To TTIP or not to TTIP: The question bugging Europe

Anmar Frangoul | Special to

Amid chaotic scenes in the European Parliament, lawmakers voted by the narrowest of margins -- 183 to 181 -- to postpone a crucial debate on the Transatlantic Trade and Investment Partnership, or TTIP.

Why is something designed to bolster trade links between the U.S. and Europe – and consequently their respective economies – proving so controversial?

CNBC gives you a guide to what's happened so far in a saga that is dividing many across Europe.

What is TTIP and why is it important?

Carsten Koall | Getty Images

The TTIP is described by the European Commission, the executive arm of the 28-country European Union, as a "trade and investment agreement" designed to help trade and boost exports by getting rid of red tape, removing tariffs, and cutting investment restrictions.

First announced by U.S. President Barack Obama in his 2013 State of the Union address, the deal is still being negotiated between the European Union and the United States.

Speaking to the BBC recently, the U.K. Foreign Secretary Philip Hammond commented that TTIP was, "A hugely important opportunity for the European Union and the USA… to set the standards for international trade for the future."

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Hammond went on to add that, "Our share, collectively, of global trade is declining as China and India and others increase their share of it. If we don't act now to set the standards… for world trade, we will find that others – the Chinese, the Indians – are dominating and (that) they are setting the standards for the future."

For Pawel Swidlicki, Policy Analyst at Open Europe, TTIP has the potential to be a game changer. "It could really set the new rules of trade, which would then be seen as a global template for other agreements around the world," he told CNBC in a phone interview. "So, in that sense it could actually do a lot to force through trade liberalization, which has obviously become bogged down at the WTO level."

What are the potential benefits of such an agreement?

A 2013 independent study by the Centre for Economic Policy Research – commissioned by the European Commission – concluded that a partnership such as TTIP could boost the EU economy by 119 billion euros ($134 billion) annually, with the US economy benefitting to the tune of 95 billion euros.

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European families would gain an extra 545 euros a year in disposable income, the report said, while it also found that global gross domestic product would increase by roughly 100 billion euros.

Is TTIP universally popular, then?

In a word, no. More than two million people have signed a petition calling for the EU to halt TTIP negotiations with the U.S. The petition also calls for the EU to not ratify the Comprehensive Economic and Trade Agreement, or CETA, with Canada.

There are concerns that TTIP would impact everything from European food and farming standards to privacy and whether a U.S. company could sue a government or organization like the English National Health Service over restricted trade practices.

"Politically it's very contentious… because in Europe there's a lot of sensitivity about this perception of American, free-for-all capitalism and the erosion of European labour and environmental standards," Swidlicki said.

Could a corporation sue a country?

One stumbling block in getting the TTIP ratified is the potential presence of an investor–state dispute settlement, or ISDS. An ISDS enables an international investor to sue the countries where their investments are based, with an international tribunal hearing the case.

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It is things like the ISDS that are creating a broad coalition of opposition to TTIP. "They're ratcheting up fear based on this ISDS clause, which they're saying will give these corporations the right to sue European governments over public policy issues, that's why it's really become such a big issue," Swidlicki said.

"For most people… trade negotiations are something quite abstract, but when people talk about it in terms of privatization of the NHS or flooding Europe with genetically modified organisms… those are issues people care about, and they pay attention," he added.

Swidlicki went on to add that, "There is a case to look at exactly what kind of dispute resolution mechanism we put in, but I think other than that, we're very pro free trade, we think TTIP's a good thing, not only TTIP but the other free trade agreements that the EU is negotiating."

What next, then?

Lamy: 'TTIP is a long haul negotiation'

The European Commission's TTIP advisory group is set to meet on June 30th, with sustainable development, energy and raw materials as well as a sustainability impact assessment on the agenda.

For Swidlicki, there is too much on the line for there not to be an agreement. "I think it is likely because of how much political credibility is at stake," he said.

"David Cameron has made it very clear that he sees this as being part of his renegotiation package, his package of being able to present British voters with a reformed Europe," he added.

"One of the pillars of that is an EU that is more open to trading with the rest of the world, so TTIP is a crucial element of that… providing that they can finalize the negotiations before the UK referendum, I think that'll be a boost for the government."

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