Commission rejects MEPs’ request for full ban on ratchet and standstill clauses in TiSA

Commission rejects MEPs’ request for full ban on ratchet and standstill clauses in TiSA

By Joanna Sopinska for EU Trade Insights

The European Commission has rejected a recommendation put forward by the European Parliament (EP) in February’s resolution to fully exclude the application of the standstill and ratchet clauses in the Trade in Services Agreement (TiSA) currently being negotiated between the EU and 22 countries, including Australia, Canada, the US, Norway, South Korea and Turkey.

“This would bring the negotiations to an end,” Christophe Kiener, EU Chief Negotiator for TiSA told the EP’s International Trade Committee (INTA) on 30 June. “This would be the end of TiSA,” he added, arguing that “there is a lot to gain from having these clauses in the agreement.” “The EU wants a more reciprocal opening of the markets,” Kiener explained, stressing that full exclusion of the standstill and ratchet clauses would be “counterproductive.”

In a resolution adopted in February this year, the EP requested that these two clauses not be applied to market access and several “sensitive” sectors, such as public and cultural services, public procurement, Mode 4, transport, and financial services. The EFDD group supported by, inter alia, the Greens and the Socialists managed also to add “national treatment commitments” to the list of areas where the standstill and ratchet clauses cannot apply, providing for their full exclusion from TiSA.

“On the Parliament’s requests to fully reject ratchet and standstill clauses, the Commission wishes to stress that these clauses are an important pillar of the TiSA architecture, as negotiated among all TiSA members,” the Commission said in a letter seen by this website on the follow-up to the EP’s resolution.

“Rejecting ratchet and standstill clauses at this late stage of the negotiations would not only have a negative impact on the ambition of the Agreement but would also bring welladvanced negotiations back to the starting point,” the Commission added, noting that “the ratchet and standstill clauses were supported by the European Parliament in its 2013 Resolution on TiSA.”

  • Standstill clauses effectively freeze the degrees of regulation in particular sectors, and parties to the agreement are no longer free to implement stricter regulatory provisions.
  • Ratchet clauses effectively impede parties to the agreement from reversing liberalisation ceilings already in place. Once a sector is liberalised, there can be no turning back.
  • Both clauses do not prevent TiSA parties from introducing any new regulations as long as it is done in a non-discriminatory manner.

Kiener stressed that the two clauses apply only to national treatment.

The EU’s position in the TiSA negotiations is based on a hybrid approach:

  • positive listing regarding market access, which is not subject to ratchet and standstill clauses (the EU/Member States are allowed to go back on previous decisions to open the market in a specific sector)
  • negative listing for national treatment which is subject to ratchet and standstill clauses (where parties decide to apply non-discriminatory measures, i.e. granting national treatment to foreign companies in a specific opened sector, they cannot go back).

The EP’s rapporteur on TiSA, Viviane Reding (EPP) expressed her disappointment with the Commission’s “clear no to the ratchet and standstill clauses.”

The Green party’s vice-president and trade spokesperson Ska Keller backed Reding, stressing that “it is not enough” that the two clauses “only apply to national treatment.”

Kiener replyed stressing that his role is to “defend the EU interests beyond going into rhetoric whether it is democratic or not.” “I happen to operate under the negotiating mandate, which is in conflict with Parliament’s request,” he added.

Public services

The Commission also warned against the full exclusion of public services from the scope of negotiations through the gold standard clause, which had been proposed by the Parliament.

“I see a very significant risk if we were to try to redraft our public services reservations as suggested by the European Parliament,” Kiener said.

“Opening up this debate in a pro-active way in a situation when there is absolutely no threat to our public services may have a counterproductive effect,” he added, arguing that a “broad carve-out” could be in a breach of WTO rules.

The EP’s report lists a number of red lines, including a demand for all public services and audio-visual services to be excluded from the scope of the negotiations.

“The Commission considers that the EU reservations on public utilities and sector-specific reservations provide the same safeguards for public services as the potential gold standard clause advocated by the Parliament,” the Commission said in its letter.

“Changing the EU reservation in TiSA now could open the door to a a contrario reading and potentially weaken the value of the EU reservations in GATS,” it added, insisting that “it is in the EU interest to decide on the scope of inclusion of public services unilaterally and not via broad horizontal carve-outs negotiated by all participants, which would give other TiSA participants the possibility to alter the high level of protection granted by the reservations in the EU offer.”

“There is a lot of criticism in the Parliament and in the outside world on the public services,” Reding said. “For us public utilities is a very good clause but not perfect as it applies only to mode 3 but not to mode 1 and 4. It applies only to monopolies but not to quotas and local content and it applies only to market access and not to national treatment. That is a worry brought to us again and again by public services representatives,” she added.

“On public services, we have to look at facts, I’m happy to discuss it based on facts,” Kiener replied.

TiSA is a plurilateral agreement currently being negotiated amongst 23 parties, with the EU counting as one, and designed to further liberalise services markets. It is supposed to be a stepping-stone towards a new global treaty on trade in services, under the auspices of the World Trade Organisation. Together, the 23 parties to the TiSA negotiations account for around 70% of global trade in services.

Next round of talks

The discussion on TiSA took place ahead of the 10-day next negotiating round starting on 8 July in Geneva. The EU hopes that this and the next round scheduled for September will help bring the negotiations closer to a conclusion at the end of this year. The 23 teams taking part in the TiSA talks are expected to continue discussions on revised market access offers put forward in May in order to narrow differences ahead of the next exchange expected in October. A further discussion on the sector-specific annexes and the institutional framework of the future deal is also expected.