108
Lead Author Mark A. Pollack The Political Economy of the Transatlantic Partnership Robert Schuman Centre for Advanced Studies EUROPEAN UNIVERSITY INSTITUTE
Lead Author
Mark A Pollack
The Political Economy ofthe Transatlantic Partnership
Robert Schuman Centrefor Advanced Studies
EUROPEAN UNIVERSITY INSTITUTE
Report prepared by theTransatlantic Programme
for and with the contribution of
Her Majestyrsquos TreasuryUnited Kingdom
Ministry of FinanceThe Netherlands
EUROPEAN UNIVERSITY INSTITUTE
ROBERT SCHUMAN CENTRE FOR ADVANCED STUDIES
The Political Economy ofthe Transatlantic Partnership
Lead Author Mark A Pollack
Report prepared by the Transatlantic Programmefor and with the contribution of
Her Majestyrsquos Treasury (United Kingdom)
Ministry of Finance (The Netherlands)
All rights reservedNo part of this paper may be reproduced in any form
without permission of theRobert Schuman Centre for Advanced Studies
copy 2003 Authors and theRobert Schuman Centre for Advanced Studies
Printed in Italy in June 2003European University Institute
Badia FiesolanaI - 50016 San Domenico di Fiesole (FI)
Italy
i
Table of Contents
Executive Summary iii
About the Authors vii
1 The Transatlantic Marketplace andthe Changing EUUS Economic Agenda 1
2 Institutions for Transatlantic Economic GovernanceOrigins and Effectiveness 5
21 Transatlantic Economic Agreements in the 1990s22 An Overview of Existing Transatlantic Institutions23 An Effective Framework for Economic Cooperation
3 Trade and Regulatory Disputesin the Transatlantic Economic Partnership 17
31 Classifying Disputes Traditional Trade Issues vslsquoBehind-the-Borderrsquo Regulatory Disputes
32 Case Study Airplane lsquoHushkitsrsquo33 Case Study Hormone-Treated Beef and
Genetically Modified Organisms34 Public Procurement
The MassachusettsMyanmar Case35 Intellectual Property Rights The Irish Music Case36 Dealing with Trade and Regulatory Conflicts
4 Transatlantic Regulatory Cooperation 3241 Why Cooperate42 Case Study Transatlantic Competition
Policy Cooperation43 Case Study EUUS Mutual Recognition
Agreements44 Case Study Data Privacy and
the Safe Harbour Agreement45 The Challenge of Transatlantic
Regulatory Cooperation
ii
5 The European Union and the Americas 4751 The EU and Latin America Trade and Investment52 EU Trade Agreements with
Latin American Countries53 Challenges for EULatin American
Economic Relations
Conclusion The New Transatlantic Economic Agenda 61
Appendix 1 EU-US Barriers to Trade in GoodsServices and Foreign Investment 65
Appendix 2 WTO Cases by the EU against the US(excludes cases as a third party) 70
Appendix 3 WTO Cases by the US against the EUand Its Member States(excludes cases as a third party) 78
References and Recommended Reading 87
Notes 94
iii
Executive Summary
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly in thecourse of the past decade During the 1990s the volume oftransatlantic trade more than doubled making the EU and the USeach otherrsquos most important trading partners Foreign directinvestment between the US and the EU has grown even more rapidlydoubling in value during the last three years of the 1990s aloneindeed it is estimated that some 35 million American jobs rely onforeign investment from the European Union with a similar number ofEuropeans employed by US firms
These developments reviewed briefly in Section 1 of this report havecreated a de facto transatlantic marketplace yet they have also led tonew strains on the transatlantic partnership and to a new andchallenging economic agenda for EUUS cooperation Prior to the1990s much of the transatlantic economic relationship was dominatedby traditional trade questions such as tariffs quotas and other directbarriers to trade typically imposed at US and EU borders With thedecline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade - most notably lsquobehind-the-borderrsquo domestic regulations adopted in response to legitimate publicconcerns about the environment consumer protection food safety anddata privacy - have emerged alongside traditional trade barriers as theprimary challenges to a mutually beneficial EUUS trade andinvestment relationship
In an effort to meet these challenges the United States and theEuropean Union have put into place an increasingly well developedinstitutional machinery for bilateral economic as well as foreign andsecurity policy cooperation These institutions examined in detail inSection 2 have fostered a regular dialogue between EU and USauthorities across a full range of issue-areas and have provided theframework for increasing efforts at regulatory cooperation and tradedispute resolution Nevertheless recent studies have demonstrated theuneven performance of these institutions across issue-areas as well asthe uneven development of the various transatlantic lsquocivil-societydialoguesrsquo and have suggested reforms to allow the EU and US tofocus more effectively on joint long-term objectives
iv
The transatlantic relationship has come under repeated strain duringthe past decade as a result of both traditional and new-style regulatorydisputes Such disputes the European Commission has pointed outconcern only an estimated 1-2 of the total value of transatlantictrade and investment yet these disputes could potentially spread toother areas of the transatlantic relationship it is therefore in theinterests of both sides to ensure that such disputes are prevented fromarising through timely consultations where possible and settledefficiently and amicably in other cases Many of thesedisputesmdashespecially traditional tariff quota antidumping andsubsidies disputesmdashare dealt with effectively through the disputesettlement procedure of the World Trade Organization (WTO) to whichthe EU and the US are both parties New-style regulatory disputeshowever often involve domestic laws adopted for legitimate purposesfollowing democratic deliberation and these disputes can placeconsiderable strain on the WTO system particularly in cases wherethe losing party would have difficulty complying with an adverse WTOruling
In such cases both the United States and the European Union shouldstrive proactively to consider the WTO compatibility of nationalregulations prior to adoption cooperate on common regulatoryproblems and seek to settle regulatory disputes through consultationswithin the WTO dispute settlement procedure wherever possibleSection 3 of the report therefore examines a range of potential reformsin US and EU domestic regulatory procedures in the bilateralrelationship and in the multilateral WTO dispute settlementprocedure
bull At the domestic level the US and the EU could commit themselvesto conducting lsquoTrade Impact Assessmentsrsquo of draft regulations sothat legislators are made aware of the potential trade implications ofproposed regulations before they are adopted
bull At the bilateral level both partners can engage in more extensiveearly warning of new rules as well as greater regulatory cooperationand greater contact among legislators to increase their awareness ofthe external impact of domestic laws Far from weakening themultilateral trading system bilateral economic cooperation can andshould strengthen the WTO by preventing difficult regulatorydisputes before they occur and by acting as a laboratory for theresolution of such disputes at the global level
bull At the multilateral level finally the EU and the US could committhemselves to modest reforms in the WTO and its disputesettlement procedure including a clarification of the lsquoprecautionaryprinciplersquo in WTO law and a possible move from retaliation tocompensation as the primary means of enforcement of WTO law
v
Of the aforementioned proposals the EU and the US have arguablymade the most progress in promoting cooperation among theirrespective domestic regulators with a growing number of formalregulatory agreements adopted since 1997 and an even larger numberof informal contacts among EU and US regulators taking place on aregular basis across a full range of issue-areas Such regulatorycontacts hold significant promise allowing regulators on both sides ofthe Atlantic to learn from each other coordinate their regulatoryefforts and avoid transatlantic regulatory disputes before they beginHowever as Section 4 of this report demonstrates in detail successfulregulatory cooperation is not a lsquomagic bulletrsquo for trade disputes butrather a lsquohothouse flowerrsquo which must be carefully nurtured and canbe easily frustrated by any of a number of potential obstaclesincluding the persistence of distinctive European and Americanregulatory philosophies and procedures the multi-level nature of theEU and US political systems and the insistence by both sides onmaintaining domestic regulatory sovereignty Overcoming theseobstacles will require the identification of lsquobest practicersquo in regulatorycooperation gradual increase in regulatory trust among EU and USregulators and a careful balancing by political leaders of domesticregulatory aims on the one hand and the importance of thetransatlantic economic relationship on the other
The EUrsquos ever-closer economic relationship with the United States hasnot developed in a vacuum but rather coincides with a second majordevelopment namely the rapid increase during the 1990s of EU tradeand foreign direct investment with the countries of North and SouthAmerica analyzed in Section 5 of the report Concurrent with itsgreater economic presence in the Americas the Union has pursued awide range of trade and economic agreements with the countries of theregion including an increasingly close trade and regulatoryrelationship with Canada a free trade agreement with Mexico andother agreements with Chile Mercosur and other Latin Americancountries
In May 2002 leaders of the European Union and Latin Americancountries met in Madrid for their second summit meeting confirmingthe conclusion of negotiations on an EUChile Association Agreementand calling for further development of bilateral ties including theeventual conclusion of a similar association agreement with MercosurIn these and future negotiations the EU should give special attentionto expanding market access for Latin American goods and servicesespecially for so-called lsquosensitive productsrsquo currently subject to high EUtariffs as well as focusing on the reduction of other means ofprotection such as tariff quotas that are applied trade in goodsservices investment public procurement intellectual property rightstechnical standards and rules of origin
vi
The European Unionrsquos economic relationships with the countries of theAmericas like its bilateral relationship with the United States isnested in turn within the multilateral trading system of the WorldTrade Organization the further development of which is a sharedpriority for both the European Union and the United States During hisrecent trip to Argentina EU Trade Commissioner Pascal Lamy stressedthe importance of ensuring that bilateral and inter-regional tradeagreements with the United States Canada and the countries of LatinAmerica rest on the multilateral foundation of WTO trade law For thisreason he argued bilateral and interregional negotiations lsquomust not beallowed to detract our attention from the pursuit of the DohaDevelopment Agendarsquo Such a commitment should remain a centraltenet of EU trade policy in the years to come
Within the multilateral rules-based trading system finally theEuropean Union and the United States should also seek to developfurther their bilateral relationship the health of which is vital to theglobal economy as a whole Addressing the full range of challenges tothe transatlantic economic partnership will in turn require a carefuland extensive study not only of traditional trade issues such as theliberalization of tariffs and quotas but also and especially the domesticsources of transatlantic regulatory disputes and successful means ofpreventing and settling such disputes More specifically such as studywould have to undertake three essential tasks
bull A comprehensive listing and analysis of EU and US regulationscapable of restricting trade and investment in the transatlanticsmarketplace
bull A comprehensive survey and analysis of formal and informalregulatory cooperation focusing on both the obstacles to suchcooperation and instances of lsquobest practicersquo in overcoming thoseobstacles and
bull A systematic analysis of various means of bilateral and multilateraldispute resolution with a particular emphasis on the specificchallenges of transatlantic regulatory disputes
The insights generated by such a study would inform not only thefurther development of the transatlantic economic partnership but alsothe development of the rules-based multilateral trading system of theWorld Trade Organization
vii
About the Authors
This report was prepared by the Transatlantic Programme of theRobert Schuman Centre for Advanced Studies at the EuropeanUniversity Institute Florence
The following persons contributed to the writing of one or moreportions of this reportRebecca Steffenson (European University Institute) contributed toSection 2Alasdair Young (University of Glasgow) contributed to Section 3including the preparation of Tables 5-7 as well as Appendices 1-3Gregory C Shaffer (University of Wisconsin School of Law) contributedtwo case studies in Section 4Mariam Camarero (Universidad Jaume I) Cecilio Tamarit (Universidadde Valencia) and Andrea Ribeiro Hoffmann (University of Tuumlbingen)contributed to Section 5 andMark A Pollack (European University InstituteUniversity ofWisconsin-Madison) served as lead author for the report andcontributed to the writing of various sections
The Transatlantic Programme is also grateful to the following personsfor comments on early drafts of the reportHelen Wallace (Director Robert Schuman Centre for AdvancedStudies)Patrick Messerlin (Institut de Sciences politiques Paris)Claus-Dieter Ehlermann (European University Institute)Ernst-Ulrich Petersmann (European University Institute) andMichael Artis (European University Institute)
The Transatlantic Programme was established in 2000 with a majorgift from BP
1
ndash 1 ndashThe Transatlantic Marketplace and
the Changing EUUS Economic Agenda
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly over thecourse of the past decade Taken together the US and the EU accountfor roughly one half of both world GDP and global trade
Table 1 Transatlantic Trade 1980-2000 in millions of Euros(share of EU total)
1980 1990 2000
EU imports from US 50733(181)
88957(205)
197992(193)
EU exports to US 29543(140)
82004(200)
232037(247)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
The European Union and the United States are also each otherrsquos mostimportant trading partners As Table 1 illustrates the volume ofEUUS trade more than doubled during the 1990s and the twocountries are currently each otherrsquos largest trading partners Indeedrecent data on trade in services summarized in Table 2 demonstrateseven more clearly the importance of the transatlantic traderelationship with the United States accounting for some 40 of theEUrsquos total imports and exports of services which in turn account forbetween one-third and one-half of total transatlantic tradeFurthermore EUUS trade has been largely balanced over the decadeof the 1990s
2
Table 2 Transatlantic Trade in Services in millions of Euros(share of EU total)
1998 1999 2000
EU imports from US 79874(360)
99042(409)
116474(407)
EU exports to US 77039(334)
92199(373)
117403(403)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
Notwithstanding the impressive growth of EUUS trade it is theinvestment relationship that most clearly distinguishes thecontemporary transatlantic marketplace As Table 3 makes clear theEuropean Union in 2000 was far and away the largest investor in theUnited States its euro 794 billion in foreign direct investment (FDI)constituting 65 of total FDI in the US1 The United States is similarlythe largest source of FDI in the European Union with someeuro 561 billion invested in 2000 These high levels of EU investment areestimated to provide roughly 35 million jobs in the United States witha similar number of European jobs relying on US investment in theUnion2 The large and growing investment relationship also explains aconsiderable portion of the recent growth in bilateral USEU tradesince an estimated 20-30 percent of all bilateral trade takes the form ofintrafirm trade within firms operating on both sides of the Atlantic
Table 3 Transatlantic Foreign Direct Investment in millions of Euros(share of EU total)
1998 1999 2000
US FDI flows into EU 60697(571)
83798(754)
121271(688)
EU FDI flows to US 133416(602)
196794(632)
172027(475)
US FDI stocks in EU 366462(60)
439928(609)
561199(625)
EU FDI stocks in US 398190(483)
622496(524)
794523(513)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
3
With the simultaneous growth of transatlantic trade and investmentand the gradual decline in EU and US tariffs and quotas followingsuccessive waves of trade liberalization the transatlantic economicagenda has been transformed Prior to the 1990s much of the EUUSeconomic relationship was dominated by trade questions andspecifically by cooperation and conflict over tariffs quotas and otherdirect barriers to trade typically imposed at US and EU borders Withthe decline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade have increased in importance aspotential sources of international trade tension Such non-tariffbarriers have been addressed in the European Union for decadesthrough the use of regulatory harmonization and more recentlythrough the mutual recognition of national standards Similarly theGATT system began as early as the Tokyo Round (1973-1979) toaddress non-tariff barriers to trade most notably through theTechnical Barriers to Trade (TBT) Agreement and more recentlythrough the 1994 Sanitary and Phytosanitary Standards (SPS)Agreement both of which apply international law disciplines to trade-distorting national regulations
Notwithstanding these new rules however lsquobehind-the-borderrsquo US andEU regulations on a diverse array of topicsmdashranging from theenvironment and food safety to consumer protection and dataprivacymdashhave emerged during the past decade as significant obstaclesto transatlantic and global trade and investment3 In some cases suchdomestic regulations have led to trade disputes between the UnitedStates and the European Union and to increasing demands frombusinesses on both sides of the Atlantic for cooperation among US andEuropean regulatory authorities to prevent and settle such disputesand facilitate access to the European and American markets
In sum the ever-increasing levels of transatlantic trade andinvestment have created a de facto transatlantic marketplace and withit an increasing incentive for the European Union and the UnitedStates to cooperate in an effort to manage that marketplace facilitatemutually beneficial economic exchange and prevent or settle the tradeand economic disputes that inevitably arise in such a closerelationship In that context this report aims to summarize the stateof our scholarly understanding about the political economy of thetransatlantic economic relationship with an emphasis on theinstitutions for joint economic governance the new challenges posedby regulatory disputes and the promise and limits of transatlanticregulatory cooperation Accordingly Section 2 of the report examinesthe development and growth of post-Cold War institutions for themanagement of the EUUS economic partnership while Section 3examines the persistence of trade and economic disputes between theEU and the US including the rise of new and potentially intractableregulatory disputes and Section 4 examines the prospects and limitsof transatlantic regulatory cooperation as a possible solution to such
4
conflicts The fifth section of the report places the EUUS bilateralrelationship in the broader context of the relationship between theEuropean Union and the various countries of the Americas and thesixth concludes with a review of potential areas for furthertransatlantic cooperation and promising areas for further study
5
ndash 2 ndashInstitutions for Transatlantic Economic Governance
Origins and Effectiveness
Transatlantic relations between the United States and the countries ofWestern Europe have long been based on common values and interestsin terms of both security and economic interdependence Throughoutthe Cold War transatlantic cooperation took place largely though theNorth Atlantic Treaty Organization (NATO) in the area of security andthrough common US and European participation in variousmultilateral economic forums including the Organization for EconomicCooperation and Development (OECD) the G-7 (now G-8) group ofhighly industrialized economies and the World Trade Organization
Cooperation between the United States and its European partners istherefore not new but the character of the relationship changedsubstantially during the 1990s with an ever-greater emphasis oneconomic as well as security cooperation and a greater recognition bythe United States of the European Union (in addition to its memberstates) as an important interlocutor Three transatlantic agreementssigned in the 1990s underpin this new transatlantic partnership andthe increasingly liberalized EUUS economic relationship TheTransatlantic Declaration (1990) the New Transatlantic Agenda (NTA1995) and the Transatlantic Economic Partnership (TEP 1998) haveeach played an important role in creating a transatlantic framework foreconomic co-operation and introducing formal transatlanticinstitutions to manage the relationship This upgrading of the EUUSrelationship in turn can be traced to several interrelateddevelopments during that decade including the end of the Cold Warthe maturation of the European Union as an economic and politicalactor and the relentless expansion of transatlantic economic exchangewhich created pressures for joint management of the emergingtransatlantic marketplace4
The end of the Cold War was clearly a precipitating cause for theupgrading of the transatlantic relationship As early as 1990 the USpresidential administration of George HW Bush proposed aTransatlantic Declaration to reaffirm USEuropean solidarity followingthe fall of the Iron Curtain and the collapse of the Soviet Union Whilethat Transatlantic Declaration itself focused largely on security issuesrather than economic cooperation the diminution of the security
6
threat from post-Soviet Russia facilitated an increasing emphasis oneconomic issues by the Clinton Administration reflected in both the1995 New Transatlantic Agenda and the 1998 Transatlantic EconomicPartnership5
This economic focus has in turn been reinforced by the maturation ofthe European Union which emerged during the late 1980s and early1990s as the worldrsquos largest internal market and the most importanttrading partner of the United States Simultaneous with thedevelopment of the EUrsquos internal market came the increasing influenceof EU political institutions including the European Commission(which plays a vital role in the EU legislative process as well as servingas trade negotiator and economic regulator in fields such ascompetition policy) and the Council of Ministers and EuropeanParliament (which collectively adopt an increasingly large portion ofEuropean economic legislation) Although the powers of the respectiveEU institutions still varies considerably across sectors theCommission has clearly emerged as the Unionrsquos primary interlocutorwith the United States on economic issues while the legislativeactivities of the Council and the Parliament have the potential toinfluence economic interests in the United States The institutions ofthe New Transatlantic Agenda have therefore attempted to incorporatethe Commission and the Council presidency through biannualsummits and other high-level meetings as well as members of theEuropean Parliament through the Transatlantic Legislatorsrsquo Dialogue(see below)
Beyond the end of the Cold War and the maturation of the EuropeanUnion finally lies the relentless increase of transatlantic economicexchange Increased transatlantic trade and investment have creatednew demands for market access and economic cooperation fromproducer groups such as the Transatlantic Business Dialogue whileother consumer labour and environmental groups have sought toensure that transatlantic cooperation takes into account their diverseinterests Indeed as we shall see below the increasingly closeeconomic relationship between the EU and the US has created newprospects for both trade conflicts and regulatory cooperation and hasresulted in what might be termed lsquoscuttle diplomacyrsquomdashthe scurrying ofEU and US government authorities to cope with the incessant conflictswhich although they compose only a small fraction of EUUSeconomic exchange threaten to poison a mutually advantageouseconomic relationship6 Largely for this reason the United States andthe European Union have established an increasingly complexinstitutional structure designed to facilitate economic and securitycooperation resolve and prevent disputes and integrate civil-societygroups into the process of transatlantic economic governance
7
21 Transatlantic Economic Agreements in the 1990s
211 The Transatlantic Declaration
The process of institutionalizing the EUUS relationship begansimultaneously with the end of the Cold War in 1989 when USPresident Bush and EU Commission President Jacques Delors agreedto work to ensure regular meetings between high-level EU and USofficials On 27 February 1990 this agreement bore fruit in the shapeof a lsquoTransatlantic Declarationrsquo pursuant to which the US and ECagreed to establish an institutional framework lsquofor regular andintensive consultationrsquo Specifically the Declaration called for biannualEUUS summit meetings between the presidents of the United Statesthe European Commission and the European Council as well asregular meetings between the US Secretary of State the ECCommission and the US Cabinet These meetings it was hoped wouldopen lines of communication create networks facilitate informationsharing and reduce the impact of disputes in transatlantic relations
In substantive terms the Transatlantic Declaration identified threemajor goals
bull economic liberalizationbull educational scientific and cultural co-operation andbull cooperation in fighting international crime terrorism and
environmental degradation7
While these policy areas were identified as priorities the agreementfailed to provide a more detailed agenda for meeting its goals Thecontent of the agreement has been described as cosmetic minimalistand lacking in substantive innovations and would soon besupplemented by other more detailed economic agreements8
212 The New Transatlantic Agenda
The next stage in developing the transatlantic economic relationshipcame with the New Transatlantic Agenda (NTA) which was signed atthe EUUS Summit in Madrid in 1995 and established four priorityareas for closer cooperation
1 promoting peace and stability democracy and development aroundthe world (in particular in Central and Eastern Europe Russia andthe Middle East)
2 responding to global challenges (with a focus on international crimedrug trafficking terrorism migration and health andenvironmental issues)
3 lsquocontributing to the expansion of world trade and promoting closereconomic relationsrsquo (including both bilateral and multilateralliberalization of trade and investment) and
8
4 building bridges across the Atlantic (specifically direct contactsamong lsquobusiness people scientists educators and othersrsquo)9
In addition to the six-page NTA itself the two partners also adopted amuch more detailed Joint Action Plan (JAP) which outlined specificpolicy areas where deeper cooperation could be pursued The economicchapter of the JAP was arguably the most ambitious of the four callingfor both the strengthening of the multilateral trading system and thecreation of liberalized lsquotransatlantic marketplacersquo with a special focuson bilateral regulatory cooperation1 0 The NTA itself also acknowledgedthe role of the Transatlantic Business Dialogue which would laterprove to be influential in setting the agenda for transatlantic economiccooperation
In institutional terms the New Transatlantic Agenda established newtransatlantic governance mechanisms and a more established policyprocess First it created a Senior Level Group of EU and US officialstogether with a lower-level NTA Task Force to help drive coordinatemonitor and implement the agenda of transatlantic relations betweenthe continuing EUUS summits Although this framework has sincebeen criticized as excessively bureaucratic and focused on summit-driven lsquodeliverablesrsquo (see below) the NTA framework has proven usefulin coordinating EU and US responses to both economic and securityissues and remains the overarching framework for transatlanticrelations today
213 The Transatlantic Economic Partnership
The drive for an ever-closer transatlantic economic relationship wasrevived in 1998 amidst revelations that cooperation in many policyareas had fallen short of initial expectations1 1 Despite the NTA and itsinstitutions high-profile trade disputes over bananas beef andextraterritorial sanctions continued highlighting the need for furthertransatlantic commitment to facilitate economic exchange and containconflict In that context the European Commission took the initiativein April 1998 calling for negotiations on a lsquosingle comprehensiveagreementrsquo to implement a lsquoNew Transatlantic Marketplacersquo TheCommissionrsquos proposal had four central objectives
1 the lsquoremoval of technical barriers to trade in goods through anextensive process of mutual recognition andor harmonizationrsquo
2 the elimination lsquoby 2010 of all industrial tariffs on an MFN basisrsquo3 the formation of a lsquofree trade area in servicesrsquo and4 further liberalization in the areas of government procurement
intellectual property rights and investment1 2
The United States had little time to respond however as the initiativefailed to secure the support of the Council of Ministers In its placethe US and the EU agreed in May 1998 to a somewhat less ambitious
9
Transatlantic Economic Partnership (TEP) which aimed to tacklebilateral regulatory barriers to trade and to identify common positionswithin multilateral trade negotiations In substantive terms the TEPand its accompanying Action Plan focused more directly than the NTAon regulatory cooperation and on the possible harmonization ofstandards as a means of removing technical barriers to trade and itcommitted both sides to negotiations in specific issue-areas includingservices intellectual property food safety and biotechnology1 3
In addition the TEP created a new set of institutions to manage theeconomic aspects of the relationship including a lsquoTEP Steering Grouprsquocharged with monitoring implementing and reviewing TEP objectivesas well as expert-level working groups The TEP also emphasized theimportance of early warning of potential trade and regulatory disputesand fostered the creation of an institutionalized lsquoearly warning systemrsquofollowing the Bonn EUUS summit in June 1999 Finally the TEPexplicitly encouraged the participation of not only business but othercivil society groups which would lead in time to the creation of thetransatlantic consumer environment and labour dialogues
Table 4 Transatlantic Cooperation Agreements at a Glance
Transatlantic Agreement Year Impact on the Economic Relationship
The TransatlanticDeclaration 1990 Contains a broad commitment to
economic liberalization
The New TransatlanticAgenda (NTA) and JointAction Plan (JAP)
1995
Includes a chapter on contributing tothe expansion of world trade andpromoting closer economic relationsJAP discusses building a lsquonewtransatlantic marketplacersquo throughincreased regulatory co-operation
Transatlantic EconomicPartnership (TEP) 1998
Outlines three main goals for thetransatlantic economic relationship1) market access gains for goods
services and agricultural products2) multilateral and bilateral trade
liberalization of goods services andcapital
3) deepening dialogue between non-governmental organizationsparliamentarians and government
10
22 An Overview of Existing Transatlantic Institutions
Todayrsquos transatlantic economic relationship is managed largely by a setof institutions that were created in stages by the TransatlanticDeclaration the NTA and the TEP Combined these institutionsconstitute a framework for long-term as well as day-to-day economiccooperation and dispute resolution
221 EUUS Summits
The biannual EUUS summit is the primary forum forintergovernmental exchange in the NTA process consisting of thehighest level of contact between the Presidents of the US the EUCommission and the Council Presidency The transatlantic policy cyclebegins and ends with these biannual summits where decisions arelsquomadersquo about the general scope for co-operation and wherelsquodeliverablesrsquo - in the form of new bilateral agreements about regulatorycooperation or the resolution of specific disputesmdashare announced Thesummits encourage policy co-ordination because they create deadlinesfor progress reports and exert pressure on lower-level officials toproduce results
222 Senior Level Group and the NTA Task Force
The Senior Level Group serves as a contact point between the EUUSSummit and the working level of the transatlantic dialogue It hasroughly six formal members including the US Undersecretary of Statefor Economic Affairs Commission delegates from the Directorates-General for external relations and trade Council Presidencyrepresentatives and representatives of the lsquoArticle 133 committeersquodealing with international trade matters The primary tasks of the SLGare to prepare the agenda of the biannual summits lsquoshopping fordeliverablesrsquo to be announced on those occasions and to monitor theimplementation of the NTA and the TEP
