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The EU's giant and secretive deregulation blitz

It is not just TTIP, across the board the EU is bowing to business pressure to do away with 'burdensome' regulation - regulation that tends to save lives, protect consumers and ensure standards.

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Regulations on health and safety, on labour rights and on environmental protection are better developed in the EU than in most of the rest of the world. They are in place to protect us and are often the result of hard-fought campaigns. However, because these regulations hamper the profit-making of big business, a program of deregulation is in process within the EU, in EU member states, notably the UK, and via the EU’s international trade agreements.

At the behest of business, there has been a decade-long and intensifying program in the EU to attack regulations by revising, amending or scrapping regulations and blocking new regulation. In the UK, legislation attacking national level protective regulation is currently going through the parliamentary process. Simultaneously the US/EU free trade agreement (called the Transatlantic Trade and Investment Partnership – TTIP) is being negotiated, which will attack regulation at the level of international ‘trade’ law. While those promoting TTIP insist that it will not weaken regulations, this is very unlikely given the overall context: the various shifts we are seeing towards simplifying, harmonising and reducing regulation across member state legislatures, in EU legislative processes and in international trade commitments, are similar, interrelated and in fact integrated.

For instance, the UK government, engaged in undermining domestic regulation via UK legislation, has also instigated a report on EU regulation that has strongly influenced the EU regulation program and is taking a major role in advancing TTIP. 

It is an agenda influenced by corporate lobbying, with the same lobbying mechanisms involved across these different levels of governance. Similar rhetoric is used to influence public opinion with terms such as ‘red tape’, ‘competitiveness’, ‘efficiency’  and ‘jobs and growth’ used to discredit regulation and justify getting rid of it even though it is there to protect us.

Small and Medium Enterprises (SMEs) are a main focus across these levels of deregulatory activity. At the EU and UK member state levels it is claimed that SMEs will benefit from minimised regulation, and it is proposed that they should be exempt from regulation where possible.

However ‘SMEs’ are 99% of EU businesses. They can have up to a €50m turnover and employ up to 250 employees to be classed as SMEs. They collectively employ 60% of EU workers. They also have 82% of work-related injuries and 90% of work-related fatalities. Thus exempting SMEs from regulations, including those governing workplace health and safety, would undermine much of the purpose of regulation, with protections arbitrarily reliant on the size of a business.

Notably, small business does not want deregulation.

Despite the continuity in the overarching aim of deregulation, there are differences in how this agenda is presented at these different levels. While David Cameron has no qualms talking about ’deregulation’ and the Bill in the UK is called the Deregulation Bill, such blatant language is avoided in the EU and ‘deregulation’ as actually denied at the trade agreement level.

At the trade agreement level, to allay public concerns about the agreement, there is insistence that regulations will not be reduced, only ‘harmonised’. The supposed benefits of regulatory harmonisation for SMEs are used as a main ‘selling point’ for the agreement, though it seems that no evidence for such claims of SME benefits has been produced.

In the EU

Initiatives against ‘red tape’ have been introduced in the EU since 2002. The EU REFIT (Regulatory Fitness and Performance) program was launched in October 2013 to simplify and improve regulation to reduce the administrative burden. But this supposed purpose of REFIT has become a fight against regulation, on behalf of business.

Under REFIT the Commission is now annually ‘screening the entire stock of EU legislation on an ongoing and systematic basis to identify burdens, inconsistencies and ineffective measures and identified corrective actions with targets for reductions in regulation and in ‘cost-savings’ (REFIT has a ‘scoreboard’). In addition there is a one-in, one out rule requiring an existing regulation to be scrapped if any new regulation is introduced. Business is encouraged to take the initiative in identifying regulation for review.

While the Commission is now set on ‘cutting red tape’, seemingly for its own sake, this can be identified as reflecting the demands of big business.  Major business lobbying structures BusinessEurope and Eurochambres have a strong influence both on the EU internal REFIT program as well as on the EU’s external trade agenda.

A key function of REFIT is ‘Fitness Checks’, whereby regulations are assessed in relation to the criterion of ‘competitiveness’. This Fitness Check assessment work is outsourced to the world’s biggest professional services company, Deloitte.

