Sorini Samet & Associates LLCwww.ssa-dc.com Consulting and Government Affairs Practice ©Sorini Samet & Associates LLC th Street, NW |Suite 930| Washington, DC 20005| March 2013 Transatlantic Trade and Investment Partnership (TTIP) From the United States’ Policy Perspective th Street, NW Suite 930 Washington, DC

Sorini Samet & Associates LLCwww.ssa-dc.com 1)Overview 2)Simultaneous Negotiations 3)Fast Track/Trade Promotion Authority 4)Most Difficult Hurdles TTIP from the U.S. Perspective

Sorini Samet & Associates LLCwww.ssa-dc.com Leaders in Global Economy U.S. and EU represent: – Almost half of the world’s GDP – Approx. 30% of world trade in goods and services When negotiations are complete, TTIP will be the biggest bilateral trade deal ever negotiated Source: World Bank *TPP (12 countries) will represent 60% of global GDP

Sorini Samet & Associates LLCwww.ssa-dc.com Investment U.S. and EU have directly invested more than $3.7 trillion in each other’s economy EU only gained competency to negotiate EU-wide foreign investment in 2009 Trade and Investment Trade 2012 U.S. Exports to EU – $458 billion in goods and services Goods - $265 billion Services - $195 billion – EU represented 21% of U.S. exports

Sorini Samet & Associates LLCwww.ssa-dc.com U.S. Goal: Elimination of all tariffs – Substantial elimination of tariffs upon entry into force, and – Transition periods where necessary for sensitive products. Tariffs already relatively low – Average US most-favored-nation (MFN) tariffs are 3.5% – Average EU MFN tariffs are at 5.2% However, in absolute terms a zero-tariff agreement is still significant – A 2010 study estimated that a full elimination of tariffs could Increase U.S. exports to the EU by up to $53 billion, or 17 %, and Increase EU exports to the U.S. by up to $69 billion, or 18%. Market Access: Goods

Sorini Samet & Associates LLCwww.ssa-dc.com – Tariff Rates USTR notification to Congress identifies a goal of obtaining “fully reciprocal access to the EU market for U.S. textile and apparel products.” Avg U.S. MFN tariff on clothing – 11.7% (peak rate significantly higher) Avg EU MFN tariff on clothing – 11.5% (peak rate higher) – Rules of Origin USTR notification highlights the establishment of rules of origin that “ensure that duty rates under an agreement with the EU apply only to goods eligible to receive such treatment and define procedures to apply and enforce such rules.” Market Access for Textile and Apparel

Sorini Samet & Associates LLCwww.ssa-dc.com U.S. industry groups and other interested parties have generally been supportive but cautiously optimistic about the deal – Support generally from business groups like U.S. Chamber of Commerce – Agricultural groups welcome the talks as long as it addresses SPS issues – NGOs like the AFL-CIO have indicated TTIP could be a beneficial agreement if certain standards are maintained Congress has expressed similar sentiments – In February, Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) laid out priorities for the agreement, emphasizing that while the agreement is “an enticing opportunity” the agreement must lower agricultural barriers and require strong intellectual property protections – Also in February, US Senators Rob Portman (R-Ohio) and Bill Nelson (D-FL) led a bipartisan group of 17 Senators in writing a letter to the Administration that welcomes the agreement but specifically calls for the elimination of unnecessary trade and regulatory barriers in all sectors, including difficult areas like agriculture Support and Opposition