Logistically the SLG typically meets twice during each CouncilPresidency with the first meeting used to assess potential areas ofcooperation and conflict and the second meeting finalizing the agendafor the EUUS summit and confirming the contents of its progressreport which is presented to summit leaders Below the SLG an lsquoNTATask Forcersquo meets somewhat more frequently (often throughvideoconferencing) to follow specific dossiers in both the security andeconomic realms
223 TEP Steering Committee and Working Groups
The TEP institutions including the Steering Group and workinggroups bring together policy experts to deal with economic issues ingreater detail The Steering Group consists of the US Deputy Assistant
11
Secretary of State for Economic Affairs Commission officials at theHead-of-Unit level and a Council Presidency representative Originallydesigned to coordinate negotiating approaches within the WTO and toact as an lsquoearly warning systemrsquo to identify possible trade disputes theTEP Steering Group has evolved into the primary coordinating body fortransatlantic economic relations including negotiations aboutregulatory cooperation in specific areas
The Steering Group is assisted by the TEP working groups which aresector-specific and thus mirror the sectors laid out by the TEPincluding agriculture biotechnology trade services and globalelectronic commerce Their main task is to find areas where the EUand the US can work together under the TEP framework and to reportany progress or problems to the Steering Group
224 The Transatlantic Early Warning System
The 1998 TEP declaration highlighted the need to identify potentialtrade disputes before they emerge At the Bonn EUUS summit inJune 1999 the two sides announced plans to formalize an EarlyWarning System for this purpose1 4 Essentially the transatlantic earlywarning system sparks an inter-agency process to identify potentialeconomic disputes at an early stage most notably with regard todomestic EU or US legislation that might act as a barrier totransatlantic trade and investment The task of spotting such potentialdisputes is delegated to the TEP Steering Group which reports earlywarning items to the Senior Level Group which in turn may take theminto account when preparing the EUUS summit agenda The TEPSteering Group also assigns contact points facilitating consultationsand agreeing on timelines for reporting back on items highlighted aspotential transatlantic policy frictions Unlike similar early warningsystems within the European Union however the transatlantic earlywarning system does not require that either side pause or reconsiderits proposed legislation or regulations The result is a system whichwhile respecting the regulatory sovereignty of both sides does notguarantee prevention or resolution of potential conflicts
12
Figure 1 The Transatlantic Early Warning System
The EUUS SummitTop-level discussions on
potential and exiting disputes
The Senior Level GroupReviews friction points reports to summitorand refers back to TEP Steering Group
or NTA Task Force
TEP Steering GroupIdentifies and monitorseconomic friction points
225 The Transatlantic Legislatorsrsquo Dialogue
An underlying feature of the early warning concept is the desire to getboth EU and US domestic policy makers to consider the externalimplications of internal policies However the Early Warning System isa bureaucratic tool The important task of raising awareness betweenEU and US legislators lies with the Transatlantic Legislatorsrsquo Dialogue(TLD) another product of the NTArsquos lsquobuilding bridgesrsquo chapter The TLDbrings together members of the US Congress and the EuropeanParliament so as to create awareness on each side of the transatlantictrade impact of EU and US legislative acts
Thus far however the TLD has not lived up to initial expectations forthree reasons First TLD participation is largely limited to members ofthe US House of Representatives and the European Parliament with aparticular interest in transatlantic relations and may not includemembers of committees drafting legislation with transatlanticrepercussions the US Senate moreover is thus far excluded from theTLD Second there is insufficient contact between the TLD and otherparts of the transatlantic dialogue for example the SLG Thirdmeetings of the TLD have been held only rarely and typically withweak attendance on the US side and the Dialogue has yet to engage inor settle any serious economic disputes between the United States andthe European Union
226 The Transatlantic Civil Society Dialogues
The fourth and final chapter of the NTA encourages the establishmentof lsquopeople to peoplersquo links as a way of building bridges across the
13
Atlantic and bringing a civil-society component to transatlanticcooperation In addition to supporting ad hoc exchange betweeneducators and scientists the EU and the US have encouraged and insome cases subsidized the establishment of formal dialogues amongEuropean and American business consumer and environmentalgroups and labour unions The 1995 NTA made specific mention ofthe Transatlantic Business Dialogue (TABD) while the 1998 TEPinvited civil society input lsquoon issues relevant to international trade as aconstructive contribution to policy makingrsquo In practice however not alldialogues have been created or function as equals
The Transatlantic Business Dialogue
The TABD is the oldest best organized and most influential dialoguein the transatlantic economic relationship Launched in 1995 at theinitiative of the US Commerce Department and the EU Commissionthe TABD brings together some 200 European and American CEOs forannual meetings which make joint recommendations on thetransatlantic policy issues1 5 From the beginning the TABD focusedthe attention of US and European legislators and regulators on theimportance of non-tariff barriers to trade calling explicitly for EUUSregulatory cooperation and mutual recognition of standardsmdashanapproach it has labelled lsquoapproved once accepted everywherersquo1 6 Inkeeping with this approach the TABD has been active in pressing forthe adoption and implementation of specific agreements including the1997 Mutual Recognition Agreements and the 2000 Safe HarbourAgreement on data privacy (examined below) In addition the TABDparticipates actively in the transatlantic early warning systemidentifying in its annual reports those domestic laws and regulationsthat might create obstacles to transatlantic trade and investment1 7
One result of this process is that the TABD has become a valuablesource of information for EU and US policy makers Sixty percent ofthe TABDrsquos original recommendations resurfaced in the NTA and theJoint Action Plan1 8 Some members estimate that one-third of itsrecommendations have been taken on board by transatlantic policymakers1 9 Nevertheless there is an increasing perception within theTABD that much of the lsquolow-hanging fruitrsquo has been picked in terms oftransatlantic trade liberalization and regulatory cooperation and a fearthat governments lsquocanrsquot deliverrsquo regulatory reforms demanded bybusiness2 0 In addition the TABD faces the challenge of interactingwith the other officially recognized dialogues with which it may notalways agree
The Transatlantic Consumer Dialogue
The decision to include consumers environmentalists and workers inthe transatlantic dialogue was the result of pressure from NGOs theEuropean Commission and eventually the US State Department The
14
success of the TABD sparked criticism from the NGO communitywhich argued that the influence of the TABD was unbalanced by anabsence of civil society input In response to these concerns the StateDepartment and the European Commission both agreed to providefunds to establish a new Transatlantic Consumer Dialogue There wassome objection to government sponsorship of the groups particularlyin the US where it was feared that the consumer dialogue was a wayto lsquogreenwashrsquo the TEP There was also a divide among its membersover the issue of trade liberalization most notably at the first meetingof the TACD which was overshadowed by a dispute between groupssuch as Public Citizen which generally oppose trade liberalization andother groups such as Consumer Union which support tradeliberalization as a means of increasing consumer choice2 1
Despite this rocky start the TACD has become an efficientorganization with a secretariat in London and a Steering Committeethat has organized its roughly 60 members into working groups onfood electronic commerce and trade In its working groups annualmeetings and recommendations the TACD has focused largely ontransatlantic regulatory issuesmdashin areas such as data privacy foodsafety and the application of the lsquoprecautionary principlersquo in riskregulationmdashbecause many consumer groups feared a downward spiralof regulatory standards as a result of increasing trade liberalizationNevertheless despite its high level of activity some members of theTACD feel that they have not had a sufficient impact on the NTAprocess which they regard as being dominated by a free-tradeagenda2 2
The Transatlantic Environmental and Labour Dialogues
Attempts to forge a functioning dialogue between the European andAmerican environmental and labour movements have been the leastsuccessful Despite initial attempts to create an environmentaldialogue the TAED suspended its activities in 2000 citing a lack offunding from the US side2 3 The TAED had until this point held threemeetings and established a Steering Committee as well as WorkingGroups on Climate Protection Bio-diversity and Forest ConservationFood and Agriculture and Industry The TAED also offered a numberof official recommendations on safe energy sources biotechnologywaste management and emissions standards although TAEDmembers like their TACD counterparts argued that the TABDcontinued to enjoy privileged access to EU and US policymakers2 4
Finally while the Transatlantic Labour Dialogue is officially still afunctioning forum it is the least developed of the transatlantic civil-society dialogues The TALD is little more than a modest exchangebetween the European Trade Union Confederation (ETUC) and theAmerican Federation of Labour and the Congress of IndustrialOrganizations (AFL-CIO) with no organizational structure secretariat
15
or formal objectives The TALD did hold several meetings in 1998 and1999 and 2000 but produced only six recommendations from thosemeetings Simplifying only slightly the ETUC and AFL-CIO havechosen to emphasize their shared interests in a global labour dialogueand have demonstrated little commitment to a specificallytransatlantic agenda within the framework of the NTA or the TEP2 5
In sum the transatlantic civil-society dialogues have arguably served auseful purpose in fostering transatlantic discussion among businessesand non-governmental organizations (most notably in the businessand consumer sectors) and in producing concrete recommendationsfor transatlantic economic cooperation However the relative weight ofthese organizations remains highly uneven and the currentarrangement is highly segmented and marked by a lack of anylsquodialogue among the dialoguesrsquo which might lead to the creation of agenuine transatlantic public sphere
23 An Effective Framework for Economic Cooperation
In recent months both official reviews and academic studies havefocused on the institutions of the NTA and the TEP asking whetherthese institutions are an adequate framework for transatlanticeconomic as well as security cooperation In its 2001 review of theNTA for example the European Commission argued that institutionssuch as the TEP Steering Group the NTA Task Force and the SeniorLevel Group serve useful purposes in fostering dialogue andcooperation between EU officials and their US counterparts but alsonoted a number of weaknesses in the current structure including thesummit-driven demand for often artificial lsquodeliverablesrsquo at six-monthintervals and the difficulty in focusing on medium- to long-termpriorities given the inevitable demands of pressing short-term issuesThe Commission therefore proposed a number of reforms to thecurrent institutions including the establishment of explicit medium-term priorities and the possible reduction of the number of EUUSsummits to one per year2 6
By and large the Commissionrsquos recommendations were welcomed bythe United States government which agreed to the establishment of aset of medium-term priorities in the context of the June 2001 Goumlteborgsummit By contrast no progress has been made on the suggestion ofreducing the number of transatlantic summits largely because of thedifficulties posed by the rotating six-month presidency on the EU sideIn addition as we have seen a number of calls have been made inrecent years for a more transparent and accountable process oftransatlantic economic governance with more balanced input fromcivil society and with a greater role for democratically electedlegislators Thus far however these calls have met with no systematicresponse from either the US or the EU
16
Moving from institutions to lsquodeliverablesrsquo a recent study by EricPhilippart and Pascaline Winand has attempted to measure the policyoutputs of the NTA by examining the joint reports of the Senior LevelGroup since 1995 in order to determine to what extent and in whichareas the goals of the Joint Action Plan had been missed met orexceeded Summarizing a complex analysis Philippart and Winandfind that the extent and level of cooperation varies both across andwithin the four chapters of the NTA with genuine joint action in someareas and lower levels of cooperation (such as the exchange ofinformation) or inactivity in others In the area of foreign policycooperation for example the authors find that EUUS cooperation hasbeen most successful and resulted in the most extensive joint actionwithin Europe itself while yielding fewer and less binding outcomes inother regions In the area of economic cooperation the authors findthat the NTA has been most active in the establishment of alsquotransatlantic marketplacersquo with relatively extensive trade andregulatory cooperation but far less active and successful incoordinating economic policies in the World Trade Organization andother multilateral fora2 7 In the following two sections therefore weturn from a discussion of institutions and process to a more explicitanalysis of specific economic issues relating to the management oftrade disputes as well as bilateral efforts at regulatory cooperation
17
ndash 3 ndashTrade and Regulatory Disputes
in the Transatlantic Economic Partnership
Despite the obvious importance of EUUS trade and investmentrelationshipmdashor indeed because of itmdasheconomic disputes have beenand remain an important feature of the transatlantic partnershipIndeed the settlement and where possible prevention of suchdisputes was a large part of the motivation behind the establishment ofthe New Transatlantic Agenda and retains an important place inbilateral economic relations
31 Classifying Disputes Traditional Trade Issues vs NewlsquoBehind-the-Borderrsquo Regulatory Disputes
Transatlantic economic disputes arise from various sources and canbe settledmdashor left unsettledmdashby a similar variety of means In terms oftheir sources we can distinguish between two broad categories oftransatlantic trade disputes (1) lsquotraditionalrsquo trade disputes regardingdiscriminatory national measures such as tariffs and quotas imposedat the border as well as subsidies antidumping actions and safeguardmeasures which discriminate explicitly between domestic and foreignproducers and (2) lsquonew-stylersquo disputes about the trade-distortingeffects of lsquobehind-the-borderrsquo regulations that act as non-tariff barriersto international trade in goods services and intellectual property
With the gradual decline of tariffs and quotas as direct barriers toinvestment and the simultaneous increase in domestic economicregulation on both sides of the Atlantic in response to concerns aboutthe environment consumer protection public health and the like thefrequency of these new-style disputes has increased drastically duringthe course of the 1990s and early 2000s Some of these disputes likethe ongoing conflicts over the regulation and marketing of hormone-treated beef and genetically modified organisms (GMOs) havegenerated considerable controversy on both sides of the Atlantic andplaced strains on the transatlantic economic partnership
The rise of such transatlantic regulatory disputes in turn hasprompted questions about what Miles Kahler and others have termedlsquosystem frictionrsquo between the respective regulatory systems of the
18
European Union and the United States In a survey of transatlanticeconomic relations conducted in 1995 Kahler concluded that thereexisted at best partial evidence of system friction between the UnitedStates and the European Union noting that some issues (egagriculture and audiovisual services) did indeed divide the US and EUsystems fundamentally while on other lsquonewrsquo issues like labourstandards and the environment the EU and the US generally sharedcommon views2 8
Surveying the landscape of transatlantic economic relations sevenyears later it remains true that the European Union and the UnitedStates are united by many common values and common interestsNevertheless in a growing number of issue-areas including food safetydata privacy copyright protection taxation accountancy standardsand others the United States and the European Union have arguablyexperienced lsquosystem frictionrsquo in the form of a large number ofsimmering regulatory disputes summarized in Appendix 1 at the endof this report
Table 5 Classifying US-EU Trade Disputes
Agriculture Industrial goods Services
Border-measures
Bananas (alsoGATS)Belgian ricedutiesTariff-rate quotacorn gluten feed
Harbour taxAnti-dumping(steel uranium)CVD (steel)Safeguard actions(steel)
Tra
dit
ion
al
Subsidies Export subsidies AirbusFSC
Regulatorybarriers
Beef hormonesGMOs
Hush kitsPublicprocurement
Audio-visualProfessionalservicesTelecommuni-cationsData privacy
New
sty
le
IPR Havana Club Irish MusiccopyrightGreek protectionof movies
19
As Table 5 makes clear the contemporary transatlantic relationship ischaracterized by both traditional trade conflicts and new-styleregulatory disputes Indeed traditional disputes about tariffs andquotas (eg bananas) subsidies (eg Foreign Sales Corporations) anti-dumping measures and safeguard actions (eg steel) constitute someof the most high-profile disputes between the United States and theEuropean Union With a few exceptions however these disputesprimarily concern traditional trade measures that are within the lsquocorebusinessrsquo of the multilateral trading system which has wellestablished rules and an effective functioning dispute settlementprocedure within the World Trade Organization Put simply the WTODispute Settlement Understanding provides a body of multilateralrules governing the permissible use of tariffs quotas and other trade-restrictive practices a forum for consultation and if necessarylitigation among the parties to a dispute before WTO panels and theAppellate Body a binding requirement for member states to complywith DSU panel and Appellate body decisions and authorizedretaliation in the event of prolonged noncompliance with thosedecisions2 9
By contrast regulatory disputes implicate national laws andregulations that are often adopted for legitimate reasons of consumerand environmental protection or public health and after extensivedemocratic or administrative processes For this reason transatlanticregulatory disputes can be more bitter and intractable than traditionaltrade disputes insofar as both sides believe that they are lsquodoing theright thingrsquo and insofar as domestic political actors resistsubordinating domestic regulations to the exigencies of internationaltrade Such regulatory disputes also create particularly difficultquestions for the WTO dispute settlement procedure insofar as theycall for a politically sensitive balance between the economic imperativeof liberalized international trade on the one hand and the economicand non-economic motivations behind domestic regulations on theother hand
Largely for this reason both the United States and the EuropeanUnion have generally avoided bringing such regulatory conflicts beforethe World Trade Organization preferring in most instances to managetheir regulatory differences through bilateral consultation andcooperation Table 6 which summarizes EUUS WTO disputes bysubject matter demonstrates clearly the continuing dominance oftraditional trade issues (tariffs subsidies countervailing duties andantidumping) and the effort by both sides to keep politically sensitiveregulatory issues away from the WTO (For more information about thesubjects and status of all EUUS trade disputes before the WTO seeAppendices 2 and 3 at the end of this report)
Simplifying slightly existing regulatory as well as traditional tradedisputes can be addressed in any one of three ways (summarized in
20
Table 7 page 22) First the EU and the US may engage in directconsultations about regulatory barriers to trade and resolve thedispute without resorting to WTO dispute resolution examples includethe dispute over airplane lsquohush kitsrsquo resolved through a negotiatedsettlement between the EU and the US and the public procurementcase involving a Massachusetts state law imposing sanctions againstfirms doing business in Myanmar which was resolved unilaterallythrough the application of US federal law Second one party maychallenge the legality of the otherrsquos regulations before the WTO as inthe case of the US challenge to the EU ban on hormone-treated beefor the EU challenge to a provision of US copyright law in cases wherethe disputed regulation is ruled to be in violation of WTOrequirements however compliance has proven difficult Third andfinally given the difficulties of resolving such disputes through eitherbilateral negotiations or WTO litigation the bulk of regulatory disputesare allowed to simmer indefinitely with periodic consultations andexchange of information among the two sides but no resolution of theresulting trade tensions As Appendix 1 makes clear the overwhelmingmajority of current transatlantic regulatory disputes fall into this thirdcategory
Table 6 Transatlantic Trade Disputes in the WTO Overview and Context
Tariffsquotascustomsdutiesrules oforigin
retaliatorymeasures
Tradedefence
instruments(a-d CVDsubsidies)
TechnicalTBTs
(classi-ficationlabelingtesting)
Substantive TBTs
(process ampproductrequire-ments)
Subsidies GATS TRIPS TRIMS GPA Other
EU - US(EU asthirdparty)
6 9 (11) 1 (1) 1 3 1 2
EU - Restof World(RoW)
14 6 1 1 3 4 3 4
RoW ndash EU 12 3 4 2 1 1
US ndash EU(US asthirdparty)
8 (1) (1) 1 (1) 8 1 8
US - RoW 10 7 3 2 7 2 6 3 1
RoW ndash US 7 21 5 1 1 1
RoW ndash RoW 17 30 1 6 10 3
Sources Adapted from DG Trade WTO - Dispute Settlement (updated 15102) httpeuropaeuintcommtradepdfcasesxls accessed15202 and the WTOs dispute database (httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
21
22
Table 7 Methods of Dispute Resolution with Examples
Negotiated Agreement orUnilateral Action
WTO Dispute Settlement SimmeringDisputes
HushkitsMassachusettsMyanmar(public procurement)
Beef hormones(EU not in compliance)Irish Musiccopyright (EUUScompensation agreement)
GMOs
The sources of such regulatory disputes and the difficulties they posefor traditional dispute settlement procedures are illustrated below infour brief case studies focusing on (1) the US challenge to EUlegislation prohibiting the use of airplane lsquohush kitsrsquo (2) the USchallenge to the EUrsquos ban on hormone-treated beef and the relateddispute over the EUrsquos moratorium on the approval of geneticallymodified foods and crops (3) the EUrsquos challenge to the aforementionedMassachusetts public procurement law and (4) the EUrsquos challenge to aprovision of the US Copyright Act Although not a thorough review ofthe entire universe of EUUS regulatory disputes these four cases doillustrate the types of regulations adopted and challenged by both theEU and the US as well as the various methods of dispute resolutionmentioned above The policy implications of these cases are discussedin Section 36
32 Case Study Airplane lsquoHushkitsrsquo
Many EUUS disputes concern the technical barriers to trade (TBTs)caused by divergent national regulations setting technical standards inareas ranging from the specifications for industrial machinery andemissions standards for motor vehicles to nutritional labelingrequirements for packaged foods As Kenneth W Abbott has pointedout in a recent study many such national regulations are identified bybusiness or governments as TBTs within the transatlantic relationshipand a far smaller percentage of these have emerged as high-profiletrade disputes3 0 To date no disputes have been litigated between theEU and the US under the TBT Agreement although one particularlyprominent case did create significant tensions in the transatlanticrelationship namely the US challenge to the EUrsquos ban on airplanelsquohushkitsrsquo
Hushkits are equipment packages designed to reduce the noiseemissions of aircraft through the use of sound-absorbing materialswith the aim of bringing particularly older planes into compliance withthe so-called lsquoChapter 3rsquo noise pollution standards adopted within theInternational Civil Aviation Organization (ICAO) In 1999 theEuropean Union which had long pressed unsuccessfully for theadoption of stricter standards within the ICAO adopted a Regulation
23
establishing a ban on the registration of older aircraft fitted withhushkits on the grounds that such aircraft only barely complied withChapter 3 standards and were substantially more polluting thannewer planes The ban on new registrations was to enter into force inMay of 2000 from April 2002 moreover hushkitted aircraft registeredin third countries would not be allowed to operate within EU territory
Although nominally intended to decrease noise pollution aroundairports in heavily populated regions of Europe the EUrsquos hushkitsRegulation met with howls of protest in the United States where theuse of hushkits had been encouraged by US authorities as a cost-effective way of meeting Chapter 3 standards A ban on the registrationof hushkitted aircraft the US argued would therefore impose adisproportionate burden on US airlines which estimated that theRegulation cost them some $2 billion by depressing the value of theirexisting fleets while benefiting European carriers that had relied moreextensively on the purchase of new aircraft designed specifically tomeet Chapter 3 specifications In legal terms moreover the UnitedStates argued that the Regulation violated the terms of the ICAOagreement which simply set a performance standard for planes anddid not authorize parties to set more demanding standards or tomandate a specific design standard (eg a ban on the use ofhushkits) The US accordingly lodged a formal ICAO complaint againstthe 15 EU member states in March of 2000
After extensive bilateral discussion as well as multilateral negotiationswithin the ICAO in October 2001 the US and the EU reached asettlement of the case The first step in this settlement was themultilateral resolution adopted on 4 October in the ICAO assemblyurging states to pursue a lsquobalanced approachrsquo to noise reductionadopting local operating restrictions only where supported by anassessment of the costs and benefits and only after fully assessingalternative measures to reduce noise At the same time the ICAOagreed to a new and stricter set of lsquoChapter 4rsquo standards to take effectbeginning in 2006
Consistent with the provisions of the ICAO agreements the EU agreedon 25 October to withdraw the original Hushkits Regulation by April2002 (the date when it would have applied to third-country aircraft) inreturn for which the US agreed to withdraw its complaint before theICAO In place of the original Regulation the Commission issued aproposal in November 2001 for a new Directive replacing the generalban on hushkitted places with a more discriminating provisionallowing noise-sensitive airports in congested urban areas to limit theuse of planes that are lsquomarginallyrsquo compliant with Chapter 3standards3 1 This draft Directive was approved by the EuropeanParliament in its first reading in March 2002 and at this writing ispending adoption by the Council of Ministers and the Parliament
24
Despite the initial acrimony between the US and the EU the hushkitscase represents a successful effort at bilateral dispute resolution in abroader multilateral setting In this case the European Union agreedafter receiving assurance and guidance from the ICAO to adopt a morediscriminating and less trade-distorting regulatory approach whichsatisfies the trade concerns of the United States while allowing the EUto address the problems of noise pollution around the Unionrsquos mostcongested urban airports As we shall see presently however not allsuch regulatory conflicts have proven so amenable to negotiatedagreement
33 Case Study Hormone-Treated Beef andGenetically Modified Organisms
EU and US food-safety regulations constitute some of the mostimportant regulatory barriers to international trade and have been thesource of some of the most politically difficult and intractabletransatlantic regulatory disputes pitting each sidersquos sovereign right toregulate the safety of its food against its international obligationsunder WTO law3 2 Within the United States regulation of food safetywas among the earliest and most politically sensitive tasks of thefederal government which has delegated much of the power fordomestic regulation to agencies like the Food and Drug Administration(FDA) which has jealously guarded its reputation as an independentand impartial regulator making decisions on the basis of scientifictests rather than political pressures In the EU by contrast foodsafety regulation is carried out in part by national regulators and inpart by the EUrsquos political bodies including the Council of Ministersthe European Parliament and the Commission The deficiencies of thispatchwork regulatory process was painfully revealed however by aseries of food safety crises during the latter half of the 1990s includingmost notably the BSE crisis of 1996 and the Union has respondedforcefully with the creation of a European Food Safety Authority andwith an insistence on the application of the so-called lsquoprecautionaryprinciplersquo justifying regulatory action in the absence of clear scientificevidence and on the basis of consumer concerns and social andeconomic criteria
Precisely because food safety regulations can act as non-tariff barriersto trade in agricultural products the EU and the US have agreed tosubject their domestic regulations to the discipline of internationalguidelines such as the United Nations Codex AlimentariusCommission which establishes international standards for food safetyand more recently through the 1994 WTO Agreement on theApplication of Sanitary and Phytosanitary Measures (the SPSAgreement) The SPS Agreement does not establish bindinginternational standards for food safety nor does it automaticallypreempt the adoption of domestic standards that might constitute
25
non-tariff barriers to trade The agreement does however incorporateand promote the adoption of international standards as well asestablish trade rules that limit the ability of states to adopt food safetyregulations that are not scientifically grounded The terms of the SPSAgreement are moreover enforceable under the WTO disputesettlement procedure
The consequences of the divergent EU and US regulatory processesand the difficulties of resolving disputes through the WTO disputesettlement procedure can be illustrated most clearly by the long-standing EUUS dispute over the issue of hormone-treated beef Theconflict began in 1989 when the European Union announced a ban onthe sale and marketing of beef treated with any one of six growth-promoting hormones that had been tested and certified as safe by theFDA In 1995 following the entry into force of the SPS Agreement theUnited States took legal action before the WTO alleging that the EUban was inconsistent with the terms of the SPS Agreement since it wasnot based on scientific evidence risk assessment or internationalstandards After a protracted legal battle involving the issuing of apanel report and a subsequent appeal the WTO Appellate Body heldwith the United States that the EU had failed to base its ban on ascientific risk assessment and ordered the EU to bring its domesticregulations into compliance with WTO law
Despite the clear ruling against it the European Union faced withopposition from public opinion and hopeful of producing additionalscientific findings that would eventually justify the maintenance of theban failed to comply with the Appellate Bodyrsquos decision The UnitedStates therefore retaliated against the EU in May of 1999 imposingtariffs of $1168 million against EU agricultural products such as foiegras Roquefort cheese and Dijon mustard These US tariffs in turnsparked protests among French and European farmers who seized onthe beef-hormones case as a symbol of the threat posed byAmericanization and globalization to European regulations andtraditions Since 1999 the United States and the European Unionhave continued to consult regularly about this case but the Unionremains firm in its refusal to alter its domestic law and the UnitedStates persists in the application of retaliatory sanctions against theEU
The transatlantic dispute over the regulation of genetically modifiedorganisms (GMOs)mdashor more precisely genetically modified foods andcropsmdashis analytically similar to the beef hormones case although thepotential economic stakes in this area of GMOs are potentially fargreater Here again the US Food and Drug Administration decided inthe early 1990s that genetically modified foods were not substantiallydifferent from conventional foods and therefore required no specialprocedures for approval or marketing and on that basis US farmersand seed producers have quickly embraced the use of genetically
