New international trade agreements could be a boon to Vermont’s import and export businesses, but some legislators worry that regulatory “harmonization” undermines the state’s authority and may threaten other sectors.
The Transatlantic Trade and Investment Partnership (TTIP) is regarded as the largest free trade agreement of its kind ever undertaken. Covering all goods, services and investments, TTIP was announced by President Barack Obama and European leaders in June. Negotiations followed in July and will continue through the fall. The agreement aims to lower tariffs and reduce regulatory barriers to trade among all American states and European countries.
British Consul General Susie Kitchens visited Vermont in September to attend the British Invasion car show in Stowe — a regular appearance for all in her post — and to learn more about the politics and economy of her new neighbor to the north. Kitchens, who’s based in Boston and serves as the main British diplomatic contact for New England, said promoting a nascent and fast-moving trade agreement between the U.S. and European Union is her office’s highest priority.
Viewed together, Europe represents Vermont’s third largest export partner, said Susan Murray, director of the U.S. offices for export assistance, commerce and commercial service in Vermont. By far the biggest money is in electronics, a field still dominated in the state by IBM, despite its continued cutbacks.
But even without those high-end electronic components, trade of shippable goods across the pond totaled more than $217 million in 2012, according to data from the Vermont Global Trade Partnership. That figure grew more than 10 percent from 2011, which itself had increased nearly 20 percent from the year before.
Kitchens said that growth could spike even higher. She listed the food and forestry industries, plus financial services, as potential growth sectors under TTIP. A report from the British Embassy in Washington predicts 42.2 percent total growth in exports, including services, from Vermont to the EU, if TTIP is passed as envisioned. It’s unclear, however, the timeframe over which that growth would take place.
And what troubles Sen. Ginny Lyons, as well as the state Attorney General’s Office, is that much of the agreement is unclear — especially its impact on the state’s regulatory authority. Negotiations of international trade agreements such as TTIP and the Trans-Pacific Partnership Agreement, which is further along in negotiations, are conducted in secret.
“It’s pretty horrific, to be honest with you,” Lyons said. “Negotiations that may very well affect state laws, undermine state laws and abrogate state sovereignty are not open to states.”
Lyons said she understands that negotiation of tariffs are best done privately so parties can evaluate various cost-benefit scenarios. But TTIP is largely about minimizing regulatory barriers. Without a seat at the negotiating table, states are left to speculate on the implications of trade agreements — or hope that information will be leaked.
That’s what happened a few years ago when the U.S. was negotiating a bilateral trade agreement with Australia. A provision that specified permissible prescription drug lists for Medicaid, for example, got out. Vermont’s Legislature felt the state’s prescription protocols could be challenged under the provision, so the state passed a resolution objecting to it. Other states followed, and the provision ultimately was peeled out of the agreement.
It’s an example also provided by Assistant Attorney General Elliot Burg, who said Attorney General William Sorrell’s office has in the past signed onto multi-state letters taking issue with the way that free trade agreements may undermine state laws or regulations.
“These do not say international trade is bad, at all,” Burg emphasized. “But you have to look at the details … and determine what the impact may be on issues of concern to Vermonters.”
Those issues manifest in state-specific regulations on matters such as environmental protection, government procurement standards, professional licensing and tobacco control.
“Generally, state legislatures are free to make decisions based on local values,” Burg said. But domestic regulation provisions place a burden on states to prove that such laws are necessary to achieve priorities such as quality of service, rather than public good, he said. “If that’s true, then many of the laws that state legislatures enact are subject to challenge.”
Burg also mentioned that the dairy industry may suffer under TPPA if a major dairy supplier from New Zealand is given new access to New England markets. But his office is largely focused on preserving hard-won ground in state regulatory authorities, such as tobacco control.
“We understand the reason why (negotiations) are not conducted completely in public,” Burg said. “But this is a process that really does shut out the states, and shut out public debate even at the congressional level, especially when it’s on a fast track.”
Lyons and Burg both serve on the Commission on International Trade and State Sovereignty — a more active player on the issue than most administrative offices, Lyons said. She underscored that neither she nor the commission are opposed to reduction of trade barriers.
“It’s a delicate balance,” Lyons said. “You have to be careful you’re not overstepping the bounds in one direction or the other.”
For her part, Kitchens is confident that common ground can be found. She said all 50 states and all 27 European countries will never settle on a single regulatory practice for each category of trade, but mechanisms can be built for accommodating unique systems that reflect each member state’s values.
In the meantime, Kitchens said, the member states just need to get to the negotiating table and find a place to start.