EU-US trade talks delve into regulatory maze

De Gucht and Froman

This article is part of our special report EU-US trade talks: moving forward?.

SPECIAL REPORT / A gulf has opened up in the approaches taken by the two sides in the transatlantic trade talks, with the European Union wanting sector-specific commitments and the United States leaning towards rules that would apply across industries, EURACTIV has learned.

EU and US negotiators meeting for a new round of trade talks on 7-11 October might repeatedly agree to disagree, but they are together on one issue: they must make progress on regulatory cooperation.

Regulatory cooperation is the crown jewel of the negotiations, João Vale de Almeida, the EU ambassador in Washington, said in a recent interview. “It is very much about regulatory coherence and how we can regulate effectively in the public interest, while eliminating duplications in the system,” he said in an interview.

Sources said that while discussions so far on regulatory cooperation were preliminary, the transatlantic partners were already diverging.

The EU favours mutual recognition of existing regulations and has put forward a list of priority sectors. These include medical devices, chemicals, pharmaceutical and automobiles, as they are the heavily-traded industries.

However, the United States seems more inclined to come up first with a kind of horizontal framework, which would work also for future regulations, the sources said.

report of the High level working group on growth and jobs released in February hinted at this point.

Roadmap

BusinessEurope Director-General Markus Beyrer said in an interview with EURACTIV that both sectoral and horizontal approaches were needed. “We will need regulators for different sectors come to mutual recognition in the best cases, but then we’ll have to define a process for the future."

“We will have to talk about early consultations, maybe even the possibility to defer the process, because if one side would like to regulate on a specific issue, and the other side wants to do it but only six months later, we would need a framework to make sure we don’t drift apart,” Beyrer added.

Companies must design and manufacture two lines of products for the markets on both sides of the Atlantic, even though we have equivalent levels of health safety, security and environmental protection.

Getting rid of duplication would save costs for both EU and US regulators and businesses. By making it easier for companies to comply with both sets of laws at the same time, billions could be saved and resources reallocated to develop and market new products.

“A strong regulatory chapter of TTIP would be a genuine ‘win-win’ for business and government. Overall, I see a readiness to do it, but I don’t see a clear roadmap yet,” Beyrer said.

Beyrer conceded the devil was in the detail and that work was underway in different sectors to move the process forward.

“We will need to bring the concerned sectors and the concerned regulators at the same table,” he said, adding that both BusinessEurope and the US Chamber of Commerce will submit a joint paper on cross-sectorial aspects of regulatory coherence.

Making it work for chemicals

EU analysts agree that if negotiators succeed finding a way out of the regulatory labyrinth on some sectors, like chemicals, that would set a precedent that could build further political momentum. A high level of non-tariff barriers are used for chemicals, cosmetics and biotechnology, say Center for Economic and Policy Research experts.

“In the area of chemicals legislation the transatlantic divide is huge,” said Lena Perenius, executive director of the European chemicals trade association Cefic.

Some estimates show that removing barriers in chemicals could yield a 8.39% increase in total exports to the US on a value added basis.

The EU and the US regulate chemicals in different ways. European regulation requires that all chemicals sold in Europe be registered with the European Chemicals Agency, while the US requirements are much less strict. Both sides, however, maintain comparable high levels of protection.

Without going for full harmonisation, chemical companies want enhanced regulatory cooperation, Perenius said, stressing the need to share information among EU and US  government bodies. 

If regulators could agree to coordinate their safety assessments of the same chemicals, companies would not have to repeat tests. This would save costs both for companies and regulators. More alignment also on technical standards could be a first step forward, the Cefic expert said.

Perenius, however, agrees that it is still too early to see the light at the end of the tunnel, and this round of negotiations will at best set the roadmap for future negotiation rounds.

According to a scenario developed the Centre for Economic Policy Research (CEPR), TTIP could lead to 100% reduction in transatlantic tariffs and a 25% decrease in the costs resulting from non-tariffs regulatory barriers, and a 50% reduction in procurement barriers. Just removing half the regulatory barriers to trade would add €200bn to the EU economy.

Both sides will discuss the full range of issues in the next round, but on regulatory cooperation agreeing on approaches would seem already a first step forward.

If successful, the Transatlantic Trade and Investment Partnership (TTIP) is expected to significantly strengthen the EU and US economies by streamlining the two regions’ regulatory regimes – without lowering environmental or product safety standards.

"We expect that the negotiations will bring about a more integrated and streamlined transatlantic regulatory environment which will increase patient safety and drive medical device innovation. Patients will benefit as information about medical devices on the market is exchanged more quickly and efficiently through a joint US-EU Unique Device Identifier (UDI) system,” said Merlin Rietschel of Eucomed, the European Medical Technology Industry Association.

"Bringing the two systems closer together will help make the transatlantic medical technology industry more competitive in the global economy. We anticipate a boost for innovation as our two systems come together—we’ll be able to exchange more information as we develop new technologies and hopefully reduce the cost of meeting regulatory requirements for both markets," added Jesús Rueda Rodriguez, director of regulatory affairs for the European Diagnostic Manufacturers Association (EDMA).

"We are coordinating with our US colleagues in PhRMA [the leading pharmaceutical and biotechnology business association in the US]. Regarding this round of negotiations we hope that clear objectives and a roadmap will be drawn up for the next rounds. There will also be a stock taking exercise in early 2014 that will be a good way of assessing the positions and what remains to be done in the months ahead," said Nicholas Elles, a spokesperson for EFPIA, the European federation for pharmaceutical industries and associations.

Negotiations between the US and the EU on the Transatlantic Trade and Investment Partnership (TTIP) have started in July.

If successful, the deal would cover more than 40% of global GDP and account for large shares of world trade and foreign direct investment.  The EU-US trade relationship is already the biggest in the world. Traded goods and services are worth €2 billion.

The agreement, the biggest bilateral trade deal ever negotiated, could result in millions of euros of savings to companies and create hundreds of thousands of jobs. It is expected that every year an average European household would gain an extra €545 and our economy would be boosted by around 0.5% of GDP, once the deal was fully implemented.

Brussels and Washington have set the ambitious goal of completing negotiations by the end of 2014. 

  • 23-27 September: Working groups meetings
  • 7-11 October: Second round of negotiations
  • December 2013: Third round of negotiations
  • January 2014: Stock-taking exercise with EU Commissioner Karel de Gucht and US Trade representative, Michael B. Froman

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