26
modified foods and crops By contrast the European Union has takena more cautious approach in a series of Directives and Regulationsrequiring specific approval procedures for genetically modified crops aswell as labeling of foods from genetically modified varieties Since1998 moreover the Council has maintained a de facto moratorium onthe approval of new GM varieties even though the EUrsquos scientificcommittees have continued to formally approve a number of varietiesas posing no health risks to consumers
The GMO issue has been the subject of intense consultation betweenthe US and the EU in recent years including the creation of an EU-USBiotechnology Forum which issued a joint report on the subject inDecember 20003 3 as well as a Biotech Working Group within theTransatlantic Economic Partnership Such fora have provided for auseful exchange of information among regulators as well as tradeofficials yet the positions of the two sides remain far apart with atbest modest signs of convergence in the EU and US approaches Thusfar the United States has refrained from bringing a case against theEU before the WTO partly of fear that the European Union facing apotential backlash against both GMOs and the WTO would be unableto comply The issue therefore remains a simmering irritant in thetransatlantic relationship with the potential to flare into a majordispute should the United States eventually decide to litigate the issuebefore the WTO
34 Public Procurement The MassachusettsMyanmar Case
The previous two cases involved US challenges to EU regulationssetting requirements for the marketing and use of industrial oragricultural products Regulatory disputes can however be directed atUS as well as EU regulations and they can concern regulationsgoverning questions other than product standards An excellentexample is the EUUS dispute over the 1996 Act adopted by the stateof Massachusetts regulating state contracts with companies doingbusiness in Myanmar (formerly Burma) The law in question wasadopted in June of 1996 by the Massachusetts State Legislature withthe avowed aim of securing human rights and democratic elections inMyanmar which was then under military rule and subject to sanctionsfrom the US federal government as well as the EU Specifically theMassachusetts law imposed sanctions on foreign as well as domesticfirms doing business in Myanmar with the aim of motivating suchfirms to withdraw from activities in that country
As Matthew Schaefer points out in an excellent analysis of the casethe MassachusettsMyanmar dispute illustrates two recurrenttensions in EUUS trade relations3 4 First the case illustrates theproblems encountered when individual US states like Massachusettswhich are not directly party to the WTO adopt laws and regulations in
27
possible contravention of WTO law Anticipating such problems duringthe negotiation of the 1994 Government Procurement Agreement(GPA) the European Union had emphasized the importance for the USof binding the states and the US federal government responded byasking each of the states to submit a voluntary lsquoletter of commitmentrsquoagreeing to be bound 37 states including Massachusetts submittedsuch letters resulting in a substantial but incomplete mechanism toensure state-level compliance with the GPA
Second the Massachusetts law in question also represents theextraterritorial application of US (state or federal) laws which employtrade and other economic provisions to secure a foreign policy aim (inthis case the cause of democracy and human rights in Myanmar)Specifically the Massachusetts law attempted to penalize not onlyAmerican firms but also foreign firms for investing in Myanmar even ifsuch investments were legal in those firmsrsquo home countries In thislatter sense the MassachusettsMyanmar case bears a strikingsimilarity to the extraterritorial sanctions applied by the US in thewell-known Helms-Burton and Iran-Libya Sanctions Acts in which theUS federal government adopted extraterritorial sanctions againstcorporations doing business in Cuba Iran and Libya (The latter caseswere resolved at least temporarily when President Clinton agreed in1998 to waive such sanctions in a bilateral agreement with the leadersof the European Union)
In the Massachusetts case the law was challenged before the WTO bythe European Union (joined by Japan) which sought to have the lawruled incompatible with US obligations under the GPA Before the WTOpanel could rule however the law was successfully challenged andoverruled under US federal law when the US Supreme Court held thatfederal action in this area (ie the federal sanctions law againstBurma) had pre-empted such sanctions by the State of Massachusettswhose law was therefore held to be unconstitutional
The successful resolution of the MassachusettsMyanmar disputesuggests several lessons for the prevention and settlement of similarcases in the future according to Schaefer In terms of disputeprevention he argues this case points to the importance of informingstate governors and legislators about the constitutional limitations onthe extraterritorial use of economic sanctions as well as theirobligations under WTO agreements (at least insofar as the statesthemselves agree to be bound by them) In terms of dispute settlementfinally the Massachusetts case suggests that litigation in domesticcourts under US law may be more a more effective and comprehensiveconstraint on state sanctions than WTO law which should thereforebe employed with restraint in such cases
28
35 Intellectual Property Rights The Irish Music Case
In addition to trade in goods and services and public procurementnational laws and regulations regarding intellectual property rightscan also have international trade repercussions even when thoseregulations apply without discrimination to domestic as well as foreignproducers Indeed protection of intellectual property has been thesubject of no fewer than 11 WTO disputes between the United Statesand the European Union since 1995 The challenges posed byintellectual property disputes are illustrated most strikingly by the so-called lsquoIrish music casersquo in which the European Union challengedprovisions of US copyright law before the World Trade Organization 3 5
The US law in question was the 1976 Copyright Act as amended bythe 1998 Fairness in Music Licensing Act Specifically Article 110(5) ofthe amended Act included a lsquobusiness exemptionrsquo according to whichestablishments such as bars shops and restaurants below a certainsize (ie 2000-3750 square feet) were allowed to play radio andtelevision music without paying fees to royalty-collecting bodies Therelevant provisions of the Act had been adopted only after long anddifficult negotiations between the representatives of US performingrights organizations on the one side and the National LicensedBeverage Association on the other and sought (however successfully)to balance the rights of copyright holders with the interests of smallrestaurant and bar owners
Although the US law applied equally to domestic as well as foreigncopyright holders in 1997 the Irish Music Rights Organization (IMRO)a collective music management company representing Irish musicianssuch as the rock group U2 filed a complaint about the law before theEuropean Commission IMRO claimed that the derogation in the lawwas in violation of US commitments under both the InternationalAgreement on Trade Related Aspects of International Property Rights(TRIPS) as well as the Berne Convention for the Protection of Literaryand Artistic Works since it failed to protect authorsrsquo rights resultingin an estimated loss of euro 121 million annually for IMROrsquos membersThe Commission having investigated the case agreed with IMRO thatthe law violated US obligations under the TRIPS agreement andinitiated a formal complaint before the World Trade Organization in1998
In June 2000 a WTO panel issued a decision in favour of theEuropean Union calling on the US to bring subparagraph (B) ofSection 110(5) of the Copyright Act (the aforementioned businessexemption) into conformity with the TRIPS agreement In response tothe panelrsquos report the United States announced that it would notappeal the panel decision but also that it would require time to amendits existing copyright legislation In the interim the United States andthe European Union agreed to establish a WTO arbitration panel
29
which would decide on the level of compensation to be granted by theUS to the EU pending modification of the Act In November 2001 thearbitrators accordingly assessed the annual losses suffered by EUcopyright owners and hence the level of compensation to be paid bythe United States at some $108 million In light of this finding EUTrade Commissioner Pascal Lamy and US Trade Representative (USTR)Robert Zoellick agreed the following month to a temporary solutionwhereby the USTR would seek authorization from Congress toestablish a special fund worth $33 million over three years to financeprojects and activities for the benefit of EU music creators pendingrevision of the US law
The December 2001 agreement between the US and the EU waspresented by EU Trade Commissioner Pascal Lamy as lsquoa good exampleof how we can manage our problems in a cooperative manner whilekeeping in mind our international commitmentsrsquo3 6 However while theUS and the EU have indeed reached an amicable three-year agreementon this issue the Irish Music case also serves as an additionalexample of the difficulties encountered by both sides in amendingdomestic regulations in response to trade concerns and WTO rulingsAlthough the European Union side insisted on the US obligation toamend its law and explicitly retained its right to return to the WTO inthe event of noncompliance at this writing there is no sign of anyimminent US effort to bring its domestic law into compliance and anextended US agreement to compensation remains a probablealternative for the foreseeable future
36 Dealing with Trade and Regulatory Conflicts
Transatlantic trade disputesmdashboth traditional disputes and new-styleregulatory conflictsmdashare inevitable in a relationship as close as EUUSrelationship and are not likely to disappear anytime in the nearfuture Many of these disputesmdashespecially old-style tariff quotasantidumping and subsidies disputesmdashare dealt with effectively by WTOdispute resolution New-style disputes however often involve domesticlaws adopted for legitimate purposes after democratic deliberation andlitigation in such cases can place severe strain on the WTO systemparticularly in cases like beef-hormones copyright and potentiallyGMOs where the losing party would have difficulty complying with anadverse WTO ruling
In light of these challenges scholars and practitioners haverecommended a range of potential reforms in US and EU domesticpolitics in the bilateral relationship and in the multilateral WTOsystem to prevent and settle regulatory disputes Although a complete
30
review of these recommendations is beyond the scope of this report3 7 some of the most promising proposed reforms include the following
bull Changes in Domestic Regulation Perhaps the most promisingsuggestions for reform are those that require no formal internationalagreement but rather domestic reforms that could be undertakeneither unilaterally or through an informal process of mutualcoordination The Transatlantic Business Dialogue for examplehas proposed that the United States and the European Union bothundertake to conduct lsquoTrade Impact Assessmentsrsquo of draftregulations so that legislators are made aware of the potential tradeimplications of proposed regulations before they are adopted Sucha procedural change could be undertaken within the respectivedomestic systems of the US and the EU and without compromisingthe regulatory sovereignty of either side and would have theadvantage of implicating legislators who thus far have been largelyabsent from the NTA process3 8 In a similar vein US observers haveadvocated the adoption by the EU of some form of advise-and-consent procedures for the adoption of regulations which wouldprovide domestic as well as foreign stakeholders with advancewarning of proposed regulations and improve the quality of EUgovernance more generally Finally as we have seen in theMassachusettsMyanmar case it has been proposed that theUnited States should do more in the future to implicate subfederalstates in international trade agreements and to inform them oftheir obligations under US constitutional as well as internationaltrade law
bull Changes in the Bilateral Relationship Notwithstanding theirincreasing complexity the institutions of the NTA and the TEP havenot prevented the rise of new regulatory disputes nor have theybeen able consistently to settle amicably all those that do arisegiven the difficulty for both sides of changing domestic regulationsadopted in response to legitimate public concerns Nevertheless anumber of bilateral reforms have recently been proposed includingmost notably the further development of the bilateral early warningsystem increased regulatory cooperation and the expansion of theTransatlantic Legislators Dialogue With regard to the firstinterviews with policy-makers on both sides of the Atlantic revealthat the early warning system has proven useful in identifyingobscure technical barriers to trade but the same policy-makersemphasize that increased early warning does not provide aguarantee that legislators or regulators will be willing or able toadjust domestic regulations and indeed the survey of regulatorydisputes undertaken above suggests that increased early warningwould not have been capable of resolving disputes over beefhormones or copyright where the primary impediment to resolutionof the disputes was not lack of information but the regulatorysovereignty of legislators and regulators on each side For this
31
reason particular emphasis has been placed on the promise ofenhanced regulatory cooperation (examined in detail in the nextsection) and on the further development of the TLD (where theprimary challenge will be to provide an incentive for domesticallyoriented parliamentarians and congressmen to participate intransatlantic consultations)
bull Reform of WTO Dispute Settlement The WTO Dispute SettlementUnderstanding establishes a binding and efficient system for theresolution of international trade disputes and most WTO memberstates are broadly satisfied with the operation of the systemNevertheless the WTO dispute resolution system is placed underparticular strain in regulatory disputes such as the beef-hormonesand Irish music cases reviewed above where it is called to balancetrade and regulatory objectives and where compliance is politicallydifficult for the losing parties In light of these weaknesses variousscholars and practitioners have suggested reforms to both WTOrules and to the DSU including most notably the clarification of thelsquoprecautionary principlersquo in WTO law and moving from retaliation tocompensation in cases of noncompliance with DSU rulings Both ofthese proposals merit further discussion in the coming review of theDispute Settlement Understanding (scheduled to be completed inMay 2003) and in the ongoing Doha Round of trade talks In themeantime the EU and the US would do well to continue theirgeneral pattern of restraint in addressing regulatory disputesbilaterally and avoiding any potential lsquooverloadingrsquo of the WTOdispute settlement procedure
Future negotiations between the EU and the US as well as futurestudies designed to inform those negotiations would do well to explorethe viability of these proposed reforms
32
ndash 4 ndashTransatlantic Regulatory Cooperation
One of the most striking features of the period since the 1995 NewTransatlantic Agenda has been the dramatic increase in both formaland informal cooperation among the regulatory authorities of theUnited States and the European Union In the past five years alonethe United States and the European Union have signed nine formalregulatory cooperation agreements in areas as diverse as competitionpolicy data privacy customs procedures veterinary standards andthe mutual recognition of testing and certification procedures (Table 8)These formal regulatory agreements moreover represent only afraction of the contacts that occur among US and EU regulators bothbilaterally and in various multilateral fora
41 Why Cooperate
The incentives for US and EU regulators to engage in formal andinformal cooperation vary across different issue-areas but cangenerally be classed into two broad categories3 9 First regulators maycooperate because they view such cooperation as useful in carrying outtheir essential rulemaking responsibilities in an increasingly integratedtransatlantic and global marketplace Such cooperation need not andtypically does not involve joint rulemaking activities but focusesinstead on exchanges of information identification of best practiceand early notification of new regulations being considered within eitherpolity In the area of food safety for example the EuropeanCommission and the US Food and Drug Administration have notidentified or implemented common standards for the reasonsdiscussed above yet the two regulators do engage in an ongoingdialogue both bilaterally and within the Codex Alimentarius (the globalbody for the establishment of food safety standards) and theCommission consulted extensively with its US counterparts in thedesign of the newly created European Food Safety Authority Similarbilateral exchanges occur regularly in other issue-areas as well aswithin multilateral standard-setting bodies such as the InternationalStandards Organization (for industrial standards) and theInternational Conference on Harmonization (for registration ofpharmaceuticals)
33
Table 8 Transatlantic Regulatory Cooperation Agreements
Agreement Targeted Regulations Year
Competition Policy Agreement Competition regulations 1991
ECUS Agreement on DrugPrecursors
Illicit drug regulations 1997
ECUS Customs and CooperationAgreement
Customs certifications 1997
EUUS General Mutual RecognitionAgreements
Conformity assessmenttesting in six sectorstelecommunicationsequipment electromagneticcompatibility electricalsafety recreational craftmedical devices andpharmaceutical goodmanufacturing practices
1997
EUUS Positive Comity Agreement Competition relations 1998
EUUS Agreement Concerning theEstablishment of Global TechnicalRegulations for Wheeled VehiclesEquipment and Parts
Technical regulations 1999
EUUS Veterinary EquivalenceAgreement
Animal export certifications 1999
EUUS Safe Harbour Agreement Data protection regulations 2000
Joint Declaration on USEUCooperation in the Field ofMetrology and MeasurementStandards
Measurement equivalence inproduct certification
2000
EUUS Agreement on MutualRecognition of Certificates ofConformity for Marine Equipment
Mutual recognition of marineequipment regulations
2001
EUUS Guidelines on RegulatoryCooperation and Transparency
Non-binding guidelines forcooperation among EU andUS regulators regardingtechnical barriers to trade
2002
Source European Commission DG TRADEhttpeuropaeuintcommtradebilateralusausahtm
34
A second and partially overlapping motivation for regulatorycooperation already touched on in Section 3 above is to avoid orresolve bilateral disputes about the potential trade-distorting effects ofnational regulations As we have seen domestic economic regulationscan become a source of transatlantic economic tension in two distinctways First domestic regulations in areas such as consumer orenvironmental protection food safety or copyright protection cancreate non-tariff barriers to international trade and investmentexamples include the recent disputes over the EUrsquos Data PrivacyDirective and its ban on hormone-treated beef as well as exemptionsto the US Copyright Act Second US and EU domestic regulators mayapply their domestic regulations in an extrajurisdictional fashion asfor example when EU and US competition authorities insist on theright to review mergers among firms in the other constituency insofaras the proposed merger creates effects in the regulatorrsquos domesticjurisdiction or when the US (or its constituent states) employs tradeand economic sanctions as an instrument of foreign policy In suchcases George Bermann has pointed out lsquothe line between simpleregulatory [cooperation] hellip and the settlement of trade disputes canbecome highly blurredrsquo4 0
The full range of regulatory cooperation agreements and practicesbetween the United States and the European Union is beyond thescope of this preliminary report Indeed interviews with practitionersfrom the United States and the European Union reveal thatconsiderable informal cooperation takes place across virtually everyconceivable area of US and EU regulation with little attention from thepress scholars or political actors Even in the absence of a full-scalecross-sectoral analysis however we can nevertheless undertake threebrief case studies of regulatory cooperation in the fields of competitionpolicy the negotiation of EUUS Mutual Recognition Agreements andthe Safe Harbour Agreement on data privacy regulation Takentogether these three cases illustrate the range of incentives forregulatory cooperation as well as the various means for suchcooperation and the significant obstacles that often stand in its way
42 Case Study Transatlantic Competition Policy Cooperation
One of the earliest regulatory cooperation agreements signed betweenEU and US authorities and one of the most successful concernscooperation in the enforcement of each sidersquos respective competitionpolicy laws including most notably the examination of proposedmergers and acquisitions
The incentives for cooperation in this area are substantial4 1 First asin other areas of regulation EU and US regulators confront similarproblems and are increasingly called upon to rule upon the samecases placing a premium on the sharing of information Second both
35
US and EU courts have ruled that their respective regulatorsmdashnamelythe Department of Justice and the Federal Trade Commission on theUS side and the Directorate-General for Competition on the EUsidemdashmay enforce domestic competition laws extraterritorially againstfirms based outside their domestic jurisdiction if and insofar thebehavior in question (eg a proposed merger) produces effects oncompetition in the domestic market Such extraterritorial applicationof both EU and US competition law raises serious issues about theduplication of effort by the two sets of regulators not to mention theadverse economic and political impact of inconsistent or conflictingdecisions on the same case by EU and US regulators
These concerns increased substantially in the early 1990s moreoverwith the rapid rise in cross-border mergers and acquisitions thataccompanied the completion of the Unionrsquos lsquo1992rsquo internal marketinitiative At approximately the same time moreover the EuropeanUnion adopted the 1990 Merger Control Regulation which gave theCommission regulatory authority to review mergers above certain sizethresholds and made the Commission an important interlocutor forthe EU in this area It was in this context of increasing cross-bordermergers and increasing EU authority over such mergers thatCompetition Commissioner Leon Brittan proposed in 1990 to expandEU competition policy cooperation with third countries beginning witha formal agreement with the United States US regulators respondedpositively to Brittanrsquos proposal and US and EU regulators agreed in1991 to adopt an agreement committing them to cooperation in thearea of competition policy including the sharing of non-confidentialinformation and coordination of enforcement activities This agreementwas later supplemented by two secondary agreements the 1998Positive Comity Agreement (which seeks to restrict the extra-territorialapplication of antitrust laws in non-merger cases but has beenformally invoked only once) and by the 1999 AdministrativeArrangements on Attendance in Hearings (which provide guidelines forthe participation of EU and US regulators in each otherrsquos hearings)
In the decade since the signature of the first Competition PolicyAgreement EUUS competition policy cooperation has generallyoperated smoothly and successfully with regulators from theCommission the Justice Department and the FTC sharing informationand coordinating enforcement activities on a daily basis andcooperating successfully on over 600 cases during the course of the1990s including almost 500 merger decisions The general success ofEUUS competition policy cooperation in the area of merger controlcan be attributed to the broad transatlantic agreement among EU andUS regulators about the basic scope and tools of policy which hasfacilitated the task of coordinating enforcement actions and generatingmutual trust among regulators
36
Nevertheless as Youri Devuyst points out in an excellent review oftransatlantic competition policy cooperation successful cooperationand conflict prevention between US and EU regulators can behampered by persistent differences in the scope and focus of US andEU competition law the procedures employed by both sides and theexigencies of confidentiality which limit the sharing of information byUS and EU agencies These limitations can be illustrated in theatypical but well-known BoeingMcDonnell Douglas merger (bothAmerican firms) which was approved by the FTC in July 1997 only tobe held up by Commission insistence that the companies agree toformal undertakings to satisfy its competition concerns Although thecase caused substantial strains in the transatlantic relationship thecompanies concerned eventually agreed to the Commissionrsquos proposedremedies allowing the merger to proceed4 2
An even more dramatic difference of opinion occurred with regard tothe proposed merger of two other US firms GE and Honeywell in2001 Here again US regulators approved the proposed merger only tosee the European Commission reject it in July 2001 after announcingthat the firmsrsquo proposed remedies had failed to satisfy theCommissionrsquos concerns Perhaps most strikingly and unlike theprevious case of EUUS disagreement in the BoeingMcDonnellDouglas merger a number of analysts claimed that the disagreementbetween US and EU regulators reflected an underlying andfundamental difference in the criteria for assessing proposedmergers4 3 Although the resulting predictions of other imminentUSEU conflicts are almost certainly overstated it is worthwhilenoting that the Commission in its December 2001 Green Paper on thereview of the Merger Control Regulation proposes to launch a debateon whether the Union should abandon its traditional lsquodominance testrsquo(ie assessing whether a proposed merger would create a dominantposition for the merged firm in the relevant market) in favour of alsquosubstantial lessening of competitionrsquo test (similar to that already usedin the US Canada and Australia)4 4 Whether the Union will move inthis direction remains unclear If so however it would represent astriking example of regulatory convergence among regulators alreadynotable for their similar (if not identical) regulatory philosophies andprocedures
43 Case Study EUUS Mutual Recognition Agreements4 5
As transatlantic tariff barriers have decreased firms have becomemore concerned with what they term duplicative regulatory compliancecosts and many have pressed for their removal This pressure hasincreased with rising transatlantic investment since divergent EU andUS standards and certification requirements most directly affecttransatlantic corporate groups and these groups more easilycoordinate lobbying on both sides of the Atlantic4 6 Transatlantic firms
37
under the auspices of the Transatlantic Business Dialogue inparticular have pressed for enhanced regulatory cooperation throughmutual recognition agreements culminating in the 1997 EUUSMutual Recognition Agreement (MRA) providing for mutual recognitionof testing and certification requirements and the more ambitious MRArelating to marine equipment signed in 2000 These agreements havebeen promoted as a major achievement of the New TransatlanticAgenda and as a flexible means of reconciling the regulatoryapproaches of the United States and the European Union andfacilitating access to both domestic markets
Notwithstanding these potential advantages however majorchallenges for transatlantic regulatory cooperation in this and otherareas are posed by the significant institutional asymmetries betweenthe United Statesrsquo and EUrsquos respective regulatory systems in an arrayof fields Where regulators adopt similar regulatory structures andsystems and enact similar substantive standards they more easilyunderstand and accept each otherrsquos regulatory determinationsRegulatory symmetry facilitates regulatory trust and confidenceenabling regulatory cooperation to occur as in the competition policycase examined above
In many issue-areas however US and EU regulators tend to work indifferent regulatory cultures Generally EU and national regulatorsoperate under the dual mission of ensuring free trade within theinternal market on the one hand while ensuring public safety throughhigh product and process standards on the other They thus are quiteaccustomed to interacting with foreign regulators and testing bodies onan ongoing basis As a consequence the Commissionrsquos DG Enterpriseand DG Trade units rarely tousled when negotiating and implementingthe 1997 Mutual Recognition Agreement The US Food and DrugAdministration (FDA) by contrast has traditionally defined its rolesolely as that of protecting US public health and has not operatedunder a dual mission of also facilitating market exchange Because theFDA is an independent regulatory authority anxious to protect itsregulatory autonomy US trade and commerce authorities encountermore difficulties in negotiating bilateral agreements concerning areaswithin the FDArsquos jurisdiction
Overall institutional adaptation for the negotiation andimplementation the 1997 MRA has been much easier for the EUwhich already has a mechanism for coordinating the mutualrecognition of product testing and certification among fifteen memberstates speaking eleven different languages This relatively deregulatedsystem consists of EU legislators setting lsquoessential requirementsrsquo in EUlsquonew approachrsquo directives which are supplemented by large numbersof harmonized lsquovoluntaryrsquo technical standards that in turn are widelyadopted Before marketing their products firms either self-certify theircompliance with these requirements or hire accredited testing and
38
certification laboratories Firms and laboratories remain subject topost-marketing member state regulatory controls as well as market-reputational constraints Member state regulators interact on a regularbasis through working groups committees and informalarrangements Overall this EU system can be characterized asgovernance by coordinated cross-border public-private networks
US regulatory officials however oversaw very different regulatorysystems in the areas covered by the 1997 MRA For example the USFederal Communications Commission (FCC) itself certified alltelecommunications equipment until the negotiation of thetransatlantic mutual recognition agreement at which time it adopted adecentralized EU model of certification The FDA continues to certifymost medical devices whereas EU authorities have permitted testingby private notified bodies since the mid-1990s The US OccupationalHealth and Safety Administration (OSHA) requires OSHA-accreditedlaboratories to certify all electrical safety equipment used in theworkplace whereas the EU has permitted manufacturers to self-certifythe equipmentrsquos conformity with European requirements since 1973
EU and US authorities began to seriously address issues of regulatorycoordination at the beginning of the 1990s In May 1989 US Secretaryof Commerce Robert Mosbacher and Commission Vice-PresidentMartin Bangemann agreed to explore the possibility of transatlanticmutual recognition agreements as well as mechanisms to grant USfirms greater access to EU standard-setting procedures After 1995these efforts were championed explicitly and repeatedly byTransatlantic Business Dialogue which became a prominent advocateof transatlantic MRAs4 7
EU and US negotiators initially discussed negotiating mutualrecognition arrangements in eleven sectors but ultimately whittledthis down to six4 8 In consequence the 1997 MRA consists of aframework agreement and six annexes respectively coveringtelecommunications equipment electromagnetic compatibilityelectrical safety recreational craft medical devices andpharmaceutical good manufacturing practices Each of the annexes isin fact a separate agreement for a separate sector covering definedcategories and lists of products
As with all trade negotiations the EU and the United States wereconcerned that the final results be lsquobalancedrsquo The United Stateswished to conclude an agreement on telecommunications equipmentfirst but the EU refused because it felt that US firms would benefitmore if the agreement covered only this sector EU negotiators thusinsisted that an agreement on pharmaceuticals and medical devices becompleted simultaneously The MRA sets up a new transatlanticstructure for overseeing its implementation First the MRA creates aJoint Committee which consists of US and EU trade officials who meet
39
twice annually Second the annexes create Joint Sectoral Committeesto oversee the annexesrsquo implementation
The 1997 Mutual Recognition Agreement does not cover recognition ofthe adequacy or equivalency of US and EU standards as such Ratherthe 1997 MRA only addresses mutual recognition by certificationbodies (known as lsquoConformity Assessment Bodiesrsquo) of each otherrsquosseparate standards4 9 Since neither the United States nor the EUrelinquishes sovereign control over the substance of their standardstrading firms still must meet the separate requirements of the worldrsquostwo largest markets In addition these assessment evaluations aresubject to certain pre-approval and post-approval conditions
