Free trade negotiations between the European Union and the United States with regard to Finnish wage earners

Free trade negotiations between the
European Union and the United
States with regard to Finnish wage
earners
4 April 2014

EU-US free trade negotiations with regard to Finnish wage earners 1
SAK, STTK and Akava
TABLE OF CONTENTS
Executive summary.................................................................................... 2
Preamble ................................................................................................... 3
1 TTIP as a global undertaking ................................................................. 3
The agreement intensifies cooperation among Western democracies ......................... 3
The agreement as a part of wider cooperation among open market economies ......... 4
The free trade agreements promote economic openness ............................................. 4
Regulatory cooperation beneficial to EU and US enterprises ........................................ 6
Labour rights to be included in the agreement .............................................................. 6
Conclusions regarding the global dimensions of the agreement ................................... 6
2 Removal of barriers to trade................................................................... 8
Current status of transatlantic trade .............................................................................. 8
Aim to eliminate customs barriers ................................................................................. 8
Public services excluded from liberalisation of trade in services ................................... 9
Openness in public procurement ................................................................................... 9
Aim of regulatory compatibility .................................................................................... 10
Economic impacts of liberalisation of trade ................................................................. 12
Conclusions regarding the removal of barriers to trade .............................................. 13
3 Boosting investments........................................................................... 16
Removing barriers to investments ............................................................................... 16
Negotiating parties aim for stronger investment protection ....................................... 16
Conclusions regarding the TTIP investment agreement .............................................. 17
4 Promoting fundamental labour rights ................................................... 20
Aim to incorporate fundamental labour rights in the agreement ............................... 20
Compliance required with fundamental ILO labour rights ........................................ 20
Conclusions regarding the promotion of fundamental labour rights .......................... 22
5 Conclusions ......................................................................................... 23

SAK, STTK and Akava
Executive summary
The Finnish trade union confederations support the negotiations on the free trade agree-
ment between the European Union and the United States. SAK, STTK and Akava empha-
sise the importance of intensifying economic and political cooperation between the
world’s leading open and democratic market economies.
The trade agreement would increase trade and investment between the EU and the US,
and this would be of economic benefit to Finland as well. Increased competition would
encourage enterprises to develop and invest, which would boost productivity and eco-
nomic growth. For wage earners, this would translate into a greater number of meaningful
and well-paid job opportunities; for consumers, into more affordable and higher quality
products and services.
Companies in the EU and the US must continue to compete by means of innovating ra-
ther than by undercutting labour or environmental standards. A key objective in the nego-
tiations is to reconcile the regulatory differences between the EU and the US. Regulatory
convergence and cooperation should be pursued openly and they must not lead to deregu-
lation. Trade unions need to be guaranteed a genuine opportunity to have a say in the
manner in which the compatibility of laws and standards is pursued.
The trade agreement would not require any weakening of labour legislation or collective
agreements. The promotion of employee mobility is a desirable objective. The confedera-
tions insist, however, that the terms of employment of posted workers must be in line
with the laws and agreements of the country of destination.
In opening up public procurement, the rights under the EU’s procurement directive to im-
pose social as well as other criteria in the awarding of public contracts must be retained.
The agreement may not be permitted to create pressures to privatise publicly funded ser-
vices. Publicly funded welfare services such as social and healthcare services must be ex-
cluded from the scope of the agreement. It must also remain permissible to return privat-
ised services into public hands.
There is no need for the agreement to provide for strong and extensive investment protec-
tion, as the rights of investors are already safeguarded under the current legal structures
of both the EU and the US. The agreement’s investment protection provisions may not be
permitted to encumber the enactment of new national legislation that is in the public in-
terest.
The vast economic and political clout of the EU and the US will put pressure on other
countries as well to introduce the ground rules mutually laid down by the two. The
agreement thus offers the EU and the US an opportunity to work towards greater open-
ness and fairness in the world economy.
In order to reduce social dumping, the agreement must strengthen the monitoring of ILO
fundamental labour rights. Mechanisms concerning economic consequences are needed to
address breeches of these rights. The means chosen here must be supportive of the ILO’s
monitoring mechanisms.
EU-US rapprochement would reduce the economic dependency of the two on countries
which do not share their common values, such as democracy and human rights. In the en-
ergy sector, cooperation would be of particular benefit to EU Member States, as they
could step up their import of energy from the United States and thus diversify their ener-
gy supply.

SAK, STTK and Akava
Preamble
The European Union and the United States launched in July 2013 negotiations on
a free-trade agreement, the Transatlantic Trade and Investment Partnership TTIP.
The agreement would give rise to the world’s largest free trade area and is thus
likely to increase the volume of trade and investments between the EU and the
United States. Finland is also estimated to benefit from the agreement.
The EU seeks to conclude the trade negotiations within the term of the current
Commission, by autumn 2014. It seems likely, however, that the negotiations will
extend into the term of the next Commission as well. The entry into force of the
agreement requires the approval of the European Parliament.
1 TTIP as a global undertaking
The agreement intensifies cooperation among Western democracies
The TTIP agreement would strengthen economic integration between the world’s
leading Western democracies. Closer economic cooperation would help the Euro-
pean Union and the United States defend their shared values and interests in the
global political arena.
Closer cooperation between the EU and the US in the energy sector in particular
would be of considerable political importance. The huge increase in oil and natu-
ral gas production in the United States is will make the country self-sufficient in
energy in the coming decades. In the case of oil, self-sufficiency may be reached
as soon as in the next few years. While US dependence on unstable oil production
regions such the Middle East wanes, the EU looks to remain greatly dependent on
Russia in particular. Roughly one third of all natural gas consumed in the EU is
imported from Russia; in Finland, the figure is 100%.
At the EU-US summit held in Brussels on 26 March 2014, it was agreed, in the
context of the Ukraine crises, that the export of liquefied natural gas (LNG) from
the United States to the Member States of the European Union would be increased
in order to reduce the European Union’s dependence on Russian energy. Accord-
ing to US President Barack Obama, the TTIP agreement would be needed in this
context to substantially increase the granting of LNG export licences to European
companies.1
1
EU-US Summit Joint Statement 26 March 2014:
http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/141920.pdf and
President Obama’s speech at the summit press conference:
http://www.whitehouse.gov/the-press-office/2014/03/26/press-conference-president-
obama-european-council-president-van-rompuy-a

