Can Europe Make It?

TTIP and common regulatory standards

The European Commission should take a hard stance and insist on European standards, while looking for novel ways in which to break down “behind-the-border” barriers to trade. 

Kate Tepper
31 May 2015
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Over the last years, NSA spying revelations and anxieties over the “Pivot to Asia” have cast a new shadow over the transatlantic relationship. In response, US and EU policymakers are attempting to forge a comprehensive Transatlantic Trade and Investment Partnership (or TTIP), which promises to deepen trade and jumpstart the transatlantic economy. But to its seemingly rising chorus of opponents, TTIP is an attempt by the powers-that-be to impose a neoliberal agenda on Europe through the back door of opaque negotiations and shadowy private courts.

The participants of the European Students Conference (ESC) at Yale that took place in February 2015 took stock of the debate and came to their own conclusions, seeing TTIP as a unique opportunity to dramatically boost Europe’s economy while upholding Europe’s commitments to transparency and regulation. What follows is the second of two student presentations on their sub-theme’s findings: here, Kate Tepper argues that the European Commission should take a hard stance and insist on European standards, while looking for novel ways in which to break down “behind-the-border” barriers to trade.

ESC formal conclusions can be accessed at the website of European Horizons, the think tank founded at the conference, but the following text deepens and contextualizes the positions taken. For more arguments—on ISDS, transatlantic energy markets, and more—visit the conference homepage. The European Students Conference was financially supported by the EU through the Erasmus+ program.

In the course of TTIP’s negotiations, it has become clear that regulation of industries central to the European economy—for example, in the form of auto-safety requirements, chemical sales, pharmaceuticals and food safety—are effectively duplicated in the US. The cost of American or European companies complying with two different sets of regulation to serve the same purpose raises trade costs immensely and reduces trade between nations. However, while sector-specific negotiations between the US and EU to standardize regulations are critically important to boosting trade, the highest common denominator principle, or the highest level of consumer and industry protection available, must be applied. This doesn’t necessarily mean creating new regulations—in sectors where regulations are significantly different, but achieve similar levels of protection, mutual recognition would achieve the same objective.

At the root of these superficial differences is a deficit of trust between European and American regulators. Cooperative partnerships between each continents' regulatory agencies, in the vein of existing partnerships like that between the American FDA and the European Medicines Agency, would discourage superficial differences from emerging in the future.

Standard convergence

However, negotiators must accept that unified standards may not be reached in every sector, given differences in regulation that are too great to realistically be tolerated by either side. A prime example of this is the difference between the EU and the USA on the sale and use of genetically modified organisms, or GMOs, in food products.

But just comparing under these ad hoc circumstances isn’t enough—creating a common database to compare and contrast American and European standards in major industries accessible to businesses, negotiators and consumers alike would make clear where the two sides of the Atlantic agree, and where they should rather agree to disagree. Increased eSignature verification to increase digital security cooperation and reduce transatlantic cybercrime would also be a step in the right direction.

Customs procedures and tariffs are a major obstacle to fast, inexpensive trade between the US and Europe, with customs duties of up to 32% on some products. Aiming to eliminate all tariffs on the trade of goods between the United States and Europe within a decade is ambitious, but would bring significant benefits.

Specifically, the phasing out of tariffs by cutting rates by 400 basis points per year, with the highest tariff (32%) eliminated within eight years, is a steep but structured way to go about this. Streamlining customs procedures, through information exchange and enhanced cooperation between custom authorities, would also boost trade.

But the more insidious manifestations of protectionism need to be eliminated along with the more obviously apparent ones. Domestic preference programs create restrictions for cross-border public procurement projects, and with the EU and US as, respectively, the largest and second-largest public procurement markets in the world, programs such as the “Buy-American” clauses keep domestic companies uncompetitive.

An addition to the WTO Agreement on Government Procurement to treat European and American companies as domestic in relation to one another for protectionist clauses, and the creation of a joint database to provide information on the complex regulatory framework of public procurement tenders, would help in fixing that problem.

Along similar lines as duplication between regulations, there is a great divergence in labor standards between the EU and US in many areas, including paid annual leave, unjust termination, worker representation, workplace safety and maximum working hours. In order to increase labor convergence, the Subgroup proposes that the United States pass legislation matching the European levels of protection, requiring companies to provide temporary workers with equal labor treatment regarding pay, overtime, breaks, rest periods, night work and holidays. Furthermore, the Subgroup recognizes the need for the US and EU to find common ground on both worker protection and representation.

Finally, to truly make trade between the United States and the European Union cheaper, simpler and faster, it is important to address the onerous visa regimes for businesspeople traveling frequently back and forth. In order to increase labor mobility, it is imperative to allow those business travelers who provide a certain level of mutual economic benefit to visit both areas sans visa to ensure that trade and commerce flow unimpeded.

More specifically, the Subgroup proposes that all EU citizens be treated alike in American immigration policies, as well as that the US cap on H-1B visas for European citizens is removed, with the possibility of unlimited renewal every two years. To further streamline business travel, the Subgroup proposes the development of a “Transatlantic Expedited Entry” program through the creation of a supranational electronic document submission database, similar to the US Customs and Border Protection program for expedited border crossings. In addition, the Subgroup proposes the exemption of intra-company transferees from obtaining H-1B visas for up to a year, with special preference to traders, investors and employees with specialized expertise.

Conclusion

TTIP, like any agreement that has the potential to dramatically alter how economies like those of the EU and US are governed, needs to be debated, its proponents challenged, its arguments scoured. But just because negotiations maintain aspects of intransparency does not mean that a conspiracy is afoot, let alone that the process cannot be salvaged by even its biggest detractors. Instead of shouting TTIP down, Europe should take control of the process and insist on getting the growth-oriented but responsible deal citizens deserve.

 

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