Implementation of the 1997 MRA moreover remains uneven Thetelecommunications electromagnetic compatibility and recreationalcraft annexes all have been implemented as required In contrastimplementation of the electrical safety medical device andpharmaceutical GMP annexes remain in dispute in part because theFDA and OSHA have been slow to recognize the equivalency ofcertification by European government regulators or privatelaboratories and in part because of the magnitude and theunfamiliarity of US regulatorsrsquo task in assessing the equivalence ofstandards from 15 different member states submitting documentationin up to 11 different languages5 0 In the words of one FDA official theFDA has lsquorefused to compromise its mission of protecting public healthfor balance of trade purposesrsquo5 1 Thus all three annexes initiallydesired by the US administration are in operation while the threeannexes desired by the Commission are not Since the US executivehas less control over the US agencies responsible for implementationboth partiesrsquo choices are somewhat constrained
On June 12 2001 the United States and the EU initialed anAgreement on Mutual Recognition of Certificates of Conformity forMarine Equipment5 2 Unlike the 1997 Mutual Recognition Agreementand its six annexes this new agreement provides for mutualrecognition of each partiesrsquo standards and procedures as lsquoequivalentrsquofor purposes of certifications issued by conformity assessment bodieslocated in the partiesrsquo respective territories (Articles 3 and 4) Pre-existing harmonization of standards in this sector made possible thepartiesrsquo mutual recognition of lsquoequivalencersquo These standards wereagreed under the auspices of the International Maritime Organization(IMO) located in Geneva This new mutual recognition agreementshould be much easier to implement because less training andinformation exchange are required insofar as testing bodies will not becertifying under separate standards or procedures The parties alsoagreed up-front to recognize each otherrsquos existing conformityassessment bodies so that no application procedures are required forimplementation (Article 6) Thus while this agreement is relativelynarrow in product coverage it is much broader in scope
40
Transatlantic businesses that first touted the benefits of EUUSmutual recognition arrangements now realize their underestimation ofthe difficulties of implementation5 3 These constraints involve not justregulators and regulatory cultures but market forces as well Themarket has not reacted favourably to the recognition of newConformity Assessment Bodies as provided under the 1997 MRA Fromthe perspective of manufacturers they typically develop long-termworking relationships with certifying laboratories which constitute aform of cost-effective firm-laboratory partnership Moreover alaboratoryrsquos mark itself may be important in some markets so thatfirms may continue obtaining formal certification from EU notifiedbodies for the EU market and US laboratories for the United States Asa result most firms may continue using the same laboratories eventhough these laboratories cannot directly certify products asConformity Assessment Bodies but must work through sub-contracting arrangements with accredited laboratories on the otherside of the Atlantic5 4 As for laboratories they will not invest in theaccreditation procedures required to become a Conformity AssessmentBody if they fear that the benefits are limited or too uncertainAccreditation costs can be substantial involving seminars workshopstraining programs audits and joint inspections with authorities acrossthe Atlantic The MRArsquos success in consequence may requireconsiderable market promotion
Perhaps the most important lesson from the implementation of theEUUS MRAs is that agreements that both guarantee public safetyand reduce trade barriers cannot be accomplished on the cheap Theyrequire sustained political will of leaders in each jurisdiction to allocatesignificant resources to finance the coordination of cross-borderregulatory networks EU member states sustained such political willand dedicated such resources over decades in order to create thesingle market Even so they too have encountered significant setbacksand obstacles While it is far too early to pre-judge the 1997 MRA itseems clear that the full benefits of the agreement will be reaped only ifboth sides take concrete steps to ensure that sufficient regulatoryresources are made available to the regulators charged withimplementing the agreement in practice
44 Case Study Data Privacy and the Safe Harbour Agreement5 5
Data privacy protection became a transatlantic issue because of thegrowing interdependence of the US and European economies and therising importance of information technology US affiliates in Europeproduce over a trillion dollars of goods and services annuallyconstituting lsquoover half of all the foreign production of US companiesrsquo5 6
These companies depend on information flows not only with thirdparty suppliers customers consultants marketers and other serviceproviders but also internally within their complex networks of
41
affiliates joint ventures and partnerships The EUUS dispute overdata privacy protection and efforts at cooperation demonstrate theinherent interrelation between social regulation and open trade policieswhere regulation (or the lack thereof) has external effects Alleged USunder-regulation can jeopardize the privacy interests of EU residentsAlleged EU over-regulation can limit the commercial operations of USenterprises In an interdependent transatlantic economy US and EUauthorities attempt to manage the ensuing conflicts of norms andmesh where possible their divergent regulatory systems
On October 24 1998 Directive 9546EC on the Protection ofIndividuals with Regard to the Processing of Personal Data and theFree Movement of Such Data became effective The EU through itsDirective takes primarily a regulatory approach to data privacyprotection as opposed to private ordering through market processesExcept for public security criminal law and related exceptions theDirective covers all processing of all personal data by whatever meansand is not limited to action by government business sector or field ofuse (arts 2-3) The Directive prohibits data controllers from processinginformation unless the individual lsquounambiguouslyrsquo consents to theprocessing and that consent is informed (arts 7 8 10 14) TheDirective provides multiple means for enforcement It requires memberstates to grant individuals a permanent right of access to obtain copiesof the data about them and have it corrected or its use enjoined (arts12 28) It obliges member states to provide a judicial remedy forinfringements of data privacy rights including the right to receivedamages (arts 22-24) To support effective enforcement each memberstate must designate an independent public authority lsquoresponsible formonitoring the application within its territoryrsquo of the Directiversquosprovisions (art 28) These supervisory authorities are to be grantedsignificant powers (arts 18 28)5 7
In contrast the United States has stressed lsquoself-regulationrsquo by theprivate sector backed by regulation which tends to be sector-specificand less stringent Congressrsquos targeting of specific sectors andconcerns is reflected in the following statutory titles The DriverrsquosPrivacy Protection Act of 1994 the Video Privacy Protection Act of1988 The Electronic Communications Privacy Act of 1986 the CableCommunications Policy Act of 1984 and The Fair Credit Reporting Actof 1971 Overall the US approach is fragmented involving standard-setting and enforcement by a wide variety of actors including federaland state legislatures agencies and courts industry associationsindividual companies and market forces US legislation providescitizens with significantly greater protection against the collection anduse of personal information by government in particular the federalgovernment than by the private sector
Article 25 of the EU Directive provides that member states shallprohibit all data transfers to a third country if the Commission finds
42
that the country does not ensure lsquoan adequate level of protectionrsquo ofdata privacy Since it appeared that the United States might notprovide for lsquoadequatersquo data privacy protection under the Directiversquoscriteria US and EU authorities engaged in intensive negotiations toavoid a ban on data flows to the United States culminating in theiragreement on Safe Harbour Principles in March 20005 8 Under theagreement EU member states now must recognize that US firmsrsquoadherence to these Principles is sufficient to protect them frommember state challenge Member state authorities however may stillchallenge transfers to firms that do not adopt and comply with thePrinciples
The guidelines set forth seven core data privacy principles for industryto follow which respectively cover the following issues Notice ChoiceOnward Transfer Security Data Integrity Access and EnforcementThe parties supplemented the Principles with a document entitledlsquoFrequently Asked Questionsrsquo (FAQs) designed to guide firms andauthorities in the Principlesrsquo application Many of the FAQs specify thescope of exceptions thereby providing some leeway to US firms
Companies join the Safe Harbour program by annually certifying to theUS Department of Commerce that they will comply with the PrinciplesThe Department of Commerce then places the companyrsquos name on itsweb site list of certifying firms Self-regulatory organizations (such asBBB Online and TRUSTe) backed by the US Federal TradeCommission offer the primary means for the Principlesrsquo enforcementIn this way the Principlesrsquo application resembles the EUrsquos new andglobal approaches to internal market harmonization5 9 As under thenew approach the Safe Harbour Principles set forth lsquoessentialrequirementsrsquo that firms must meet As under the global approachfirms self-certify their adherence which certification is backed first byaudits from self-regulatory organizations and then (ultimately) by theauthority of the state As of February 23 2002 156 companies hadcertified their adherence to the Principles
The Directive also provides other ways to comply with it in particularthrough obtaining lsquounambiguousrsquo consent from the lsquodata subjectrsquo inEurope (art 7) and the signature of a lsquomodel contractrsquo with data privacyauthorities in member states (Article 26) In January 2002 theCommission approved standard contract clauses covering privacyprotection that can be applied to all data transfers from the EUregardless of a firmrsquos adherence to the Safe Harbour Principles Firmsalso can sign ad hoc contracts with individual member state dataprivacy authorities In addition firms can sign contracts with affiliateswhen transferring personal information such as information containedin personnel files
The Safe Harbour Principles are still at an inchoate stage so that itremains too early to assess their impact Some commentators have
43
questioned the effectiveness of the Principles given that relatively fewUS companies have signed them However some practitioners pointout that companies will not certify their procedures until theiroperations are in compliance6 0 For large companies this allegedly caninvolve considerable re-engineering of their information systemscreation of new internal policies and training of personnel
Nonetheless companies engaged in transatlantic business operate inthe shadow of the Directiversquos potential enforcement Under theDirective US businesses face potential litigation before Europeancourts and administrative bodies unless they adhere to the SafeHarbour Principles Even though privacy advocates have criticized theSafe Harbour Principles the agreement represents a potentially usefultool for such advocates In addition the agreement has increased thedemand for legal consulting and other privacy services within theUnited States For example the Better Business Bureau OnLinecreated a privacy seal program which incorporates the Safe HarbourPrinciples and the Electronic Frontier Foundation a public interestorganization has associated with information technology companies tolaunch a program named TRUSTe to rate the privacy protection ofInternet sites which program also is certified under Safe Harbour
In a world of increased economic interdependence the Safe HarbourPrinciples point to the importance of regulatory cooperation acrossborders involving public and private actors Certification groups suchas BBB OnLine meet with European data protection officials so thatthey become comfortable in the workings of an alternative USapproach Government officials including in Europe realize that theydo not have the resources to enforce the Directiversquos provisions solelyon their own and thus rely on public-private networks in an attemptto ensure better global practices affecting EU constituentsNonetheless to make the Principles work will require sustained cross-border cooperation
45 The Challenge of Transatlantic Regulatory Cooperation
Although brief and selective this review of cooperation across threesectors suggests several tentative conclusions about both the benefitsand the potential obstacles to transatlantic regulatory cooperation
With regard to the potential benefits of transatlantic regulatorycooperation we have identified two First as we have seen regulatorycooperation has the potential to enhance the efficiency of regulationthrough the exchange of information and best practice the provision ofearly warning of potential disputes the avoidance or management ofconflicting regulatory decisions and the gradual building of mutualtrust among regulators Second regulatory cooperation can facilitatetransatlantic trade and investment by removing duplicative regulatory
44
requirements and other non-tariff barriers within the transatlanticmarketplace Such cooperation moreover need not involve thecomplete harmonization or convergence of EU and US regulationsalthough there is some preliminary evidence of convergence in specificissue-areas including the acceptance by the United States of a mutualrecognition scheme similar to that long practiced in the EuropeanUnion and the EUrsquos active discussion of moving from its currentlsquodominance testrsquo to a possible new standard for regulatory mergerscloser to that employed by competition authorities in the UnitedStates
Yet despite the obvious promise of transatlantic regulatorycooperation a broad survey of EUUS cooperation in various areasincluding the three case studies analyzed above points to a number ofpotential obstacles to successful transatlantic regulatory cooperation
bull Regulatory Independence In a number of areas US regulatorsenjoy greater regulatory independence than their Europeancounterparts and may resist what they perceive to be an effort tocompromise domestic regulatory standards and processes in theinterests of international trade The result in some cases is that theUSTR and other central agencies of the federal governmentencounter difficulty guaranteeing compliance with regulatoryagreements by specific regulatory agencies such as the FDA andOSHA if and insofar as these agencies believe that implementationof those agreements would compromise established US regulatorystandards and procedures
bull Transparency and Administrative Law Requirements Across awide range of issue-areas US regulators express concern about thedifferent administrative-law requirements for regulators in the USand the European Union most notably in the area of transparencyIn the United States regulators are required to adhere to thelsquonotice-and-commentrsquo rulemaking procedures of the AdministrativeProcedure Act which requires agencies to provide public notice ofproposed regulations in the Federal Register allow individuals tosubmit comments prior to the final adoption of new rules and keepa public record of the regulatory process The EU rulemakingprocedure although typically characterized by widespreadconsultation of interested parties does not incorporate thesefeatures
bull Confidential Information T h e need to pr o tect con f id e n tia lin f or m a ti on of fir m s an d ot h er pr iva te pa r tie s also pla ce s lim i ts on th ea b i lity of both sid es to co op er a t e in th e ad o p tion an d im p lem en ta tion of reg ula tion s pa r ti cula r l y in th e en f or cem e n t of US an d EU com p etiti on la w s reg a r d in g ca r tel s an d con cen tr a tio n s wh er e fi r m sh a v e been mor e reluct a n t to ag r ee to th e sh a r in g of con f i d en tia lin f or m a ti on th a n in th e ar e a of mer g er con tr o l revi ew ed ab ove
45
bull Multi-Level Governance The United States and the EuropeanUnion are both federal or quasi-federal governance systems withregulatory powers divided in most sectors between the federalEUlevel on the one hand and individual statesmember states or evenlocal governments on the other In terms of regulatory cooperationthis division of regulatory powers means that US executive-branchnegotiators and EU Commission officials are frequently chargedwith negotiating regulatory agreements in areas where the statesretain at least partial regulatory competence and to charges fromboth sides that their counterparts are unable to lsquodeliver the statesrsquoExamples of such state regulatory powers on the US side includethe regulation of insurance and other services as well as publicprocurement where the EU has insisted that the participation ofindividual states is vital to the enforcement of regulatoryagreements6 1 Similar problems afflict the EU side whereCommission efforts to engage in regulatory cooperation may befrustrated by resistance among individual member states as in thecase of GMOs or by the slow adoption of EU-level regulations as inthe case of financial services
bull Regulatory Sovereignty Ultimately the adoption of the broadregulatory frameworks for economic activity consumer andenvironmental protection and other areas is entrusted on bothsides of the Atlantic to democratically accountable bodies such asthe Congress and President in the US and the Council of Ministersand European Parliament in the European Union Within theEuropean Union the harmonization and mutual recognition ofnational regulations has been accomplished in large part through adeliberate transfer of regulatory sovereignty to the European level(as in EU merger control) through the pooling of regulatorysovereignty in the Council of Ministers and the EuropeanParliament (as in data privacy and food safety) and through themutual recognition of standards as enforced by the European Courtof Justice To date however the European Union and the UnitedStates have proven unwilling to compromise their regulatorysovereignty in the various agreements reviewed above indeed eventhe most successful experiment in transatlantic regulatorycooperation that in competition policy is predicated explicitly oneach sidersquos ability to cooperate without any substantial change to itsdomestic regulatory objectives and procedures
The existence of these various obstacles does not of course mean thattransatlantic regulatory cooperation is doomed to failure Some areaslike competition policy are subject to relatively few obstacles tosuccessful cooperation while others such as food safety encountermultiple obstacles Even in difficult areas like food safety moreoverregular exchange of information has proven useful in allowingregulators on each side to understand each otherrsquos regulatoryphilosophies and procedures and gradually to build up the trust
46
among regulators that will be required for the successful operation offuture efforts at mutual recognition or harmonization of regulations
As a first step in this direction the European Union and the UnitedStates agreed in April 2002 to the adoption of a set of non-bindinglsquoEUUS Guidelines on Regulatory Cooperation and TransparencyrsquoAlthough this joint statement of principles does not bind either the USor the EU to any specific regulatory measures and explicitly excludesthe sensitive area of agriculture the agreement does call forregularized exchange of information between EU and US regulatorsand for consideration of harmonization or mutual recognition ofstandards lsquoas may be appropriate in specific casesrsquo to minimizeunnecessary technical barriers to trade In addition the documentsuggests that both EU and US regulators should apply potentially far-reaching principles of transparency in rule-making including publicnotification of and comment on proposed regulations Theimplementation of the guidelines is to be reviewed on an ongoing basisby the TEPTBT Working Group6 2
The significance of the new EUUS Guidelines will depend on theirimplementation in practice across an array of issue-areas in themonths and years to come Regardless of the success of this specificendeavor however regulatory cooperation remains an importantpriority for the European Union and the United States in achievingtheir respective regulatory aims while also preventing and resolvingpotential trade disputes For this reason the conclusion to this reportsuggests a careful and systematic study of current attempts atregulatory cooperation across issue-areas identifying key obstaclesand lsquobest practicersquo at overcoming those obstacles would represent asubstantial contribution to future efforts in this area
47
ndash 5 ndashThe European Union and the Americas
EUUS economic relations do not take place in a vacuum As wehave seen transatlantic efforts at trade liberalization regulatorycooperation and dispute resolution are nested within and frequentlymake explicit use of the rules-based multilateral trading system of theWorld Trade Organization the next round of which both the UnitedStates and the European Union have identified as a priority in thecoming years
Just as importantly the story of the EUrsquos ever-closer economicrelationship with the United States coincides with a second majordevelopment namely the rapid increase of EU trade with the countriesof North and South America Prior to the 1990s the United States wasthe most important trading partner and the largest source of foreigndirect investment in Canada Mexico and throughout most of LatinAmerica and this important role for the US has been further enhancedby the adoption and implementation of the North American Free TradeAgreement (NAFTA) with Mexico and Canada as well the earlynegotiations regarding the possible creation of a multilateral FreeTrade Area of the Americas During the course of the 1990s howeverthe European Union has developed an increasingly close andinstitutionalized relationship with Canada Mexico the Mercosurcustoms union and other countries of Central and South Americawhere it now rivals the economic importance of the United States
In institutional terms the EUUS relationship finds its closestcounterpart in the Unionrsquos bilateral relationship with Canadamdashthisdespite an EUCanada economic relationship that is dwarfed by eachsidersquos economic relationship with the US In economic terms theEUCanada relationship is substantially less important than Canadarsquosbilateral relationship with the United States which is far and awayCanadarsquos largest trading partner taking some 87 of total Canadianexports The integration of Canadarsquos economy with that of other Northand South American states moreover has increased in recent yearswith the implementation of NAFTA and a free trade agreement withChile Nevertheless the European Union ranks as Canadarsquos second-largest trading partner after the United States while Canada accountsfor approximately 17 of EU imports and 22 of total EU exports Asin the EUUS relationship moreover foreign direct investment has
48
outpaced trade as a source of interdependence in the EUCanadarelationship with Canada holding 32 of all FDI in the Union whilethe EU is the second largest investor in Canada after the US holdingsome 8 of all foreign direct investment in Canada6 3
Institutionally the EUCanada relationship is structured by a series ofbilateral agreements including the 1990 Declaration on EuropeanCommunity-Canada Relations and the 1996 Joint Political Declarationon EU-Canada Relations and its accompanying Joint EU-CanadaAction Plan and by a series of regular high-level summits that parallelthose held between the EU and the US The EU and Canada have alsosigned a number of important regulatory cooperation agreements inrecent years including a 1996 customs cooperation agreement a setof Mutual Recognition Agreements agreed in 1998 and agreements onveterinary equivalence and cooperation policy cooperation both signedin 1999 Trade disputes between the EU and Canada are relativelyrare and have generally been dealt with successfully through bilateralconsultation or through the WTO dispute resolution procedure6 4
The Union has come also to play an increasingly important economicrole in Latin America characterized by a sharp increase in both tradeand especially foreign direct investment in the region At the sametime the Union has pursued a wide range of trade and economicagreements with the countries of Latin America including a free tradeagreement with Mexico and other agreements with Mercosur andother Latin American countries In the rest of this section thereforewe examine the EUrsquos economic relationship with the countries of LatinAmerica focusing in turn on the changing patterns of EULatinAmerican trade and investment EU economic agreements with thecountries of the region and the remaining challenges for the EULatinAmerica relationship
51 The EU and Latin America Trade and Investment
The pattern of the trade relationships between the EU and the mainLatin American countries has changed substantially during the lastdecade Although none of them was a major trade partner the largercountries of Latin America already represented an importantproportion of EU exports and imports in 1990 when Mercosur plusMexico and Chile accounted for 43 of extra-EU exports and 32 ofits imports The trade balance was very favourable to the Europeanside with a deficit of over US$8 billion During the 1990s Europeconsolidated its Latin American export markets and increased itsmarket share in Argentina Mexico Chile and especially Brazil In2000 the EU maintained the proportion of its exports towards theanalysed countries while increasing the proportion of imports up to35 The trade balance has improved versus Argentina Mexicoand Brazil whereas the deficit has increased significantly with Chile
49
The total deficit with the countries has now turned into a surplus ofmore than 5 billion
Table 9 EULatin American Trade and Investment(ExportsImports and Foreign Direct Investment as apercentage of total extra-EU flows Trade Balances aremillions of US$)
of EUexports
of EUimports
Trade balance of EUFDI
1990 2000 1990 2000 1990 2000 1999 2000
Argentina 03 08 08 06 -2252 737 54 15
Brazil 25 18 09 17 -5711 -1031 38 53
MERCOSUR 28 25 19 23 -8368 301 92 68
Mexico 11 15 07 07 1231 6973 06 08
Chile 03 04 06 05 -1336 -1653 19 ---
Note figures with an asterisk correspond to year 1999Source European Commission DG-Trade
Moving from Latin America as a whole to individual countries andgroupings we come first to the Mercosur countries (Argentina BrazilParaguay and Uruguay) which created a customs union in 1994 andhave since increased partly thanks to their own process of economicintegration their openness towards the rest of the world6 5 The twosmallest countries are considerably more open (a tradeGDP ratio of70 in Paraguay and 33 in Uruguay in 1999) whereas thisproportion is 19 in Argentina and 15 in Brazil6 6 Although intra-area trade accounts for 20 of their total flows trade with NAFTA andthe EU has also increased during the nineties The financial crises ofthe end of the decade have especially since 1998 temporally put ahalt in the process and affected their external demand By 2000 theEU as a bloc had overtaken the United States as Mercosurrsquos singlelargest trade partner representing 30 of their exports and 35 oftheir imports
The EU and Mercosur can be considered complementary economicblocs in both agricultural and industrial products The EU is the mainexport market for Mercosur agriculture with a 40 share (the USrepresents only 9) More precisely 50 of Mercosur exports towardsthe EU are agricultural products and are concentrated in a smallrange of products such as oilseeds (particularly soy) and animal feedproducts We should also mention coffee (10 of EU imports fromMercosur) livestock and meat and derivatives fruit and derivativestobacco and fish products In contrast EU exports of agricultural
50
products to Mercosur are modest (approximately 6 of total) and areconcentrated in three groups of products alcoholic beverages dairyproducts and other edible animal products and cocoa derivatives Thetrade balance is negative for the EU in agricultural products althoughthe opposite happens in the case of industrial goods The EU is themain supplier of industrial and capital goods to the area includingmost importantly automobiles machinery and mechanical appliancesand a third group of products from the electrical industry (mainlyradiotelephony appliances and parts)
Economic relations between Argentina and the EU developed verypositively since the signature in 1990 of the ECArgentina frameworkagreement on trade and economic co-operation During the 1990sArgentina advanced towards being an open market economy and optedfor an outward-looking external policy where Mercosur and the EUplayed a key role The EU is Argentinarsquos second largest trading partner(after Brazil) overall trade with the EU has more than doubled duringthe last 10 years and represents around 25 of total trade Howeverthe crisis that started at the end of last decade has interrupted thispositive trend The main components of EU imports are agriculturalproducts and raw materials while EU exports to Argentina concentrateon machinery and transport equipment chemicals and manufacturedgoods
Brazil is the largest Latin American economy its GDP accounting for35 of the area or 65 of Mercosur Brazilrsquos domestic market with apopulation over 160 million people constitutes a potentially attractivedestination for both US and EU exports Brazil also signed a co-operation agreement in 1995 with the EU which is now its maintrading partner destination of 268 of its exports and origin of 252of its imports although the US follows very closely (243 and 233respectively) Although during the last years the EU has progressivelyreduced its share of the Brazilian market in favour of the US Brazilremains the EUrsquos main trade partner in Latin America Like Argentinathe process of opening to international competition started between1990 and 1993 As a result Brazilrsquos trade surpluses of the 1990squickly turned into substantial deficits later in the decade only slowlycorrected after the 1999 devaluation The main components of EUimports (1999 data) were vegetable products prepared foodstuffsmineral products transportation equipment wood and wood pulpproducts and machinery and mechanical appliances the latter alsoimportant in EU exports together with transportation equipmentchemical products base metals plastics and rubber
Mexico is the tenth-largest world economy and the most importantLatin-American exporter its total exports amounting to US$166 billionin 2000 In order to qualify its relative size it should be compared withBrazil the second larger exporter in the region (and ninth worldeconomy in terms of GDP) which exported only US$55 billion Mexico
51
is traditionally one of the EUrsquos most important trade partners in LatinAmerica sharing with Brazil its high potential for growth as an exportmarket Mexico has also followed a process of opening to internationalcompetition during the end of the eighties and all the nineties first byunilateral tariff reductions then by subscribing to ten free tradeagreements with the majority of the Latin American countries or areasCanada and the US (creating NAFTA) and in Europe with the EFTAand the EU
During the period 1994-2000 Mexican exports to the US increased240 while their composition has substantially diversified Oil-relatedexports represented only 98 of the total in 2000 compared to 248in 1990 Agricultural products did not account for more than 25 andthe rest of the exports were manufactured goods In contrast 75 ofMexicorsquos imports are intermediate goods 134 capital goods and theproportion of consumption goods is only 117 The EU is Mexicorsquossecond trading partner after the US although the data reveals theoverwhelming dependence of Mexico on the US economy 887 of itsexports are directed to the US and 73 of its imports come from it Inthe EU Germany and Spain represent Mexicorsquos largest export marketswith 09 each Germany is the main European supplier representinga 33 of Mexicorsquos imports As mentioned above Mexicorsquos tradebalance with the EU is highly deficitary
Chile is considered the most open stable and liberalized economy inLatin America Despite its relatively modest size Chile is an importanttrading nation due to its high tradeGDP ratio (over 40) Chile is thefifth Latin American exporter (US$182 billion in 2000) withagriculture and fishery accounting for 10 of the total and the other90 distributed between mining (449 ) and industry (442) Incontrast Chilersquos imports are concentrated in the industrial sector(77) with mining (135) and agriculture (22) lagging far behindIt should be stressed that Chilean trade is globally balanced andexhibits important surpluses with the European Union and Asia Incontrast Chile cumulates its largest deficit with Argentina its main oilsupplier