SAK, STTK and Akava
The agreement as a part of wider cooperation among open market
economies
Until the mid-1990s, agreements aimed at liberalising world trade were concluded
on a multilateral basis among all member states of GATT (subsequently the
WTO). Since then global negotiations have produced few results and the focus
had shifted to bilateral and regional trade agreements. At the same time, trade ne-
gotiations have increasingly become an element of geopolitics for nations and
economic regions.
In 2010, the Obama administration launched an ambitious round of negotiations
designed to bring about a free trade agreement with US allies in the Pacific
(Trans-Pacific Partnership TPP). Underlying these negotiations was the US aim of
shifting its foreign policy emphasis to Asia, where the foremost goal is to foster
US interests relative to the rising superpower China. The TPP agreement is envi-
sioned to create a framework for the success of the Pacific region’s open market
economies2
in competition against China’s state-led system as well as other
emerging economies.3
July 2013 saw the launch of the negotiations on the Transatlantic Trade and In-
vestment Partnership TTIP between the European Union and the United States.
One of the aims of the partnership is to usher the European Union into the bloc al-
ready consisting of the United States and the other TPP nations.
Once Japan decided in 2013 to join in the TPP negotiations and to initiate negotia-
tions with the EU on a bilateral trade agreement, the TPP and TTIP negotiations
came to encompass a group of open market economies accounting for more than
60 % of the global economy.
The TTIP negotiations are being pursued between the two largest economies in
the world. According to Eurostat, in 2010 the 27 EU Member States accounted for
26 % of global GDP while the United States accounted for 23 %.
The free trade agreements promote economic openness
One of the aims of both the TPP and TTIP agreements is to agree on a set of rules
to promote openness in the global economy. The considerable weight carried in
the world economy by the TTIP and TPP countries would allow them to utilise
various instruments to encourage – or to pressure – other nations to open up their
economies. In the forthcoming investment agreement negotiations between the
2
The TPP group consists of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico,
New Zealand, Peru, Singapore, the United States, and Vietnam, the last-mentioned being
the only one in the group not classified by the Heritage Foundation as ‘free’ in terms of
economic freedom.
3
Gordon, B. K. (2011), The Trans-Pacific Partnership and the Rise of China
http://www.foreignaffairs.com/articles/136647/bernard-k-gordon/the-trans-pacific-
partnership-and-the-rise-of-china

SAK, STTK and Akava
EU and China, for instance, it would be difficult for China to disengage from dis-
cussion on rules that are already included in both the TPP and TTIP agreements.
The European Union and the United States are both hoping that China will liberal-
ise its economy and abandon certain features of its economic model which the two
perceive as a significant economic threat4
. Both the EU and the US are running
major trade deficits with China and their relative significance in the manufactur-
ing sector has decreased while China has become the world’s leading exporter of
industrial goods.
The TTIP and TPP agreements are to contain rules to address the aggressive fa-
vouritism of state-owned enterprises and the restrictions on foreign and privately
owned companies that are typical of the Chinese economic model. Exchange rate
manipulation as a means of increasing exports may also to be prohibited. The
United States has for many years strongly criticised China for this practice.
China has responded to Western criticism primarily by emphasising that the Unit-
ed States and the other developed economies similarly protected their own econ-
omies in the early years of their development. In line with the strategic policy goal
that was adopted by the Communist Party of China in 2006, the country’s state-
owned enterprises have, however, become increasingly aggressive global actors.
This has served to undermine the plausibility of China’s argument in the West5
.
The Commission’s negotiating mandate approved by the European Council in-
cludes the goal of defining common rules with the United States on state subsi-
dies, state monopolies, state-owned enterprises and enterprises assigned by the
state to perform specific tasks. The Council also gave the Commission a mandate
to negotiate rules concerning private-sector monopolies and abuses of dominant
market positions, in respect of which current US legislation is considerably strict-
er than European legislation. No official objectives were laid out for these negoti-
ations, however.
4
Dalton, M. (2013), Europe Seeks New Trade Weapons
http://online.wsj.com/news/articles/SB10001424127887324010704578414673612252346
?mg=reno64wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB1000142412788
7324010704578414673612252346.html
5
Jie (Cherry) Yu (2012), Firms with Chinese Characteristics: The Role of Companies in
Chinese Foreign Policy
http://www.lse.ac.uk/IDEAS/publications/reports/pdf/SR012/yu.pdf

