The origins of EU-US proposals for “regulatory cooperation” show a process dominated by big business right from the start. The ongoing TTIP talks are seeking to enshrine and fortify a dangerous precedent, argue Kenneth Haar and Max Bank.
Kenneth Haar is a researcher at Corporate Europe Observatory (CEO), a Brussels-based NGO that challenges the influence of big business and business lobby groups in EU policymaking. Max Bank is a campaigner for LobbyControl, a German NGO that campaigns for transparency in lobbying.
The main focus for lobbying efforts in Brussels right now is the Transatlantic Trade and Investment Partnership (TTIP), a proposed EU-US trade deal that concerns a whole raft of policy areas from finance to consumer affairs, data protection to culture. The Investor-State Dispute Settlement (ISDS) chapter of the TTIP talks is of grave concern and has captured significant public and media attention, especially over the last 12 months. Under ISDS, major international corporations will acquire the legal right to raise barriers against the democratic decisions of sovereign states or supranational associations, when they consider that such decisions jeopardise their profits. But TTIP also involves proposals for what is known as “regulatory cooperation”. This will aim to dismantle existing “regulatory barriers” to trade and prevent new ones from emerging. Public interest regulations would thus have to undergo lengthy transatlantic probes, including vetting by business for possible impacts on trade. Advances in environmental regulation, workers’ rights and consumer standards as well as gains in many other areas are at stake.
Its drab name is a key part of what makes it so threatening. “Cooperation” sounds positive. But for whom? The lack of attention to this aspect of the EU-US talks has enabled those who would rather not engage in any form of serious public debate on these issues to spread comforting soundbites about how regulatory cooperation means “cutting red tape”. Cuts are definitely on the cards, and are set to come in the form of attacks on public interest legislation and curbs on the power of elected representatives.
From the beginnings of transatlantic regulatory cooperation in the 1990s, the European Commission and the US government have been determined to put big business at the heart of decision-making. DG Trade and the US Department of Commerce helped to set up the Transatlantic Business Dialogue (TABD), a club of CEOs from some of the biggest EU and US companies to advise officials on trade and investment. The TABD would become very powerful over the years, with senior European and American officials making a habit of consulting thoroughly with this business lobby group on the terms of the transatlantic agenda.
A case that demonstrates how regulatory cooperation and the TABD facilitated big business priorities over the public interest is that of AIG and the financial sector collapse of 2008.
In 2002, the EU adopted new rules in an attempt to ensure transnational corporations that worked in different parts of the financial sector no longer escaped capital adequacy rules. US companies operating in the financial services business would thus have to be supervised in Europe and abide by EU rules on capital requirements. This idea horrified Wall Street bankers and they duly turned to US financial authorities to relay their concerns to the Europeans.
Under regulatory cooperation, dialogues were launched to bring EU and US rules into line. The deal reached meant that US banks and other big financial players were able to operate in the EU without any meaningful monitoring by European authorities.
When the financial crisis hit, it soon became clear that supervisors knew very little about the EU side of the account books of US financial sector players. This was certainly true in the case of the now infamous investment bank Lehman Brothers. It was also accurate for insurance giant AIG, whose financial products division was based in London. AIG had also become a major trader of Credit Default Swaps (CDS) – a type of contract that offers a guarantee against the non-payment of a loan.
The conglomerate’s dissolution in autumn 2008 was a decisive moment in the financial crisis. Its inability to honour its obligations to CDS holders was decisive in its downfall. Because of regulatory cooperation, supervision was weak, meaning authorities weren’t able to deal with the emerging crisis. In the end AIG got a $182 billion bailout from the US government, its demise spearheading a financial sector crisis that proved disastrous to millions of people.
Such combined efforts between the EU and US authorities also helped to hamper action on data protection, hazardous electronic waste, animal testing, ozone depleting substances and aviation emissions. These examples are taken from a report published by Corporate Europe Observatory and LobbyControl. The most disturbing fact is that all of the scenarios unfolded during a period in which regulatory cooperation was based on voluntary, and not particularly comprehensive, rules within a weak institutional structure. Under TTIP, all of that is set to change as the same corporate lobbyists use the talks to enshrine such procedures into the policy-making rulebook.
Regulatory cooperation is poised to become the cornerstone of TTIP. According to both leaked and published proposals, the EU is betting on regulatory cooperation as the key to the removal of “barriers to trade”. EU negotiators and the Commission routinely assert that such an approach will not lead to lower standards or reduced levels of protection. This claim, however, is belied by experience. Regulatory cooperation under TTIP follows in the tracks of past experiments by expanding and strengthening an experiment that has gone on for years, and which has already shown it has teeth, providing a series of inroads for industry to dominate the regulatory agenda and possibly preventing regulation in the public interest from appearing on the political agenda in the first place.