The EU is Chilersquos main trading partner taking in approximately 25 ofthe countries imports during 20016 7 Among the EU countries theUnited Kingdom and Italy accumulate 34 of Chilersquos trade each andFrance 3 Chile is not only a market for EU exporters of goods andservices but also an important source of imports both in agriculturaland industrial goods The main components of EU imports from Chileare manufactured goods raw materials agricultural products andbeverages and tobacco EU exports of goods are concentrated inmachinery and transport equipment chemical products andmanufactured goods
52
Latin America in general and particularly Mercosur has been involvedin the general trend that directed large capital flows towards emergingand developing economies In 1990 only 16 of overall foreign directinvestment was received by developing countries whereas in 2000 thisproportion had reached 37 Latin America and the Caribbeanreceived around 11 of these flows during the period 1995-99 Brazilreceived one third of the investment in the area whereas Argentinaand Chilersquos proportions were 16 and 8 respectively thanks to theacquisitions of domestic firms by the Spanish companies Repsol andEndesa However due to its instability Argentina has experienced asignificant reduction in foreign investment since 2000 Mexico is thesecond destination of FDI in Latin America (17 during the periodabove mentioned) and in contrast with other countries such asArgentina these flows exhibit a very stable behaviour
Although Mexico followed a process of capital movements liberalizationsimilar to the experiences of Brazil and Argentina a factor behind thestability of these movements is related to its process of regionalintegration with North America Many multinational enterprises haveinvested in Mexico as a platform to produce manufactured goodsdirected towards the US and Canadian markets As an examplebetween 1995 and 2000 more than 60 of cumulated FDI went to themanufacturing sector and 65 had its origin in the US Theseinvestment flows have contributed to the modernization of theindustrial sector and to a significant improvement in Mexicorsquoscompetitive position in the automobile electronic and textileindustries which can help to explain the excellent export performanceof this country in recent years Finally in 2000 the banking sector hascumulated 30 of the total flows of FDI received by Mexico whereasservices telecommunications and the oil industry have had a verylimited interest for foreign investors This fact is in contrast with theother large Latin American economies
The majority of the FDI that the Mercosur countries received in thesecond half of the nineties was directed towards the privatization of thepublic firms especially in the area of services (CEPAL 2001) Due tothis process FDI has abandoned its traditional destinations (forexample in 1995 55 of the FDI stock of Brazil was concentrated inmanufacturing) to be employed in mergers and acquisitions mainly inthe service sector According to Tansini and Vera in 1998 and 199978 of these acquisitions were directed towards Argentina and 18had Chile as destination6 8 In 1999 30 of the capital flows receivedby Brazil were absorbed by the privatizations although since then themajority of the resources were devoted to consolidating andrestructuring these firms
The European Unionrsquos share of foreign direct investment inLatin America increased dramatically during the 1990s with netinflows from the EU increasing from US$1077 billion in 1993 to
53
US$17068 billion in 1997 nearly overtaking total inflows to the regionfrom the United States Within Europe moreover there has been ashift in the primary investors in Latin America with Spain inparticular joining the United Kingdom and Germany as the leadingEuropean investors in the region (see Figure 2) During the 1980s theUK produced more than 50 of the cumulated FDI flows in Mercosurplus Chile6 9 followed by Germany (25) In the 1990s by contrastGermany increased its participation to more than 30 whereas Spainmore than doubled its share to 24 Germanyrsquos FDI concentrated inmanufacturing (such as the automobile industry) during the first halfof the decade especially in Argentina and Brazil with their largedomestic markets Since 1995 Spain is the main European investordirecting its interests in the privatization sectors bankingtelecommunications and energy Other EU countries with importantFDI flows in Mercosur and Chile during the nineties have beenthe Netherlands France and Portugal (the latter with Brazil as itsprimary destination) According to the EC Commission the EUrsquos stockof foreign direct investment in 1999 was euro 1 billion in Uruguayeuro 31 billion in Argentina and euro 34 billion in Brazil EU investment inParaguay is virtually non-existent whereas Chile cumulateseuro 104 billion although in this country the US is still the main foreigninvestor
52 EU Trade Agreements with Latin American Countries7 0
The first symbolic push for the intensification of EU relations withLatin America followed the 1969 lsquoDeclaration of Buenos Airesrsquo issuedby the Latin American members of the Special Committee for LatinAmerican Coordination and calling for an institutionalization of theEULatin America political dialogue and closer economic cooperationbetween both regions
Unlike some previous attempts this time the EU responded positivelyand a regular dialogue between the group of Latin Americanambassadors in Brussels (GRULA) and EC representatives wasinitiated The major substantive measure advanced in this dialoguewas the policy developed toward the Caribbean countries which wereincorporated together with other European former colonies in Africaand the Pacific in the so-called ACP Group and were accorded a specialregime as stated in the Lomeacute Convention of 19757 1 Apart from thatthe Communityrsquos official policy during this period was limited tobilateral economic treaties with the major Latin American countries(so-called first generation agreements) such as the non-preferentialtrade agreements with Argentina in 1970 Uruguay in 1973 Brazil in1973 and Mexico in 19757 2
54
Table 10 EULatin American Trade Agreements
Agreement Objectives Year ofentry into
fEUMexico FreeTrade Agreement(EconomicPartnershipPolitical Co-operation and Co-operationAgreement)
Liberalizes over 96 per cent of EU-Mexicotrade by 2007 at the latest fullyliberalizes industrial products by 2003for the EU and 2007 for Mexico withnegotiations on tariff phase-out ofagricultural items deferred until 2003includes rules on intellectual propertyand dispute settlements and providesEU access to the Mexican procurementand services markets similar to NAFTA
2000
CentralAmericaEUFramework Co-operationAgreement andRegionalProgramme for theReconstruction ofCentral America(PRRAC)
The Framework Agreement seeks tostrength the co-operation in theeconomic financial commercial socio-cultural areas and environment Asecond aim is to reinforce the CentralAmerican Integration System ThePPRAC is a specific program for recoveryfrom the effects caused by hurricaneMitch
Both since1999
AndeanCommunityEUCo-operationagreement andGSP
Political aspects anti-drug dialogueCommercial aspects since 1998 theGeneral System of Preferences is appliedunder a new regime As a result 75 ofproducts imported from the AndeanCommunity to the EU are exempt fromcustom duties Framework Co-operationAgreement to promote regionalintegration
1998(politicaldialogueand co-
operation)and 1999
(GSP)
EUChile AssociationAgreement
Governments concluded negotiations inApril 2002 on a wide-ranging AssociationAgreement including the creation of a free-trade area in goods and services anagreement on wines and spirits andprovisions on public procurementinvestment competition and intellectualproperty
Awaitingratificationby the EUand Chile
MercosurEuropeanUnion
Framework agreement came into force in1999 Negotiations on an interregionalfree-trade agreement began in 1999 andare ongoing
Frameworkagreementsince 1999Free-tradeagreementexpected in
2005
Source Flocircres (2001) DG Trade (European Commission) and Camarero andTamarit (2002)
55
Figure 2 EU Foreign Direct Investment in MERCOSUR + Chile(Cumulated flows Country shares EU = 100)
Source OECD International Direct Investment Statistics YearbookNote For clarity some EU countries with smaller investment shares in MERCOSURhave been excluded
From the mid-1970s to mid-1980s the official policy of the EC towardsLatin America was based mainly on the Inter-Parliamentary Dialoguebetween the European Parliament and Latin Americanparliamentarians and on bilateral economic treaties With regard tothe latter a new round of lsquosecond-generationrsquo agreements was signedbetween 1980 and 1985 with individual countries such as Argentina in1980 Uruguay in 1980 and Brazil in 1982 and with sub-regionssuch as the Andean Pact (created in 1969 between VenezuelaColombia Equator Peru and Bolivia) in 1983 and the CentralAmerican Common Market in 1986 7 3
From the mid-1980s onward Latin America became the focus of moresubstantial political and economic policies from the EU On thepolitical side a variety of multilateral fora have been set up The SanJoseacute Group was launched in Costa Rica in 1984 with the aim ofsupporting progress in the peace process and democracy in CentralAmerica From that date annual meetings have been organizedextending their aims to other fields like the rule of law and humanrights the fight against the trafficking of drugs and educationaltechnical and cultural co-operation The Rio Group was established in1986 again meeting on an annual basis with a membership includingall the South American countries as well as Mexico Finally twosummit meetingsmdashthe first in Rio de Janeiro in June 1999 and a
0
10
20
30
40
50
60
1980-90
1991-98
56
second held under the Spanish EU Presidency in Madrid in May2002mdashbrought together the leaders of 48 countries from the EU andLatin America The first summit in Rio agreed upon an Action Plan toincrease co-operation in the political and cultural spheres and calledfor negotiation of association agreements with Chile and Mercosurwhile the Madrid summit further developed political cooperation andconfirmed the conclusion of a bilateral EUChile AssociationAgreement7 4
The 1990s and early 2000s finally have witnessed the conclusion bythe EU of a round of so-called lsquothird-generationrsquo treaties between theEU and various Latin American countries and trade blocs The primaryagreements in force or under negotiation between the Union and thecountries of Latin America are summarized in Table 10 In all thecases the nature of these agreements is twofold encompassingpolitical agreements on questions such as democracy the environmentand human rights and as well as economic agreements regarding theliberalization of trade and investment
521 The EUMexico Free Trade Agreement
Since 1975 the EU has signed several agreements with MexicoAlthough these agreements were not significantly different from othersalready in force with other countries in the same geographic areaMexico had always received a particular treatment Thus in the 70sMexico benefited from the treatment of most favoured nationneglecting the fact that this country was not a member of the GATT atthat time Later Mexico was eligible under the GSP scheme benefitingfrom this treatment until 1995 when this system was revisited andMexico lost much of its preferential access to the EU marketNegotiations aiming at the establishment of an FTA with the EUstarted during the same year The primary reason was the concern inthe EU about possible trade diversion due to the Mexican entry intoNAFTA in 1994 A general agreement removing trade barriers betweenthe EU and Mexico would minimize any trade diversion effect
Although the most important part of the agreement is the creation of afree trade area between the EU and Mexico the so-called GlobalAgreement includes a rather wide package institutionalising a regularpolitical dialogue and extending the bilateral co-operation Thisagreement places the EU in a better position to compete for access tothe Mexican market In 2007 all industrial goods will be free of tariffsMoreover in trade volume 52 of EC exports will enter the Mexicanmarket duty free by 2003 and for the remaining 48 a maximum dutyof 5 will be applied This extremely quick dismantling calendar willplace economic operators on both sides on an equal footing with otherpreferential partners in real time Concerning agricultural and fisheriesproducts some European special sensitivities are respected allowingat the same time for preferential access to European and Mexican
57
exporters into their respective markets The agreement also includespreferential treatment in services providing service providers from theEU with access to the Mexican market which will be equivalent if notsuperior to that currently enjoyed by operators from Mexicorsquos otherpreferential partners in particular the US and Canada In the servicessector EU banks and insurance companies will be authorized tooperate and establish directly on the Mexican territory Theliberalization of investment and payments related to investments willtake place in 2003 The agreement also provides access to the Mexicanprocurement market similar to NAFTA Finally provisions are madeabout intellectual property competition and dispute settlement
The agreement covers other aspects apart from trade Thus the EUfosters co-operation programmes with Mexico for an annual amount onaverage of euro 13 million during the 1990-99 period There were alsosignificant activities under horizontal programmes such as AL-Invest(Latin American Investment Programmes) and ALFA (Latin AmericanAcademic Formation)
522 Relations with Central America
The most important part of the cooperation between the EU and LatinAmerica and more specifically with Central America has beenimplemented through the so-called cooperation agreements The firstbilateral agreements with individual Central American countries weresigned during the 1970s and early 1980s Later on a second wave ofagreements were adopted covering a wider range of areas topicsbeginning with the First Framework Agreement of Co-operation forCentral America signed in 1985 This agreement belongs to the mostadvanced second-generation type and covers areas such ascommercial promotion and well as agricultural industrial andeconomic co-operation The Second Framework Agreement of Co-operation signed in 1993 is considered as a lsquothird generationrsquo type7 5
This Agreement came into force in 1999 including two novelties apackage of aid for refugees and a programme to support democracyand human rights The previsions of financial technical and economicco-operation aid with these countries from 2000 to 2006 are close toeuro 500 million Furthermore the Commission has decided to participatein the initiative for highly indebted poor countries (HIPC) The eligibleLatin American countries are Honduras and Nicaragua which stand toreceive as much as euro 30 million Additionally the European InvestmentBank has made several loans to the Central American Bank forEconomic Integration (CABEI) in order to support reconstruction in theregion
58
523 Relations with the Andean Community and Chile
The EU has established a complete institutional framework with theAndean Community implementing different instruments in each field(political dialogue trade and co-operation) with a special emphasis onthe question of lsquoanti-drugrsquo measures
Trade relations between the EU and the Andean Community haveincreased 32 over the last nine years currently representing 08 ofthe EUrsquos total trade and 167 of total trade for the AndeanCommunity It is worthwhile to note that 90 of Andean exportsconsist of raw materials or primary production while 85 of the EUrsquosexports are manufactured products From 1999 on the EU hasgranted under the Generalized System of Preferences (GSP)preferential access for all industrial products as well as numerousagricultural products especially for those Andean countries committedto fighting against drug production and trafficking
In the area of political co-operation the Andean region was the first inLatin America to conclude a regional co-operation agreement with theEU The present regional framework agreement was signed in 1993and entered into force in 1998 The amount of the aid to the areareached some euro 6 millionyear for the period 1982-97
Finally the EU has also established several bilateral agreements withChile including the Framework Agreement signed in 1996 andcurrently in force This agreement covers political and economiccooperation and formed the cornerstone for a new EUChileAssociation Agreement the negotiation of which was completed inApril 2002 The agreement which is currently awaiting ratification byboth parties calls for the creation of a free-trade area in goods andservices an agreement on wines and spirits including both market-access questions and the use of protected names a Sanitary andPhytosanitary Agreement new rules on public procurementinvestment competition and intellectual property and a dispute-resolution mechanism7 6
524 The Launching of a Free Trade Area with Mercosur77
The EU is currently the main trade partner of Mercosur The EUgenerally imports agricultural and primary products from Mercosurwhile it exports primarily industrial commodities7 8 The EU has aFramework Agreement of co-operation similar to others with severalcountries or blocs in Latin America In June 2000 negotiations werere-opened aiming at signing a new Inter-regional AssociationAgreement This new agreement would cover not only commercialaspects but also many others like political dialogue or cooperation(social and humanitarian economic and development) between the twoblocs
59
The fifth round of negotiation between the EU and Mercosur took placein July 2001 The main point in this round was the presentation bythe EU of its offer for the reduction of tariff and non-tariff barriers inorder to liberalize trade in goods services and public procurementThese reductions would cover all the industrial products and 90 ofagricultural products over a period of no longer than ten yearsMercosurrsquos answer to that proposal was given during the sixth roundin October 2001 presenting its own offer in terms of tariff and non-tariff reduction and public procurement At the same time there hasbeen an exchange of views on political dialogue as well as someimprovement in the area of technical and scientific co-operationenergy transport telecommunications and information technologyNegotiations continue but conclusion of the agreement is not expecteduntil 2005
53 Challenges for EULatin American Economic Relations
As even this brief survey has made clear the European Union todayplays a substantial economic and political role in Latin America EUtrade with and foreign direct investment in the region have increaseddramatically during the course of the past decade with the EU nowemerging as the most important economic partner for Mercosur inparticular At the same time the EUrsquos political and economicagreements have demonstrated ever-greater ambition and anincreasingly broad economic agenda embracing not only tariff andquota reductions but also provisions on non-tariff barriersinvestment and public procurement as well as political provisionsregarding democracy and human rights
The completion of a more ambitious system of economic agreementswith the Latin American countries remains a goal for both the UnitedStates and the European Union However there are importantqualitative differences between the strategies of the two trade blocswhile the European Union is trying to keep the development of a hub-and-spoke system of bilateral agreements with individual countries or(as in the case of Mercosur) customs unions the United States hasannounced its desire to create a multilateral Free Trade Area of theAmericas The countries of the region for their part havedemonstrated a decades-long commitment to economic liberalizationlocked in place by a series of both multilateral and bilateral tradeagreements amongst themselves as well as with the United States andthe European Union although their commitment to proceeding alongthese lines has been tested by the recent economic crisis in Argentina
The EULatin America summit meeting held in Madrid in May 2002witnessed the conclusion of the EUChile free trade agreement whichis now awaiting ratification by both sides but further negotiations lieahead particularly in the case of the proposed EUMercosur
60
agreement which remains far from a conclusion not expected before2005 In these negotiations the EU should give special attention toexpanding market access for the Mercosur countries especially for so-called lsquosensitive productsrsquo Although the EU has presented itself as achampion of free trade within various multilateral fora it is clear thatthe Union has actively sought to preserve barriers in some industrialsubsectors and especially in the agricultural sector where theCommission has estimated that some 10-12 of all EU imports fromthe Mercosur countries are currently labelled as lsquosensitiversquo7 9 Removalof these barriers would benefit not only Latin American countries butalso European consumers who are currently playing higher prices foran amount equivalent to 5-7 of the Unionrsquos GDP8 0 In addition thenegotiation process should cover not only tariffs (since over 50 of allimports from Mercosur are eligible for an average tariff lower than25) but also other means of market-access protection such as tariffquotas which are applied extensively to agriculture and food productsAdditional areas for negotiation include trade in goods servicesinvestment public procurement intellectual property rights technicalstandards and rules of origin
Finally neither these EULatin American negotiations nor theextensive EUUS cooperation outlined in the previous sections of thisreport should distract the European Union or the United States fromtheir shared priority namely the successful completion of alsquoDevelopment Roundrsquo of multilateral trade talks within the WTODuring his recent trip to Argentina EU Trade Commissioner PascalLamy stressed the importance of ensuring that bilateral and inter-regional trade agreements such as those that the EU has concludedwith the countries of Latin America rest on the multilateral foundationof WTO trade law For this reason he argued bilateral andinterregional negotiations lsquomust not be allowed to detract our attentionfrom the pursuit of the Doha Development Agendarsquo8 1 Such acommitment should remain a central tenet of EU trade policy in theyears to come
61
ConclusionsThe New Transatlantic Economic Agenda
The United States and the European Union have an extraordinarilyclose and important economic relationship the health of which is vitalto the global economy as a whole Both partners stand to gain a greatdeal by making the relationship more productive Both stand to lose ifdisputes cause interruptions and acrimony and if the relationship failsto adapt to new pressures and new challenges
The agenda of transatlantic economic relations has evolved andexpanded to reflect the increasingly integrated nature of thetransatlantic marketplace To be sure traditional trade questionsmdashandtrade tensionsmdashpersist between the European Union and the UnitedStates Despite the generally low level of tariffs between the EU andUS tariff peaks and quotas remain for both sides in a number ofsensitive areas which can and should be subject to further reductionsin the Doha Round of trade liberalization talks within the World TradeOrganization In addition to tariffs and quotas a number of othertraditional trade measuresmdashincluding most notably antidumpingsubsidies and safeguard measuresmdashcontinue to plague thetransatlantic partnership most strikingly in the current dispute overUS safeguard actions in the steel sector Nevertheless while theseriousness of these disputes should not be underestimated themultilateral rules-based trading system of the World TradingOrganization is generally well equipped to address such issues andthe United States and the European Union should continue in theirefforts to use and support the WTO as a forum for both negotiationand dispute resolution
Perhaps the greatest challenge to the transatlantic economicrelationship however is the expansion of the transatlantic economicagenda to encompass domestic regulations that are adopted forlegitimate purposes but act in practice as non-tariff barriers to tradefragmenting the transatlantic market and in some cases leading tobitter and intractable trade disputes As we have seen these types ofdisputes also create enormous legal and political challenges to thedispute settlement procedure of the WTO where judgments in areassuch as the beef hormones and Irish music disputes have createdpolitical controversy without (at this writing) securing full compliancefrom the states concerned
62
For these reasons any attempt to deepen transatlantic economicintegration between the United States and the European Union mustaddress not only tariffs quotas and similar disputes about subsidiesantidumping actions and safeguard measures but also the new-styleregulatory disputes that are likely to become the most importantbarriers in the transatlantic marketplace and place the greateststrains on the EUUS relationship and the multilateral WTO systemin the medium- to long-term future
Addressing these challenges in turn will require a careful andextensive study and more comprehensive understanding not only oftraditional trade issues but also and especially the domestic sourcesof transatlantic regulatory disputes existing efforts to resolve suchdisputes and possible new mechanisms for preventing and settlingfuture regulatory disputes between the European Union and theUnited States
Such a study would necessarily be wide-ranging involving not onlyeconomists who would identify the potential benefits of economicliberalization but also political scientists political economists andlegal scholars who would identify the domestic sources oftransatlantic regulatory disputes the possibility of preventing suchdisputes through early warning andor regulatory cooperation and themost promising means of settling disputes either bilaterally ormultilaterally Any such study would therefore have to undertakethree fundamental tasks
1 A comprehensive listing and analysis based on publiclyavailable sources of EU and US regulations capable of restrictingtrade and investment between the European Union and the UnitedStates
This report has taken a first step towards such an analysis with thecompilation of regulatory barriers identified by the United States andthe EU in their respective trade barriers reports for 2001 (see Appendix1) but further research is required to identify both the sources and theseriousness of problematic regulations
bull In terms of sources a useful first step would be to identify whetherthe regulations in question were adopted by the local state orfederal (EU) levels of government and whether they were adoptedthrough legislation or by regulatory authorities
bull In terms of seriousness a preliminary effort should be made toidentify the economic impact of the regulations in question ontransatlantic trade and investment Such an analysis could draw onthe research done by the US and the EU as well as on the periodicreports of the World Trade Organization and the Transatlantic
63
Business Dialogue but should be conducted by independenteconomists it is to be accepted as authoritative by both parties
In addition an effort should be made by scholars and practitioners onboth sides of the Atlantic to identify new challenges to the relationshipparticularly those arising from the application of new technologiessuch as electronic commerce and biotechnology
2 A comprehensive survey and analysis of transatlanticregulatory cooperation including areas of informal cooperationamong regulators as well as areas of formal agreement
Section 4 of this report identified regulatory cooperation as aparticularly promising means of preventing as well as settlingtransatlantic regulatory disputes yet it also identified a number ofpolitical legal and institutional barriers which can hindermdashand havehinderedmdashcooperation across a range of issue-areas Given therecognized promise of regulatory cooperation among EU and USauthorities as a means of realizing our joint regulatory aims andavoiding future regulatory disputes more detailed studies oftransatlantic regulatory cooperation are vital in order to identifybarriers to regulatory cooperation as well as instances of lsquobest practicersquoin overcoming those barriers
3 A systematic analysis of various means of bilateral andmultilateral dispute resolution with particular emphasis on thespecific challenges of transatlantic regulatory disputes
Finally while emphasis can and should be placed on prevention ratherthan settlement of transatlantic disputes future studies should focuson new and innovative means of dispute settlement in regulatorydisputes given the acknowledged difficulties of litigating regulatorydisputes before the WTO Dispute Settlement Body At the domesticlevel the prospects for the adoption of lsquotrade impact assessmentsrsquo aswell as a more general move toward transparent regulatory procedureson both sides of the Atlantic should be examined At the bilaterallevel special attention should be directed toward the possibleexpansion of early warning as well as the possible use of bilateralarbitration and mediation outside the WTO At the multilateral levelfinally the EU and US should jointly examine the possible revision ofWTO rules to clarify the use of the precautionary principle and toconsider possible amendments to the WTO Dispute SettlementUnderstanding to be undertaken in May 2003
Appendix 1 EU-US Barriers to Trade in Goods Services and Foreign Investment
Type ofmeasure EU concerns about US rules US concerns about EU rules
Tariffs Tariff peaks Food products Textiles Footwear Leathergoods Jewelry Ceramics and glass Trucks Railway carsOptical fibers Tubes for computer monitorsSANCTIONS IN RETALIATION FOR THE EU BAN ON HORMONE-TREATED BEEFTariff quotas dairy products tobacco
BANANAS (tariff quota + discriminatorylicensing) (settled)CUMULATIVE RECOVERY SYSTEM (brown rice)ADMINISTRATION OF CUSTOMS DUTIES FOR RICE(B) (agreement 1101)
Trade defenceinstruments
1916 ANTIDUMPING ACTSAFEGUARD MEASURES ON STEEL WIRE ROD (32000)SAFEGUARD MEASURES ON WELDED STEEL PIPE (32000)BYRD AMENDMENT (ANTI-DUMPING DUTIES GO TO INJUREDINDUSTRY)FAILURE TO LIFT COUNTERVAILING DUTIES AFTER SUNSET REVIEWSQUOTA ON THE IMPORT OF WHEAT GLUTEN (WITHDRAWN 62001)METHODOLOGY OF COUNTERVAILING DUTIES WITH RESPECT TOBRITISH STEEL ANTI-DUMPING DUTIES ON SEAMLESS PIPE
Othercustomsbarriers
Excessive invoicing requirementsEU not recognized as a country of originTEXTILES amp LEATHER CUSTOMS FORMALITIES amp RULES OF ORIGINTuna (certification of origin)
Other leviesand charges
Customs fees (eg Merchandise Processing Fee)HARBOUR MAINTENANCE TAX and Harbour Services Fee50 tax on imported equipment for boats Taxes that falldisproportionately on European automakersbull Luxury tax (70)bull Gas Guzzler tax (85)bull CAFEacute penalties (~100)
65
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade
SHRIMP-TURTLE ndash to import shrimp countries must be certifiedas matching US efforts to protect sea turtles (EU third party)Tuna-dolphin ndash to import tuna countries must be approvedby the National Marine Fisheries ServiceGeneral prohibition on the importation of dairy productsmade from unpasturized milkEffective prohibition on the importation of yogurtMilk protein for yogurt must come from approved diariesDivergence from international standardsReliance on third-party conformity assessment (eg reelectrical equipment and domestic appliances)US and Canadian content labeling of carsApproval slower than for US-produced drugsOver-the-counter drug approval requires US market historyExtensive product description (textiles amp leather)Citrus fruits must be landed at North Atlantic portsRules on all imports of ruminant animals and animalproducts from all EU countries because of BSEBan on some uncooked meat productsStrict condition on imports of egg products (continuousinspection of production process)Low acid canned food (eg fish and dairy products) subject todetailed prior approval systemPre-clearance inspection of apples and pears from somemember states for pestsProhibition on imports of all animals and products from amember state where a disease exists (not just region wherefound)Approval of wine labels
HORMONE-TREATED BEEFLack of national treatment with respect toGEOGRAPHICAL INDICATIONS for agriculturalproducts and foodPoultry treated with chlorinated waterEffective moratorium on approval of GMproducts since 498Mandatory labeling of all foods containingmore than 1 GM ingredientsStringent certification of non-hormone-treated beef (new US program seemsadequate)Food feed and fertilizer containing specifiedrisk materials (narrower product range thanprevious rule)Treatment and traceability of raw materialsfor production of gelatine for humanconsumption (agreement near on healthcertificate that would enable US exports toresume)EU approval of 3rd country establishmentsexporting animal products (esp dairy)Derogation from EU standards required forUS wine (on-going negotiations to try toresolve)Heat or pressure treatment of softwoodpacking material (new EU rule similar todraft international standard)Metric-only labeling (implementation delayedto 2009)
66
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade(continued)
Excessive post-entry quarantine of hardy nursery stocksExporters of meat or meat products to the US may notprocess meat from countries that are not recognized as freefrom diseases of concern to the US
Slow and arbitrary new aircraft certificationHushkits (dispute brought to ICAO work onan ICAO standard)Labeling of TSP (fertilizer) disadvantages USexportsRestrictive limits on low frequency emissionsfrom electrical and electronic equipment
Regulatorybarriers totrade (USstate and EUmember statelevel)