SAK, STTK and Akava
Regulatory cooperation beneficial to EU and US enterprises
A key aim of the free trade agreement between the EU and the US is reconcile
regulatory differences between the two parties. The aim is to reconcile a wide
range of technical regulations while not changing basic laws such as those regulat-
ing labour (see Chapter 2). Were the two biggest economic actors of the world
economy to agree on common standards, this would put pressure on the rest of the
world to comply with those standards, not least in order to gain access to EU and
US markets.
The regulatory cooperation between the European Union and the United States
would further their interests in two ways. On the one hand, their enterprises would
gain an advantage in the global marketplace, as their production systems would
already be compliant with the new international norms. On the other hand, the au-
thorities of the EU and the US, and the European and American enterprises con-
sulted by them, could gain powers over the future direction of global standard de-
velopment.
The TTIP agreement is to include provisions on permanent forms of regulatory
cooperation. This would provide a permanent opportunity to optimise standards in
keeping with the interests of European and American enterprises. The extensive
regulatory cooperation included in the TTIP agreement is not a component of the
TPP agreement, however.
Labour rights to be included in the agreement
Both the TTIP and the TPP agreements are to include rules on environmental pro-
tection and fundamental labour rights (see Chapter 4).
When compliance with fundamental rights is required under both the TTP and the
TTIP, compliance with such rights can be demanded with greater forcefulness
from non-agreement states as well, in trade negotiations and with the help of other
trade policy instruments such as anti-dumping duties6
. In trade negotiations pur-
sued under the auspices of the WTO, developing countries have opposed EU and
US proposals on the incorporation of fundamental labour rights in trade agree-
ments.
Conclusions regarding the global dimensions of the agreement
The Finnish trade union confederations see that it is important to promote fair
competition and economic openness in the world economy and fundamental prin-
ciples and rights at work. At present, China and many other countries gain consid-
erable unfair competitive advantages from the implementation of protectionist
6
The European Parliament only recently voted in favour of imposing anti-dumping duties
and anti-subsidy duties on the basis of social dumping as well.
http://www.socialistsanddemocrats.eu/newsroom/sds-welcome-strong-victory-social-and-
labour-rights-new-anti-dumping-legislation

SAK, STTK and Akava
policies and for not applying workers’ fundamental rights, both of which are to be
addressed in the TTIP agreement. Employment in manufacturing has developed
unfavourably in Finland and many other open economies with strong labour
rights, and this has been partly caused by unfair competition in the world econo-
my.
In the TTIP negotiations it is, nonetheless, important to agree on such rules gov-
erning open markets that allow states to implement active industrial policy, also
with the help of state-owned enterprises. It is also important for states to retain the
right for state monopolies and other state-owned actors when these are needed to
advance public interests.
The opportunity for defining international and even global rules must be taken use
of, yet along with the economic interest of the EU and the US the interests of de-
veloping countries in particular need to be taken into account. Third-world pro-
ducers’ access to the EU and US markets on favourable terms is vital to the eco-
nomic development of these countries. Trade is the best tool of developmental
policy, and the promotion of trade also creates markets for products from the EU.
The European Union and the United States share a common value base built on
democracy, human rights and the rule of law. This value base provides a good
foundation for economic cooperation that enables the reduction of economic de-
pendency on countries which do not share these values.

SAK, STTK and Akava
2 Removal of barriers to trade
Current status of transatlantic trade
The European Union and the United States are the two largest actors in world
trade and also the most important trade partners to each other. Trade with the US
has been important to Finland as well; in recent years, the United States has ac-
counted for roughly 6% of Finland’s non-EU imports and 15% of its non-EU ex-
ports.
In terms of value, the most important Finnish export item in the last decades have
been ships, which have been exported to the US in greater number than to any
other country. Other significant export items have been various kinds of machin-
ery and mechanical equipment, chemical industry products such as petrol, medical
devices and equipment, and paper. While industrial goods play a major role in
imports as well, services account for a considerably higher portion of imports
(roughly one half) than of exports (roughly one quarter).
Aim to eliminate customs barriers
In the negotiations, the European Union is pursuing the objective of eliminating
all export and import duties from both industrial and agricultural goods. Special
treatment may nonetheless be afforded to the most ‘sensitive’ of goods.
With the exception of textiles and clothing, customs duties on industrial goods are
already very low. Meanwhile, both parties continue to protect their agriculture
with fairly high customs duties, the EU even more so than the US. The EU impos-
es particularly high tariffs on dairy products (48%), animal products (22%), sugar
(22%) and beverages and tobacco products (20%), while the highest tariffs in the
United States apply to dairy products (20%), beverages and tobacco products
(16%) and sugar (10%)7
.
As part of the TTIP negotiations, the European Commission made to the United
States in February 2014 an offer to lift duties on all goods with the exception of
beef, pork and poultry as well as certain other ‘sensitive’ products, to which abso-
lute quotas would also continue to apply8
. The proposal is in line with the objec-
tives of the Finnish Food and Drink Industries’ Federation9
.
7
WTO & ITC & UNCTAD: World Tariff Profiles 2011.
8
ROBIN EMMOTT and PHILIP BLENKINSOP (2014), Exclusive: EU ready to lift duties
on most U.S. goods for trade pact http://www.reuters.com/article/2014/02/06/us-eu-usa-
trade-idUSBREA1519S20140206
9
TTIP statement issued by the Finnish Food and Drink Industries’ Federation to the Agri-
culture and Forestry Committee of Parliament
http://www.etl.fi/www/fi/lausunnot/lausunnot/LausuntoPDF/Komission_neuv_transatlanttis
esta_EKmv_20130527.pdf