Sorini Samet & Associates LLCwww.ssa-dc.com U.S. FTANegotiations BeganSignedEntry-into-forceSenate ApprovalHouse Approval AustraliaApr-035/18/20041/1/20057/15/20047/14/2004 Bahrain1/26/20049/14/20041/11/200612/13/200512/7/2005 Canada9/26/19851/2/19881/1/19899/9/1988 7/9/1988 ChileDec-006/6/20031/1/20047/31/20037/24/2003 Colombia5/18/200411/22/20065/15/201210/12/2011 Costa Rica1/8/20035/28/20041/1/20096/30/20057/28/2005 Dominican Republic1/8/20035/28/20043/1/20076/30/20057/28/2005 El Salvador1/8/20035/28/20043/1/20066/30/20057/28/2005 Honduras1/8/20035/28/20044/1/20066/30/20057/28/2005 Israel1/1/19844/22/19859/1/19855/23/19855/7/1985 Guatemala1/8/20035/28/20047/1/20066/30/20057/28/2005 NAFTA2/5/199112/17/19921/1/199411/20/199311/17/1993 Jordan6/6/200010/24/200012/17/20017/31/20019/24/2001 South Korea2/2/20066/30/20073/15/201210/12/2011 MoroccoJan-036/15/20041/1/20067/21/20046/22/2004 Nicaragua1/8/20035/28/20044/1/20066/30/20057/28/2005 Oman11/15/20041/19/20061/1/20096/29/20067/20/2006 Panama4/26/20046/28/2007N/A10/12/2011 PeruMay-044/12/20062/1/200911/2/200712/4/2007 SingaporeDec-005/6/20031/1/20047/31/20037/24/2003 Current U.S. FTAs

Sorini Samet & Associates LLCwww.ssa-dc.com Trans-Pacific Partnership (TPP) began as expansion of Trans-Pacific Strategic Economic Partnership (TPSEP) (Signed on 6/18/2005, effective 5/28/2006) – Chile, New Zealand, Singapore and Brunei – U.S. entered into the talks on 10/22/1008 – Australia, Vietnam and Peru announced participation in November 2008 – Malaysia joined in October 2010 – Canada and Mexico joined in October 2012 – Japan joined in June 2013 *goal is to complete TPP by Fall 2013 – “early harvest” FTAs Being Negotiated

Sorini Samet & Associates LLCwww.ssa-dc.com NAFTA & Uruguay Budget Cuts – Furlough – DOD providing USTR flights Agreements already in force – which will supersede? Simultaneous Negotiations

Sorini Samet & Associates LLCwww.ssa-dc.com – Trade policy is developed by both the Executive and Legislative Branches of the U.S. Government – Article I, Section 8 Gives Congress the power to “regulate commerce with foreign nations…and to… lay and collect taxes, duties, imposts and excises…” – Article II, Section 2 Gives the President exclusive ability “to make Treaties, provided two thirds of the Senators present concur” The U.S. Constitution

Sorini Samet & Associates LLCwww.ssa-dc.com Need for fast track Trade Expansion Act of 1962 – Congress granted the President the authority to negotiate reduction or elimination of tariffs and required the President to submit the final agreement for Congressional Review and statement of why it was concluded – GATT Kennedy Round ( ) results required the U.S. to make changes to its domestic law for compliance Non-tariff barriers: Customs valuation and Anti-dumping agreements – In 1966, Congress passed a resolution opposing the “nontariff commitments” made by the Johnson Administration during the negotiations – Led to the debate that created the … Fast Track Authority

Sorini Samet & Associates LLCwww.ssa-dc.com Legislative History Trade Act of 1974 (P.L ) – The committee recognizes… that such agreements negotiated by the Executive should be given an up-or-down vote by the Congress. Our negotiators cannot be expected to accomplish the negotiating goals.. If there are no reasonable assurances that the negotiated agreements would be voted up-or – down on their merits. Our trading partners have expressed an unwillingness to negotiate without some assurances that the Congress will consider the agreements within a definite time-frame.” Administration – Provided the authority to the President to create international trade agreements that affected both tariffs and non tariff barriers – Required the President to: Consult with Congress (relevant committees) during negotiations Notify Congress 90 calendar days before signing an agreement Grant accreditation of 10 members of Congress to act as advisers to U.S. delegation of negotiators Congress – Limited time to consider implementing bills before they are brought to the floor – Once on the floor: up or down vote, cannot filibuster or add amendments Extended for five years, ending 1/2/1980 Presidential authority to proclaim tariff modifications expired 1/2/1982 Participated in GATT Tokyo Round ( ) Fast Track Authority