Duplicate approval of wine labelsState-level safety certification and environmental protectionrequirements (especially of agricultural and food products)Ban on fuel additive MTBE (CA)
Bans on some approved GM products(A I amp L)No approvals for planting certain GMproducts (G P)Unresponsive to requests for field trials ofGM crops (Gr)Ban on GM in animal feed adopted (It) - notin forceHCFC bans by Sw amp FnAdditional navigation light requirements(Fn) ndash suspendedTesting of wheat leading to virtual ban onimports (transshipment recently permitted)(Gr)Harsh interpretation of EU SPSrequirements caused or threatened to causeproblems for processed meat productspoultry products game meat seafoodanimal feed wood products (It)Qualitative imports standards and high test-ing and registration fees for bull semen (It)
67
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Servicesbarriers
50 tax on all non-emergency repairs to US-owned shipscarried out outside the USBarriers in mobile communications (investment restrictionslengthy procedures)De-facto reciprocity requirements regarding satellite-basedcommunications servicesExclusive digital terrestrial television standard (ATSC ) differentfrom EU (DVB-T)Impractical for foreign securities firms to establish branches inorder to engage in broker-dealer activitiesForeign mutual funds unable to make public offerings becauseof registration conditionsForeign investment is restricted in coastal and domesticshippingPartnership with US entity required for granting of licenses forlandings sub-marine cablesOnly US citizens or corporations organized under US law canoperate or maintain power facilities on Federal landForeign stake in airlines capped at 49 (25 of voting stock)Foreign-built vessels prohibited from engaging in coastwisetrade either directly between or via a foreign port and cannot beregistered for dredging towing or salvage
State-level measures Prohibitions on EU exporters distributing rebottling or retailingtheir own wineSome states require insurance companies to already beestablished in another stateSome states require insurers to buy reinsurance from state-licensed insurance companies
European content requirements for TVbroadcastsAccess to the single aviation marketrestricted to firms majority-owned andcontrolled by EU nationalsBanking insurance and investmentservices rules require reciprocaltreatment by home country (no US firmsadversely affected)
Member state measures Content requirements for radiobroadcasts (Fr)Requirements that cinemas showEuropean films (It Sp)Nationality requirements affecting tovarying degrees the provision of legalservices (A Dk Fn Fr G It)Strict restrictions on advertising byforeign legal consultants (Dk)Nationality requirements affecting tovarying degrees the provision ofaccounting services (A Dk Fr)
68
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Foreigninvestmentbarriers
National security vetting (Exon-Florio Amendment)US subsidiary required to exploit deep-water ports or to fish inUS Exclusive Economic ZoneFishing-vessel-owning entities must be 75 owned andcontrolled by US citizensForeign individuals or foreign-controlled corporations cannotacquire licenses for using nuclear materialsConditional national treatment governs participation ingovernment research programmes (subsidiaries in US allowed toparticipate but eligibility process more cumbersome)
Mirror-image reciprocity applies toinvestments in the extraction ofhydrocarbons (no US firms adverselyaffected)
NotesIncludes measures in effect + those for which implementation has been suspended as a result of agreementDoes not include non-discriminatory measures systemic barriers (such as the presence of monopolies the pricing ofpharmaceuticals or delays and lack of transparency in standard setting) government procurement intellectual propertyprotection subsidies (including FSC) or issues being prosecuted under EU rules
Barriers in small caps are the subject of WTO proceedings (consultations have been requested)
Sources Commission Report on United States Barriers to Trade and Investment 2001 USTR National Trade Estimate ReportForeign Trade Barriers 2001
69
Appendix 2 WTO Cases by the EU against the US (excludes cases as third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS38Cuban Libertyand DemocraticSolidarity Act
Extraterritorial application of the USembargo of trade with Cuba in so far as itrestricts trade between the EU and Cubaor between the EU and the US Thecreation of a right of action in favour ofUS citizens to sue EU persons andcompanies in US courts in order to obtaincompensation for Cuban properties Thedenial of visas and exclusion from the USof persons involved in confiscating ortrafficking in confiscated property
GATT (V XI XIII)
GATS (II III VIXI XVI XVIIAnnex onMovement ofNaturalPersons)
596 1096 Understandingreached (497)
WTDS39Tariff increaseson productsfrom the EU
The measures were taken in response tothe adoption of EU legislation on the useof hormones in livestock farming andseek unilaterally to settle the issuewithout resorting to the mechanisms ofthe WTO
GATT (I II XXIII)
DSU (3 22 23)
496 996 [No report]
WTDS63Anti-dumpingmeasures onimports of solidurea from theformer GermanDemocraticRepublic
By maintaining the order against the fivestates of the former GDR the US hasignored de jure and de facto their fullintegration into the reunified FederalRepublic of Germany and thus theeconomic integration of their companiesinto the German market economy
Anti-Dumping(92 11)
1296 ndash
70
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS85Measuresaffecting textilesand apparelproducts
Changes to rules of origin of textile andapparel products which entered intoforce on 1 July 1996 adversely affectexports of EU fabrics scarves and otherflat textile products which are no longerrecognized as being of EU origin and losethe free access to the US that theyenjoyed before
Textiles (24 4244)
Rules of origin(2)
GATT (III)
TBT (2)
697 ndash Negotiatedsolution (997)
WTDS88Measureaffectinggovernmentprocurement
Massachusetts law regulating statecontracts with companies doing businesswith or in Burma (Myanmar)
GPA (VIIIb XXIII)
697 998 Law overturnedunder US law
WTDS100Measuresaffecting importsof poultryproducts
Ban on imports of poultry and poultryproducts produced in the EU until theUnited States is able to obtain additionalassurances of product safety No groundsgiven
GATT (I III XXI)
SPS (2 3 4 58 Annex C)
TBT (2 5)
897 ndash
WTDS108Tax treatmentfor Foreign SalesCorporation
The FSC scheme provides for anexemption to the general rulesestablished in the US Internal RevenueCode which results in substantial taxsavings for US companies exportingthrough FSCs
Subsidies (3)
Agriculture (8 910)
1197 798 Panel found infavour of the EUEU not considerFSCReplacement Actadequate Panelfound in favourof the EUAppellate Bodyreport check
71
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS118HarbourMaintenance Tax
Ad valorem tax (0125) on allwaterborne imports entering US ports
GATT (I II IIIVIII X)
298 ndash Reform proposed(HarbourServices Fee)but EU stillviews asproblematic
WTDS136Anti-dumpingAct of 1916
The Act imposes penal sanctions againstthe importation of goods and their sale inthe US when the price is lower than inthe country of production or in otherforeign countries where the goods areexported
GATT (III4 VI1and VI2)
WTO (XVI4)
Anti-Dumping(1234 amp 5)
698 1198 Appellate Bodyfound in favourof the EU
Implementationpending
WTDS138Imposition ofcountervailingduties on certainhot-rolled leadand bismuthcarbon steelproductsoriginating in theUK
Methodology relied on the presumption(based mostly on pre-WTO legislation andpractice) that benefits from priorsubsidies pass through without the needto show that a benefit continues to beconferred
Subsidies (11b10 14 194)
698 199 Appellate Bodyupheld Panelreport favouringEU (500)
WTDS151Measuresaffecting textilesand apparelproducts (II)
Same as WTDS85 Same asWTDS85
1198 ndash Negotiatedsolution (997)
72
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS152Sections 301-310 of the TradeAct of 1974
Imposes specific strict time limits withinwhich unilateral determinations must bemade that other WTO Members havefailed to comply with their WTOobligations and trade sanctions must betaken against such WTO Members
DSU (3 21 2223)
WTO (XVI4)
GATT (I II IIIVIII XI)
1198 199 US through aStatement ofAdministrativeActionundertaken toact consistentwith WTOobligationsPanel ruled thatso long asrespectedcompatible(1199)
WTDS160Section 110(5) ofUS CopyrightAct
Section 110(5) of the US Copyright Actpermits under certain conditions theplaying of radio and television music inpublic places without the payment of aroyalty fee
TRIPS (9(1) 13) 199 499 Panel found infavour of the EU(700) EU andUS havenegotiated anarrangement
Implementationpending
73
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS165Import measureson certainproducts fromthe EU
100 tariffs on certain product inretaliation for the EUs failure to bring itsbanana trade regime into compliance withWTO ruling
GATT (I II VIII)
DSU (3 21 2223)
399 599 Appellate Bodyfound in favourof the EU(1200)
US broughtsanctions intoagreement
Sanctionssuspended asresult of 401agreement
WTDS166Safeguardmeasures onimports of wheatgluten from theEU
Methodology not ensure that all injurydue to imports Imports from Canadawere excluded from the investigation
GATT (I XIX)
Agriculture (42)
Safeguard (214 5 8 12)
399 699 Appellate Body(1200) found infavour of the EU
WTDS176Section 211OmnibusAppropriationsAct
Section 211 provides that the registrationor renewal in the US of a trademarkpreviously abandoned by a trademarkowner whose business and assets havebeen confiscated under Cuban law is nolonger permitted without consent ofprevious owner No US court shallrecognize or enforce such rights
TRIPS (2 15 1641 42 62)
799 600 Appellate Bodyfound in favourof the EU (102)
74
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS186Section 337 ofthe Tariff Act of1930 andamendmentsthereto
Under Section 337 the US caninvestigate whether imported goodsinfringe US intellectual property rightsand can exclude them from entry into theUS Despite amendment the EUconsiders that the procedures andremedies are substantially different fromprocedures concerning domestic goodsand discriminate against Europeanindustries and goods
GATT (III)
TRIPS (2 3 927 41 42 4950 51)
100 ndash
WTDS200Section 306 ofthe Trade Act of1974 andamendmentsthereto(lsquocarouselrsquo)
Section 306 provides for a mandatorymodification (every 6 months) of theproducts subject to sanctions imposedagainst a WTO member which has notcomplied with a WTO panel ruling
DSU (3 21 2223)
GATT (I II XIXXIII)
600 ndash
WTDS212Countervailingmeasuresconcerningcertain productsfrom the EU (14cases)
US application of countervailing dutiesbased on an irrefutable presumption thatnon-recurring subsidies granted to aproducer prior to a change of ownershiplsquopass throughrsquo to the current producerfollowing the change of ownership
SCM (10 19 21) 1100 801 Panelestablished
75
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS213Countervailingduties on certaincorrosion-resistant carbonsteel flatproducts fromGermany
Results of a full sunset review whichmaintains CV duties The original dutywas imposed prior to entry into force ofWTO agreements EU considers that itwould not have been possible to imposethis duty (less than 1) if theinvestigation had been governed by theSCM agreement
SCM (10 11921)
1100 801 Panelestablished
WTDS214Definitivesafeguardmeasures onimports of steelwire rod andcircular weldedcarbon qualityline pipe
EU considers that Sections 201 and 202of the Trade Act of 1974 and Section 311of the NAFTA Implementation Act containprovisions which prevent the US fromrespecting Safeguards Agreement
Safeguards (2 34 5 8 12)
GATT (I XIX)
1100 801 Panelestablished
WTDS217Continueddumping andsubsidy OffsetAct of 2000(ByrdAmendment)
The Act mandates the distribution of theproceeds of duties levied pursuant to aCVD an AD order or a finding under theAntidumping Act of 1921 to the affecteddomestic producers
AD (5 8 18)
SCM (11 1832)
GATT (X)
WTO (XVI)
1200 701 Panelestablished andjoined with panelestablished byCanada andMexico(WTDS234)
76
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS225Anti-dumpingduties onseamless pipefrom Italy
Results of a sunset review which foundthat anti-dumping duties on imports ofseamless line and pressure pipe fromItaly will continue at a rate of 127 EUconsiders this finding is in breach of ADAgreement (duties not lower than 2)
AD (58 111113 17)
GATT (XXII1)
201 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 152027
7
Appendix 3 WTO Cases by the US against the EU and Its Member States(excludes cases as a third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS13Duties onimported grains
Reference price system used to determinethe duties applicable to imports of grainsappear to result in the application ofhigher rates of duties to shipments of USgrains than is permitted under the EUWTO tariff schedule and to discriminateagainst US exports of grains
GATT (I II VIIX)
Agreement onImplementingGATT Article VII(109 11 22Annex I)
795 397 Negotiatedagreement(1195)
Request forpanel withdrawnfollowingimplementation(497)
WTDS26Measuresaffecting meatand meatproducts(Hormones)
EU measures prohibiting the importationof meat and meat products that havebeen treated with growth hormones
GATT (III or XI)
SPS (2 3 5)
TBT (2)
Agriculture (4)
196 496 Appellate Bodyfound in favourof US (298)
Sanctions inplace
78
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS27Import regimefor bananas
EU regime for the importation sale anddistribution of bananas established byCouncil Reg No 40493 and subsequentlegislation regulations and administrativemeasures including those reflecting theprovisions of the Framework Agreementon Bananas which implementsupplement and amend that regime
GATT (I II III XXI XIII)
Licensing (1 3)
Agriculture
TRIMs (2)
GATS (II XVIXVII)
296 496 Appellate Bodyfound in favourof the US andEcuador (997)
Compliancepanel foundrevised EUregime stillincompatible(499)
US Ecuador andEU negotiatedsettlement(401)
WTDS37Portugal ndashPatent protectionunder theIndustrialProperty Act
The term granted existing patents underthe Portuguese Industrial Property Actappears to be inconsistent with Portugalsobligations under the TRIPS Agreement
(GATS (33 6570)
496 Negotiatedsolution (596)
WTDS62Customsclassification ofsome computerequipment
Reclassification of certain LAN adaptercards automatic data processingmachines and units thereof astelecommunications apparatus raised thetariff applied them
GATT (II) 1196 297 Appellate Bodyoverturned Panelreport favouringUS (698)
79
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS67UK ndash Customsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS68Ireland ndashCustomsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS80Belgium ndash-measuresaffectingcommercialtelephonedirectoryservices
Conditions for obtaining a license topublish commercial directories inBelgium
GATS (II VI VIIIXVII)
597 ndash
WTDS82Ireland ndashmeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPS Agreement
TRIPS (9-14 6365)
597 198
80
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS83Denmark ndashmeasuresaffecting theenforcement ofintellectualproperty rights
Denmark does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
597 ndash Negotiatedsolution (301)
WTDS86Sweden ndashMeasuresaffecting theenforcement ofintellectualproperty rights
Sweden does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
697 ndash Negotiatedsolution (697)
WTDS104Export subsidiesndash processedcheese
Export subsidies including under aninward processing arrangement in favourof processed cheese distort markets fordairy products and adversely affect USsales of dairy products
Agriculture (8 910 11)
Subsidies (3)
1097 ndash
WTDS115Ireland ndashMeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPs Agreement
TRIPS (9-14 6365 70)
198 198
81
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS124Enforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
TV stations in Greece regularly broadcastcopyrighted motion pictures and TVprograms without the authorization ofcopyright owners Effective remediesagainst copyright infringement do notappear to be provided or enforced
TRIPS (41 61) 598 ndash Negotiatedsolution (301)
WTDS125Greece ndashEnforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
Same as WTDS124 Same asWTDS124
Same asWTDS124
Sameas
WTDS124
Same asWTDS124
WTDS127Belgium ndashCertain incometax measuresconstitutingsubsidies
Belgian corporate taxpayers receive aspecial tax exemption for recruiting adepartmental head for exports
Subsidies (3) 598 ndash
82
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS128Netherlands ndashCertain incometax measuresconstitutingsubsidies
Dutch income tax law permits exportersto establish a special export reserve forincome derived from export sales
Subsidies (3) 598 ndash
WTDS129Greece ndash Certainincome taxmeasuresconstitutingsubsidies
Greek exporters are entitled to a specialannual tax deduction calculated as apercentage of export income
Subsidies (3) 598 ndash
WTDS130Ireland ndashCertain incometax measuresconstitutingsubsidies
Under Irish income tax law specialtrading houses qualify for a special taxrate in respect of trading income from theexport sale of Irish-manufactured goods
Subsidies (3) 598 ndash
WTDS131France ndash Certainincome taxmeasuresconstitutingsubsidies
French companies may deducttemporarily certain start-up expenses ofits foreign operations through a taxdeductible reserve account
Subsidies (3) 598 ndash
83
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS158Import regimefor bananas II
Failure to implement the DisputeSettlement Bodys recommendations andrulings in WTDS27 within a reasonableperiod
199 See WTDS27
WTDS172Measuresrelating to thedevelopment of aflightmanagementsystem
French government has agreed to grantand the Commission has approved aloan on preferential and non-commercialterms to develop a FMS for Airbusaircraft
Subsidies (5 6)
GATT (XXIII1b)
599 ndash
WTDS173France -Measuresrelating to thedevelopment of aflightmanagementsystem
See WTDS172 See WTDS172 SeeWTDS172
SeeWTDS172
See WTDS172
WTDS174Protection oftrademarks andgeographicalindications foragriculturalproducts andfoodstuffs
EU rule does not provide nationaltreatment with respect to geographicalIndications nor sufficient protection topre-existing trademarks that are similaror identical to a geographical indication
TRIPS (3 16 2463 65)
699 ndash
84
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS210Belgium -Administrationof measuresestablishingcustoms dutiesfor rice
Belgian customs values and duties forrice would lead to a denial of duty rebatesfor US rice and to duties in excess of thebound rate
GATT (I II VIIVIII X XI)
CVA (1)
TBT (2 3 5 67 9)
Agriculture (4)
1000 101 Negotiatedsolution (1101)
WTDS223Tariff-rate quotaon corn glutenfeed from the US
TRQ triggered by DSB ruling against theUS in WTDS166
Safeguards (8182 83)
GATT (I II XIX)
101 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
85
87
References and Recommended Reading
Primary Sources Web sites
European Commission DG TRADE Bilateral Trade Relations USAhttpeuropaeuintcommtradebilateralusausahtm
European Union Europa Web Site httpeuropaeuint
European Union Mission to the United Stateshttpwwweurunionorg
Transatlantic Business Dialogue httpwwwtabdcom
Transatlantic Consumers Dialogue httpwwwtacdorg
Transatlantic Environmental Dialoguehttpwwwtiesweborgtaedindexhtm
Transatlantic Legislators Dialoguehttpwwweuroparleuintintcooptlddefault_enhtm
Transatlantic Information Exchange Service httpwwwtiesweborg
United States Mission to the European Union httpwwwuseube
United States Trade Representative Western EuropeEU pagehttpwwwustrgovregionseu-medwesteurindexshtm
World Trade Organization httpwwwwtoorg
Primary Sources Official Government Documents
CEPAL 2001 Informe de la Inversioacuten Extranjera en Ameacuterica Latina y elCaribe Antildeo 2000 Naciones Unidas Chile
Commission of the European Communities 1998a The NewTransatlantic Marketplace Draft Communication from the Commissionto the Council the European Parliament and the Economic and SocialCommittee available athttpeuropaeuintcommdg01sectionahtm
Commission of the European Communities 1998b Commission staffworking paper concerning the establishment of an inter-regionalassociation between the European Union and Mercosurhttpeuropaeuintcommexternal_relation
88
Commission of the European Communities 2000 The TransatlanticEconomic Partnership Overview and Assessment Coordination DGTRADEE3 October
Commission of the European Communities 2001a Reinforcing theTransatlantic Relationship Focusing on Strategy and Delivering ResultsCOM(2001)154 of 20 March 2001 Available on-line athttpwwweurunionorgpartnerTransatlAgendapdf
Commission of the European Communities 2001b Report on UnitedStates Barriers to Trade and Investment July available on-line athttpeuropaeuintcommtradepdfusrbt2001pdf
Commission of the European Communities 2001c Green Paper on theReview of Council Regulation (EEC) No 406489 COM(2001)7456final of 11122001
UNCTAD 2001 Informe sobre las inversiones en el mundo UnitedNations New York and Geneva
US Department of Agriculture (1998) Agriculture in the WTOSituation and Outlook Series WRS-98-4 Washington EconomicResearch Service
United States Trade Representative 2001 2001 National TradeEstimate Report on Foreign Trade Barriers available on-line athttpwwwustrgovhtml2001_contentshtm
World Trade Organization 2000 Trade Policy Review The EuropeanUnion Report by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
World Trade Organization 2001 Trade Policy Review United StatesReport by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
Secondary Sources
Abbott Kenneth W 20001 lsquoDisputes over Technical Barriers toTrade Are the Rules and Procedures Adequatersquo paper prepared forthe Conference on Dispute Prevention and Dispute Settlement in theTransatlantic Partnership European University Institute Fiesole 5-6July
Atlantic Council of the United States 2001 Changing Terms of TradeManaging the New Transatlantic Economy Policy Paper April(Washington DC The Atlantic Council of the United States)
Barfield Claude E 2001 Free Trade Sovereignty Democracy TheFuture of the World Trade Organization (Washington AmericanEnterprise Institute Press)
Bermann George 1996 lsquoRegulatory Cooperation between theEuropean Commission and US Administrative Agenciesrsquo
89
Administrative Law Journal of the American University Vol 9 pp 933-983
Bermann George Matthias Herdegen and Peter Lindstreth eds2001 Transatlantic Regulatory Co-Operation Legal Problems andPolitical Prospects (New York Oxford University Press)
Bignami Francesca and Steve Charnovitz 2001 lsquoTransatlantic CivilSociety Dialoguesrsquo Chapter 10 in Pollack and Shaffer TransatlanticGovernance in the Global Economy
BP Chair in Transatlantic Relations 2001 Resolving and PresentingUS-EU Trade Disputes Six Prize-Winning Essays (Florence EuropeanUniversity Institute Robert Schuman Centre for Advanced Studies 9May 2001)
Busch Marc L and Eric Reinhardt 2001 lsquoTesting International TradeLaw Empirical Studies of GATTWTO Dispute Settlementrsquo in Daniel LM Kennedy and James D Southwick eds The Political Economy ofInternational Trade Law Essays in Honor of Robert E Hudec (NewYork Cambridge University Press)
Camarero M and CR Tamarit 2002 lsquoLa Unioacuten Europea y lasAmeacutericas consecuencias del establecimiento de un acuerdo deasociacioacuten interregional entre la UE y Mercosurrsquo Papeles de EconomiacuteaEspantildeola n 91 (forthcoming)
Charnovitz Steve 2001 lsquoRethinking WTO Trade Sanctionsrsquo AmericanJournal of International Law Vol 95 (October)
Claes Benedicte A 2000 lsquoComment Aircraft Noise Regulation in theEuropean Union The Hushkit Problemrsquo Southern Methodist UniversitySchool of Law Journal of Air Law and Commerce Vol 65 329-382
Cowles Maria Green 2001a lsquoThe New Transatlantic DialogueTransforming the New Transatlantic Dialoguersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 213-233
Cowles Maria Green 2001b lsquoTransatlantic Cooperation and Discordin the New Economy A Case Study of the Global Business Dialogue one-Commercersquo paper delivered at the Biennial Conference of theEuropean Community Studies Association Madison Wisconsin 31May
Damro Chad 2001 lsquoBuilding an International Identity The EU andExtraterritorial Competition Policyrsquo Journal of European Public PolicyVol 8 No 2 (April) 208-226
Devuyst Youri 2001 lsquoTransatlantic Competition Policy Cooperationrsquoin Mark A Pollack and Gregory Shaffer eds Transatlantic Governancein the Global Economy (Lanham MD Rowman amp Littlefield) pp 127-151
Evans David S 2002 lsquoThe New Trustbusters Brussels andWashington Part Waysrsquo Foreign Affairs JanuaryFebruary
90
Evenett Simon J Alexander Lehmann and Benn Steil 2000 AntitrustGoes Global What Future for Transatlantic Cooperation (WashingtonDC Brookings Institution Press)
Falke Andreas 2001 lsquoThe EU-US Conflict over Sanctions PolicyConfronting the Hegemonrsquo European Foreign Affairs Review Vol 5No 2 139-163
Featherstone Kevin and Roy Ginsberg 1996 The United States andthe European Union in the 1990s Partners in Transition (LondonPalgrave)
Flores R 2001 lsquoRegional Economic Integrationrsquo in Investing in LatinAmerican Growth Unlocking Opportunities in Brazil Mexico Argentinaand Chile EAU Australian Department of Foreign Affairs and TradeChap 12 pp 259-282
Frankel JA E Stein and SJ Wei 1998 lsquoContinental Trading BlocsAre they Natural or Supernaturalrsquo in JA Frankel ed TheRegionalization of the World Economy (Chicago The University ofChicago Press)
Frost Ellen 1997 Transatlantic Trade A Strategic Agenda(Washington DC Institute for International Economics)
Gardner Anthony 1997 A New Era in US-EU Relations The ClintonAdministration and the New Transatlantic Agenda (London Avebury)
Giordano P A Valladio and M-F Durand eds 2001 Vers un accordentre lrsquoEurope et le Mercosur (Presses de Science Po Paris)
Helfer Laurence R 2000 lsquoWorld Music on a US Stage ABerneTRIPS and Economic Analysis of the Fairness in MusicLicensing Actrsquo Boston University Law Review Vol 80 93-204
Helweg Jason 2000 lsquoThe Retreat of the State The MassachusettsBurma Law and Local Empowerment in the Context ofGlobalization(s)rsquo Wisconsin International Law Journal Vol 18 477-510
Hindley Michael 1999 lsquoNew Institutions for Transatlantic TradersquoInternational Affairs Vol 75 45-60
Hudec Robert 1998 lsquoThe New WTO Dispute Settlement Procedure AnOverview of the First Three Yearsrsquo Minnesota Journal of Global TradeVol 8 22-24
Kahler Miles 1995 Regional Futures and Transatlantic Relations (NewYork Council on Foreign Relations Press)
Keohane Robert O Andrew Moravcsik and Anne-Marie Slaughter2001 lsquoLegalized Dispute Resolution Interstate and TransnationalrsquoInternational Organization Vol 54 No 4 457-488
Knauss Jody and David Trubek 2001 lsquoThe Transatlantic LaborDialogue Minimal Action in a Weak Structurersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 235-254
91
Kolasky William J and Leon B Greenfield 2001 lsquoA View to a KillThe Lost GEHoneywell Deal Reveals a Trans-Atlantic Clash ofEssentialsrsquo Legal Times 30 July 2001 p 28
Kuner Christopher 2001 lsquoBeyond Safe Harbour European DataProtection Law and Electronic Commercersquo International Lawyer Vol31
LaFrance Mary 2001 lsquoCongress Trips Over International Law WTOFinds Unfairness in Music Licensing Actrsquo Journal of Art andEntertainment Law Vol 11 397-424
Lorvellec Louis 1997 lsquoBack to the Fields after the Storm Agriculturein the European Union after the Uruguay Round Agreementsrsquo DrakeJournal of Agricultural Law Vol 2 (Winter) p 411
Mazumdar Anandashankar 2002 lsquoEuropean Commission Gives FinalApproval to Model Clauses to Protect Personal Datarsquo InternationalTrade Reporter Vol 19 187 (31 January)
Mehta K 2002 lsquoInternational Competition Policy Cooperationrsquorevised version of a paper presented at the BP Chair Conference onDispute Prevention and Dispute Settlement in the TransatlanticPartnership European University Institute Florence July 2001
Messerlin Patrick A 2001a Measuring the Cost of Protection in Europe(Washington DC Institute for International Economics)
Messerlin Patrick A 2001b lsquoNiveau et coucircts du protectionnismeeuropeacuteenrsquo in Giordano P A Valladao y M-F Durand (eds) Vers unaccord entre lrsquoEurope et le Mercosur Presses de Science Po Paris
Mishkin FS and MA Savastano 2001 lsquoMonetary Policy Strategiesfor Latin Americarsquo Journal of Development Economics 66 415-444
Nagarajan N 1998 lsquoMercosur and Trade Diversion What Do theImport Figures Tell Usrsquo Economic Papers No 129 EuropeanCommission
Petersmann Ernst-Ulrich ed 1997 The GATTWTO DisputeSettlement System International Law International Organizations andDispute Settlement (Kluwer Law International)
Peterson John 1996 Europe and America Prospects for Partnership(New York St Martinrsquos Press 1996)
Peterson John 2001 lsquoGet Away from Me Closer Yoursquore Near Me TooFar Europe and America after the Uruguay Roundrsquo in Mark A Pollackand Gregory Shaffer eds Transatlantic Governance in the GlobalEconomy (Lanham MD Rowman amp Littlefield) pp 45-72
Peterson John and Maria Green Cowles 1998 lsquoUS EconomicDiplomacy What Makes the EU Differentrsquo Governance Vol 11 No 3pp 251-71
Philippart Eric and Pascaline Winand 2001 lsquoDeeds Not WordsEvaluating and Explaining the US-EU Policy Outputrsquo in Philippart and
92
Winand eds Ever Closer Partnership Policymaking in US-EU Relations(Brussels Peter Lang) pp 431-463
Pollack Mark A ed 2001 The New Transatlantic Agenda at Five ACritical Assessment (San Domenico di Fiesole BP Chair inTransatlantic Relations Robert Schuman Centre for AdvancedStudies European University Institute)
Pollack Mark A and Gregory C Shaffer 2001a lsquoTransatlanticGovernance in Historical and Theoretical Perspectiversquo in Mark APollack and Gregory Shaffer eds Transatlantic Governance in theGlobal Economy (Lanham MD Rowman amp Littlefield) pp 3-42
Pollack Mark A and Gregory C Shaffer 2001b lsquoThe Challenge ofReconciling Regulatory Differences Food Safety and GMOs in theTransatlantic Relationshiprsquo in Mark A Pollack and Gregory Shaffereds Transatlantic Governance in the Global Economy (Lanham MDRowman amp Littlefield) pp 153-178
Pollack Mark A and Gregory C Shaffer 2001c lsquoWho Governsrsquo inMark A Pollack and Gregory Shaffer eds Transatlantic Governance inthe Global Economy (Lanham MD Rowman amp Littlefield) pp 287-305
Reidenberg Joel 2001 lsquoE-Commerce and Trans-Atlantic PrivacyrsquoHouston Law Review Vol 8 717-49
Schaefer Matthew 2002 lsquoGovernment Procurement DisputesLessons from the Dispute over the Massachusetts 1996 Act RegulatingState Contracts with Companies Doing Business with Burma(Myanmar)rsquo paper presented at the Conference on Dispute Preventionand Dispute Settlement in the Transatlantic Partnership EuropeanUniversity Institute Florence 5-6 July 2001 final version submitted26 January 2002
Shaffer Gregory 1999 lsquoThe Power of EU Collective Action The Impactof EU Data Privacy Regulation on US Business Practicersquo EuropeanLaw Journal Vol 5
Shaffer Gregory 2000 lsquoGlobalization and Social Protection TheImpact of EU and International Rules in Ratcheting Up of US PrivacyStandardsrsquo Yale Journal of International Law Vol 25 pp 1-88
Shaffer Gregory C 2002 lsquoManaging US-EU Trade Relations throughMutual Recognition and Safe Harbour Agreements lsquoNewrsquo and lsquoGlobalrsquoApproaches to Transatlantic Economic Governancersquo in Ernst-UlrichPetersmann ed Dispute Avoidance and Dispute Settlement in theTransatlantic Partnership (unpublished manuscript) (working paper onfile with the author)
Sindelar Leslie 2001 lsquoNot So Fair After AllmdashInternational Aspects ofthe Fairness in Music Licensing Actrsquo The Transnational Lawyer Vol14 435-71
Steffenson Becky J 2001 The Institutionalization of EU-US RelationsDecision Making Institution Building and the New Transatlantic
93
Agenda unpublished PhD dissertation University of GlasgowDepartment of Politics
Tansini R and T Vera 2001 lsquoLos procesos de integracioacuten enAmeacuterica Latina El caso de Mercosurrsquo Informacioacuten Comercial EspantildeolaFebrero-Marzo nuacutem 790 107-117
Vogel David 1997 Barriers or Benefits Regulation in TransatlanticTrade (Washington DC Brookings Institution)
Vogel David 2001 Ships Passing in the Night The Changing Politics ofRisk Regulation in the United States and the European Union RSCASWorking Paper No 200116
Woolcock Stephen 2000 lsquoEuropean Trade Policy Global Pressuresand Domestic Constraintsrsquo in Helen Wallace and William Wallaceeds Policy-Making in the European Union (New York Oxford UniversityPress) pp 373-99
Yerkey Gary G 2000a lsquoEU Accuses US of Failing to ImplementMRAs on Electrical Safety Pharmaceuticalsrsquo International TradeReporter Vol 17 1662 (2 November)
Yerkey Gary G 2000b lsquoUS European CEOs Call on Governments toResolve Dispute Over MRA by Dec 18rsquo International Trade ReporterVol 17 1662 (30 November)
Young Alasdair 2001 Trading Up or Trading Blows US Politics andTransatlantic Trade in Genetically Modified Food RSCAS WorkingPaper No 200130
Young Alasdair R 2002 lsquoRisk Positive Integration and SystemFriction The Single European Market and World Tradersquo paperpresented at the Council of European Studies Conference 14-16March 2002
94
Notes
1 The EU and the 50 US States website of the European Union Mission tothe United Stateshttpwwweurunionorgpartnerusstatesusstateshtm
2 Ibid