SAK, STTK and Akava
Public services excluded from liberalisation of trade in services
The negotiations have the aim of liberalising not only trade in goods but also trade
in services. The Council gave the Commission a very broad mandate to negotiate
the liberalisation of trade in services, including sectors earlier excluded from EU
trade agreements (e.g. transportation). The specific sectors to be included in the
negotiations remain to be determined. Professional services are one of the sectors
in which the removal of barriers to trade is being negotiated; others include social
services, healthcare services and educational services, but only in respect of pri-
vately funded services.
The barriers to trade in services are currently higher on average in Finland and the
European Union than in the United States. Barriers are particularly high in the
EU’s transportation sector. Considerable barriers exist in both the EU and the US
in respect of professional services such as accountancy, auditing, and legal ser-
vices, whereas in some sectors such as telecommunications barriers on both sides
are already quite low. 10
The TTIP negotiations on the liberalisation of trade in services also involve the
reciprocal recognition of professional and vocational qualifications, business li-
censing procedures and possibly also the promotion of labour migration by e.g.
facilitating the posting of workers between the two economies. In at least some of
the trade agreements concluded to date, the EU has required observance of the
collective labour agreements and labour legislation of the country of destination in
respect of posted workers.
In earlier EU agreements, public services have been afforded double protection by
a general exclusionary clause for publicly funded services and by sector-specific
clauses. Trade agreements thus have not forced the parties thereto to privatise any
public services or to choose a given form of service provision (public or private).
The Council has not given the Commission a mandate to amend this approach.
Openness in public procurement
Opening up public procurement at all levels of government is also an aspect of the
TTIP negotiations. At present, domestic suppliers are strongly favoured in public
procurements in the US. Factors underlying this trend include the ‘Buy American’
legislation.
Wider access for European enterprises to the public procurement market in the
United States could, according to the Ministry for Foreign Affairs, open up signif-
icant opportunities for Finnish companies especially in the information and com-
10
Research Institute of the Finnish Economy ETLA: EU:n ja Yhdysvaltojen mahdollisen
kauppa- ja investointikumppanuus-sopimuksen vaikutuksia suomalaiselle
elinkeinoelämälle ja yhteiskunnalle [Impacts of the potential EU-US trade and investment
partnership agreement on business and society in Finland, report available only in Finn-
ish. 2013

SAK, STTK and Akava
munication sector, products and services related to energy and environmental
competence, the health sector, and the infrastructure sector11
. The export of Fin-
land’s most important US export item, ships, could also grow easier, as American
products are nowadays vigorously favoured in the United States’ federal purchas-
es of means of transport. At present, only American ships are permitted to traffic
between American ports.
Unlike in the United States, in the European Union and in Finland public pro-
curement is already fairly open to international competition, particularly to other
EU Member States but also to signatories to the WTO’s GPA agreement, which
include the United States. The trade negotiations are likely, at most, to allow
American enterprises to achieve the same standing in Finland’s public procure-
ments as is currently held by enterprises from EU Member States. Only fairly mi-
nor changes would thus take place in Finland.
Aim of regulatory compatibility
A key objective of the TTIP negotiations is to agree on a wide-spanning reconcili-
ation of regulation in the European Union and the United States. The negotiations
in this respect centre on technical regulation related to product and service quality
requirements, whereas no convergence of labour legislation, for instance, is being
pursued.
Generally speaking, the standard of regulation is high in both the US and the EU,
yet there are also marked differences between the two. Financial markets, for ex-
ample, are clearly more strictly regulated in the US than in the EU, whereas the
opposite holds true in respect of e.g. food safety.
The European Council has given the Commission a mandate to negotiate on in-
creasing regulatory convergence and co-operation in such a manner that the
standard of regulation is not lowered. On several occasions, the Commission has
given public assurances that the negotiations are not about deregulation. In addi-
tion, the Commission has emphasised that ‘basic laws’ i.e. laws to protect human
life and health, animal health and welfare, or environment and consumer interests,
will not be part of the negotiations12
.
The precise extent of the laws defined by the Commission as ‘basic laws’, and as
such excluded from the negotiations, is unclear. The negotiations do not extend to
e.g. labour legislation, yet neither are the negotiations limited solely to the laws
and regulations pertaining to the technical properties of goods and services. Since
11
http://www.formin.fi/public/default.aspx?contentid=294940&nodeid=48660&con
tentlan=2&culture=en-US
12
European Commission: TTIP Questions and answers
http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and-answers/

SAK, STTK and Akava
the negotiations are being pursued in secret, it is unclear which regulations exactly
are negotiated upon.
A large bulk of the costs in transatlantic trade currently arise from the different
requirements imposed in the EU and the US on the properties of goods and ser-
vices. According to surveys conducted by the Ministry for Foreign Affairs of Fin-
land, the single biggest obstacle to Finnish enterprises in expanding to the US
market is the technical barriers to trade based on regulatory differences13
.
Regulatory convergence, without compromising on standards, would be accom-
plished by one of the following four alternative means on a case by case basis:
1. adopting common regulation through harmonisation of the parties’ exist-
ing legislation,
2. adopting common regulation through the joint rollout of wholly new regu-
lation, such as existing global standards,
3. deciding that existing rules guarantee the same level of safety and other
key aims (’equivalence’), or
4. reciprocally recognising existing regulation in cases where the rules of
both are of high standard despite having different mechanisms or aims.
In relation to regulatory convergence, the trade agreement has the aim of agreeing
on objectives such as the forms and timetable of the convergence. These efforts
would be continued in the years following the conclusion of the agreement with
the aim of working on regulatory convergence of both horizontal and sector-
specific regulations. The sectors covered are expected to include, for example,
food, chemicals and automotive industry, ICT and the pharmaceutical industry
and other health-related sectors (e.g. medical devices). In other words, the goals is
to remove technical barriers to trade in several of Finland’s major export sectors.
With a view to future legislative endeavours, the goal is to agree on a mechanism
for consultation between the parties prior to the enactment of legislation. The
agreement would not infringe in any way on the parties’ rights to enact and im-
pose their own laws and regulations, however.
In the TTIP negotiations, the United States has raised demands related to the
drafting process of future regulations. The United States is reportedly 14
hoping
13
Research Institute of the Finnish Economy ETLA: EU:n ja Yhdysvaltojen mahdollisen
kauppa- ja investointikumppanuus-sopimuksen vaikutuksia suomalaiselle elinkeinoelämä-
lle ja yhteiskunnalle [Impacts of the potential EU-US trade and investment partnership
agreement on business and society in Finland]. 2013
14
“US pushes for higher transparency in EU business regulation”, Financial Times
23 February 2014

