The Transatlantic Trade and Investment Partnership (TTIP) - what's the deal? The EU and the US are currently engaged in negotiations on a major free trade agreement with the aim to cut tariffs and regulatory barriers. What are the potential consequences for employment law and workers rights? This article by Matt Ward of Lewis Silkin explores the issues.

The European Union and the United States are presently engaged in behind-closed-doors negotiations on a major trade deal that could make it easier to buy and sell goods and services between Europe and the States. 

The EU believes the deal will create jobs and have little or no impact on employment rights, but unions and some non-governmental organisations (NGOs) are less sure.  They are worried the deal will have far-reaching negative consequences, including on rights in the workplace.  Are we about to see a transatlantic trade-off of European employment protections?

The Transatlantic Trade and Investment Partnership

Discussions have been taking place between the two prospective partners since mid-2013 on the so-called Transatlantic Trade and Investment Partnership (TTIP).  The seventh round of talks is due to take place in Maryland from 29 September to 3 October 2014.  The official line from the EU is that TTIP will facilitate the trading of goods to and from the US.  As well as cutting tariffs, the idea is that TTIP will remove barriers beyond the border – such as differences in technical regulations, standards and approval procedures.

The underlying concern is that the EU's and US's mismatched rules and regulations are often costly for companies – for example, pharmaceutical firms – who want to sell their products across both markets.  TTIP will make the present patchwork of different rules and regulations set by the EU and US more compatible.  The ideal outcome is that companies will only need to comply with a single set of processes and procedures before they can put their products on shop shelves on both sides of the pond.  The desire for greater harmonisation of standards and regulations is, however, creating disharmony among groups with an interest in protecting employment rights.

Side effects on employment rights?

Rather than seeing TTIP as an economic elixir, many unions and NGOs are concerned about the proposed deal and are not persuaded by the EU's promise that it will promote growth and create jobs.  The European Trade Union Confederation, the World Development Movement and Unison, among others, predict that any economic benefits delivered by TTIP will have harmful side effects on labour relations and employment rights. 

According to a number of such stakeholders, the consequences of TTIP would include a freeze on new workplace laws, the undermining of international labour relations standards and a reduction in existing employment protections.  It's worth considering the validity of each of these concerns in turn.

New labour laws in the ice cooler?

Claims that TTIP will have a chilling effect on the passing of new labour relations and employment laws among EU member states centre on proposed Investor-State Dispute Settlement (ISDS) rules, which are expected to be included in TTIP.  These rules would allow large corporations to sue national governments for taking actions they regard as “expropriation” - for example, where a government legislates in a way that reduces a corporation’s ability to make a return on its investment. 

Opponents of TTIP claim this might include situations where large corporations believe their ability to make a profit has been hindered by new employment laws.  The oft cited example is of the use of ISDS mechanisms to sue the Egyptian government for increasing the minimum wage.

According to various interest groups, the ISDS rules under TTIP would involve an international arbitration process that bypasses and overrides domestic judicial systems.  National governments would have to pay compensation if they lost cases and reimburse the costs of cases even if they won.  As a result, it is argued, the mere threat of being taken to arbitration will persuade national governments to abandon plans to introduce new employment regulation.

Even when national governments are not under threat of legal action, there is a concern that ISDS rules would create a “regulatory chill” preventing national governments from regulating in the public interest for fear of litigation.  The risk of facing claims like those encountered by the Egyptian government could, it is feared, dissuade national governments from enhancing employment benefits or improving worker protections.

The EU’s response to such concerns is apparently that national governments will retain the right to adjust and modify their employment laws and TTIP will not automatically trump existing EU workplace protections.  Any repeals or amendments of EU laws and regulations would have to be approved by the EU member states and the European Parliament. 

In March 2014, the EU published a consultation document on the ISDS rules it is seeking to include within the TTIP.  This clarified that a national government could be held responsible for breaching its obligation to give investors fair and equitable treatment only in respect of breaching of a limited set of basic rights.  These include the denial of justice, disregard for the fundamental principles of due process, targeted discrimination on grounds of gender, race or religious religion, and abusive treatment.

TTIPing workplace rules against employees?

There is a separate argument that TTIP could lead to workers’ rights and protections being downgraded where the negotiators identify them as “barriers” to trade.  Interest groups point out that employment rules and agreements are explicitly one of TTIP’s regulatory targets, creating the risk that existing rights and regulations might become bargaining chips.  The concern is that current workplace protections will not be enshrined in the wording of TTIP – or worse, that some will be treated as red tape that can be cut for the sake of reducing the cost of doing transatlantic business.

