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Will Regulations Sink EU-U.S. Free Trade?

October 15, 2013 in Economics

By Simon Lester, Inu Barbee

Simon Lester and Inu Barbee

Trade negotiations are not what they used to be. The advent of ‘twenty-first century’ or ‘comprehensive’ trade agreements, whose scope reaches far beyond the traditional topics of tariff reductions and market access, have opened up discussions in a number of areas that used to be the exclusive realm of domestic policy. One area in which trade agreements have expanded is in addressing so-called ‘beyond the border’ issues such as regulatory trade barriers. In the Transatlantic Trade and Investment Partnership (TTIP) talks, the trade effects of domestic regulation have been emphasized as an area of great potential economic growth, with large figures being thrown around—some citing a 2.5 to 3 percent increase in GDP from the total elimination of regulatory trade barriers. But this early enthusiasm for resolving these long-standing barriers to trade masks a fundamental problem that is emerging: The United States and the European Union are at odds over the nature of regulatory trade barriers and how to address them.

For the United States, the focus seems to be on applying its domestic regulatory reform efforts on a global basis. On his latest trip to Europe, U.S. Trade Representative Michael Froman extolled the virtues of the U.S. approach to regulating, and urged the EU to take into account the principles of “transparency,” “participation,” and “accountability.” He noted that the U.S. process promotes these principles by providing: “advance notice of specific regulatory measures” (transparency); “meaningful opportunities for input from a broad range of stakeholders” (participation); and “responses to that input” (accountability).

The United States and the European Union are at odds over the nature of regulatory trade barriers and how to address them.”

His emphasis on these features reflects U.S. criticism of the EU regulatory process, in particular the EU’s system of issuing general papers for comment prior to proposing actual rules, without allowing comments on the text of the regulation itself. The clear implication of Froman’s remarks, made in Brussels before an audience of trade officials, is that, from the U.S. perspective, the EU should reform its regulatory process to take these principles into account.

The EU, by contrast, does not see domestic regulatory reform as the central issue in the elimination of transatlantic regulatory trade barriers. Furthermore, the EU does not view national discrepancies in the rulemaking process as a problem for cooperation more generally, and has also argued that the EU …read more

Source: OP-EDS

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