3 As Miles Kahler wrote in 1995 lsquoIncreasingly the points of conflict amongthe industrialized countries are not the familiar ones of barriers toexchange at the border but an entire array of ldquodomesticrdquo policies thatproduce conflict by appearing to restrict market access or alter theterms of competition The agenda of behind-the-border issues that hasbecome more prominent in the 1990s will only grow as economicintegration continues and groups mobilize to seek new benchmarks foran international ldquolevel playing fieldrdquo rsquo (Kahler 1995 5) For gooddiscussions of regulatory barriers in USEU trade relations see alsoVogel 1997 Young 2002
4 This section draws on the analysis presented in Pollack and Shaffer2001a
5 For good discussions see Gardner 1997 Peterson and Cowles 1998
6 Pollack and Shaffer 2001c 291
7 lsquoTransatlantic Declarationrsquo text available on-line athttpwwweurunionorgpartnertransatldechtm
8 See eg Featherstone and Ginsburg 1996 Peterson 1996
9 lsquoThe New Transatlantic Agendarsquo text available on-line athttpwwweurunionorgpartneragendahtm
1 0 lsquoJoint US-EU Action Planrsquo text available on-line athttpwwweurunionorgpartneractplanhtm
1 1 Gardner 1997
1 2 Commission of the European Communities 1998a
1 3 lsquoTransatlantic Economic Partnership Action Planrsquo text available on-lineat httpeuropaeuintcommtradebilateralusa1109tephtm For auseful review of the TEP see Commission of the EuropeanCommunities 2000
95
1 5 For good discussions of the TABD see Cowles 2001a 2001b and thewebsite of the TABD at httpwwwtabdorg
1 6 lsquoCincinnati Recommendations Transatlantic Business DialoguersquoNovember 16-18 2000 p 4 Available on-line athttpwwwtabdorgrecommendationsCincinnati00pdf
1 7 Ibid page 5
1 8 Cowles 2001b
1 9 Steffenson 2001
2 0 Pollack ed 2001 12
2 1 For an excellent discussion of the TACD and its activities see Bignamiand Charnovitz 2001 and the TACD website at httpwwwtacdorg
2 2 For example sixty-five consumer groups issued a statement in 2000stating that the EU and the US had largely ignored consumer tradepolicy recommendations TACD press release lsquoUS amp EU ConsumerGroups Call for Swift Action to Balance Trade Dialoguersquo 30 March 2000
2 3 The USIA funding for the TAED ($100000) was subject to approval fromthe Senate Finance Committee In January 2000 the objection of SenatorJesse Helms to TAED funding blocked the approval of funds andstopped the State Department from issuing the grant The TAED arguedthat this demonstrated the US governmentrsquos lack of dedication to theproject See lsquoTransatlantic Environment Dialogue suspends its activitiesdue to the failure of US government to stick to its commitmentsrsquoaccessed on 12 March 2002 on the TAED websitehttpwwwtiesweborgtaedindexhtml For a good general discussionof the TAED see Bignami and Charnovitz 2001
2 4 To summarise the TAED recommended the removal of subsidies forenvironmentally unfriendly energy sources (such as coal) demanded thatsustainability assessments be applied to a number of WTO agreementsand expressed it opposition to the multilateral TRIPs Technical Barriersto Trade and SPS Agreements It aired concerns about biotechnologyeco-labelling and the Precautionary Principle the MRAs and Chemicaland Electrical Waste Management (WEEEs) It stressed transparency intransatlantic and multilateral decision making urged both governmentsto support the Kyoto Treaty and to stop challenging environmentallegislation at the WTO The message to the EUUS Summit Lisbon May31 2000 was that lsquoUntil such time as parity exists betweenenvironmental governance and multilateral trade rules we demand thatboth the United States and the European Union immediately agree tomutual moratorium on WTO challenges and threatened challengesrsquo Fora good discussion of the TAED and its activities see Bignami andCharnovitz 2001
2 5 For an excellent discussion of the TALD see Knauss and Trubek 2001
96
2 6 Commission of the European Communities 2001a
2 7 Philippart and Winand 2001
2 8 Kahler 1995 See also Vogel 1997 Young 2002
2 9 For excellent overviews of the WTO dispute resolution procedure and itspredecessor within the GATT see Petersmann 1997 Hudec 1998 Buschand Reinhardt 2001 and BP Chair in Transatlantic Relations 2001 Fora provocative challenge to the DSU see Barfield 2001
3 0 This section draws largely on Abbottrsquos (2001) account of transatlanticdisputes over TBTs in general and the hushkits case in particular Forother accounts of the hushkits dispute see also Claes 2000 andPeterson 2001 58-59
3 1 Commission of the European Communities lsquoCommission Proposes NewLegislation to Fight Aircraft Noisersquo Press Release IP 011683
3 2 For a detailed analyses of transatlantic disputes over food safety andgenetically modified organisms see Pollack and Shaffer 2001b Vogel2001 and Young 2001
3 3 The text of the report can be found athttpeuropaeuintcommexternal_relationsusbiotechbiotechhtm
3 4 Schaefer 2002 1-2 See also Hellweg 2000
3 5 For useful background on the case filed before the WTO as DS160 seeHelfer 2000 LaFrance 2001 and Sindelar 2001
3 6 Commission of the European Communities lsquoEU and US Agree onTemporary Compensation in Copyright Disputersquo Press Release IP011860
3 7 For good discussions of potential reforms of the bilateral relationship aswell as WTO dispute settlement including a wide range of proposals seeeg BP Chair in Transatlantic Relations 2001 Charnovitz 2001 Barfield2001 and Petersmann 2001
3 8 Some countries such as the United Kingdom have establishedguidelines for policymakers to take trade implications of proposedregulations into account but neither the US nor the EU currentlyemploys any statutory requirement to undertake such an impactassessment
3 9 Bermann 1996 961 For an excellent set of essays on various aspects oftransatlantic regulatory cooperation see also Bermann Herdegen andLindstreth (eds) 2001
4 0 Ibid p 966
97
4 1 For excellent analyses of USEU competition-policy cooperation fromwhich this analysis is largely drawn see eg Evenett Lehmann and Steil2000 Devuyst 2001 Damro 2001 and Mehta 2002
4 2 Devuyst 2001 142-145
4 3 See eg Kolasky and Greenfield 2001 Evans 2002
4 4 Commission 2001c 38-40
4 5 This section draws extensively from research reported in Shaffer 2002
4 6 Subsidiaries of US firms in the EC account for about one-third of ECimports from the United States while subsidiaries of EC firms in theUnited States account for about 38 of US imports from the EC SeePollack and Shaffer 2001a 14
4 7 Agreement on Mutual Recognition Between the European Communityand the United States of America Available on-line athttpeuropaeuintcommtradepdf0713mra-usenpdf
4 8 The five excluded sectors were information technology pressureequipment road safety equipment lawn mowers and personal protectiveequipment such as helmets
4 9 However as an exception tests of pharmaceutical good manufacturingpractices are to be performed by regulatory bodies and not privatelaboratories in accordance with that annex
5 0 Yerkey 2000a 2000b
5 1 Quoted in Shaffer 2002 23
5 2 Agreement Between the European Community and the United States ofAmerica on Mutual Recognition of Certificates of Conformity for MarineEquipment Available on-line athttpeuropaeuintcommtradepdfmareqpdf
5 3 See Shaffer 2002
5 4 See Shaffer 2002
5 5 This section draws extensively from research reported in Shaffer 2002
5 6 The above figures are from the prepared testimony of Assistant Secretaryof Commerce Franklin Vargo before the House Committee onInternational Relations See lsquoIssues in US-European Union TradeEuropean Privacy Legislation and BiotechnologyFood Safety PolicyrsquoFederal News Service (May 7 1998)
5 7 Mazumdar 2002 See also Shaffer 2000 Reidenberg 2001
5 8 Commission Decision of 26 July 2000 pursuant to Directive 9546ECof the European Parliament and of the Council on the adequacy of the
98
protection provided by the safe harbour privacy principals and relatedfrequently asked questions issued by the US Department of CommerceAvailable on-line athttpeuropaeuintcommtradepdfsafeharbourpdf For generalinformation on safe harbour documents see Safe Harbor Documentshttpwwwexportsgovsafeharborsh_documentshtm
5 9 Guide to the Implementation of Directives Based on the New Approachand the Global Approach Available on-line athttpeuropaeuintcommenterprisenewapproachlegislationguidedocument1999_1282_enpdf
6 0 See Shaffer 2002
6 1 For a good discussion of the obstacles posed by US federalism inregulatory cooperation see Commission of the European Communities2000
6 2 lsquoEU-US Guidelines on Regulatory Cooperation and Transparencyrsquoavailable on-line athttpeuropaeuintcommenterpriseenterprise_policygov_relationsregulcooptransathtm See also lsquoTransatlantic Bid to Cut Red TapersquoEuropean Report 10 April 2002 and Micheal Mann lsquoDrive to Head OffTrade Riftsrsquo Financial Times 13 April 2002
6 3 See the DG Trade website lsquoBilateral Trade Relations Canadarsquo accessedat httpeuropaeuintcommtradebilateralcanadacanadahtml
6 4 For useful and up-to-date reviews of the EUCanada relationship see inaddition to the DG Trade web page cited above the websites of theEuropean Union Delegation to Canadahttpwwweudelcanorgenglishindexcfm and the Canadian Missionto the European Union httpwwwdfait-maecigccaeu-missionconten_ehtml
6 5 For more information about Mercosur visit the following internetaddress httpwwwmercosurorg
6 6 Tansini and Vera 2001
6 7 lsquoEUChile Deal Reached on Free Trade Agreementrsquo European Report 27April 2002
6 8 Ibid
6 9 Camarero and Tamarit (2002) Source OECD International SectoralDatabase
7 0 For more information about the EU and Latin America visit the followinginternet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 1 The Lomeacute Convention replaced the Yaounde Convention of 1963 afterthe accession of the UK to the Community It was renewed in 1979
99
(Lomeacute II) 1985 (Lomeacute III) 1989 (Lomeacute IV) and 1995 (Lomeacute IV) andconsists of a system of preferences for imports in which industrial goodsalmost free of tariffs and agricultural receive different treatments InJune 2000 the Lomeacute Convention was replaced by the CotonouAgreement which stabilized what can be seen as a transitory regimeaiming to incorporate the ACP countries in the WTO general rules
7 2 What characterizes first-generation agreements is their conventionalbilateral and technical structure and their reference to possiblereciprocal cooperation In practical terms however these treaties onlyextended the Most Favoured Nation (MFN) status to its signatories
7 3 The second-generation agreements referred mainly to specificcommercial and cooperation questions
7 4 For the conclusions of the Madrid summit see the Latin America webpage of the Commissionrsquos Directorate-General for Tradehttpeuropaeuintcommtradebilaterallaclachtm
7 5 In October 1998 hurricane Mitch one of the worst natural disastersever to have hit the region caused a material damage equivalent to 10of the regionrsquos GDP The EU not only played a significant role in theinternational communityrsquos emergency aid but also launched in 1998a medium-term rehabilitation plan called the Regional Programme forthe Reconstruction of Central America (PRRAC) Funding was set ateuro 250 million committed for the 1999-2002 period but to beimplemented within six years The target countries were HondurasNicaragua El Salvador and Guatemala
7 6 For details on the provisions of the EU-Chile Association Agreement andthe status of the ratification procedure seehttpeuropaeuintcommexternal_relationschileintroindexhtm
7 7 The information about the results of the different negotiation rounds canbe updated at the following internet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 8 For an assessment of the trade-diverting effects of Mercosur seeNagarajan (1998)
7 9 Commission of the European Communities 1998b
8 0 Messerlin 2001b
8 1 Pascal Lamy lsquoFacing the Challenge of Globalization Regional Integrationor Multilateral Rulesrsquo Buenos Aires 1 March 2002 Reproduced on theDG Trade website athttpeuropaeuintcommtradespeeches_articlesspla99_enhtml
Lead Author
Mark A Pollack
The Political Economy ofthe Transatlantic Partnership
Robert Schuman Centrefor Advanced Studies
EUROPEAN UNIVERSITY INSTITUTE
Report prepared by theTransatlantic Programme
for and with the contribution of
Her Majestyrsquos TreasuryUnited Kingdom
Ministry of FinanceThe Netherlands
EUROPEAN UNIVERSITY INSTITUTE
ROBERT SCHUMAN CENTRE FOR ADVANCED STUDIES
The Political Economy ofthe Transatlantic Partnership
Lead Author Mark A Pollack
Report prepared by the Transatlantic Programmefor and with the contribution of
Her Majestyrsquos Treasury (United Kingdom)
Ministry of Finance (The Netherlands)
All rights reservedNo part of this paper may be reproduced in any form
without permission of theRobert Schuman Centre for Advanced Studies
copy 2003 Authors and theRobert Schuman Centre for Advanced Studies
Printed in Italy in June 2003European University Institute
Badia FiesolanaI - 50016 San Domenico di Fiesole (FI)
Italy
i
Table of Contents
Executive Summary iii
About the Authors vii
1 The Transatlantic Marketplace andthe Changing EUUS Economic Agenda 1
2 Institutions for Transatlantic Economic GovernanceOrigins and Effectiveness 5
21 Transatlantic Economic Agreements in the 1990s22 An Overview of Existing Transatlantic Institutions23 An Effective Framework for Economic Cooperation
3 Trade and Regulatory Disputesin the Transatlantic Economic Partnership 17
31 Classifying Disputes Traditional Trade Issues vslsquoBehind-the-Borderrsquo Regulatory Disputes
32 Case Study Airplane lsquoHushkitsrsquo33 Case Study Hormone-Treated Beef and
Genetically Modified Organisms34 Public Procurement
The MassachusettsMyanmar Case35 Intellectual Property Rights The Irish Music Case36 Dealing with Trade and Regulatory Conflicts
4 Transatlantic Regulatory Cooperation 3241 Why Cooperate42 Case Study Transatlantic Competition
Policy Cooperation43 Case Study EUUS Mutual Recognition
Agreements44 Case Study Data Privacy and
the Safe Harbour Agreement45 The Challenge of Transatlantic
Regulatory Cooperation
ii
5 The European Union and the Americas 4751 The EU and Latin America Trade and Investment52 EU Trade Agreements with
Latin American Countries53 Challenges for EULatin American
Economic Relations
Conclusion The New Transatlantic Economic Agenda 61
Appendix 1 EU-US Barriers to Trade in GoodsServices and Foreign Investment 65
Appendix 2 WTO Cases by the EU against the US(excludes cases as a third party) 70
Appendix 3 WTO Cases by the US against the EUand Its Member States(excludes cases as a third party) 78
References and Recommended Reading 87
Notes 94
iii
Executive Summary
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly in thecourse of the past decade During the 1990s the volume oftransatlantic trade more than doubled making the EU and the USeach otherrsquos most important trading partners Foreign directinvestment between the US and the EU has grown even more rapidlydoubling in value during the last three years of the 1990s aloneindeed it is estimated that some 35 million American jobs rely onforeign investment from the European Union with a similar number ofEuropeans employed by US firms
These developments reviewed briefly in Section 1 of this report havecreated a de facto transatlantic marketplace yet they have also led tonew strains on the transatlantic partnership and to a new andchallenging economic agenda for EUUS cooperation Prior to the1990s much of the transatlantic economic relationship was dominatedby traditional trade questions such as tariffs quotas and other directbarriers to trade typically imposed at US and EU borders With thedecline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade - most notably lsquobehind-the-borderrsquo domestic regulations adopted in response to legitimate publicconcerns about the environment consumer protection food safety anddata privacy - have emerged alongside traditional trade barriers as theprimary challenges to a mutually beneficial EUUS trade andinvestment relationship
In an effort to meet these challenges the United States and theEuropean Union have put into place an increasingly well developedinstitutional machinery for bilateral economic as well as foreign andsecurity policy cooperation These institutions examined in detail inSection 2 have fostered a regular dialogue between EU and USauthorities across a full range of issue-areas and have provided theframework for increasing efforts at regulatory cooperation and tradedispute resolution Nevertheless recent studies have demonstrated theuneven performance of these institutions across issue-areas as well asthe uneven development of the various transatlantic lsquocivil-societydialoguesrsquo and have suggested reforms to allow the EU and US tofocus more effectively on joint long-term objectives
iv
The transatlantic relationship has come under repeated strain duringthe past decade as a result of both traditional and new-style regulatorydisputes Such disputes the European Commission has pointed outconcern only an estimated 1-2 of the total value of transatlantictrade and investment yet these disputes could potentially spread toother areas of the transatlantic relationship it is therefore in theinterests of both sides to ensure that such disputes are prevented fromarising through timely consultations where possible and settledefficiently and amicably in other cases Many of thesedisputesmdashespecially traditional tariff quota antidumping andsubsidies disputesmdashare dealt with effectively through the disputesettlement procedure of the World Trade Organization (WTO) to whichthe EU and the US are both parties New-style regulatory disputeshowever often involve domestic laws adopted for legitimate purposesfollowing democratic deliberation and these disputes can placeconsiderable strain on the WTO system particularly in cases wherethe losing party would have difficulty complying with an adverse WTOruling
In such cases both the United States and the European Union shouldstrive proactively to consider the WTO compatibility of nationalregulations prior to adoption cooperate on common regulatoryproblems and seek to settle regulatory disputes through consultationswithin the WTO dispute settlement procedure wherever possibleSection 3 of the report therefore examines a range of potential reformsin US and EU domestic regulatory procedures in the bilateralrelationship and in the multilateral WTO dispute settlementprocedure
bull At the domestic level the US and the EU could commit themselvesto conducting lsquoTrade Impact Assessmentsrsquo of draft regulations sothat legislators are made aware of the potential trade implications ofproposed regulations before they are adopted
bull At the bilateral level both partners can engage in more extensiveearly warning of new rules as well as greater regulatory cooperationand greater contact among legislators to increase their awareness ofthe external impact of domestic laws Far from weakening themultilateral trading system bilateral economic cooperation can andshould strengthen the WTO by preventing difficult regulatorydisputes before they occur and by acting as a laboratory for theresolution of such disputes at the global level
bull At the multilateral level finally the EU and the US could committhemselves to modest reforms in the WTO and its disputesettlement procedure including a clarification of the lsquoprecautionaryprinciplersquo in WTO law and a possible move from retaliation tocompensation as the primary means of enforcement of WTO law
v
Of the aforementioned proposals the EU and the US have arguablymade the most progress in promoting cooperation among theirrespective domestic regulators with a growing number of formalregulatory agreements adopted since 1997 and an even larger numberof informal contacts among EU and US regulators taking place on aregular basis across a full range of issue-areas Such regulatorycontacts hold significant promise allowing regulators on both sides ofthe Atlantic to learn from each other coordinate their regulatoryefforts and avoid transatlantic regulatory disputes before they beginHowever as Section 4 of this report demonstrates in detail successfulregulatory cooperation is not a lsquomagic bulletrsquo for trade disputes butrather a lsquohothouse flowerrsquo which must be carefully nurtured and canbe easily frustrated by any of a number of potential obstaclesincluding the persistence of distinctive European and Americanregulatory philosophies and procedures the multi-level nature of theEU and US political systems and the insistence by both sides onmaintaining domestic regulatory sovereignty Overcoming theseobstacles will require the identification of lsquobest practicersquo in regulatorycooperation gradual increase in regulatory trust among EU and USregulators and a careful balancing by political leaders of domesticregulatory aims on the one hand and the importance of thetransatlantic economic relationship on the other
The EUrsquos ever-closer economic relationship with the United States hasnot developed in a vacuum but rather coincides with a second majordevelopment namely the rapid increase during the 1990s of EU tradeand foreign direct investment with the countries of North and SouthAmerica analyzed in Section 5 of the report Concurrent with itsgreater economic presence in the Americas the Union has pursued awide range of trade and economic agreements with the countries of theregion including an increasingly close trade and regulatoryrelationship with Canada a free trade agreement with Mexico andother agreements with Chile Mercosur and other Latin Americancountries
In May 2002 leaders of the European Union and Latin Americancountries met in Madrid for their second summit meeting confirmingthe conclusion of negotiations on an EUChile Association Agreementand calling for further development of bilateral ties including theeventual conclusion of a similar association agreement with MercosurIn these and future negotiations the EU should give special attentionto expanding market access for Latin American goods and servicesespecially for so-called lsquosensitive productsrsquo currently subject to high EUtariffs as well as focusing on the reduction of other means ofprotection such as tariff quotas that are applied trade in goodsservices investment public procurement intellectual property rightstechnical standards and rules of origin
vi
The European Unionrsquos economic relationships with the countries of theAmericas like its bilateral relationship with the United States isnested in turn within the multilateral trading system of the WorldTrade Organization the further development of which is a sharedpriority for both the European Union and the United States During hisrecent trip to Argentina EU Trade Commissioner Pascal Lamy stressedthe importance of ensuring that bilateral and inter-regional tradeagreements with the United States Canada and the countries of LatinAmerica rest on the multilateral foundation of WTO trade law For thisreason he argued bilateral and interregional negotiations lsquomust not beallowed to detract our attention from the pursuit of the DohaDevelopment Agendarsquo Such a commitment should remain a centraltenet of EU trade policy in the years to come
Within the multilateral rules-based trading system finally theEuropean Union and the United States should also seek to developfurther their bilateral relationship the health of which is vital to theglobal economy as a whole Addressing the full range of challenges tothe transatlantic economic partnership will in turn require a carefuland extensive study not only of traditional trade issues such as theliberalization of tariffs and quotas but also and especially the domesticsources of transatlantic regulatory disputes and successful means ofpreventing and settling such disputes More specifically such as studywould have to undertake three essential tasks
bull A comprehensive listing and analysis of EU and US regulationscapable of restricting trade and investment in the transatlanticsmarketplace
bull A comprehensive survey and analysis of formal and informalregulatory cooperation focusing on both the obstacles to suchcooperation and instances of lsquobest practicersquo in overcoming thoseobstacles and
bull A systematic analysis of various means of bilateral and multilateraldispute resolution with a particular emphasis on the specificchallenges of transatlantic regulatory disputes
The insights generated by such a study would inform not only thefurther development of the transatlantic economic partnership but alsothe development of the rules-based multilateral trading system of theWorld Trade Organization
vii
About the Authors
This report was prepared by the Transatlantic Programme of theRobert Schuman Centre for Advanced Studies at the EuropeanUniversity Institute Florence
The following persons contributed to the writing of one or moreportions of this reportRebecca Steffenson (European University Institute) contributed toSection 2Alasdair Young (University of Glasgow) contributed to Section 3including the preparation of Tables 5-7 as well as Appendices 1-3Gregory C Shaffer (University of Wisconsin School of Law) contributedtwo case studies in Section 4Mariam Camarero (Universidad Jaume I) Cecilio Tamarit (Universidadde Valencia) and Andrea Ribeiro Hoffmann (University of Tuumlbingen)contributed to Section 5 andMark A Pollack (European University InstituteUniversity ofWisconsin-Madison) served as lead author for the report andcontributed to the writing of various sections
The Transatlantic Programme is also grateful to the following personsfor comments on early drafts of the reportHelen Wallace (Director Robert Schuman Centre for AdvancedStudies)Patrick Messerlin (Institut de Sciences politiques Paris)Claus-Dieter Ehlermann (European University Institute)Ernst-Ulrich Petersmann (European University Institute) andMichael Artis (European University Institute)
The Transatlantic Programme was established in 2000 with a majorgift from BP
1
ndash 1 ndashThe Transatlantic Marketplace and
the Changing EUUS Economic Agenda
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly over thecourse of the past decade Taken together the US and the EU accountfor roughly one half of both world GDP and global trade
Table 1 Transatlantic Trade 1980-2000 in millions of Euros(share of EU total)
1980 1990 2000
EU imports from US 50733(181)
88957(205)
197992(193)
EU exports to US 29543(140)
82004(200)
232037(247)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
The European Union and the United States are also each otherrsquos mostimportant trading partners As Table 1 illustrates the volume ofEUUS trade more than doubled during the 1990s and the twocountries are currently each otherrsquos largest trading partners Indeedrecent data on trade in services summarized in Table 2 demonstrateseven more clearly the importance of the transatlantic traderelationship with the United States accounting for some 40 of theEUrsquos total imports and exports of services which in turn account forbetween one-third and one-half of total transatlantic tradeFurthermore EUUS trade has been largely balanced over the decadeof the 1990s
2
Table 2 Transatlantic Trade in Services in millions of Euros(share of EU total)
1998 1999 2000
EU imports from US 79874(360)
99042(409)
116474(407)
EU exports to US 77039(334)
92199(373)
117403(403)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
Notwithstanding the impressive growth of EUUS trade it is theinvestment relationship that most clearly distinguishes thecontemporary transatlantic marketplace As Table 3 makes clear theEuropean Union in 2000 was far and away the largest investor in theUnited States its euro 794 billion in foreign direct investment (FDI)constituting 65 of total FDI in the US1 The United States is similarlythe largest source of FDI in the European Union with someeuro 561 billion invested in 2000 These high levels of EU investment areestimated to provide roughly 35 million jobs in the United States witha similar number of European jobs relying on US investment in theUnion2 The large and growing investment relationship also explains aconsiderable portion of the recent growth in bilateral USEU tradesince an estimated 20-30 percent of all bilateral trade takes the form ofintrafirm trade within firms operating on both sides of the Atlantic
Table 3 Transatlantic Foreign Direct Investment in millions of Euros(share of EU total)
1998 1999 2000
US FDI flows into EU 60697(571)
83798(754)
121271(688)
EU FDI flows to US 133416(602)
196794(632)
172027(475)
US FDI stocks in EU 366462(60)
439928(609)
561199(625)
EU FDI stocks in US 398190(483)
622496(524)
794523(513)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
3
With the simultaneous growth of transatlantic trade and investmentand the gradual decline in EU and US tariffs and quotas followingsuccessive waves of trade liberalization the transatlantic economicagenda has been transformed Prior to the 1990s much of the EUUSeconomic relationship was dominated by trade questions andspecifically by cooperation and conflict over tariffs quotas and otherdirect barriers to trade typically imposed at US and EU borders Withthe decline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade have increased in importance aspotential sources of international trade tension Such non-tariffbarriers have been addressed in the European Union for decadesthrough the use of regulatory harmonization and more recentlythrough the mutual recognition of national standards Similarly theGATT system began as early as the Tokyo Round (1973-1979) toaddress non-tariff barriers to trade most notably through theTechnical Barriers to Trade (TBT) Agreement and more recentlythrough the 1994 Sanitary and Phytosanitary Standards (SPS)Agreement both of which apply international law disciplines to trade-distorting national regulations
Notwithstanding these new rules however lsquobehind-the-borderrsquo US andEU regulations on a diverse array of topicsmdashranging from theenvironment and food safety to consumer protection and dataprivacymdashhave emerged during the past decade as significant obstaclesto transatlantic and global trade and investment3 In some cases suchdomestic regulations have led to trade disputes between the UnitedStates and the European Union and to increasing demands frombusinesses on both sides of the Atlantic for cooperation among US andEuropean regulatory authorities to prevent and settle such disputesand facilitate access to the European and American markets
In sum the ever-increasing levels of transatlantic trade andinvestment have created a de facto transatlantic marketplace and withit an increasing incentive for the European Union and the UnitedStates to cooperate in an effort to manage that marketplace facilitatemutually beneficial economic exchange and prevent or settle the tradeand economic disputes that inevitably arise in such a closerelationship In that context this report aims to summarize the stateof our scholarly understanding about the political economy of thetransatlantic economic relationship with an emphasis on theinstitutions for joint economic governance the new challenges posedby regulatory disputes and the promise and limits of transatlanticregulatory cooperation Accordingly Section 2 of the report examinesthe development and growth of post-Cold War institutions for themanagement of the EUUS economic partnership while Section 3examines the persistence of trade and economic disputes between theEU and the US including the rise of new and potentially intractableregulatory disputes and Section 4 examines the prospects and limitsof transatlantic regulatory cooperation as a possible solution to such
4
conflicts The fifth section of the report places the EUUS bilateralrelationship in the broader context of the relationship between theEuropean Union and the various countries of the Americas and thesixth concludes with a review of potential areas for furthertransatlantic cooperation and promising areas for further study
5
ndash 2 ndashInstitutions for Transatlantic Economic Governance
Origins and Effectiveness
Transatlantic relations between the United States and the countries ofWestern Europe have long been based on common values and interestsin terms of both security and economic interdependence Throughoutthe Cold War transatlantic cooperation took place largely though theNorth Atlantic Treaty Organization (NATO) in the area of security andthrough common US and European participation in variousmultilateral economic forums including the Organization for EconomicCooperation and Development (OECD) the G-7 (now G-8) group ofhighly industrialized economies and the World Trade Organization
Cooperation between the United States and its European partners istherefore not new but the character of the relationship changedsubstantially during the 1990s with an ever-greater emphasis oneconomic as well as security cooperation and a greater recognition bythe United States of the European Union (in addition to its memberstates) as an important interlocutor Three transatlantic agreementssigned in the 1990s underpin this new transatlantic partnership andthe increasingly liberalized EUUS economic relationship TheTransatlantic Declaration (1990) the New Transatlantic Agenda (NTA1995) and the Transatlantic Economic Partnership (TEP 1998) haveeach played an important role in creating a transatlantic framework foreconomic co-operation and introducing formal transatlanticinstitutions to manage the relationship This upgrading of the EUUSrelationship in turn can be traced to several interrelateddevelopments during that decade including the end of the Cold Warthe maturation of the European Union as an economic and politicalactor and the relentless expansion of transatlantic economic exchangewhich created pressures for joint management of the emergingtransatlantic marketplace4
The end of the Cold War was clearly a precipitating cause for theupgrading of the transatlantic relationship As early as 1990 the USpresidential administration of George HW Bush proposed aTransatlantic Declaration to reaffirm USEuropean solidarity followingthe fall of the Iron Curtain and the collapse of the Soviet Union Whilethat Transatlantic Declaration itself focused largely on security issuesrather than economic cooperation the diminution of the security
