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EU-US trade pact could drop key stumbling block: Malmstroem

30 September 2014, 10:31 CET
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EU-US trade pact could drop key stumbling block: Malmstroem

Cecilia Malmstroem - Photo © European Union 2014 EP

(BRUSSELS) - Europe's incoming trade commissioner Cecilia Malmstroem on Monday opened the door to scrapping a controversial yet central element of a giant EU-US free trade deal that lets corporations sue governments.

Sweden's Malmstroem was repeatedly quizzed on the huge pact as she faced the European Parliament on the first day of interviews with European Commission president Jean-Claude Juncker's new team.

In her testimony she mooted the possibility of dropping a highly contentious clause in the EU-US Transatlantic Trade and Investment Partnership (TTIP), the trade deal that is about to enter a seventh round of negotiations in Washington.

The so-called investor-state dispute settlement, or ISDS, allows firms to sue national governments if they feel that local laws -- such as health and safety regulations -- violate the trade deal and threaten their investments.

But activists and critics, including the influential German government, fear the mechanism could allow multinational companies to bypass national legislation and undermine national sovereignty.

In Uruguay, for example, cigarette maker Philip Morris has sued the government for ordering that the health warnings be larger on cigarette packets

"Will ISDS be part of TTIP? I don't know, maybe not," Malmstroem said in the question-and-answer session with EU lawmakers.

- World's biggest trade pact -

The EU-US pact would be the biggest free-trade agreement ever, with bilateral trade in goods last year worth some 500 billion euros ($670 billion), another 280 billion euros in services and trillions in investment flows.

A free trade deal would add some 119 billion euros annually to the EU economy, with 95 billion euros for the United States, the EU says.

But the row over the clause has become a growing distraction.

Malmstroem noted that many other trade pacts around the world contained ISDS mechanisms.

"ISDS is something of a concern, but there are thousands of them in the world," Malmstroem said.

She said it must be possible "to design a system ... to avoid abuses, to bring full transparency and to ensure the right to regulate the public interest."

But there was a further row when it emerged that Malmstroem's nuanced position contrasted with her testimony -- accidently sent to lawmakers late last week -- that included a far clearer opposition to ISDS.

In an embarrassing turn of events, it emerged that a senior staffer to Commission chief Juncker had inserted the phrase into Malmstroem's testimony and was forced to remove it later.

Leftists and green lawmakers criticised the softer approach she took in her interviews.

"Malmstroem fits the model of her predecessors: an unacceptable retreat on ISDS... and an unshakeable faith in the virtues of the free market," said Yannick Jadot, lawmaker from the Greens.

Critics are also worried that TTIP is being negotiated behind closed doors to the benefit of corporate interests.

In her published testimony, Malmstroem attempted to address these concerns.

"Transparency is a key aspect of gaining trust and legitimacy," she said, adding that it was "a manner of working which I intend to continue pursuing."

European Parliament hearings of the Commissioners-designate


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