There are specific concerns that the US has not ratified core conventions of the International Labour Organization (ILO).  Whereas the EU has historically included employment and union rights in trade agreements similar to the TTIP, interest groups point to the US’s lack of commitment to respecting and implementing internationally recognised labour standards.  They fear that TTIP might enable an emasculation of workplace protections, undermining the standing of the ILO.

The EU, however, appears to be committed to maintaining the principles and rules set out in the 1998 ILO Declaration on Fundamental Rights and Principles at Work and the 2008 ILO Declaration on Social Justice for a Fair Globalization 2008.  According to the EU’s initial position paper for the TTIP talks, its opening stance on employment rights is based on both of those documents.  This suggests that the European negotiators have marked out the 1998 and 2008 declarations as “lines in the sand” on employment rights which they will be unwilling to concede.  Indeed, the EU would like to see TTIP lead to further ILO standards and conventions and has expressed the wish that it might promote the ILO’s “decent work” agenda.

EU trade agreements have historically included articles on multilateral labour standards and agreements.  Such clauses have traditionally included each party’s commitment to dialogue on trade-related labour issues, the promotion and effective implementation of internationally recognised core labour standards (as contained in ILO conventions) and freedom of association and recognition of the right to collective bargaining.  It will be interesting to see what, if any, articles along these lines are included in the text of TTIP when it becomes available.

A race to the bottom? Reducing unnecessary regulation

A further argument made by some unions and NGOs is that TTIP’s central aim – to reduce unnecessary regulation by harmonising standards across the EU and US – will inevitably lead to a lowering of the established European safeguards for workers.  In other words, the drive for compatibility between both regimes will lead to the adoption of “lowest common denominator” employment regulation. 

The EU, somewhat defensively, has offered reassurances that TTIP will not lead to lower workplace standards or conditions for employees.  While it has not provided any detail on what it perceives to be the risks of any deal with the US in that respect, it has stated that it expects TTIP to include a chapter specifically devoted to labour and the environment.  The EU’s initial position paper emphasises that it is not willing to agree a deal that compromises the rights of workers and talks about ensuring that increased trade “...does not come at the expense of... ...labour rights”. 

Yet despite this, there is also a suggestion in the EU's position paper that it could be persuaded to consider some reductions in current levels of workplace protection where domestic labour standards are used as a form of “disguised protectionism”.

Fair trade or trade-off?

No-one can predict with any certainty what overall impact TTIP will have, if any, on labour relations.  Nor is it possible to forecast how the agreement may shape specific employment laws. 

An alternative analysis to the trade union/NGO arguments outlined above is that TTIP will bring significant benefits to businesses, while having negligible negative consequences for employment rights.  There are, after all plenty of EU labour laws that businesses perceive to be archaic, bureaucratic barriers to trade while affording no significant benefits to workers.  For example, smaller businesses in low-risk lines of work may understandably query whether it should be necessary for the EU to require them to keep written health and safety assessments. 

With some justification, entrepreneurs often voice reservations about expecting their fledgling businesses to implement every latest EU regulation or directive when they need to be focused on winning new work.  Rapidly expanding, fast-evolving firms may, in particular, consider complex rules on employee consultation to be unnecessarily oppressive.  TTIP could, it is argued, provide a welcome impetus towards ejecting some the more burdensome EU labour laws in favour of new, streamlined, transatlantic standards. 

In reality, however, TTIP is unlikely to usher in a regulatory revolution - nor will it lead to the spectre of a legal “wild west” dominated by corporate cowboys warned of by some interest groups.  The EU has repeatedly reassured interest groups that TTIP will have no adverse impact on employees’ rights.  It contends there will be no general lowering of workplace standards or conditions, existing ILO conventions will be stay in place and national governments will retain powers to modify their labour relations and employment laws.  Changes in this area will be limited to situations where workplace regulation effectively blocks companies from selling their goods or services abroad.

The new European Commission president Jean-Claude Juncker, in his July 2014 political agenda, promised a “reasonable and balanced trade agreement with the US” but was adamant that he would “not sacrifice Europe’s safety, health, social and data protection standards or our cultural diversity on the altar of free trade”.

How far will Mr Juncker be able to deliver on this in the sphere of employment law?  For every EU reassurance on workers’ rights, there is another interest group pamphlet, campaign or blog warning that TTIP will have a damaging impact.  Until we see the proposed wording of the agreement, it is too soon to say whether such arguments are justified or mere scaremongering.  What is certain is the time has not yet come for EU employers and workforces to say an unreserved “howdy” to US-style labour laws.

By Lewis Silkin LLP


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