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Does TTIP present opportunities for US-EU Energy Cooperation?

How the United States and the EU should deal with energy in the Transatlantic Trade and Investment Partnership (TTIP) remains a debated issue writes Douglas Hengel . For the EU, reinforcing its Energy Union and obtaining a tangible U.S. commitment to Europe’s energy security is critical. The United States, meanwhile, sees energy as more a matter for diplomatic and technical channels, rather than a central trade issue that should be addressed in TTIP.

To highlight the strategic importance of energy issues the EU has sought a separate energy chapter in TTIP. With its substantial dependence on Russia for oil and gas imports, the EU seeks strong provisions in TTIP on transparency in energy, disciplines on state-owned companies, and third party access to pipelines. Brussels sees capturing agreed obligations in a distinct energy chapter as the most effective way to reinforce EU efforts to fully integrate its internal energy market and to (hopefully) influence Moscow’s behavior. Not voiced as openly, Brussels also sees TTIP as potential additional leverage with those EU members who have tended to make sweetheart energy deals with Moscow in violation (at least in spirit) of EU rules and “solidarity.” While energy has been eclipsed in recent months by other, arguably more controversial issues in the negotiations, such as investor-state dispute settlement, the right framing of energy issues remains a key EU goal for TTIP. The United States has not taken a formal position on including a distinct energy chapter, instead questioning the need for separating out provisions on energy from language on trade in goods and services or on investment.

In an effort to help inform policymakers and the public, The German Marshall Fund of the United States, along with the Center on Global Energy Policy at Columbia University and the Lugar Center, has published a paper “Considerations for the Treatment of Energy in the US-EU Transatlantic Trade and Investment Partnership” providing background on how existing trade arrangements, such as those under the WTO as well as NAFTA and recent EU agreements, apply to energy. The report also looks at how to address energy in TTIP, sounding a note of caution about the potential for unintended consequences of including a particular provision, such as language on freedom of transit for energy that could embroil TTIP in the controversy surrounding the Keystone XL pipeline to bring Canadian oil to the U.S. Gulf Coast.

The United States and EU have an opportunity in TTIP to develop rules, principles, and new modes of cooperation on energy, an issue of critical importance to our economies. The EU has proposed inclusion of a number of issues in TTIP that are not well covered under current international trade rules, including the definitions of energy goods and services, the conduct of state-owned enterprises, non-discriminatory access to energy resources, third-party access to pipelines and electricity grids, and non-tariff barriers on environmental goods such as energy efficiency standards. These are important matters to address, even if they may not all be significant in the U.S.-EU trade relationship.

While the United States and Europe have a robust dialogue on energy issues, TTIP offers a way to hard-wire our shared values on competition, transparency, and market access into an agreement consistent with the importance Washington attaches to Europe’s energy security, and that can shape the global energy agenda. The United States cites setting high-standard trade rules in Asia under the Trans-Pacific Partnership as vital to avoid China setting the agenda; a similar argument can be made that TTIP should have strong energy provisions to help reduce the vulnerability of our EU partners to political and economic coercion by its dominant energy supplier. Our power to produce this result is enhanced by the energy boom in the United States, an opportunity to take advantage of now.

Leaving aside for the moment whether energy is best addressed in a distinct chapter or dispersed throughout the agreement, well-designed obligations in TTIP can reinforce the EU’s Energy Union and strengthen its energy security. A fully integrated European gas market is in the United States’ commercial interest, as are exports of liquefied natural gas from the Gulf Coast set to begin later this year. This is a time of revolutionary change in global energy markets, with major trade implications. If TTIP is meant to be a new kind of economic agreement, a template for the 21st century, and a pillar of the transatlantic community, energy must be a central part of it.

Douglas Hengel is a Senior Resident Fellow with The German Marshall Fund (GMF). This article was first published by the GMF.

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