Sorini Samet & Associates LLCwww.ssa-dc.com Trade Agreements Act of 1979 (P.L ) – Extended Presidential authority to enter agreements on non-tariff barriers – Did NOT extend Presidential tariff modification authority – Extended fast track authority until January 2, 1988 – Implemented the GATT Tokyo Round Agreements The Trade and Tariff Act of 1984 (P.L ) – Added requirement that the President notify House Ways and Means and Senate Finance Committee of intention of entering negotiations Provided fast track denial if either Committee disapproved within 60 days – Added that agreements that lead to tariff modifications be subject to congressional approval via implementing legislation – Negotiated and implemented the U.S.-Israel and U.S.-Canada FTAs Fast Track Authority

Sorini Samet & Associates LLCwww.ssa-dc.com Omnibus Trade and Competitiveness Act of 1988 (OTCA) (P.L ) – Extended President’s authority to enter into agreements until 6/1/1993 – Extended Fast Track procedures for agreements entered into before 6/1/1991 and if requested by President until 6/1/1993 – Added ability for Congress to derail already authorized agreements under Fast Track and to block extension of fast track past original expiration date if enough progress has not been made – GATT Uruguay Round was concluded, after an additional extension of TPA Special law (H.R – P.L ) was passed to extend authority and implementing procedures until 4/16/1994 – Negotiated and Implemented NAFTA in 1993 (P.L ) – *expired for 8 years between Fast Track Authority

Sorini Samet & Associates LLCwww.ssa-dc.com Hiatus HW&M and SF reported legislation to renew it in 1997, but House Republicans pulled it from the floor before a vote, per the request of the Clinton Administration In 1998, the House voted for fast track, but the bill failed to pass ( ) – Although both parties supported fast track, no one could agree on how labor and environmental issues should be addressed in trade agreements negotiated under renewed authority Republicans wanted limited coverage Clinton Administration and Congressional D’s preferred broader coverage No resolutions were adopted at the WTO Ministerial meeting in Seattle in 1999 No major trade negotiations occurred during this time Fast Track Authority

Sorini Samet & Associates LLCwww.ssa-dc.com Trade Act of 2002 (P.L ) Renamed to “Trade Promotion Authority” (TPA) Authorization to negotiate is only granted if the President determines that foreign trade is “unduly burden(ed) and restrict(ed) and the purposes, policies, priorities and objectives of the Trade Act will be promoted” by the Trade Act of 2002 Included labor and environmental provisions as “principle negotiating objectives” but did not mandate the inclusion of minimal enforceable labor standards in trade agreements Added the Congressional Oversight Group (COG) Added Congressional ability to veto a negotiated agreement Added 5 limitations on negotiation of agreements regarding tariff barriers Added 9 broad trading negotiating objectives Implemented Chile, Singapore, Australia, Morocco, the Dominican Republic, the Central American countries, Bahrain, Oman and Peru FTAs Signed South Korea, Panama and Colombia FTAs FTAs with Malaysia, Thailand, UAE and members of the South African Customs Union (SACU) were also of interest to the United States – *expired on July 7, 2007 Trade Promotion Authority

Sorini Samet & Associates LLCwww.ssa-dc.com Implementation of FTAs with Korea, Colombia and Panama – Signed in 2006 and 2007 – President Bush sent the Colombia FTA to the Congress without consultation or notice – Nancy Pelosi then changed the House Rules and removed the 90-day time table Congress had to consider – Agreements were reopened for negotiations in 2010 under President Obama and updated agreements’ implementing legislation was passed on October 12, 2011 – Went into effect on: Korea - March 15, 2012 Colombia - May 15, 2012 Panama – October 31, 2012 Trade Promotion Authority

Sorini Samet & Associates LLCwww.ssa-dc.com Analysis of TPA evolution Drastic increase of Congressional oversight and involvement throughout entire negotiation process Reduction of Presidential negotiating power “up or down” Congressional vote is no longer being applied Trade Promotion Authority

