in the way of trade while not in any way diluting our standards of medical, food and labour protection. It is about removing red tape, essentially. There are also opportunities in areas such as the rules governing customs systems and so forth. Energy is on the agenda and for the first time there are two chapters which clearly indicate Europe's interests. The first is a chapter on the SME sector, with Europe aiming to ensure this sector is at the heart of any agreement and will benefit from it, and the second is on sustainable development, which emphasises that this is about maintaining and increasing the standards of environmental and climate protection, labour protection and so forth. Europe is also determined that there will be no interference with the democratic right of Parliament to make regulatory decisions. These issues are nailed into the preliminary discussion documents.

On displacement, it has been estimated that in the overall European context displacement will amount to about 0.7% and will happen over a number of years. Obviously there will be growing sectors and sectors that decline, but the implementation of an agreement like this would not be expected to be a sudden jolt causing rapid change. None the less, we must be alert to the fact that some sectors will come under pressure and we must be prepared for that. Overall, the displacement levels identified in some studies compare favourably with natural displacement levels in Enterprise Ireland and IDA companies of about 5% per annum. There is always a churn in exporting companies, as opportunities and sectors wax and wane. While we must be alert to potential displacement and be prepared, we cannot stand with our finger in the dam trying to stop change from happening in certain sectors. It is about being ahead of the change and trying to position ourselves to take advantage of the new opportunities that will arise. In the long term, that is where a lot of the dynamism of a US-EU agreement could arise. If we can be part of the growth sectors of the future, like the convergence of medical devices and ICT, for example, the so-called internet of things and so forth, we will benefit hugely. Ireland is well placed in that regard because we have a combination of multi-national and indigenous companies operating here. If we get a wider US-EU setting of standards, we could be at the heart of a standard-setting, innovative marketplace. In the longer term, that is where many of the opportunities will emerge from agreements of this nature.

That gives just an outline.

We need to be wide awake in any negotiations and this is no different. Both sides need to be satisfied at the end of this. It goes to the Council of Ministers so each member state must be satisfied and the European Parliament must be satisfied. There are many checks and balances in this process. The negotiation is only under way and it has been very transparent compared with predecessors. Many more documents have been put out for inspection. Stakeholders' meetings are held regularly in order that people can be a part of it and concerns can be flagged well in advance. Commissioner Malmström has been very sensitive and open in how she handles the negotiations. She has been here and she gives access to Ministers, and parliamentarians, including MEPs and so on. She is determined to get a good agreement with which everyone will be happy at the end.