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U.S., EU Already Sparring on Regulatory Cooperation Under T-TIP

Friday, October 11, 2013
Sandler, Travis & Rosenberg Trade Report

U.S. and European Union officials have said repeatedly since negotiations on the Transatlantic Trade and Investment Partnership were announced earlier this year that perhaps the most meaningful benefits of this agreement would come from closer cooperation on regulatory issues. But with substantive talks not even yet begun, the two sides are already wrangling over what that cooperation should look like.

U.S. Trade Representative Mike Froman said in a Sept. 30 speech that Washington’s goal is to “bridge the divergences between two well-regulated markets” while retaining a “shared commitment to strong regulations in the public interest” and reducing “unnecessary costs that damage our collective competitiveness in an increasingly competitive global economy.” He highlighted problems such as disagreements on how to define and recognize equivalence among regulations, the inability to test U.S.-made products against EU standards in the U.S., and the fact that “the only bodies the EU recognizes as producing international standards are those in which the EU member states cast the bulk of the votes.” These and other differences have created unnecessary barriers, Froman said, which not only increase costs and deter trade and investment but have also “emerged as the greatest potential impediment” to further economic integration and “inhibited our ability to present a shared vision to other countries and to agree on global rules.”

Froman offered three principles that should underlie efforts under the T-TIP to address these issues, highlighting how the U.S. system reflects these principles and suggesting that the EU’s system needs work in each area. First, transparency, such as by providing adequate advance notice of specific regulatory measures instead of “just preliminary, general papers on the subject.” Second, participation, or providing meaningful opportunities for input from a broad range of stakeholders, public and private, foreign and domestic. Third, accountability, or providing responses to that input as well as a rationale for the final regulatory decision that is based on evidence and science. “If we succeed in embedding these principles” in the T-TIP, he said, “we'll produce better regulations and mitigate many of the tensions we face around regulatory divergences.”

Froman raised similar concerns with respect to the setting of standards. While the need for interoperable standards in the area of information technology “encouraged the EU to join the U.S. in working with private sector-led standards,” he said, “in other areas, an inability to incorporate the best ideas from market-driven standard-setting processes has discouraged innovation and interoperability, increased costs and reduced competitiveness.” Under T-TIP the goal should be “to move standardization towards new open, global horizons.”

The prospects for bringing the two sides together on these issues are better than they might appear, Froman said. For example, the “so-called gap between Europe’s preference for the precautionary principle and the United States’ focus on cost-benefit analysis” in considering regulatory action is "decreasingly important.” In addition, “we can draw inspiration from the difficult work we have both accomplished” in pushing through difficult but important regulatory reforms.

EU Trade Commissioner Karel De Gucht offered his take on the matter, including a rebuttal of some of Froman’s assertions, in an Oct. 10 speech. De Gucht rejected any implication that the EU should modify its regulatory system to more resemble that of the U.S., stating that “a beauty contest will flatter no-one” and that “neither side will be successful if its seeks to impose its system on the other.” He defended the EU regulatory and standards systems, which reflect decades of experience fostering cooperation among 28 member countries, as being transparent, open to input from “anyone who will potentially be affected,” and based on “the best science available.” He also asserted that these systems have resulted in “perhaps the highest level of consumer, environmental and labor protections in the world” and have eliminated separate, conflicting standards that would inhibit the free movement of goods across borders.

De Gucht said that from the EU’s perspective there are three essential elements for the regulatory chapter of T-TIP. First, strengthening cooperation on regulations and standards that could have a significant impact on transatlantic trade, such as by opening channels of information and communication early in the process. Second, examining ways to make existing regulations more compatible, such as mutual recognition that regulations in areas such as automobiles and pharmaceuticals yield the same level of safety or greater efficiencies in areas such as chemicals where the two sides’ regulatory approach may be very different. Third, a new Regulatory Cooperation Council “that brings together the heads of the most important EU and U.S. regulatory agencies” to “monitor the implementation of commitments made and consider new priorities for regulatory cooperation,” including the joint development of regulations “that could then have a good chance of becoming international standards.”

Froman and De Gucht did agree, however, that the T-TIP will not result in lower standards of protection or prevent either side from promulgating the regulations they feel are necessary.  

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