SAK, STTK and Akava
for greater openness in the preparation of regulation within the EU. The US is
seeking an opportunity for American enterprises and other actors to put forward
their views within the framework of legislative preparation in the EU. The right to
be heard would apply not only to enterprises but also to NGOs and the trade union
movement. This issue is further discussed below in the ‘Conclusions regarding the
removal of barriers to trade’
Economic impacts of liberalisation of trade
According to an impact study15
conducted by CEPR on assignment from the
Commission, an ambitious and comprehensive transatlantic trade and investment
agreement would increase EU exports to the United States by 28% while imports
would go up by 37%. The agreement overall would increase the EU’s total ex-
ports (Unites States and elsewhere combined) by 6% and imports by 5%. Total
exports would rise in all sectors except electrical machinery, in which US manu-
facturers are considerably more competitive than Europeans. Positive export im-
pacts of particular magnitude would be seen in the automotive industry (42%),
metals and metal products (12%), chemicals (9%) and foodstuffs (9%).
In respect of electrical machinery, agricultural and other primary production
products, some sectors of the metal industry and certain service sectors, the value
of the EU’s total imports would rise considerably more than the value of total ex-
ports, according to the CEPR. Imports in these sectors may be presumed to substi-
tute for the EU’s own production to a significant degree. In the estimation of the
CEPR, however, only 0.2%–0.5% of the EU’s labour force would have to change
jobs and move to another sector due to the structural changes wrought by the free
trade agreement.
No sector-specific impact study based on mathematical modelling has been per-
formed in respect of Finland16
, yet increased trade would undoubtedly have its
impacts on trade between Finland and the US as well. Assuming that the CEPR
projection of exports growth would be realised in full in Finland, a marked in-
crease in export revenues would take place. In 2012, Finnish exports of goods and
services to the United States had a combined value of €4.8 billion17
. A 28% hike
in exports would translate into an additional €1.3 billion in export revenues. In the
absence of relevant research, it is not possible to determine in which sectors in
Finland companies would find it hardest to adapt to the freer trade with the US.
Increased trade would intensify competition and result in the most efficient and
innovative enterprises growing stronger. This development would boost produc-
tivity and thus lead to greater economic growth and higher wage-payment capaci-
15
Centre for Economic Policy Research CEPR: Reducing Transatlantic Barriers to Trade
and Investment 2013
http://trade.ec.europa.eu/doclib/docs/2013/march/tradoc_150737.pdf
16
See the aforementioned general study by ETLA (footnote 13), however
17
Customs (export of goods) and Statistics Finland (export of services)

SAK, STTK and Akava
ty. For consumers and for the industry using intermediate products, increased
trade with the United States would bring about lower product prices and thus im-
prove real earnings and profitability.
According to the CEPR study as well as other studies on the possible impacts of
TTIP18
, the overall economic effects of the free trade agreement (including in-
creased investment, which is addressed below in a separate Chapter) would be
positive for the EU. Open economies such as Finland are presumed to reap greater
than average benefits from the agreement.
The TTIP impact assessments have come to conflicting conclusions as to the im-
pacts of the agreement beyond the EU and the US. The impacts on third countries
are likely to depend largely on the extent to which these countries are able to
adapt to the regulatory requirements of the EU and the US. Third-country impacts
would also depend on the geopolitical and development policy aims pursued by
the EU and the US (see Chapter 1).
Conclusions regarding the removal of barriers to trade
As a small open economy, Finland may expect to gain economically from the re-
moval of trade barriers between the European Union and the United States. It is
important not only to maximise these gains but also to minimise any risks arising
from the agreement.
The elimination of customs barriers would primarily impact on agriculture and the
food and beverage industry in Finland. In the negotiations, the European Commis-
sion is striving to retain customs barriers for several product groups of key rele-
vance to Finland, and the risks to employment in these sectors may thus be esti-
mated to be moderate.
Benefits to consumers need also be pursued. The increase in competition resulting
from more trade may well bring down the prices of foodstuffs as well as other
products, and thus increase the purchasing power of consumers.
The removal of technical barriers to trade may result in greater structural change
in the Finnish economy than the reduction of customs barriers. Industry geared to
the domestic market may be expected to encounter ever fiercer foreign competi-
tion. The Government should indeed be prepared to allocate greater resources to
the different programmes it has in place to support workers in conditions of struc-
tural change.
International impact studies suggest that, as a whole, the structural change brought
about by the TTIP agreement would be beneficial to Finland. Productivity and the
potential wage level would be higher than average in the jobs created as a result of
the agreement.
18
IFO/Bertellsmann, CEPII, Kommerskollegium.

