The most important free trade agreement you’ve never heard of

The most important free trade agreement you’ve never heard of

BRISTOL, UNITED KINGDOM - AUGUST 11: In this photo illustration a laptop displays the Amazon website on August 11, 2014 in Bristol, United Kingdom. This week marks the 20th anniversary of the first online sale. Since that sale - a copy of an album by the artist Sting - online retailing has grown to such an extent that it is now claimed that 95 percent of the UK population has shopped online and close to one in four deciding to shop online each week. (Photo Illustration by Matt Cardy/Getty Images)

Nearly two dozen countries have spent the last three years wrangling over a trade deal that will set the rules governing trade in services for much of the world for decades to come.

Yet you’ve likely never heard of it.

Other mammoth trade deals have triggered demonstrations across the EU and the U.S. while the so-called Trade in Services Agreement’s technicalities are being worked out largely without political pushback. In fact, it seems to have made it to the homestretch. 

The 18th round of TiSA negotiations concluded June 3, the next round begins Friday, and negotiators and national ministers appear to be pushing hard for the deal to be concluded by the end of the year. In October, a new market access offer will be presented by the negotiating countries for discussions. In November, parties meet again in Geneva and then again in December, “hopefully to conclude the agreement,” a Commission source said.

As more evidence of the deal’s potential scope, consider that the United States moved to keep China out of the deal just as it did with the Trans-Pacific Partnership, the free trade agreement between Washington and 11 other Pacific Rim countries. The EU wanted to include China. Now, if Beijing is allowed to join after negotiations conclude, it would have to adopt the rules set out by TiSA without getting any say.

TiSA deals with barriers to services trade such as the conditions by which lawyers from Norway might be able to practice in the United States.

But even when whistleblower platform WikiLeaks exposed draft copies of some of the proposed chapters of the deal late last month, the documents barely made a splash.

The only real frustration over the deal appears to be inside the rooms where negotiators have dithered over details about access to the U.S. maritime sector, European Union data privacy rules and e-commerce.

“Most trade deals include a chapter on services. But a negotiation such as TTIP is also expected to address where regulatory differences are unnecessary barriers to trade in areas such as  agricultural products and geographical indicators,” said Joshua Meltzer, a senior fellow at the Brookings Institute, referring to major sticking points in the Transatlantic Trade and Investment Partnership talks between the U.S. and EU.

“We are concerned that TiSA will restrict the ability of the EU and its member states to maintain their right to regulate in the future” — Johannes Kleis, European Consumer Organization

TiSA deals with barriers to services trade such as the conditions by which lawyers from Norway might be able to practice in the United States or German engineers might gain easier visa access to Mexico.

“People simply don’t get excited about such issues, and the long-term consequences of such a deal are much harder to grasp,” Meltzer added.

Among the few groups that have voiced their worries is the European Consumer Organization (BEUC).

“We are concerned that TiSA will restrict the ability of the EU and its member states to maintain their right to regulate in the future,” spokesman Johannes Kleis said.

Some of TiSA’s negotiating parties propose that measures authorizing the supply of a service be based on “objective” and “transparent” criteria, potentially opening up the EU to disputes from other members of the pact that argue a regulation doesn’t meet the objective standard, the BEUC warns.

“Let’s say the EU plans to pass legislation for a certain service to have to respect higher consumer protection standards and that such legislation affected trade with a TiSA partner,” Kleis said. “This trade partner could urge the EU to reduce its ambition, saying the measure would not be necessary.”

TiSA also means deciding how a platform such as Amazon, as well as any other e-commerce, can treat data from a purchase in Europe or in Australia. At the moment the issue of data flows is a sticking point in the TiSA negotiations, with a rift between the U.S. and the EU. The U.S. favors a free flow of data across negotiating countries, while the EU was willing to concede less on the data front.

According to negotiators who took part in the 18th round, the EU is waiting for approval of the EU-U.S. “privacy shield,” an agreement that would require companies to transfer data across the Atlantic in a way that complies with EU privacy protections before moving forward. That is set to happen next week. If the deal is signed — as the European Commission has announced is likely multiple times over the past weeks — the negotiations on data flows on hold in TiSA might unlock or be resolved during coming rounds of talks.

That’s a bad thing from some viewpoints.

“If such an agreement were to be reached it would be extremely difficult to be reversed and that worries us,” said Myriam Vander Stichele of SOMO, the Centre for Research on Multinational Corporations, an NGO.

The European Commission, however, has given assurances that it is committed to protecting public services and that any decision to deregulate or privatize them is entirely up to national or local governments.

“The EU has never made commitments regarding publicly funded health services or insurance portability in any of its free trade agreements and does not intend to do so in the future,” TiSA included, the Commission said in a statement.

Setting rules for decades

Once TiSA takes effect, countries representing 70 percent of the world’s services trade will have a common set of rules governing those services, giving them hugely powerful leverage on countries outside of the pact.

“It’s nearly certain that those countries outside of TiSA will want access to the biggest common service market on the planet,” an official from one of the negotiating nations told POLITICO during the last round of negotiations in Geneva. That includes China.

But TiSA’s ultimate aim is even more ambitious. “Once the agreement comes into force we are hoping to integrate it into the World Trade Organization, in other words, have its rules accepted by all 162 WTO members and become the benchmark for global trade in services,” one European Commission source told POLITICO.

Over the past 20 years, trade agreements have shifted from what is known as a multilateral approach including all WTO countries to a plurilateral one involving a subset of their number. The shift was the response of very slow progress in multilateral trade deals given that all countries have a de facto veto power, and progress on services has stalled for the last two decades.

“If we get these negotiations right, TiSA is an opportunity for Europe to consolidate its position as a world leader in services trade” — Viviane Reding, MEP

“It has been more than 20 years since the conclusion of a major trade agreement on services has been made,” said Mark Wu, an assistant professor at Harvard Law School who specializes in international trade law.

Trade in services accounts for a fifth of global trade, a number that is projected to increase steadily over the next decades as developing countries move from manufacturing and industrial-based economies to more service-based economies.

“If we get these negotiations right, TiSA is an opportunity for Europe to consolidate its position as a world leader in services trade,” said Viviane Reding, a Christian Democrat MEP and the European Parliament’s rapporteur on the pact. “We need to be standard-makers today, not to be standard takers tomorrow.”

International service exports were valued at about $5 trillion, a nearly 5 percent increase from a previous year, according to World Trade Organization data from 2014, the most recent available. Total global exports for 2014, including goods, were valued at $24 trillion, up by 1.2 percent from the previous year. Today, nearly 80 percent of America’s gross domestic product and 75 percent of the EU’s GDP is made up by the service sector.

The elephant outside the room

Understanding TiSA means looking at who is sitting around the negotiating table as well as those who are not. Beijing applied to be part of the negotiations when they began three years ago, but the U.S. blocked its application, much to the annoyance of other negotiating partners, the EU included.

“China is a heavyweight. If it was included in the negotiating process, the U.S. would have to negotiate taking into account very different positions from its own,” a negotiator in Geneva told POLITICO, speaking on the condition of anonymity. “The U.S. wants to decide the rules and then have every other country that wants to join TiSA simply follow them.”

A senior representative of the U.S. private sector during a visit to Brussels confirmed that sentiment to POLITICO.

There are multiple potential points of disagreement between the U.S. and China. One of the most difficult is data flows. The United States has had some difficulty settling the issue with the EU. If it were to negotiate with China — a country where data is highly controlled by the central government — the differences would be enormous.