REPORT
Report from
Washington EU-US High Level Regulatory Cooperation Forum
(10-12 April 2013)
and
Dublin Transatlantic Business Round Table
(19 April 2013)
Washington: Reinhard Quick and Adrian van den Hoven along with DI and a large
number of European sector industries participated in the High Level Regulatory
Cooperation Forum in Washington. The US Chamber hosted the High Level Forum. On
the governmental side, DG Trade and Enterprise were well represented while the US
side was represented by USTR, Commerce and OIRA (regulatory oversight
department of the White House Administration). While in Washington, we also met with
Mike Froman (White House), Dan Mullaney (USTR), Matthew Murray (Commerce),
Everett Eissenstatt (Senate Finance), Geoffrey Antell (House Ways and Means). A
delegation of the European Parliament was also on visit that week to Washington.
Dublin: Adrian van den Hoven and member federations (DI, SN, CBI, IBEC, Lewiatan,
etc.) participated in a Round Table co-organised by IBEC, BUSINESSEUROPE and
the US Chamber of Commerce in Dublin. Commissioner De Gucht represented the
Commission while Vital Moreira (EP INTA Chairman) and Minister Bruton (Irish
Presidency) were also in attendance. Ambassador Kennard and Mike Froman
represented the US Government. The Irish Prime Minister and Deputy Prime Minister
also participated in the event which took place in parallel with the informal EU trade
ministers council. Unfortunately, a few BUSINESSEUROPE members and our
President were unable to join the event due to extreme weather conditions in Dublin on
17 April.
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Huge political and business momentum for TTIP
Although it is impossible to attend a meeting or event on TTIP without hearing at least
one naysayer explain the challenges ahead in the negotiations, the political and
business momentum for this trade negotiation is significant and only comparable to the
early days of the WTO Doha Round. Both in Washington and in Dublin, large business
participation was combined with very concrete proposals on what to pursue in the
upcoming negotiations. On 11 April a Business Coalition on Transatlantic Trade
consisting of mainly big US corporations and led by the US Chamber also held an
information session on TTIP in Congress. In addition, there is widespread cross-party
support for these negotiations in the US Congress, the European Parliament, the US
Administration, the Commission and the Council of Ministers.
Both governments are currently going through their respective procedures to start the
negotiations. The Commission has submitted its mandate to the Council for adoption
(and notified it to the Parliament). On 20 March, the US President has sent a letter to
the US Congress seeking authorization to start negotiations within 90 days. This may
enable the negotiations to officially begin in June perhaps with an official launch in the
margins of the G8 Summit in Northern Ireland. The Congress has also been signaling
its willingness to work with the Obama Administration to adopt Trade Promotion
Authority (TPA) which will be necessary to ratify the TTIP and the Transpacific Trade
Partnership (TPP) without amendment.
Of course, both sides recognize the significant challenges ahead in the negotiations
where difficult issues will need to be tackled in order to achieve the outcomes
developed in the High Level Working Group report. In addition to traditional market
access issues in goods and services, both sides also acknowledge the strategic and
economic importance of advancing regulatory cooperation and convergence through
these negotiations. There is a shared ambition to restore Transatlantic trade leadership
by pursuing an ambitious trade negotiation on all issues.
In Europe, the Parliament and the Council have already begun to highlight sensitive
issues in the negotiations (some aspects of agricultural regulation, cultural industries,
some aspects of IPR protection, for example). Debate within the institutions is focusing
on whether to make these issues non-negotiable (“red lines”) or sensitive negotiating
points where compromises can nevertheless be found. The US government has said
that all issues should be on the negotiating table and warned against the EU
negotiating on the basis of “red lines”.
On the US side, less is filtering out about sensitivities although any issue which
touches on state or sub-federal issues will be very challenging to address. In addition,
both sides have warned that they will not fundamentally change their basic legislation
for the needs of this agreement.
Opposition to the negotiations is very low key for the time being. Some NGOs
expressed their opposition to the negotiations in Washington referring to the agreement
as “TAFTA” in order to associate it with NAFTA (the FTA between the US, Canada and
Mexico) which has bad press in the US. There were also farmers’ protests in Dublin
that coincided or perhaps targeted the informal Trade Ministers’ Council. The only
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impact that these groups has was a recommendation by both governments to business
that they should explain the benefits of the agreement to a wide spectrum of civil
society. We anticipate that the scale of this negotiation could compel civil society1 to
step up their activities for or against the negotiations.