Sorini Samet & Associates LLCwww.ssa-dc.com Negotiations for TPP & TTIP have successfully been initiated despite expiration of TPA Unprecedented with the exception of WTO Ministerial Meeting in Seattle in 1999 Recent Congressional criticism of USTR’s lack of transparency during TPP negotiations Trade Promotion Authority

Sorini Samet & Associates LLCwww.ssa-dc.com This summer? Coupled with … – Customs Reauthorization – GSP Expiration (July 31, 2007) – MTBs Trade Promotion Authority

Sorini Samet & Associates LLCwww.ssa-dc.com 1)Agriculture 2)Government Procurement 3)Regulatory Issues and Non-Tariff Barriers 4)Aircrafts (maybe) Most Difficult Hurdles

Sorini Samet & Associates LLCwww.ssa-dc.com EU tariffs are generally high on agricultural goods – Examples Dairy – Avg U.S. MFN tariff on dairy – 19.1% – Avg EU MFN tariff on dairy – 55.2% Sugar – Avg U.S. MFN tariff on sugar – 16.6% – Avg EU MFN tariff on sugar – 29.1% Agriculture

Sorini Samet & Associates LLCwww.ssa-dc.com Agriculture

Sorini Samet & Associates LLCwww.ssa-dc.com Agriculture

Sorini Samet & Associates LLCwww.ssa-dc.com Sanitary and Phytosanitary sector (SPS) – Genetically Modified Organisms (GMOs) – Chemicals – EU's approval system for biotechnology products – Documentation requirements on U.S. exports of cherries Technical Standards Registration, Evaluation and Authorization of Chemical (REACH) Toxic Substances Control Act (TSCA) Agriculture

Sorini Samet & Associates LLCwww.ssa-dc.com Subsidies Beef quotas – Never filled because of the hormone issue – Should be expanded under TTIP, but wont be helpful unless SPS issues are also addressed Agriculture

Sorini Samet & Associates LLCwww.ssa-dc.com EU draft mandate seeks access to sensitive fields of defense and security – Under the Government Procurement Agreement (GPA) the US and EU have previously opened up access to some non-sensitive defense items – US generally excludes sensitive defense and security access from its free trade agreements Extensive procurement commitments may conflict with "Buy America/n" restrictions and other carve outs, including those for small businesses. EU political will to push for defense procurement access unclear – The draft proposal is facing opposition from some EU countries (e.g. France) and may not be included in the final mandate or may not be pushed in the final agreement Government Procurement

Sorini Samet & Associates LLCwww.ssa-dc.com EU seeking greater access to U.S., public utilities market – Challenges: Consent would need to be obtained from state/local level in U.S. which could be a burdensome process EU seeking greater commitments at U.S. state/local level – According to Inside U.S. Trade, currently, only 37 of 50 U.S. states are covered under the GPA. Government Procurement

Sorini Samet & Associates LLCwww.ssa-dc.com Considered more costly and harmful than tariff barriers – EU Trade Commissioner De Gucht estimates that such barriers are equivalent to a traditional imports tariff of 10-20%. Goal is to reduce barriers in – Sanitary and phytosanitary sector E.g., EU's approval system for biotechnology products; EU ban on beef raised with artificial growth hormones; documentation requirements on U.S. exports of cherries. – Restrictive administration of tariff-rate quotas and other technical barriers to trade like redundant or burdensome permitting, licensing, and certification. – Other disciplines on regulatory coherence, including early consultations on significant regulations, use of impact assessments, periodic review of existing regulatory measures, and application of good regulatory practices. Challenge: Harmonizing standards while still providing a high level of health, safety, and environmental protection Regulatory Issues and NTBs

Sorini Samet & Associates LLCwww.ssa-dc.com Consulting and Government Affairs Practice ©Sorini Samet & Associates LLC th Street, NW |Suite 930| Washington, DC 20005| March 2013 Questions?