SAK, STTK and Akava
The liberalisation of trade in services cannot be permitted to create pressures to-
wards the privatisation of public services or publicly owned enterprises. Moreo-
ver, it must remain possible to return privatised services into public hands. Posted
workers must be guaranteed all of the same minimum rights as workers in the
country of destination. Public sector actors must retain the right to impose social
and environmental criteria in public procurement.
The draft TTIP position papers of several European industry federations of trade
unions and the position paper ETUC position19
emphasise the risks related to
trade in services and public procurement despite these risks having been effective-
ly minimised in the EU’s earlier trade agreements through the means described
above. It is unlikely that the EU changed its policies in these respects.
Public procurement and trade in services also offer opportunities. Increased com-
petition for public contracts may reduce public sector expenditure and improve
the quality of the goods and services acquired. In services, productivity in the US
is higher than in the EU in many sectors and the increased competition ensuing
from liberalisation could thus enhance productivity and potential wage levels in
the services sectors in the EU.
Convergence of professional and vocational qualifications, and easing of work
permit procedures would facilitate cross-Atlantic job-seeking. The labour laws
and collective agreements of the destination country must be observed in all cir-
cumstances, however. Neither is any decline in the standard of professional and
vocational qualifications to be deemed acceptable. The sensitive nature of certain
sectors of the labour market needs to be taken into account.
The parties to the TTIP negotiations have on several occasions given public as-
surances that the negotiations are not about deregulation. Nonetheless, it must be
ensured that the standard of regulation remains unchanged.
Deregulation might pose a particular risk, for instance, when reconciling widely
differing regulations on privacy and health and safety. A particular challenge is to
reconcile the European REACH Regulation on chemicals with the equivalent US
legislation. The US has expressed its unwillingness to adopt certain practices re-
quired by the REACH regulation, with particular opposition directed at the impo-
sition of chemical reporting requirements on enterprises. In this context as well as
elsewhere, the occupational health and safety rights of workers and the right of
consumers to safe products of high quality standard must be ensured.
The Treaties of the European Union dictate that the European social partners and
professional organisations need to be consulted on any reforms to labour market
regulations. The parties may also independently negotiate framework agreements
pertaining to the world of work, either on their own initiative or on the initiative
19
ETUC position on the Transatlantic Trade and Investment Partnership (2013)
http://www.etuc.org/documents/etuc-position-transatlantic-trade-and-investment-
partnership#.UwtyUuN_vQM

SAK, STTK and Akava
of the Commission. These European rights must stand unaltered. The regulatory
culture of the European Union and the United States may as such warrant devel-
opment, provided that this results in better regulation.

SAK, STTK and Akava
3 Boosting investments
Removing barriers to investments
In respect of investments, the negotiations first and foremost seek to increase for-
eign direct investment (FDI) between the European Union and the United States.20
The two are already the world’s largest sources of foreign direct investment and
also the most important investment destinations to one another.
The United States is an important investment partner to Finland as well; it is the
destination of one third of foreign direct investment from Finland to countries
outside the EU. American-owned companies, meanwhile, occupy second place in
Finland when measured by the number of employees, bested only by Swedish-
owned enterprises21
.
In terms of value, however, FDI between Finland and the United States as well as
Finland and other countries has been modest. Between 2003 and 2012, the flow of
FDI abroad from Finland as a percentage of GDP was on average only 1.9% while
the figure for FDI from abroad to Finland was 1.8%. The equivalent average fig-
ures for European Union Member States were 3.8% and 2.8%, respectively22
.
The aim of the EU in the negotiations is to achieve more effective FDI liberalisa-
tion than in any agreements to date. In Finland, the barriers to FDI are low to
begin with, while these are considerably higher in the US. According to the rele-
vant OECD indicator, the FDI Regulatory Restrictiveness Index, Finland was
among the least restrictive investment destinations among OECD countries in
2011 with an index score of 0.019. The equivalent figure for the US was 0.089.
The only more closed OECD country in the European Union was Austria (0.106).
Then again, the United States is a markedly less restrictive investment destination
than ‘frontrunner’ China, where the index score was 0.409. 23
Negotiating parties aim for stronger investment protection
In the TTIP negotiating mandate for the EU, agreed upon in June 2013, the Com-
mission was given the mandate to negotiate the highest level of investment pro-
tection gained in any agreements to date. In trade and investment agreements, for-
eign investors have traditionally been afforded protection in three distinct areas,
and the Council’s directives to the Commission regarding the negotiations set the
objective of incorporating all three into the agreement with the United States.
20
investments in foreign enterprises leading to a holding of 10% or more
21
aforementioned ETLA study (footnote 13)
22
UNCTAD http://unctadstat.unctad.org
23
OECD Factbook 2013 10.1787/factbook-2013-table87-en

SAK, STTK and Akava
Components of investment protection:
1. protecting investments against expropriation
2. guaranteeing investors the right to ’fair and equitable’ treatment
3. guaranteeing investors a level playing field relative to local investors
While the third aim is a generally accepted element in international economic re-
lations, the first two have generated greater controversy. Protection against expro-
priation in international investment agreements applies both to cases which are
nowadays quite rare, where governments expropriate the production capacity of
enterprises, but also to regulatory expropriation.
In the latter case, governments may be held to have violated the agreements when
they enact legislation, the indirect effects of which are of such significance as to
equate with actual expropriation. The significance of ‘fair and equitable’ treat-
ment, meanwhile, differs considerably depending on the text of the relevant
agreement and the party interpreting it. Agreements seldom contain a comprehen-
sive definition of the concept, and this has resulted in interpretational disputes. As
in the case of expropriations, this investment protection principle has been utilised
in challenging the legislative undertakings of numerous governments.
The European Council laid down for the Commission the aim of incorporating in
the TTIP agreement the Investor-State Dispute Settlement (ISDS) mechanism.
This would mean that disputes concerning investment protection would be re-
solved in international arbitral tribunals such as the ICDIS operating under the
World Bank.
Arbitral tribunals are bodies independent of national court instances. They would
e.g. decide whether new legislation is consistent with the agreement. When a giv-
en law is found to be contrary to the agreement, the enacting state may become
liable for damages to the claimant investor. Amendment of the law in question
could not be demanded, however. In addition, it should be noted that action could
not be brought against states for legislation predating the entry into force of the
agreement.
Conclusions regarding the TTIP investment agreement
Investment from Finland to the United States might increase somewhat with the
investment agreement while its impacts on investment from the United States to
Finland would in all likelihood be fairly small, considering that the barriers to for-
eign investment are, to begin with, low in Finland but somewhat higher in the US.
In those EU Member States with higher barriers to investments, the impacts might
be more positive. According to the CEPR study, the ambitious removal of barriers
to investments would indeed expand employment by American enterprises in the
EU by as much as 11%. The positive dynamic effects of increased international
investments would indirectly benefit Finland as well.
The removal of investment barriers would have no significant adverse impacts for
Finland, whereas strong investment protection combined with the international

