TTIP: What does it mean for the food and beverage industry?

BY JAMES TUMBRIDGE
Partner of intellectual property and litigation, Pillsbury Winthrop Shaw Pittman

Talks are underway between the US and the EU to establish a Transatlantic Trade and Investment Partnership (TTIP). With the deal facing obstacles in the US Congress as well as a growing attack in Europe, businesses leaders might be forgiven for wondering whether TTIP is worth all this bother.

Sadly there are huge inaccuracies being reported in Europe around TTIP’s potential down sides: it’s been described as a Trojan horse for corporations, just a way to claim damages if a government stops them doing business. Fears are raised of countries the world over, being sued and losing huge sums, to these terrible, faceless corporations. Frankly, such hyperbole is misleading. The reality is that TTIP is about creating jobs and growth in the Western economies that are still recovering from the 2008 global financial crash.

TTIP at its heart is not about unregulated business doing as it wishes, it is about free trade. Europe in the form of the EU, for all its good points, has far too many barriers to investment from elsewhere. The USA is no better, as anyone who has ever seen US TV commercials will know; they always distinguish between foreign and domestic. This is a chance to give European business a better path to success in the USA.

Though the biggest challenge and perhaps biggest reward under TTIP may come in the food sector: the food industry, upon which so many jobs depend, has much to gain from the right deal; for example in the recognition of geographical indications. In Europe we have evolved strong and clear protection under EU regulations for regional specialities, ranging from Champagne to Parma ham and Roquefort cheese. However, this does not apply in the US where its regime of regional speciality protection is linked to trade mark law by statute, usually by the employment of certification marks. The US regime presents difficulties for EU food companies, and their concerns are subject to negotiation. So TTIP could provide the chance to tackle the US manufacturers who make products for the US market under names that enjoy regional speciality protection in Europe.

The biggest challenge though may be on the different attitudes to food safety: the US is generally more liberal in what it allows, so genetically modified food is far more prevalent. Over 90% of corn, soya and cotton (cotton oil being used in food) in the US is grown using genetic engineering, whereas the EU has hardly any; indeed many EU states ban GM foods outright. In addition, 80% of pesticides in the USA are banned in Europe, and the level of pesticide residue considered safe in food is far lower in the EU than the USA. Then there is the fact that the EU bans the use of growth hormones in cattle and pigs, unlike the USA. Consequently, free importation of US foods to Europe poses a real concern. If TTIP creates a common standard for food safety then it could radically change the food supply arrangements between our continents, and that might be a huge boon to us all – though this is a tough ask, and food maybe the hardest part of creating a trans-Atlantic free trade area.

Outside of the technical headaches, much of the concern with TTIP is with the Investor-to-State Dispute Settlement (ISDS) procedures. ISDS arbitration is a system of international arbitration designed to protect foreign investors from discrimination or unfair treatment by governments. ISDS arbitration can lead to compensation being paid to the investor who has, for example, had their property confiscated. It is not of itself a right to compensation. It is a process under which a company can make a complaint against a government. It is too easy to forget that in some parts of the world, the court system and judiciary do not feel free to criticise their own government, and the ISDS procedures are about ensuring there is a trustworthy disputes process.

Some critics have suggested that investors should seek redress only through the judicial system of the country where the investment is made, before asserting a claim in investor-state arbitration. But such a requirement undermines the very reason why ISDS is included in most investment agreements – to depoliticise the issue in dispute and to provide for a neutral panel to examine whether a host government has breached its treaty obligations. The scare story also ignores the fact that even without TTIP, a company can always sue the government for breach of contract in the right circumstances.

TTIP has garnered international publicity and prompted a number of protests in recent months.

We must also not forget that the deal is not one way: if rights are given to US companies, then European companies get the same rights in the USA. So there is a mutual desire in both the USA and EU to get this right. What TTIP seeks to do is open up our economies to enjoy closer trade and investment, and to assure both European and US companies that if they make investments, the country they invest in will treat them fairly. Indeed the UK government has set a specific aim to get provisions which protect UK investors from discriminatory treatment in the US.

Does this matter? Returning to food, let’s consider an example: oyster farmers presently cannot export to the USA, due to the different tests used in the USA and EU to ensure they are safe to eat. Their problem is already on the negotiation table, and the EU is asking to open up the USA market for European oysters. Does anyone truly begrudge an oyster exporter the opportunity to sell to the USA, and to know they must be treated fairly under the ISDS system if the USA doesn’t honour the deal?

If we get TTIP right we can create jobs and growth, and reduce the cost of living. The aim is not evil, the drivers are not corporations, TTIP is an opportunity for us all.