Coordination between the U.S. and the EU can foster better trade and improved outcomes.
After more than a year of courtship, the United States and European Union took the first steps towards making their longstanding trade relationship official by kicking off in July the first round of negotiations for the U.S.-EU Transatlantic Trade and Investment Partnership, or TTIP. Over sixty negotiators and senior European officials trekked from Brussels to Washington to mark the special occasion. Despite the fanfare surrounding the TTIP’s launch, the crucial component of these negotiations will likely prove to be something that isn’t normally the focus of trade negotiations: regulatory cooperation.
Negotiators on the TTIP face a daunting task of coming up with innovative methods to solidify and enhance the world’s largest bilateral economic relationship, with $5 trillion of trade and investment flowing between the United States and Europe. The United States and EU already enjoy a unique trading relationship because tariffs between the two partners are already quite low, averaging 5.2% for the EU and 3.5% for the U.S. across agricultural and industrial goods. Simply removing these tariffs could boost economic growth in the United States by $180 billion over five years—no small sum. However, addressing non-tariff barriers is the true key to unlocking the potential of the TTIP.
Non-tariff barriers result from regulatory differences that serve no legitimate purpose, often simply arising from a lack of coordination rather than explicit determinations to apply differing requirements. Regulators fail to engage one another, and, once rules are on the books, they are extremely difficult to change. Because of the deeply integrated nature of the U.S. and EU economies—in which products cross international borders several times before arriving for final consumption—and because U.S. and EU citizens desire similar levels of protection, many regulatory differences can and should be removed.
In large part because Europe shares a great deal of culture and common values with the United States, including similar high standards for health and safety, the TTIP has been met with a largely positive reception from both sides of the aisle in Congress and with the Obama Administration. In endorsing the TTIP, President Obama further built upon a groundswell of support for enhanced coordination between the United States and its trading partners that has emerged in recent years, including Executive Order 13609, which endorsed many of these principles set forth in Administrative Conference Recommendation 2011-6.
Despite the widespread support for greater regulatory cooperation, however, some confusion exists as to what calling for enhanced cooperation means. Indeed, since certain common terminology often has a specific meaning in a trade and regulatory context, it is important to clarify what is actually meant by “regulatory cooperation.”
Regulatory cooperation refers to the numerous activities that can be leveraged to eliminate existing trade barriers and avoid the creation of future barriers. First, regulatory cooperation is not a synonym for “harmonization.” Harmonization, merely one of many activities that can be classified as regulatory cooperation, involves the creation of an identical regulation or standard across two jurisdictions. This may make sense in select cases and sectors, but is frequently not desirable or even possible in many others. Sovereign nations must retain the right to set the level of regulatory protection desired by their citizens, and international regulatory cooperation fully respects this principle.
Harmonization, however, represents just one end on the spectrum of regulatory cooperation. Regulatory cooperation also includes a variety of other options: mutual recognition, using common data sets, information sharing, recognizing common testing procedures, common labeling or product information, joint compliance and enforcement, referencing and developing common standards, and joint regulatory development plans. Each of these options preserves the ability of sovereign nations to adopt differing regulations while removing unnecessary divergences and ensuring that all parties are acting on the best available information.
In addition, regulatory cooperation does not end when a regulation is promulgated. Regulators must continue to work together throughout the regulatory lifecycle. This continued coordination includes cooperating on enforcement and compliance to ensure ongoing alignment. It may also include retrospective look-backs to see if regulations are achieving the predicted effects.
Importantly, regulatory cooperation is not about more or less regulation, but about achieving better regulatory outcomes. No activities should occur without assurances that legally-mandated regulatory objectives are in fact being met.
The wide range of cooperation options ultimately enhances regulatory effectiveness without stretching resources. When regulators can share compliance duties and work together to leverage standards and best practices, they become more efficient in meeting their statutory objectives. While regulators are often engaged in conversation with one another, multiple initiatives can be better coordinated and leveraged to streamline regulation. At its core, regulatory cooperation is about a better process and a better outcome, benefitting government, consumers, and business alike.
In fact, regulatory cooperation between the United States and EU is of longstanding vintage. A recent example of successful U.S.-EU cooperation is the organics mutual recognition agreement signed by USDA and the EU Commission. In addition, the Federal Aviation Administration (FAA) and the European Aviation Safety Authority (EASA) have long successfully cooperated. The U.S. and EU have also recognized the general importance of greater regulatory cooperation, signing understandings in 2002 and 2011 and strongly emphasizing the importance of regulatory cooperation throughout the process leading to the launch of the TTIP.
The TTIP presents an extraordinary opportunity to solidify and enhance current regulatory cooperation activities between the United States and EU. It can reinforce the notion that, in today’s global society, regulatory actions cannot be isolated in a purely domestic vacuum.
Finally, regulatory cooperation also represents an exciting opportunity for scholarship and is a natural outgrowth for administrative law in today’s increasingly globalized society. For example, while regulatory discussions have long occurred in the financial services industry, questions remain as to how the APA should be applied to these “informal” dialogues. There are also questions about how to properly structure impact assessments to address international impacts, how regulators might be able to share confidential information with their foreign counterparts, and what type of communications may occur and when. More broadly, comparative law scholarship might address the respective regulatory regimes prevailing in the United States and EU and explore opportunities for achieving greater convergence.
The TTIP clearly represents a momentous and exciting development for all stakeholders, not the least of which include regulatory scholars.