SAK, STTK and Akava
ISDS mechanism would be more problematic. Its political cost would be the
threat of more constricted democratic legislative power and judicial power. Unless
exhaustively defined, investment protection could permit unfounded ISDS pro-
ceedings to be brought against governments.
This would translate into a de facto transfer of power from multi-level legal sys-
tems to three-person panels. The substantial damages which these panels would
be empowered to adjudicate would give rise to uncertainty and could act as a de-
terrent to legislators, who might err too strongly on the side of caution in catering
for the interests of multinational enterprises in their enactment of new legislation.
There are issues of principle associated with the strong investment protection in-
cluding the ISDS arbitration proceedings, yet it need not necessarily give rise to
any major practical issues. In the most recent years for which statistics have been
compiled, not a single developed country has been ordered to pay damages in
such proceedings24
. Finland, for example, as far as is known, has never had to pay
compensation on the basis of its own 65 investment agreements despite ISDS pro-
cedure being included in many of these, whereas compensation has been ordered
payable by several developing countries where investors lack the protections af-
forded by the rule of law.
The standing of investors in the EU and the US is already strong, which begs the
question of whether a strong investment protection agreement incorporated into
the free trade agreement confers benefits equal in value to the inherent risks. Were
strong investment protection included in the agreement, this might facilitate the
achievement of protection of equivalent level in future investment agreement ne-
gotiations scheduled to take place in the near future between e.g. the EU and Chi-
na. On the other hand, the refusal of Australia to incorporate ISDS procedure in
its agreement with the US in 2007 has not prevented the US from including the
procedure in all its subsequent agreements.
It would suffice for the TTIP agreement to reinforce the equal treatment of inves-
tors. In this way a level playing field could be guaranteed, for example, for Finn-
ish and American companies in the US market. To guarantee equal treatment,
ISDS procedures may not necessarily need to be incorporated in the agreement.
The application of investment protection could instead perhaps be entrusted to na-
tional courts of law. Reliance on the national judicial system may, however, also
be problematic. One study has, for example, found the US International Trade
Commission USITC, which hears patent cases, to have issued biased rulings and
to have favoured American enterprises at the expense of foreign ones25
. There is
no particularly compelling evidence of such partisanship, however.
24
ISDS statistics of UNCTAD for the years 2011 and 2012.
25
Robert Hahn: Assessing Bias in Patent Infringement Cases: A Review of International
Trade Commission Decisions. Brookings 2007.

SAK, STTK and Akava
If the promotion of investment protection nonetheless proceeds along the lines
proposed by the Council, it is vital that the range of situations in which investment
protection applies be defined exhaustively and that every effort be taken to ensure
the maximum independence and transparency of the ISDS procedure. It should al-
so be enshrined in the agreement that the reform of labour legislation, social legis-
lation and occupational health and safety legislation could never be construed as
violation of the agreement.
In consequence of civil society criticism, the European Commission launched in
March 2014 a public consultation on investment protection and the dispute set-
tlement mechanism. The draft position papers of various European industry feder-
ations of trade unions as well as the position paper of the European Trade Union
Confederation ETUC26
demand that the ISDS procedure be wholly excluded from
the Transatlantic Trade and Investment Partnership between the EU and the US.
The negotiations on investment protection have been suspended for the duration
of the public consultation. The Finnish trade union movement will also submit a
statement in the consultation and welcomes the frank disclosure of both the
threats and opportunities associated with the topic.
26
See above, footnote 19

SAK, STTK and Akava
4 Promoting fundamental labour rights
Aim to incorporate fundamental labour rights in the agreement
Both the European Union and the United States wish to retain their autonomy in
labour regulation and are not pursuing negotiations on amending any national la-
bour legislation or industrial relations institutions. In TTIP, only two restrictions
would be applied to this autonomy. Firstly, the agreement would prohibit the
weakening of labour legislation in order to reinforce competitiveness. Secondly, it
would bind both parties to comply with a set of fundamental labour rights.
The negotiating mandate of the European Commission states that labour matters
are to be incorporated in the TTIP agreement on the basis of the provisions in ear-
lier agreements of the EU and the US. Earlier EU agreements have regulated la-
bour issues, along with other social and environmental issues, in a chapter on
Trade and Sustainable Development. Agreements concluded by the United States
have correspondingly included separate Environment and Labor Chapters.
In their trade and investment agreements, the European Union and the United
States have included requirements on fundamental labour rights to a greater extent
than agreements concluded by other parties27
. Based on the earlier EU and US
agreement provisions, trade union organisations ETUC and AFL-CIO both con-
sider that fundamental rights can be strongly enshrined in the TTIP agreement28
.
Compliance required with fundamental ILO labour rights
Both the sustainable development negotiating agenda of the Commission29
and
the negotiating objectives of the US30
state that in the labour domain, the starting
point shall be the commitment of the parties to the ILO Declaration on Fundamen-
tal Principles and Rights at Work (1998) and the ILO Declaration on Social Jus-
tice for a Fair Globalization (2008), which are binding on all ILO members, the
US included.
27
See ILO reports on labour related provisions in free trade agreements:
http://www.ilo.org/wcmsp5/groups/public/---dgreports/---
dcomm/documents/publication/wcms_228965.pdf and in investment agreements:
http://www2.ilo.org/wcmsp5/groups/public/---
ed_emp/documents/publication/wcms_191245.pdf
28
http://www.etuc.org/documents/etuc-position-transatlantic-trade-and-investment-
partnership#.UwxhLON_vQM
http://www.aflcio.org/Issues/Trade/U.S.-EU-Free-Trade-Agreement-TTIP
29
http://trade.ec.europa.eu/doclib/docs/2013/july/tradoc_151626.pdf
30
http://www.finance.senate.gov/newsroom/chairman/download/?id=7486a33d-7cb9-
41ba-9492-3cc3145e3598