Summary of issues for the agreement
1. Industrial tariffs
The issue of industrial tariffs does not appear to raise many concerns on either side of
the Atlantic (although sensitivities may clearly exist). This is positive considering the
huge economic potential of rapidly eliminating these tariffs. However, challenges will
develop over rules of origin which are essential to enable companies to benefit from the
tariff cuts. One challenge will be the opportunity to use regional cumulation. Another
challenge lies in the sometimes excessively strict rules applied in the US.
2. Industrial non-tariff barriers
Although industrial non-tariff barriers probably do exist between the EU and the US,
there is a limited focus on this issue in comparison with the efforts put into regulatory
cooperation and convergence. The main focus here is how to improve TBT notification
and transparency procedures on both sides of the Atlantic – but this is also part of
regulatory cooperation.
3. Agricultural tariffs
Agricultural tariff negotiations will be a significant challenge in the negotiations as both
sides have opposite offensive/defensive interests. The US is expected to put more
pressure in this area as exported oriented US farm states producing beef and cereals
play a big role in the Senate Finance committee. Meanwhile EU exporters of dairy
products are heavily targeting the US market.
4. Agricultural non-tariff barriers
This will be another bone of contention in the negotiations. EU GMO and other SPS
restrictions are heavily criticized in the US as “protectionist”. The EU has also faced a
series of excessive US SPS regulations (in beef and dairy for example) and will likely
seek the extension of geographic indicator protection to products beyond wines and
spirits.
5. Regulation Cooperation and Convergence
Both administrations consider the regulatory aspect of the negotiations as the ‘centre
piece’ of the future agreement. BUSINESSEUROPE and the Chamber of Commerce
presented the horizontal aspects of regulatory cooperation. The sectoral presentation
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Many civil society groups support the negotiations but want special terms included in the agreement –
for example trade unions or animal welfare organizations.
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concentrated on short term and medium to long term deliverables of TTIP. A particular
emphasis was made with respect to avoidance of duplicative requirements (e.g. for
inspections and testing). A summary of all the business presentation is attached.
The agreement will most probably have a horizontal chapter on regulatory cooperation
as well as sectoral annexes. The sectoral annexes contained in the EU/Korea FTA and
in the US/Korea FTA are seen as starting points but not as a blueprint for the
negotiations. TTIP will have to go beyond these sectoral annexes. A horizontal chapter
will also guarantee that regulatory cooperation can continue even after the entry into
force of the agreement.
There is no agreement yet whether TTIP will cover legislation or whether it will be
restricted to delegated acts, i.e. ‘regulations’. European industry advocates for a
comprehensive agreement covering both legislation and regulations. The TTIP cannot
cover the rulemaking activities of the US agencies alone but must include all
legislations/regulations which affect transatlantic trade.
One central theme of discussions in Washington was how to improve the transparency
of regulation and consultative procedures toward the partner on the other side of the
Atlantic. Much of the discussion focused on the difference between the EU and the US
rule-making process. On the positive side, the EU and the US have been moving closer
together in terms of better/smart regulation processes over the last 15 years. For
example, EU impact assessment procedures and US cost-benefit analyses can, in
some cases, be done using similar approaches. However, several differences remain.
First, neither the EU nor the US conduct Transatlantic trade and investment impact
assessments in their procedures (although formally both have guidelines to conduct
international trade assessments which they do not really put into practice.). In addition,
American notification and consultation procedures for new regulations follow a much
more rigorous (but also rigid) consultative procedure which can be challenged by
stakeholders in court. We can expect that the US will press the EU to put into place
more transparent procedures in relation new rules – perhaps with a focus on
comitology rules as general regulations or directives are usually adopted in a more
transparent manner with consultation procedures in Europe. Another challenge is the
fact that all EU regulatory or legislative proposals (with some exceptions for
comitology) are subject to impact assessment and consultation procedures as all
legislation must originate from the Commission in the EU system. In the US, many laws
that either shape regulation or could even be considered a regulation originate in the
Congress and are subject to neither cost benefit analysis (although the congressional
budget office does make budgetary assessments) nor public consultation procedures
(although Congress can be lobbied by virtually anyone it may be argued). Similar
concerns may arise with respect to European Parliament or Council amendments that
considerably alter a Commission proposal. How to address this in a way that promotes
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Transatlantic commerce and openness of our respective regulatory processes will be a
challenging aspect of the TTIP negotiations.