Other EU initiatives supporting this deregulatory trajectory:

  • - The appointment, by Commission President Jean-Claude Juncker, of a First Vice President for Better Regulation in the new Commission structure. Frans Timmermans, known for his previous deregulatory work with the Dutch government, now has the power of veto over any regulatory initiatives by other Commissioners. 
  • - Contrary to a layperson’s understanding, ‘Impact Assessment’ in this current EU deregulatory context is now business-focused, considering measurable cost/benefits to business while ignoring the social costs of degraded regulation.  An Impact Assessment Board has had to approve all impact assessment for regulations. But business still wants more input than this structure allows, calling for a more ‘independent’ board with less Commission bureaucrats and more business representatives. With the Impact Assessment Board about to become the Regulatory Scrutiny Board, this appears to be happening.
  • - The European Council’s (representatives of member state governments) support for REFIT was strongly influenced by the UK ‘Cut EU Red Tape’ report produced by a Business Taskforce set up by David Cameron to identify how EU regulation could be changed to better suit business.
  • - In the new Commission structure, with an extra layer of Vice Presidents, Energy, Maritime and Fisheries but also Climate Action and Energy are now all under the ‘Vice President for Energy Union’, thus Climate Action has been downgraded and subsumed.
  • - The final report of a High Level Group on Administrative Burdens, set up as part of the 2007 Action Program for Reducing Administrative Burdens in the EU, also reflected the UK Business Taskforce report, recommending a strengthened REFIT with a competitiveness test for all regulation proposals and an exemption for SMEs. (The Chair, Edmund Stoiber, was found to be working for Deloitte).
  • - ‘Red Tape Watch’ has been set up by a group of MEPs from the conservative European Peoples Party grouping in the European Parliament.

Importantly, the leaked draft work program of the new Commission (in which the phrase ‘jobs and growth’ is used 12 times across 6 pages) prioritises so-called ‘Better Regulation’ and 'fitness checks’.

In the UK

In the UK, the Coalition government is pushing through Oliver Letwin’s Deregulation Bill, of immense importance because it is meta-regulation. This legislation, like REFIT at the EU level, provides for assessment of all UK legislation, existing or proposed, against the criteria of pro-business ‘growth promotion’. Any legislation that does not meet these corporate-interest criteria can be dumped. The section ‘Exercise of regulatory functions: economic growth’ (88), will require regulators to prioritise ‘the desirability of promoting economic growth’ and to particularly ensure that

  • (a) regulatory action is taken only when it is needed, and

(b) any action taken is proportionate.

This language, similarly vague to language used in trade agreements, leaves regulators open to legal challenge, thus effectively deterring the introduction of new regulation.

Who will decide if ‘any action taken is proportionate, and how will this be decided?

(See an excellent, in-depth discussion of the implications of this key clause in the Deregulation Bill)

The Deregulation Bill also includes the ‘Repeal of duty to prepare sustainable community strategy’ (80) and the ‘Repeal of duties relating to consultation or involvement’ (83), both in relation to local government, indicating the sort of regulation that will be under attack.

This Bill is going through the Westminster parliamentary processes with very little attention.

Coalition Prime Minister Cameron also set up the Business Taskforce consisting of 6 business leaders that produced the ‘Cut EU Red Tape’ report which has been so influential in the EU. After a July 2013 call for input from business on what  EU regulation changes were wanted, the Taskforce’s 60 page report was presented to the Council (Oct 2013). Although it was a UK initiative, the report calls on the 3 pillars of the EU (Commission, Council and Parliament) to take forward these recommendations. 

Along with the focus on ‘competitiveness’, many of the Taskforce proposals involve undermining employees’ rights  and environmental protections, referencing soil protection, waste, impact assessments and fuel emissions. They include recommendations to ‘refrain from bringing forward legislative proposals on shale gas’, and to ‘ensure that data protection rules don’t place unreasonable costs on business’.

To address the ‘Barriers to Trading across Borders’ it identifies, the Taskforce report recommends removing international regulatory barriers which inhibit trade, as well as dropping proposals for origin-marking on consumer goods, and introducing ‘a risk-based process for the evaluation of plant protection products’ suggesting a weakening of pesticide protection measures, which, in the context of international trade, is a big issue in US food product exports to the EU.  

In a letter sent to businesses four months after the report went to EU institutions, the Taskforce claims successes that include the (false) October 2013 sign-up of the Canada-EU Comprehensive Economic and Trade Agreement (CETA). Although the deal was not actually completed until October 2014, this shows that CETA is seen as a success by the UK government-sponsored Taskforce, in relation to its aims and its report.

This letter also refers to the strong take-up and promotion of the report’s ‘principles’ by major EU business lobby mechanisms, BusinessEurope  and Eurochambres, both major influences on internal and external  EU trade policy.

The UK Red Tape Challenge was a mechanism whereby the Cabinet, at the earliest stage in the consideration of regulating, invited proposals from business on ‘themes’, with the resulting regulatory proposals eventually coming before a committee focused on reducing regulation that had a ‘one in, two out’ rule (rather than a ‘one in, one out rule’).  

