Thursday, 21 January 2016
Transatlantic Trade and Investment Partnership: Statements
I am glad to have the opportunity to participate in this debate on the Transatlantic Trade and Investment Partnership because it is an important negotiated trade agreement on which we are embarking. Ireland is a small trading economy and is more dependent on exports than any other economy in the European Union. Our exports of goods and services represent about €200 billion, which is more than the whole of our national income put together. That shows the importance of the scale of exports. When one looks at our export-oriented companies, between them, namely, Enterprise Ireland and IDA Ireland companies, they employ 400,000 people. Exports are at the very heart of our economic activity. It is commonly recognised that for every job within the export-oriented sector, another one is created in the various supply chains and services.
Some 800,000 jobs are directly or indirectly dependent on trade in this economy. That is a huge portion of our economy. Members can understand why free trade and free trade agreements are very important to our country. The negotiation of access to new markets historically has been a big driver of economic development in Ireland. Members will recall that when we joined the European Union many years ago and this was a relatively closed economy and very dependent on agriculture, we had only 1 million people at work throughout the economy. Now we have 2 million people at work, a doubling of the number of those at work.
We have dramatically diversified our economy. We have seen a huge growth in living standards and conditions in our country. Opening up Ireland to trade has been a major part of our historical development. The Acting Chairman will recall, as he has been around long enough as have I, that many of the negotiations around joining the European Union were hotly contested and many people opposed to joining argued to the best of their beliefs that our joining it would sacrifice employment, but we have seen employment double in the economy in the ensuing years. There is a long history of people being concerned about trade agreements and that is appropriate but it also is appropriate to bear in mind that where trade barriers come down and countries get the chance to trade it is to the mutual gain of both countries. The first lesson one learns in economics is about the mutual gains that people get from trade and the potential for growth and development of one's economy. While it is right that negotiators should be vigilant and prepared for every eventuality in a negotiation, it is also important to bear in mind the potential gains that can take place, as our history clearly illustrates.
When one embarks on a strategy of being open to participation in global trade, it imposes certain requirements and disciplines on the way in which one runs one's economy. The recent history of Ireland's boom and bust gives us a very fresh reminder of how a small open economy can forget the importance of being competitive in export markets, and that it will do so as its peril. In the early 2000s when the so-called Celtic tiger economy was at its height, only 1% of the jobs with respect to the jobs growth during the unprecedented growth between 2000 and 2007 were coming from exporting sectors. This was building up an unsustainable reliance on sectors such as construction, the public service and other areas that was not underpinned by a trading competitiveness that is essential for any small open economy.
By contrast, the recovery we have seen in recent years has shown a very different shape. Some 40% of the 136,000 people who are now back at work are directly employed by export oriented companies and one can add another multiplier to that 40% with respect to indirect employment. The recent history of our recovery has been very much centred around our capacity to compete and win in global markets at a time when there was very few sources of buoyancy in our economy. Export growth was the key. That is the context within which Europe has approached the free trade agreement and it has a comprehensive list of trade agreements it is seeking or, in some cases, has already negotiated. Europe has also been struggling for new sources of growth. Opening trade to new markets is crucial for Europe's long-term capacity to create and sustain jobs.
It is commonly recognised that 90% of the growth in the world economy will be outside Europe in the years ahead. We have to negotiate better access and become more committed to those markets where growth will occur in the future. That is very much true of the potential of the EU-US trade corridor as well. About one third of all world trade occurs on that corridor, therefore, it is one that has huge potential importance for Europe and Ireland.
The US is one of Ireland's largest trading partners. Irish goods exports to the US are worth €21 billion. We have very close historical relations with the US and we stand to gain significantly from a successful emergence of a trade agreement provided it does the right things and opens up opportunities for us. It is important we are vigilant in the course of that negotiation. An independent study commissioned by my Department has flagged very significant potential gains, up to €2 billion in terms of GDP, up to 10,000 in terms of extra jobs in exporting capacities and an increase in real wages of 1.5%. Significantly positive opportunities can be achieved through such a trade agreement.