Ensuring that regulations which affect Transatlantic commerce are non-discriminatory
will also need to cover how each side regulates on the basis of clear evidence
(scientific or otherwise). In principle, both the EU and the US must regulate in this
manner according to their own laws. In the US, regulatory agencies (like the FDA) are
required to make decisions on the basis of available evidence (or to request new
evidence). Similar rules apply to EU agencies (like the EMA or the EFSA) which
provide independent scientific advice based on a review of evidence to EU regulators
(primarily the Commission) to enable it to propose new regulations for example to
authorize the marketing of new products. We anticipate that the TTIP will integrate
rules referring to such evidence based approaches to regulation as part of a procedure
to prevent barriers to commerce between our two economies. In addition, we
understand that many of the proposals of sector industry associations for the TTIP also
aim to foster cooperation between agencies as regards the collection of evidence’ and
data. The aim here is twofold: to help develop common approaches to evidence by
agencies (for example related to risk assessments) which should improve their
regulatory capabilities at lower cost to regulatory agencies and; inasmuch as possible
to reduce data collection requirements for companies to help save them money as well.
One challenged we faced in Washington was the non-participation of regulatory
agencies in the discussions as only they know what could be achieved through closer
cooperation in this area.
The historical disagreement between the EU and the US on standards referenced in
regulation will certainly be a part of the TTIP discussions. For now, the discussion is a
reiteration of the discussion on the benefits of the American versus the EU approach to
standardization. In the US, they claim that their private sector standard setting bodies
are most appropriate to foster competition between standards (and hence technological
choices) and that these bodies are “international” because American and nonAmerican companies can participate in the process. In the EU, the recognition of EU or
international standards is seen as an important tool to promote market opening as
EU/international standards prevent national standards from blocking trade in the Single
Market. The US challenges the EU’s referencing of international standards because EU
member states have an overwhelming number of combined votes in international
standard setting bodies. To address these diverging views on standards, it will be
essential to focus on the role of standards in preventing commerce between the EU
and the US rather than on the merits of one or the other’s standard setting system. In
this way, the TTIP could include a mechanism to address cases where standards
referencing creates transatlantic barriers.
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Sectoral regulatory convergence opportunities
At the EU-US Regulatory Cooperation Forum, a significant number of industrial sector
associations (more often than not jointly as Transatlantic industry views) presented
ideas to promote convergence or mutual recognition.
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Industries requiring marketing authorisation
The health industries (pharmaceuticals, generic pharmaceuticals, pharmaceutical
ingredients, medical equipment producers) all put forward views on how to reduce
double inspections of industrial sites and put forward ideas for the mutual recognition of
data and/or standards to reduce testing requirements and costs. The cosmetics
industries put ways to address certain contradictions in EU and US regulations in fields
where both sides aim to pursue very similar policy objectives and called for reduced
double testing. The chemicals industry promoted views on how to address new
regulatory areas such as nanotechnology and how to share and to protect test data
required for chemical marketing authorizations. The food and agricultural sectors
underlined the many barriers to commerce arising from regulation that did not always to
account of scientific evidence. A common concern raised by these sectors was the
absence of dialogue with regulators/agencies on the options for TTIP regulatory
convergence.
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Industries working on the basis of product standards
The auto and the auto components sector put forward ideas on how to develop
common standards in new regulatory areas (e-vehicles) but also underscored their
ambition to develop a common approach to standards for more traditional issues
(environmental and safety standards) over the longer term. The boat industry
underlined the need for common standards or mutual recognition to enable more
commerce.