TTIP and other new generation EU international 'trade' deals

The ‘Conclusions’ of the EU Council (Dec 2014) on EU ‘Smart Regulation‘ (another label in this ongoing deregulatory agenda) emphasise that:

‘..it is necessary to promote the most efficient regulatory and non-regulatory tools, such as harmonisation and mutual recognition' (my emphasis) …

This language, in relation to the EU, could have come straight from a leaked TTIP document – it would need to be leaked as that is the only way we see TTIP documentation in this secretive deal.

The core of the US/EU free trade agreement, the Transatlantic Trade and investment Partnership – TTIP, is ‘regulatory ‘harmonisation’ (or ‘co-operation’ or ‘coherence’), ostensibly about making regulations in the US and the EU the same for efficiency and to reduce costs, reductions that may be passed onto consumers. But critics of the agreement believe this is actually a deregulatory agenda, to get rid of regulations in order to increase the profits of big corporations.

Including investor state dispute settlement (ISDS) in TTIP will allow transnational corporations to sue governments for changing regulations. This threat, of the state potentially having to pay compensation to corporations, is a legalised means of effectively blocking regulation.

The ongoing regulatory aspect of the TTIP as a ‘living agreement’ is the setting up of a Regulatory Co-operation Committee, open to business input, from when regulation is first being considered, which must then be taken into account. Prioritising business input and the harmonising of regulation will inherently subvert the role of democratic government and its right to regulate.

Proponents of TTIP, particularly the EU Trade Commission, the UK government, and the UK Department of Business, Innovation and Skills, deny any lowering standards or weakening of regulation and give isolated examples where protections will be definitively maintained, such as in relation to the importation of chlorine-washed chicken or hormone-laden beef (although US exporters are not accepting this).

But it is in the mechanisms for regulating that harmonisation with the US is most dangerous. The US processes for formulating regulation allow for a great deal of interference by corporations, including delaying tactics, that effectively restrict the ability of regulators to protect the public. With EU priorities already shifted from regulating for public protection to removing regulation for business ‘competitiveness’, the foundations for harmonisation with the US in this respect are already established. We are already advanced in the cost/benefit-to-business mode of assessing regulations (see December 2014 UK BIS doc ‘The Ninth Statement of New Regulation’).

Delaying the passage of legislation is an effective way of defeating regulatory proposals in both the US and the EU. As part of the EU deregulatory program, there is currently pressure to abandon unfinished regulation from the previous European Parliament and this appears now to be a Commission decision.

TTIP, as well as other EU new-generation trade agreements that include regulatory harmonisation and ISDS—particularly CETA and the EU/Singapore free trade agreement which are both close to finalisation—are being negotiated against a backdrop of corporate-interest EU deregulation. In this context, it is highly unlikely that the aims in EU international trade agreement negotiations would not match those being pursued at the EU and UK member state levels.

It is much more likely that the direction for TTIP and other ‘trade’ deals, the supreme mechanism for legalised corporate benefit, would be similar to the trajectory of these other levels of law-making, especially when the means, including ISDS, will be embedded in the agreements. 

Conclusion

There is clearly a single, coherent deregulatory agenda, despite denials at the trade agreement level. While regulation is generally to protect the public, workers and the environment, it is being treated only as a burden and cost, and input for these programs is mostly coming from business. Although the interests of small business is being emphasised across these legislative contexts, it is notable that the big business and big employers’ organisations are the main lobbyists for this agenda. At the level of international trade agreements it is certainly transnational firms that gain most from this deregulation. The language of ‘jobs and growth’ is being used at all levels but without evidence.

These different levels of governance can ultimately be leveraged against each other, to achieve overall aims. While exemption is being sought for the large part of business that is SME, the National Treatment rule in trade deals disallows differentiated treatment for transnational corporations in relation to that afforded to domestic companies, and non-discrimination is the basis of the trade agenda. TTIP and also the Trade in Services Agreement (TiSA) are pushing across-the-board National Treatment for all services except those particularly identified for exclusion. Thus not only would exemption for SMEs undermine regulation per se, but it would open the door for legal challenges that may see regulations on all corporations reduced to match – towards ever deeper deregulation.

We need:

  • - To grasp the big picture of this corporate takeover of our world and of our democracy that is happening now
  • - To resist this corporate-takeover wholesale and at different levels.
  • - To assert that regulation is not ‘onerous red tape’ but is our hard-fought social protection
  • - To raise awareness of, and block, the Deregulation Bill in the UK.
  • - To recognise, contrary to the belief that many still hold, that the EU and our membership of it does not provide our best protection, and that it allows for initiatives to undermine democracy, which often originate in the UK. 
  • - To oppose TTIP and other trade deals with deregulatory provision and to counter the claims that regulations will not be negatively affected by these deals.
  • - And we need to construct a positive, informed and credible alternative narrative
About the author

Linda is a researcher on international trade issues particularly surrounding the EU.


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