Mining tar sands oil at Fort McMurray in Alberta, Canada. Credit: Chris Arsenault/IPS

By Carey L. Biron
WASHINGTON, Jul 17 2014 (IPS)

Newly publicised internal documents suggest that U.S. negotiators are working to permanently block a landmark regulatory proposal in the European Union aimed at addressing climate change, and instead to force European countries to import particularly dirty forms of oil.

Environmentalists, working off of documents released through open government requests, say U.S. trade representatives are responding to frustrations voiced by the oil and gas industry here. This week, U.S. and E.U. officials are in Brussels for the sixth round of talks towards what would be the world’s largest free-trade area, known as the Transatlantic Trade and Investment Partnership (TTIP).“These documents show that the U.S. is simply not interested in an open, transparent [negotiation] process.” -- Bill Waren

“These documents show that the U.S. is simply not interested in an open, transparent [negotiation] process,” Bill Waren, a senior trade analyst with Friends of the Earth U.S., a watchdog group, told IPS. “Rather, U.S. representatives have been lobbying on the [E.U. regulatory proposal] in a way that reflects the interests of Chevron, ExxonMobil and others.”

The oil industry has repeatedly expressed concern over the European Union’s potential tightening of regulations around transport fuel emissions, first proposed in 2009 for what’s known as the Fuel Quality Directive (FQD). Yet according to a report released Thursday by Friends of the Earth Europe, the sector now appears to have convinced the U.S. government to work to permanently block the implementation of this standard.

Current negotiating texts for the TTIP talks are unavailable. But critics say the negotiations are forcing open the massive E.U market for a particularly heavy form of petroleum known as tar sands oil, significant deposits of which are in the Canadian province of Alberta.

“Since the adoption of the revised Fuel Quality Directive in 2009, the international oil companies … petroleum refiners, the Cana­dian government and the Albertan provincial government have spent enormous resources and used aggressive lobbying tactics to delay and weaken the implementation proposal,” the new report, which is being supported by a half-dozen environmental groups, states.

“The oil industry and the Canadian government … are afraid that the FQD could set a precedent by recognising and labelling tar sands as highly polluting and inspire similar legislation elsewhere.”

Safeguarding investments

At issue is the mechanism by which the European Union would determine the greenhouse gas emissions of various types of oil and gas. As part of Europe’s broader climate pledges, the FQD was revised to reduce the emissions of transport fuels by six percent by the end of the decade.

In 2011, the E.U. proposed that tar sands and other unconventional oils be formally characterised as having higher greenhouse gas “intensity” than conventional oil, given that they require more energy to produce – 23 percent higher, according to a study for the European Commission.

Yet tar sands have received massive interest from oil majors in recent years. Some 150 billion dollars were invested in Canadian tar sands between 2001 and 2012, according to Friends of the Earth, a figure expected to grow to nearly 200 billion dollars through 2022.

“Major oil investors want to immediately move as much tar sands oil as possible to Europe,” Waren says. “Over the longer term, they want to get the investments that will allow them to develop the infrastructure necessary to ship that exceptionally dirty fossil fuel to Europe.”

Many investors likely assumed the Canadian tar sands oil would have a ready market in the United States. But not only is the U.S. economy reducing its dependence on oil – particularly imports – but the trans-national transport of Canadian tar sands oils has become a major political flashpoint here, and remains uncertain.

So, last year, oil lobbyists here began to push U.S. trade representatives to use the nascent TTIP talks to safeguard the E.U. market for unconventional oils.

“[I]f the EU approves the proposed amendment to the FQD … it would adversely affect the U.S.-EU relationship, potentially eliminating a $32 billion-a-year flow of trade,” David Friedman, a vice-president with American Fuel & Petrochemical Manufacturers, a major trade association, wrote in a May 2013 letter to the top U.S. trade official.

Now, according to an internal European Commission e-mail uncovered by Friends of the Earth Europe and outlined in the new report, U.S. trade representatives appear to be echoing this analysis.

“[T]he US Mission informed us formally that the US authorities have concerns about the transparency and process, as well as substantive concerns about the existing proposal (the singling out of two crudes – Canada and Venezuela,” the letter, said to be from October 2013, reportedly states.

Canada and Venezuela have the world’s largest deposits of tar sands oil.

The letter also notes that the U.S. negotiators would prefer a “system of averaging out the crudes”, meaning that all forms of oil would simply receive one median score regarding their emissions intensity. This would effectively lift any E.U. bar on unconventional oils – and, according to the Friends of the Earth analysis, add an additional 19 million tons of carbon dioxide to the atmosphere.

‘Threatening’ climate policies

The new revelations come just a week after the leaking of a TTIP paper on E.U. energy policy, which would push the United States to abolish restrictions and automatically approve crude oil exports to the European Union. The document offered a rare glimpse into notoriously secret talks.

“We strongly oppose attempts by the E.U. to use this trade agreement, negotiated behind closed doors, to secure automatic access to U.S. oil and gas,” Ilana Solomon, director of the Responsible Trade Program at the Sierra Club, a conservation and watchdog group, told IPS. “I think there’s strong support for continued restrictions on this issue among both the public and policymakers, due to the implications for both energy security and the climate.”