5. Services
The High Level Working Group called on the EU and the US to apply the highest level
of openness to one another on the basis of their current FTA practice. In addition,
several key sectors are putting forward proposals in logistics (shipping rules) and trade
facilitation. In addition, both the insurance and the banking sector are advocating for
some limited mutual recognition between the two markets. It is unclear whether
American restrictions in sectors such as telecoms, shipping, or airlines can be fully
lifted through this agreement. Access to professions was also raised by the EU side
although these sectors are generally regulated by state-level professional associations,
which presents an additional challenge.
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6. Public Procurement
This will be a challenging issue for the negotiations as many procurement contracts are
regulated at the state or local level in the US and can include restrictions to trade
between US states. A targeted approach to clarify how certain US federal laws create
barriers at state and local level can bear fruit however. There may also be an
opportunity to gain support from certain state governors who have found it extremely
challenging to apply some federal legislations and thus have been unable to invest, for
example, in key infrastructure projects.
7. Intellectual Property Rights
Both sides appear to recognize the importance of a strong IPR chapter to address
global challenges – notably forced technology transfer to emerging markets. However,
due to concerns in Europe over the failed ratification of ACTA (anti-counterfeiting
agreement) and in the US over the rejection of certain internet copyright enforcement
laws, there are mixed views in business and government as to whether copyright
should be explicitly covered by an agreement. However, less controversial issues may
logically be reviewed under the agreement such as how to better protect industrial
trade secrets.
8· Investment rules
Although EU member states and the US generally have some form of investment treaty
(ranging from very dated Treaties of Commerce and Friendship to more modern BITs
but that have been questioned by the European Court of Justice), there should be an
interest to negotiate an investment chapter in the TTIP for three reasons. First, TTIP
could create a model for the global pursuit of bilateral investment treaties or chapters of
FTAs. Second, TTIP could address the very real investment restrictions that arise in
EU and US federal and sub-federal laws. Third, TTIP could address the fact that
company complaints of investment discrimination are not always adequately dealt with
by national or local court systems. Interestingly, anti-globalisation NGOs are criticizing
the potential inclusion of on investment chapter in the negotiations by claiming that
such agreements are only needed to deal with emerging markets with weak rule of law
traditions and systems (thereby implicitly recognizing the need for these agreements
which they oppose in principle). Neither the EU nor the US has given any indication
that investment should be excluded from the negotiations so far. As this is part of their
standard model FTAs, we expect they will include an investment chapter in their
bilateral agreement.
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Other issues: The revival of bipartisanship in Washington?
On our last missions to Washington, the poor state of bipartisan relations made
progress on most policy issues very challenging. While the situation is still described as
extremely bipartisan by most analysts in Washington, a few policy issues appear to be
making some progress across party lines.
US deficit
The mood in Washington was more positive regarding the possibility of a bipartisan
agreement on a budget which would both increase revenues (taxes on the wealthiest
part of the population) and reduce entitlements (social programmes such as health
insurance and public pensions). The effect of the sequester which automatically
imposes spending cuts on US government agencies is also having its effect on the
TTIP negotiations as USTR officials must reduce staff and travel budgets at this time.
Gun control
The public debate in Washington was dominated by debates over gun control. The
recent series of school/university shootings have increased public support for stricter
rules on the sale of weapons – notably calling for background checks on purchasers.
Although not a business issue, the fact that bipartisan progress was being made on this
issue signals the possibility that bipartisan policy-making could develop on other issues
– deficit reform or trade for example.
Energy Policy
On energy policy, the main issues concern shale gas. On the one hand, the
government has not authorized sufficient infrastructure projects for oil and gas
pipelines to enable shale gas and oil producers to ship their production to the refinery
regions in Texas and California. This is creating bottlenecks and further pushing prices
downwards. In addition, the government is reacting slowly to requests for authorization
for LNG export plants which could serve global markets – including Europe. Some US
industries are quite actively opposing LNG exports because they benefit from very low
prices and are reinvesting in the US to take advantage of low energy prices.
Climate regulation
The likelihood of the US adopting a climate law to introduce a cap and trade scheme is
very unlikely as neither the government nor the Congress is really pushing the issue.
The US is likely to continue with sector specific measures to address this problem (i.e.
regulation of industrial emissions and transport emissions). This will make it
challenging to agree to specific emissions cuts in a future international climate
agreement.
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