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United States | Brussels, 13 July 2015

Protecting public services in TTIP and other EU trade agreements

Protecting public services in TTIP and other EU trade agreements

In the EU, public services such as healthcare and education are amongst the best in the world. They play a special role which Europeans value, and which EU law recognises.

For that reason the EU, and individual EU countries, are required to protect public services in any new laws or policies they adopt - including EU-wide trade agreements with countries outside Europe.

4 guarantees protecting public services in every EU trade deal

So all EU trade deals provide four important guarantees for public services – on monopolies, on access to the market, on subsidies and on regulation.

These ensure that EU governments remain entirely free to manage public services as they wish.

  1. Monopolies
    If they wish, national, regional or local governments can organise public services so that just one supplier provides the service. This is what economists call a 'monopoly'. The single supplier can be:
    • publicly owned – in other words, a 'public monopoly'
    • a private firm with the exclusive right to offer a particular service.
    And it can operate at any level – nationally, regionally or locally. This protection applies to all sectors except telecommunication and computer services.
  2. Access to the market
    For healthcare social services and education which receive public funding or support in any form or for services providing water for drinking, or for industrial use, governments don't have to give access to their markets to service providers from outside the EU. TTIP will not change this. Instead, governments can prevent foreign firms from providing, or investing in, these services.
  3. Subsidies
    EU governments at all levels are free to provide subsidies to any sector, from theatres to social services. They don't have to treat companies from outside the EU in the same way as EU ones. So they can exclude non-EU companies from such subsidies if they wish.
  4. Regulation
    EU trade agreements leave governments free to regulate any service including those which they consider to be a public service.
    Governments can do so:
    • however they choose - for example, in the way they:
    • give licenses to suppliers to provide a particular service - for example, governments can require providers to offer services such as postal services to everyone in the country (known as a universal service obligation)
    • set the quality standards that suppliers have to meet - for example, governments can set accreditation standards for universities
    • at any level of government – national, regional or local.

Positive or negative list – 2 different ways to exclude public services

The way the EU puts these guarantees in its trade agreements is by specifying so-called 'reservations', or exceptions.

The EU does this using one of two ways – a positive or a negative list.

Which one it uses depends on how it lists its commitments on services in the agreement:

  1. Positive list
    In some agreements, each EU country specifies the kinds of service it will open up to foreign suppliers – this is known as 'positive listing'.
    One example is the EU's trade agreement with South Korea.
  2. Negative list
    In others, EU states say they will open up all services to foreign providers, except for certain services listed in two annexes.
    This is the case, for example, in the EU's trade agreement with Canada.

The difference between the 2 kinds of list is strictly technical, because the EU achieves the same result, either way.

Freedom to choose – and change - public service providers

If a national, regional or local government in the EU decides to procure (buy) certain public services from a private contractor, it must comply with the rules that apply to public procurement.

However, it's free at any time to reverse its decision to buy services from that private provider. It just has to respect the terms of the contract involved.

That means that, when it comes to public services, there is no so called 'ratchet clause' in any EU trade deal.

A ratchet means that a government commits itself not to reintroduce a trade barrier it had previously removed autonomously, in a sector where it had made a commitment.

A ratchet clause does not apply to:

  • monopolies
  • exclusive rights
  • water or publicly-funded education, health or social services.

So a ratchet clause could never be a back-door to privatisation – either in TTIP or in any other EU trade deal.

20 years of protection that works

This approach has already protected public services in the EU for the last 20 years.

In 1995 the EU and other WTO members signed an international agreement on trade in services, known as the GATS.

Since then, the EU has signed many other trade deals with individual countries or groups of countries. Several of these deals have opened up trade in services.

At the same time, governments across the EU have been able to run services like hospitals, schools or water distribution, in the just the same way as before the EU signed these deals.

TTIP and all other free trade agreements the EU negotiates, including TiSA, will work in exactly the same way, offering the same 4 guarantees for public services.

EU Trade Commissioner Cecilia Malmström and US Trade Representative Mike Froman confirmed their respective approaches to public services in a joint public statement they made in March 2015.

Earlier in January 2015, Commissioner Malmström had already confirmed personally, in writing, the EU's commitment to protecting public services in its current and future free trade agreements, including TTIP.

She did so in:

'Public monopolies', 'exclusive rights', 'right to adopt or maintain any measures' – key terms explained

Trade deals, like other policies, can be complex. Trade negotiators and lawyers sometimes use technical terms which are precise, but which aren't always easy for others to understand.

This table shows:

  • text in existing EU trade agreements which refers to public services
  • what that text means in plain English.