SAK, STTK and Akava
According to the 1998 ILO Declaration, the fundamental principles and rights at
work apply to all member states of the organisation. Arising from their member-
ship in the Organization, members are obligated to respect, to promote and to real-
ize the principles concerning the fundamental rights expressed in the eight funda-
mental ILO Conventions:
1. freedom of association and the effective recognition of the right to collec-
tive bargaining,
2. the elimination of all forms of forced or compulsory labour,
3. the effective abolition of child labour, and
4. the elimination of discrimination in respect of employment and occupa-
tion.
The ILO Declaration on Social Justice for a Fair Globalization issued in 2008
states that the fundamental principles and rights at work are necessary for the full
realization of all of the strategic objectives of the ILO: promoting employment,
enhancing and developing social protection (including social security and labour
protection), promoting social dialogue and tripartism, and promoting the funda-
mental principles and rights at work.
The European Commission holds that in addition to the 1998 and 2008 ILO Dec-
larations, the agreement could mention other ILO Conventions and standards as
well and also reaffirm the parties’ commitment to the promotion of the Organiza-
tion’s Decent Work Agenda. The Commission also has the aim of incorporating in
the agreement monitoring mechanisms involving various stakeholders. The
agreement concluded between the EU and South Korea, for example, provided for
the establishment on the part of both parties of monitoring bodies consisting of
trade unions, employer organisations and civil society organisations. Cooperation
between the monitoring bodies was furthermore enshrined in the agreement.
The United States seeks to have the agreement provide for sanctions against viola-
tion of the fundamental labour rights in the same manner as against violations of
other obligations under the agreement. An equivalent clause has earlier been in-
corporated at least in the agreement between the United States and Peru.
The ILO Declarations and norms are ‘public goods’. The Organization has links
with e.g. the European Commission’s Directorate-General for Trade, which draws
upon the observations and recommendations of the ILO’s Committee of Experts
and the Committee on Freedom of Association in its policy-making.
The ILO has no issue with other parties making reference to its Declarations and
Conventions in their activities or with their imposing sanctions based on the
monitoring of the Declarations and Conventions.

SAK, STTK and Akava
Conclusions regarding the promotion of fundamental labour rights
The substance of fundamental labour rights should be given as broad a definition
as possible in the TTIP agreement with reliance on the current commitments un-
dertaken by the United States and the European Union. In practical terms, this
would primarily mean committing to the ILO Declarations of 1998 and 2008.
In the TTIP agreement, the most progressive provisions of earlier EU agreements
on the monitoring of fundamental labour rights should be combined with the most
progressive sanction mechanisms of earlier US agreements. Monitoring and sanc-
tions should nonetheless be implemented in a manner supportive of the ILO’s ex-
isting monitoring mechanisms.
Even if the TTIP agreement were to bring together the best monitoring provisions
and the best sanction provisions of earlier agreements, this would in all likelihood
have little direct impact on workers in the EU or those in the US. To date, no vio-
lation of fundamental rights is yet to result in punitive measures on the basis of
the sanction provisions in US agreements, for example.
The provisions in the agreement would nonetheless be stronger than in any earlier
trade agreement. In providing a model for future trade negotiations with other
countries, they would serve to steer development in the right direction. A stronger
model for the safeguarding of fundamental labour rights in trade policy could
provide a useful tool for reducing social dumping in world markets (see Chapter
1).

SAK, STTK and Akava
5 Conclusions
The conclusion of a free trade agreement between the European Union and the United States
is desirable.
 The agreement would boost jobs and growth in Finland. Export revenues
could increase by as much as €1.3 billion. Purchasing power would in-
crease.
 The agreement would give rise to the world’s largest free trade area which
would strengthen the EU’s relevance in the global political arena
 The agreement must not be allowed to undermine the development of multi-
lateral trade within the framework of the World Trade Organization WTO.
The TTIP agreement can act as progressive model for WTO negotiations in
areas such as fundamental labour rights.
Finnish export companies would benefit from reduced US protectionism.
 The United States is a key trading partner of Finland.
 Important export sectors include the maritime industry and associated ser-
vices.
The agreement would serve as an important benchmark in promoting US–EU
standards and labour rights
 The aim of the central employee federations of Finland is for the agreement
to include an ambitious chapter on labour rights in which:
1. Councils with trade union representation would be established to monitor
the observance of fundamental labour rights and to issue recommendations.
Provisions would be laid down to impose financial consequences for the vi-
olation of fundamental rights.
2. The TTIP should contain no such labour provisions or mechanisms that
would undermine the standing of the ILO. Instead the role of the ILO should
be strengthened, for example, by making reference to ILO Declarations and
Conventions.
Provisions on investor protection should be unambiguous and should under
no conditions become an obstacle to the development of legislation that is fair
and in the public interest.

SAK, STTK and Akava
 The Finnish trade union confederations do not support the inclusion in the
agreement of strong investor protection provisions. Guaranteeing non-
discrimination of investors will in all likelihood suffice.
 The dispute settlement procedures must be impartial.
The Commission’s pursuit of openness and consultation is commendable.
 A public consultation on investment protection and dispute settlement was
initiated in March 2014.
Public procurement shall be provided for in the agreement in a manner that
permits the continued imposition of social criteria in awarding public con-
tracts.
 The compatibility of the EU’s new public procurement directive and this
free trade agreement must be safeguarded.
The agreement may not result in increased pressures to privatise public ser-
vices
 National decision making powers over who provides public services must
be retained.

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