The International Trade Practice Center on Bloomberg Law® provides in one comprehensive, time-saving resource.
July 5 — The Treasury Department and the financial-services industry in the U.S. and European Union continue to disagree over how the financial sector will be treated in an EU-U.S. trade agreement as negotiators prepare for the next round of trade talks.
The 14th round of Transatlantic Trade and Investment Partnership (TTIP) negotiations is scheduled to begin July 11 in Brussels, and negotiators for both sides continue to hold opposing views on several topics, including financial services.
Both sides generally agree the trade deal should include a separate chapter on financial services. However, the Treasury Department is resisting an EU request to insert language promoting EU-U.S. cooperation on financial regulation, and that is a chief sticking point to concluding the chapter
The EU's response? If the treaty doesn't address financial regulatory cooperation it won't address something the U.S. wants: enhanced market access for financial services.
While the EU is concerned with “extraterritoriality,” under which U.S. regulators might attempt to impose components of U.S. financial laws such as the Dodd-Frank Act on European entities, the U.S. is concerned that any TTIP language aiming to harmonize laws between the two sides effectively could dilute the power of such laws, Mayer Brown LLP partner Timothy Keeler told Bloomberg BNA.
And as difficult as they already are, TTIP negotiations about financial services could be further complicated by the U.K.'s June 23 vote to exit the EU, Keeler and others said (127 ITD, 7/1/16).
A chief premise of the trade deal publicly stated by senior EU and U.S. trade officials is to conclude a comprehensive treaty establishing lasting high-quality standards, not merely strike another free trade agreement between two trading blocs.
A European Commission trade specialist told Bloomberg BNA that in upcoming negotiations, the EU will push to include the following elements related to financial services in TTIP:
The U.S. side, meanwhile, is seeking in TTIP more traditional objectives typically found in trade deals, such as non-discriminatory treatment of U.S. institutions with respect to their operations in the EU.
Treasury Department spokesmen declined to comment on the negotiations.
Peter Matheson, managing director of the Securities Industry and Financial Markets Association, told Bloomberg BNA any financial services regulatory harmonization language in TTIP should be forward looking and not be used either to revisit past EU-U.S. disagreements or create some sort of future punitive mechanism concerning financial regulation.
Instead, treaty language should ensure future rules and laws allow financial services companies to engage in commerce in either jurisdiction with minimal disruption.
“It means that the rules that apply in the EU and the rules that apply in the United States are consistent enough that they do not negatively impact cross-border transatlantic business. So if you're operating in the European Union in the financial services industry, you're still able to operate in the United States without having a completely different business model or operations,” Matheson said.
A successfully negotiated financial services section of TTIP will probably possess a prudential exemption allowing either side to violate agreement terms in the event of financial instability in its home market.
The standoff between negotiators might end if TTIP establishes a process for resolving regulatory disputes when one party asserts the other is being too extraterritorial in applying its jurisdictional rules, said Keeler, a former chief of staff in the Office of the U.S. Trade Representative. The U.S. would avoid prescriptive rules and gain market access, while the EU would gain a process to resolve extant regulatory disputes.
“It seems to me that could be a logical landing spot, and it could be pretty easy to go from not talking to each other with arms crossed to, okay you [the U.S.] get market access if we [the EU] get a resolution process. And that dynamic doesn't change whether the U.K. is in the EU or not,” Keeler said.
Keeler said the presumed British exit from the EU following the June 23 “Brexit” vote could distract negotiators, preventing them from their stated goal of completing the agreement's text by the end of 2016. “It was going to be difficult enough to finish TTIP before the end of the year, and when you add [the Brexit vote], it just seems more unlikely” the trade deal will be completed by Dec. 31, he said.
Others agreed. “Brexit is definitely a shock to TTIP, which will significantly reduce the chances of any agreement being reached. The first question in negotiations is knowing who you are negotiating with. It is not clear who is on the other end in a U.S.-EU negotiation at the moment,” Aaron Klein, policy director at The Brookings Institution's Initiative on Business and Public Policy, said in a statement sent to Bloomberg BNA.
To contact the reporter on this story: Stephen Joyce in New York at email@example.com
To contact the editor responsible for this story: Jerome Ashton at firstname.lastname@example.org
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)