The new disclosures have indeed caught the attention of the U.S. Congress. Last week, 11 lawmakers renewed a line of questioning from last year about Washington’s influence on E.U. tar sands policy.

“We reiterate that actions pressuring the EU to alter its FQD would be inconsistent with the goals expressed in President Obama’s Climate Action Plan,” the lawmakers wrote to the U.S. trade representative, Michael Froman, “and we remain concerned that trade and investment rules may be being used to undermine or threaten important climate policies of other nations.”

Yet such concerns may already be too late.

Last month, media reports suggested that the European Commission is now considering a proposal to go with the U.S.-pushed “averaging” approach to its fuel-emissions calculation. The same week, Europe’s first shipment of tar sands oil – 570,000 barrels from Canada – reportedly arrived on Spanish shores.

By Martin Khor
GENEVA, Aug 17 2013 (IPS)

Two new trade agreements involving the two economic giants, the United States and the European Union, are leading a charge against the role of the state in the economy of developing countries.

Attention should be paid to this initiative as it has serious repercussions on the future development plans and prospects of developing countries.

The two latest attempts towards this are through the Trans-Pacific Partnership Agreement (TPPA) and the Trans-Atlantic Trade and Investment Partnership (TTIP). A new feature of both, as compared to other FTAs, will be discipline on the operations of state enterprises and a reduction of the state’s role in development.

Martin Khor. Credit: Nic Paget-Clarke

The latter is a subject of long-standing discussion. The immediate post-colonial period saw a tendency towards a strong state, including government ownership of some key sectors, such as industry and banking.

Past decades witnessed a wave of privatisation across both rich and developing countries. But the state still owns or controls utilities, infrastructure, public services, banks and a few strategic industries in many developing countries.

Countries provide incentives for foreign companies, such as tax-free status. However, the state also offers special treatment to local companies, such as grants, cheaper-than-normal credit, subsidies, and government contracts.

The developmental role of the state in developing countries is now coming under attack from developed countries.

This is promoted by the big companies in the U.S., Europe and Japan, which seek to enter the markets of developing countries – the source of their future profits.

The support given by the state to domestic companies is seen by multinational companies as a hindrance to their quest for expanded market share in developing countries.

They are thus seeking to change the worldview and policy framework in developing countries, to get them to reduce the role of state enterprises as well as to curb the governments’ promotion of local private companies.

A sub-chapter on state-owned enterprises is a prominent part of the TPPA, which is being negotiated by the U.S. and Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Japan has just joined too.

The U.S. and Australia are leading the move to have rules to discipline the role of the government in the economy, through a two-pronged approach.

First, to get government or other monopolies to behave in a “non-discriminatory” way, including when they buy or sell goods and services. For example, they are not allowed to give preferences or incentives to local firms.

Second, companies that are linked to the government (including through a minority share) should not get advantages vis-à-vis other firms in commercial activities. Of course, the developed countries that are proposing this are thinking of their companies -how they can get more access to developing countries’ markets.

In the TTIP, a U.S.-European Union agreement, negotiations for which started in July, the EU has prepared a sub-chapter on state-owned enterprises, with rules that seem quite similar to what the U.S. and Australia are proposing in the TPPA.

Although the TTIP only involves Europe and the U.S. directly, the rules it sets are intended to have consequences for other countries.

According to press reports, the two economic giants are planning for the rules they set in the TTIP to become the standard for future bilateral agreements that also include developing countries.

They also hope that these rules will eventually be internationalised in the World Trade Organisation, which has over 130 member states.

The EU position paper on state-owned enterprises says that its aim is to “create an ambitious and comprehensive standard to discipline state involvement and influence in private and public enterprises” and for this to “pave the way to other bilateral agreements to follow a similar approach and eventually contribute to a future multilateral engagement.”

In other words, the constraints on the role of the state, and the reduction of the space for behaviour or operations of state-linked companies, will become the way of the future for all countries, if the U.S. and European plans succeed.

These attempts to curb the role of the state in the economy are worthy of serious study and counter-action.

Developing countries that succeeded in economic development were able to combine the roles of the public and private sectors in a partnership that advanced overall national development.

Asian countries, including Japan, South Korea, Malaysia, Singapore and China, have pioneered this model of public sector collaboration with the private sector.

Those few developing countries that managed to get development going were all driven by the “developmental state”, or the leadership role of government in establishing the framework of economic strategy, and the collaboration between the state, state enterprises, and commercial companies.

Ironically, agricultural subsidies, the main trade-distorting practice of developed countries and regions like the U.S., Europe or Japan, have been kept off the agenda of the FTAs negotiated by the U.S. and EU with developing countries, including the TPPA.

The developed countries are clever not to include what would be more damaging to them. Thus the developing countries are deprived of what would have been the major trade gain for them.

Naturally, there are pros and cons to any agreement, including the FTAs. Any potential gain for a country in exports or investments should be weighed against potential losses to domestic producers and consumers, and especially the loss to the government in policy space and potential pay-outs to companies claiming compensation under the FTAs’ investment rules.

But if developing countries have to come under new international rules that curb the role of the state and that re-shape the structure of their economy, then the prospects for future development will be adversely affected.
(END/COPYRIGHT IPS)

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