I was particularly pleased that I was in the chair of the EU Presidency when the negotiation of this agreement occurred. It is worth reiterating to the House that when that mandate was negotiated it was founded on some important principles that have shaped the whole debate ever since and that are the bedrock of it. One is that there would be no erosion of the protection of workers or of health, consumer and environmental standards. A very important principle set out at the outset was that there would be no undermining of the right of Europe to regulate in the public interest, nor would there be any undermining of the procedures through which those regulations are developed in a democratic process and that there would be no erosion of the right of countries to run public services in whatever way they choose. That has been endorsed since by a common declaration by both Mike Froman and Commissioner Malmström. Also, there was a commitment that there would be greater transparency in the process of developing this agreement than there was in any previous one, and that has been very much a characteristic of this. In addition and very importantly, any agreement must be approved by the European Parliament and must be agreed in each member state by whatever system that member state has for ratification of those agreements. Those are very important principles and they have continued to dominate the consideration of the negotiations every since.
To summarise the process of what has happened, the purpose of this agreement is to generate jobs and growth by reducing barriers to trade and investment. It started with the appointment of a high level group in 2001, which did the scoping work on it and identified the areas where potential could be developed. We then secured a mandate from member states. A unanimous mandate was given to the European Union, to the Commission, to start negotiations on a very ambitious, historic, deep and comprehensive agreement, and there was very wide ambition on both sides to see this through. To date, there have been 11 rounds of negotiations and they have focused on three separate pillars, namely, market access, regulatory co-operation and rules.
Market access involves what we all would know about with respect to tariff, or non-tariff, barriers to trade in good or services. In terms of the progress on that, a second tariff offer was exchanged, excluding agriculture, and both sides have now arrived at a level of proposal covering 97% of tariff lines. Significant progress has been made on that. In addition, teams have been finalised working through revised services and investment offers which aim at improving the conditions for transatlantic trade in both areas. There has been some discussion on public procurement but, as Members will know, that is particularly important from a European point of view, it is a sensitive one from a US point of view but, from an Irish point of view, it is an area where there are real opportunities to be gained.
The second bloc is around regulatory issues and, essentially, it is focused on co-operation in the area of how regulation is conducted. It is not to change the regulations in either country - those are copperfastened by the principle that each bloc has the right to set its own regulatory approach in terms of public interest - but to reduce the cost of unnecessary red tape by making it easier for companies to comply with both EU and US laws while ensuring food, animal and plant imports are safe within the rules of each respective bloc.
It is about looking at where a pharmaceutical company, for example, has to run through all of the same tests in the United States that it has already completed against the same criteria within the European Union. The intention is to recognise the equivalence of ways in which tests are calibrated, among other issues. There are real opportunities in the more regulated sectors to have some common approaches to develop whereby there will be a recognition of the tests that occur in either. That will not be at the expense of consumers or lowering standards. Under an EU-US trade agreement, there would be no dilution of labour or environmental standards, no change to genetically modified organisms, no dilution of the right to regulate and no interference with public service provision. That was set out in a joint declaration by Mr. Mike Froman and the Commisioner, Ms Cecilia Malmström. The agreement also underpins the EU regulatory and democratic process, in other words, the way in which regulations are developed will remain the same. It is significant that non-tariff barriers of the type in place are probably five or six times greater in terms of economic significance than tariffs.
The third area is rules for trade-related issues and cover such matters as intellectual property rights, for example, so-called geographical indicators, in other words the right to call a product Parma ham if it was not produced in Parma, and energy investment. These issues are the third strand.
To outline some of the progress made, the one issue that has probably caused the most controversy in this House and which will no doubt be a feature in this debate is the investment protection system that it is proposed to include in the treaty. It is right that people are anxious about it and will look very carefully at what is negotiated because there have been some very bad investment protection treaties negotiated in the past. What the European Union is clearly setting out to do is to rectify the defects in some of them. The principle is easy to understand. If an Irish company is trading in 50 US states, it wants an assurance that it does not have to depend on every single state enacting into its law the protections set out in an agreement with the United States. Having an investor dispute settlement system clearly has attractions for Irish companies which will be trading, for example, in the public procurement system and which might face obstacles that are unfair or discriminatory.
The European Union has been very clear, as will be seen in the Canadian agreement, on when such agreements can be utilised. They are very restricted. There must be a denial of justice in criminal, civil or administrative proceedings; a fundamental breach of due process, including a fundamental breach of transparency in judicial administrative proceedings; manifest arbitrariness; targeted discrimination on manifestly wrong grounds such as gender, race or-----