6
threat from post-Soviet Russia facilitated an increasing emphasis oneconomic issues by the Clinton Administration reflected in both the1995 New Transatlantic Agenda and the 1998 Transatlantic EconomicPartnership5
This economic focus has in turn been reinforced by the maturation ofthe European Union which emerged during the late 1980s and early1990s as the worldrsquos largest internal market and the most importanttrading partner of the United States Simultaneous with thedevelopment of the EUrsquos internal market came the increasing influenceof EU political institutions including the European Commission(which plays a vital role in the EU legislative process as well as servingas trade negotiator and economic regulator in fields such ascompetition policy) and the Council of Ministers and EuropeanParliament (which collectively adopt an increasingly large portion ofEuropean economic legislation) Although the powers of the respectiveEU institutions still varies considerably across sectors theCommission has clearly emerged as the Unionrsquos primary interlocutorwith the United States on economic issues while the legislativeactivities of the Council and the Parliament have the potential toinfluence economic interests in the United States The institutions ofthe New Transatlantic Agenda have therefore attempted to incorporatethe Commission and the Council presidency through biannualsummits and other high-level meetings as well as members of theEuropean Parliament through the Transatlantic Legislatorsrsquo Dialogue(see below)
Beyond the end of the Cold War and the maturation of the EuropeanUnion finally lies the relentless increase of transatlantic economicexchange Increased transatlantic trade and investment have creatednew demands for market access and economic cooperation fromproducer groups such as the Transatlantic Business Dialogue whileother consumer labour and environmental groups have sought toensure that transatlantic cooperation takes into account their diverseinterests Indeed as we shall see below the increasingly closeeconomic relationship between the EU and the US has created newprospects for both trade conflicts and regulatory cooperation and hasresulted in what might be termed lsquoscuttle diplomacyrsquomdashthe scurrying ofEU and US government authorities to cope with the incessant conflictswhich although they compose only a small fraction of EUUSeconomic exchange threaten to poison a mutually advantageouseconomic relationship6 Largely for this reason the United States andthe European Union have established an increasingly complexinstitutional structure designed to facilitate economic and securitycooperation resolve and prevent disputes and integrate civil-societygroups into the process of transatlantic economic governance
7
21 Transatlantic Economic Agreements in the 1990s
211 The Transatlantic Declaration
The process of institutionalizing the EUUS relationship begansimultaneously with the end of the Cold War in 1989 when USPresident Bush and EU Commission President Jacques Delors agreedto work to ensure regular meetings between high-level EU and USofficials On 27 February 1990 this agreement bore fruit in the shapeof a lsquoTransatlantic Declarationrsquo pursuant to which the US and ECagreed to establish an institutional framework lsquofor regular andintensive consultationrsquo Specifically the Declaration called for biannualEUUS summit meetings between the presidents of the United Statesthe European Commission and the European Council as well asregular meetings between the US Secretary of State the ECCommission and the US Cabinet These meetings it was hoped wouldopen lines of communication create networks facilitate informationsharing and reduce the impact of disputes in transatlantic relations
In substantive terms the Transatlantic Declaration identified threemajor goals
bull economic liberalizationbull educational scientific and cultural co-operation andbull cooperation in fighting international crime terrorism and
environmental degradation7
While these policy areas were identified as priorities the agreementfailed to provide a more detailed agenda for meeting its goals Thecontent of the agreement has been described as cosmetic minimalistand lacking in substantive innovations and would soon besupplemented by other more detailed economic agreements8
212 The New Transatlantic Agenda
The next stage in developing the transatlantic economic relationshipcame with the New Transatlantic Agenda (NTA) which was signed atthe EUUS Summit in Madrid in 1995 and established four priorityareas for closer cooperation
1 promoting peace and stability democracy and development aroundthe world (in particular in Central and Eastern Europe Russia andthe Middle East)
2 responding to global challenges (with a focus on international crimedrug trafficking terrorism migration and health andenvironmental issues)
3 lsquocontributing to the expansion of world trade and promoting closereconomic relationsrsquo (including both bilateral and multilateralliberalization of trade and investment) and
8
4 building bridges across the Atlantic (specifically direct contactsamong lsquobusiness people scientists educators and othersrsquo)9
In addition to the six-page NTA itself the two partners also adopted amuch more detailed Joint Action Plan (JAP) which outlined specificpolicy areas where deeper cooperation could be pursued The economicchapter of the JAP was arguably the most ambitious of the four callingfor both the strengthening of the multilateral trading system and thecreation of liberalized lsquotransatlantic marketplacersquo with a special focuson bilateral regulatory cooperation1 0 The NTA itself also acknowledgedthe role of the Transatlantic Business Dialogue which would laterprove to be influential in setting the agenda for transatlantic economiccooperation
In institutional terms the New Transatlantic Agenda established newtransatlantic governance mechanisms and a more established policyprocess First it created a Senior Level Group of EU and US officialstogether with a lower-level NTA Task Force to help drive coordinatemonitor and implement the agenda of transatlantic relations betweenthe continuing EUUS summits Although this framework has sincebeen criticized as excessively bureaucratic and focused on summit-driven lsquodeliverablesrsquo (see below) the NTA framework has proven usefulin coordinating EU and US responses to both economic and securityissues and remains the overarching framework for transatlanticrelations today
213 The Transatlantic Economic Partnership
The drive for an ever-closer transatlantic economic relationship wasrevived in 1998 amidst revelations that cooperation in many policyareas had fallen short of initial expectations1 1 Despite the NTA and itsinstitutions high-profile trade disputes over bananas beef andextraterritorial sanctions continued highlighting the need for furthertransatlantic commitment to facilitate economic exchange and containconflict In that context the European Commission took the initiativein April 1998 calling for negotiations on a lsquosingle comprehensiveagreementrsquo to implement a lsquoNew Transatlantic Marketplacersquo TheCommissionrsquos proposal had four central objectives
1 the lsquoremoval of technical barriers to trade in goods through anextensive process of mutual recognition andor harmonizationrsquo
2 the elimination lsquoby 2010 of all industrial tariffs on an MFN basisrsquo3 the formation of a lsquofree trade area in servicesrsquo and4 further liberalization in the areas of government procurement
intellectual property rights and investment1 2
The United States had little time to respond however as the initiativefailed to secure the support of the Council of Ministers In its placethe US and the EU agreed in May 1998 to a somewhat less ambitious
9
Transatlantic Economic Partnership (TEP) which aimed to tacklebilateral regulatory barriers to trade and to identify common positionswithin multilateral trade negotiations In substantive terms the TEPand its accompanying Action Plan focused more directly than the NTAon regulatory cooperation and on the possible harmonization ofstandards as a means of removing technical barriers to trade and itcommitted both sides to negotiations in specific issue-areas includingservices intellectual property food safety and biotechnology1 3
In addition the TEP created a new set of institutions to manage theeconomic aspects of the relationship including a lsquoTEP Steering Grouprsquocharged with monitoring implementing and reviewing TEP objectivesas well as expert-level working groups The TEP also emphasized theimportance of early warning of potential trade and regulatory disputesand fostered the creation of an institutionalized lsquoearly warning systemrsquofollowing the Bonn EUUS summit in June 1999 Finally the TEPexplicitly encouraged the participation of not only business but othercivil society groups which would lead in time to the creation of thetransatlantic consumer environment and labour dialogues
Table 4 Transatlantic Cooperation Agreements at a Glance
Transatlantic Agreement Year Impact on the Economic Relationship
The TransatlanticDeclaration 1990 Contains a broad commitment to
economic liberalization
The New TransatlanticAgenda (NTA) and JointAction Plan (JAP)
1995
Includes a chapter on contributing tothe expansion of world trade andpromoting closer economic relationsJAP discusses building a lsquonewtransatlantic marketplacersquo throughincreased regulatory co-operation
Transatlantic EconomicPartnership (TEP) 1998
Outlines three main goals for thetransatlantic economic relationship1) market access gains for goods
services and agricultural products2) multilateral and bilateral trade
liberalization of goods services andcapital
3) deepening dialogue between non-governmental organizationsparliamentarians and government
10
22 An Overview of Existing Transatlantic Institutions
Todayrsquos transatlantic economic relationship is managed largely by a setof institutions that were created in stages by the TransatlanticDeclaration the NTA and the TEP Combined these institutionsconstitute a framework for long-term as well as day-to-day economiccooperation and dispute resolution
221 EUUS Summits
The biannual EUUS summit is the primary forum forintergovernmental exchange in the NTA process consisting of thehighest level of contact between the Presidents of the US the EUCommission and the Council Presidency The transatlantic policy cyclebegins and ends with these biannual summits where decisions arelsquomadersquo about the general scope for co-operation and wherelsquodeliverablesrsquo - in the form of new bilateral agreements about regulatorycooperation or the resolution of specific disputesmdashare announced Thesummits encourage policy co-ordination because they create deadlinesfor progress reports and exert pressure on lower-level officials toproduce results
222 Senior Level Group and the NTA Task Force
The Senior Level Group serves as a contact point between the EUUSSummit and the working level of the transatlantic dialogue It hasroughly six formal members including the US Undersecretary of Statefor Economic Affairs Commission delegates from the Directorates-General for external relations and trade Council Presidencyrepresentatives and representatives of the lsquoArticle 133 committeersquodealing with international trade matters The primary tasks of the SLGare to prepare the agenda of the biannual summits lsquoshopping fordeliverablesrsquo to be announced on those occasions and to monitor theimplementation of the NTA and the TEP
Logistically the SLG typically meets twice during each CouncilPresidency with the first meeting used to assess potential areas ofcooperation and conflict and the second meeting finalizing the agendafor the EUUS summit and confirming the contents of its progressreport which is presented to summit leaders Below the SLG an lsquoNTATask Forcersquo meets somewhat more frequently (often throughvideoconferencing) to follow specific dossiers in both the security andeconomic realms
223 TEP Steering Committee and Working Groups
The TEP institutions including the Steering Group and workinggroups bring together policy experts to deal with economic issues ingreater detail The Steering Group consists of the US Deputy Assistant
11
Secretary of State for Economic Affairs Commission officials at theHead-of-Unit level and a Council Presidency representative Originallydesigned to coordinate negotiating approaches within the WTO and toact as an lsquoearly warning systemrsquo to identify possible trade disputes theTEP Steering Group has evolved into the primary coordinating body fortransatlantic economic relations including negotiations aboutregulatory cooperation in specific areas
The Steering Group is assisted by the TEP working groups which aresector-specific and thus mirror the sectors laid out by the TEPincluding agriculture biotechnology trade services and globalelectronic commerce Their main task is to find areas where the EUand the US can work together under the TEP framework and to reportany progress or problems to the Steering Group
224 The Transatlantic Early Warning System
The 1998 TEP declaration highlighted the need to identify potentialtrade disputes before they emerge At the Bonn EUUS summit inJune 1999 the two sides announced plans to formalize an EarlyWarning System for this purpose1 4 Essentially the transatlantic earlywarning system sparks an inter-agency process to identify potentialeconomic disputes at an early stage most notably with regard todomestic EU or US legislation that might act as a barrier totransatlantic trade and investment The task of spotting such potentialdisputes is delegated to the TEP Steering Group which reports earlywarning items to the Senior Level Group which in turn may take theminto account when preparing the EUUS summit agenda The TEPSteering Group also assigns contact points facilitating consultationsand agreeing on timelines for reporting back on items highlighted aspotential transatlantic policy frictions Unlike similar early warningsystems within the European Union however the transatlantic earlywarning system does not require that either side pause or reconsiderits proposed legislation or regulations The result is a system whichwhile respecting the regulatory sovereignty of both sides does notguarantee prevention or resolution of potential conflicts
12
Figure 1 The Transatlantic Early Warning System
The EUUS SummitTop-level discussions on
potential and exiting disputes
The Senior Level GroupReviews friction points reports to summitorand refers back to TEP Steering Group
or NTA Task Force
TEP Steering GroupIdentifies and monitorseconomic friction points
225 The Transatlantic Legislatorsrsquo Dialogue
An underlying feature of the early warning concept is the desire to getboth EU and US domestic policy makers to consider the externalimplications of internal policies However the Early Warning System isa bureaucratic tool The important task of raising awareness betweenEU and US legislators lies with the Transatlantic Legislatorsrsquo Dialogue(TLD) another product of the NTArsquos lsquobuilding bridgesrsquo chapter The TLDbrings together members of the US Congress and the EuropeanParliament so as to create awareness on each side of the transatlantictrade impact of EU and US legislative acts
Thus far however the TLD has not lived up to initial expectations forthree reasons First TLD participation is largely limited to members ofthe US House of Representatives and the European Parliament with aparticular interest in transatlantic relations and may not includemembers of committees drafting legislation with transatlanticrepercussions the US Senate moreover is thus far excluded from theTLD Second there is insufficient contact between the TLD and otherparts of the transatlantic dialogue for example the SLG Thirdmeetings of the TLD have been held only rarely and typically withweak attendance on the US side and the Dialogue has yet to engage inor settle any serious economic disputes between the United States andthe European Union
226 The Transatlantic Civil Society Dialogues
The fourth and final chapter of the NTA encourages the establishmentof lsquopeople to peoplersquo links as a way of building bridges across the
13
Atlantic and bringing a civil-society component to transatlanticcooperation In addition to supporting ad hoc exchange betweeneducators and scientists the EU and the US have encouraged and insome cases subsidized the establishment of formal dialogues amongEuropean and American business consumer and environmentalgroups and labour unions The 1995 NTA made specific mention ofthe Transatlantic Business Dialogue (TABD) while the 1998 TEPinvited civil society input lsquoon issues relevant to international trade as aconstructive contribution to policy makingrsquo In practice however not alldialogues have been created or function as equals
The Transatlantic Business Dialogue
The TABD is the oldest best organized and most influential dialoguein the transatlantic economic relationship Launched in 1995 at theinitiative of the US Commerce Department and the EU Commissionthe TABD brings together some 200 European and American CEOs forannual meetings which make joint recommendations on thetransatlantic policy issues1 5 From the beginning the TABD focusedthe attention of US and European legislators and regulators on theimportance of non-tariff barriers to trade calling explicitly for EUUSregulatory cooperation and mutual recognition of standardsmdashanapproach it has labelled lsquoapproved once accepted everywherersquo1 6 Inkeeping with this approach the TABD has been active in pressing forthe adoption and implementation of specific agreements including the1997 Mutual Recognition Agreements and the 2000 Safe HarbourAgreement on data privacy (examined below) In addition the TABDparticipates actively in the transatlantic early warning systemidentifying in its annual reports those domestic laws and regulationsthat might create obstacles to transatlantic trade and investment1 7
One result of this process is that the TABD has become a valuablesource of information for EU and US policy makers Sixty percent ofthe TABDrsquos original recommendations resurfaced in the NTA and theJoint Action Plan1 8 Some members estimate that one-third of itsrecommendations have been taken on board by transatlantic policymakers1 9 Nevertheless there is an increasing perception within theTABD that much of the lsquolow-hanging fruitrsquo has been picked in terms oftransatlantic trade liberalization and regulatory cooperation and a fearthat governments lsquocanrsquot deliverrsquo regulatory reforms demanded bybusiness2 0 In addition the TABD faces the challenge of interactingwith the other officially recognized dialogues with which it may notalways agree
The Transatlantic Consumer Dialogue
The decision to include consumers environmentalists and workers inthe transatlantic dialogue was the result of pressure from NGOs theEuropean Commission and eventually the US State Department The
14
success of the TABD sparked criticism from the NGO communitywhich argued that the influence of the TABD was unbalanced by anabsence of civil society input In response to these concerns the StateDepartment and the European Commission both agreed to providefunds to establish a new Transatlantic Consumer Dialogue There wassome objection to government sponsorship of the groups particularlyin the US where it was feared that the consumer dialogue was a wayto lsquogreenwashrsquo the TEP There was also a divide among its membersover the issue of trade liberalization most notably at the first meetingof the TACD which was overshadowed by a dispute between groupssuch as Public Citizen which generally oppose trade liberalization andother groups such as Consumer Union which support tradeliberalization as a means of increasing consumer choice2 1
Despite this rocky start the TACD has become an efficientorganization with a secretariat in London and a Steering Committeethat has organized its roughly 60 members into working groups onfood electronic commerce and trade In its working groups annualmeetings and recommendations the TACD has focused largely ontransatlantic regulatory issuesmdashin areas such as data privacy foodsafety and the application of the lsquoprecautionary principlersquo in riskregulationmdashbecause many consumer groups feared a downward spiralof regulatory standards as a result of increasing trade liberalizationNevertheless despite its high level of activity some members of theTACD feel that they have not had a sufficient impact on the NTAprocess which they regard as being dominated by a free-tradeagenda2 2
The Transatlantic Environmental and Labour Dialogues
Attempts to forge a functioning dialogue between the European andAmerican environmental and labour movements have been the leastsuccessful Despite initial attempts to create an environmentaldialogue the TAED suspended its activities in 2000 citing a lack offunding from the US side2 3 The TAED had until this point held threemeetings and established a Steering Committee as well as WorkingGroups on Climate Protection Bio-diversity and Forest ConservationFood and Agriculture and Industry The TAED also offered a numberof official recommendations on safe energy sources biotechnologywaste management and emissions standards although TAEDmembers like their TACD counterparts argued that the TABDcontinued to enjoy privileged access to EU and US policymakers2 4
Finally while the Transatlantic Labour Dialogue is officially still afunctioning forum it is the least developed of the transatlantic civil-society dialogues The TALD is little more than a modest exchangebetween the European Trade Union Confederation (ETUC) and theAmerican Federation of Labour and the Congress of IndustrialOrganizations (AFL-CIO) with no organizational structure secretariat
15
or formal objectives The TALD did hold several meetings in 1998 and1999 and 2000 but produced only six recommendations from thosemeetings Simplifying only slightly the ETUC and AFL-CIO havechosen to emphasize their shared interests in a global labour dialogueand have demonstrated little commitment to a specificallytransatlantic agenda within the framework of the NTA or the TEP2 5
In sum the transatlantic civil-society dialogues have arguably served auseful purpose in fostering transatlantic discussion among businessesand non-governmental organizations (most notably in the businessand consumer sectors) and in producing concrete recommendationsfor transatlantic economic cooperation However the relative weight ofthese organizations remains highly uneven and the currentarrangement is highly segmented and marked by a lack of anylsquodialogue among the dialoguesrsquo which might lead to the creation of agenuine transatlantic public sphere
23 An Effective Framework for Economic Cooperation
In recent months both official reviews and academic studies havefocused on the institutions of the NTA and the TEP asking whetherthese institutions are an adequate framework for transatlanticeconomic as well as security cooperation In its 2001 review of theNTA for example the European Commission argued that institutionssuch as the TEP Steering Group the NTA Task Force and the SeniorLevel Group serve useful purposes in fostering dialogue andcooperation between EU officials and their US counterparts but alsonoted a number of weaknesses in the current structure including thesummit-driven demand for often artificial lsquodeliverablesrsquo at six-monthintervals and the difficulty in focusing on medium- to long-termpriorities given the inevitable demands of pressing short-term issuesThe Commission therefore proposed a number of reforms to thecurrent institutions including the establishment of explicit medium-term priorities and the possible reduction of the number of EUUSsummits to one per year2 6
By and large the Commissionrsquos recommendations were welcomed bythe United States government which agreed to the establishment of aset of medium-term priorities in the context of the June 2001 Goumlteborgsummit By contrast no progress has been made on the suggestion ofreducing the number of transatlantic summits largely because of thedifficulties posed by the rotating six-month presidency on the EU sideIn addition as we have seen a number of calls have been made inrecent years for a more transparent and accountable process oftransatlantic economic governance with more balanced input fromcivil society and with a greater role for democratically electedlegislators Thus far however these calls have met with no systematicresponse from either the US or the EU
16
Moving from institutions to lsquodeliverablesrsquo a recent study by EricPhilippart and Pascaline Winand has attempted to measure the policyoutputs of the NTA by examining the joint reports of the Senior LevelGroup since 1995 in order to determine to what extent and in whichareas the goals of the Joint Action Plan had been missed met orexceeded Summarizing a complex analysis Philippart and Winandfind that the extent and level of cooperation varies both across andwithin the four chapters of the NTA with genuine joint action in someareas and lower levels of cooperation (such as the exchange ofinformation) or inactivity in others In the area of foreign policycooperation for example the authors find that EUUS cooperation hasbeen most successful and resulted in the most extensive joint actionwithin Europe itself while yielding fewer and less binding outcomes inother regions In the area of economic cooperation the authors findthat the NTA has been most active in the establishment of alsquotransatlantic marketplacersquo with relatively extensive trade andregulatory cooperation but far less active and successful incoordinating economic policies in the World Trade Organization andother multilateral fora2 7 In the following two sections therefore weturn from a discussion of institutions and process to a more explicitanalysis of specific economic issues relating to the management oftrade disputes as well as bilateral efforts at regulatory cooperation
17
ndash 3 ndashTrade and Regulatory Disputes
in the Transatlantic Economic Partnership
Despite the obvious importance of EUUS trade and investmentrelationshipmdashor indeed because of itmdasheconomic disputes have beenand remain an important feature of the transatlantic partnershipIndeed the settlement and where possible prevention of suchdisputes was a large part of the motivation behind the establishment ofthe New Transatlantic Agenda and retains an important place inbilateral economic relations
31 Classifying Disputes Traditional Trade Issues vs NewlsquoBehind-the-Borderrsquo Regulatory Disputes
Transatlantic economic disputes arise from various sources and canbe settledmdashor left unsettledmdashby a similar variety of means In terms oftheir sources we can distinguish between two broad categories oftransatlantic trade disputes (1) lsquotraditionalrsquo trade disputes regardingdiscriminatory national measures such as tariffs and quotas imposedat the border as well as subsidies antidumping actions and safeguardmeasures which discriminate explicitly between domestic and foreignproducers and (2) lsquonew-stylersquo disputes about the trade-distortingeffects of lsquobehind-the-borderrsquo regulations that act as non-tariff barriersto international trade in goods services and intellectual property
With the gradual decline of tariffs and quotas as direct barriers toinvestment and the simultaneous increase in domestic economicregulation on both sides of the Atlantic in response to concerns aboutthe environment consumer protection public health and the like thefrequency of these new-style disputes has increased drastically duringthe course of the 1990s and early 2000s Some of these disputes likethe ongoing conflicts over the regulation and marketing of hormone-treated beef and genetically modified organisms (GMOs) havegenerated considerable controversy on both sides of the Atlantic andplaced strains on the transatlantic economic partnership
The rise of such transatlantic regulatory disputes in turn hasprompted questions about what Miles Kahler and others have termedlsquosystem frictionrsquo between the respective regulatory systems of the
18
European Union and the United States In a survey of transatlanticeconomic relations conducted in 1995 Kahler concluded that thereexisted at best partial evidence of system friction between the UnitedStates and the European Union noting that some issues (egagriculture and audiovisual services) did indeed divide the US and EUsystems fundamentally while on other lsquonewrsquo issues like labourstandards and the environment the EU and the US generally sharedcommon views2 8
Surveying the landscape of transatlantic economic relations sevenyears later it remains true that the European Union and the UnitedStates are united by many common values and common interestsNevertheless in a growing number of issue-areas including food safetydata privacy copyright protection taxation accountancy standardsand others the United States and the European Union have arguablyexperienced lsquosystem frictionrsquo in the form of a large number ofsimmering regulatory disputes summarized in Appendix 1 at the endof this report
Table 5 Classifying US-EU Trade Disputes
Agriculture Industrial goods Services
Border-measures
Bananas (alsoGATS)Belgian ricedutiesTariff-rate quotacorn gluten feed
Harbour taxAnti-dumping(steel uranium)CVD (steel)Safeguard actions(steel)
Tra
dit
ion
al
Subsidies Export subsidies AirbusFSC
Regulatorybarriers
Beef hormonesGMOs
Hush kitsPublicprocurement
Audio-visualProfessionalservicesTelecommuni-cationsData privacy
New
sty
le
IPR Havana Club Irish MusiccopyrightGreek protectionof movies
19
As Table 5 makes clear the contemporary transatlantic relationship ischaracterized by both traditional trade conflicts and new-styleregulatory disputes Indeed traditional disputes about tariffs andquotas (eg bananas) subsidies (eg Foreign Sales Corporations) anti-dumping measures and safeguard actions (eg steel) constitute someof the most high-profile disputes between the United States and theEuropean Union With a few exceptions however these disputesprimarily concern traditional trade measures that are within the lsquocorebusinessrsquo of the multilateral trading system which has wellestablished rules and an effective functioning dispute settlementprocedure within the World Trade Organization Put simply the WTODispute Settlement Understanding provides a body of multilateralrules governing the permissible use of tariffs quotas and other trade-restrictive practices a forum for consultation and if necessarylitigation among the parties to a dispute before WTO panels and theAppellate Body a binding requirement for member states to complywith DSU panel and Appellate body decisions and authorizedretaliation in the event of prolonged noncompliance with thosedecisions2 9
By contrast regulatory disputes implicate national laws andregulations that are often adopted for legitimate reasons of consumerand environmental protection or public health and after extensivedemocratic or administrative processes For this reason transatlanticregulatory disputes can be more bitter and intractable than traditionaltrade disputes insofar as both sides believe that they are lsquodoing theright thingrsquo and insofar as domestic political actors resistsubordinating domestic regulations to the exigencies of internationaltrade Such regulatory disputes also create particularly difficultquestions for the WTO dispute settlement procedure insofar as theycall for a politically sensitive balance between the economic imperativeof liberalized international trade on the one hand and the economicand non-economic motivations behind domestic regulations on theother hand
Largely for this reason both the United States and the EuropeanUnion have generally avoided bringing such regulatory conflicts beforethe World Trade Organization preferring in most instances to managetheir regulatory differences through bilateral consultation andcooperation Table 6 which summarizes EUUS WTO disputes bysubject matter demonstrates clearly the continuing dominance oftraditional trade issues (tariffs subsidies countervailing duties andantidumping) and the effort by both sides to keep politically sensitiveregulatory issues away from the WTO (For more information about thesubjects and status of all EUUS trade disputes before the WTO seeAppendices 2 and 3 at the end of this report)
Simplifying slightly existing regulatory as well as traditional tradedisputes can be addressed in any one of three ways (summarized in
20
Table 7 page 22) First the EU and the US may engage in directconsultations about regulatory barriers to trade and resolve thedispute without resorting to WTO dispute resolution examples includethe dispute over airplane lsquohush kitsrsquo resolved through a negotiatedsettlement between the EU and the US and the public procurementcase involving a Massachusetts state law imposing sanctions againstfirms doing business in Myanmar which was resolved unilaterallythrough the application of US federal law Second one party maychallenge the legality of the otherrsquos regulations before the WTO as inthe case of the US challenge to the EU ban on hormone-treated beefor the EU challenge to a provision of US copyright law in cases wherethe disputed regulation is ruled to be in violation of WTOrequirements however compliance has proven difficult Third andfinally given the difficulties of resolving such disputes through eitherbilateral negotiations or WTO litigation the bulk of regulatory disputesare allowed to simmer indefinitely with periodic consultations andexchange of information among the two sides but no resolution of theresulting trade tensions As Appendix 1 makes clear the overwhelmingmajority of current transatlantic regulatory disputes fall into this thirdcategory
Table 6 Transatlantic Trade Disputes in the WTO Overview and Context
Tariffsquotascustomsdutiesrules oforigin
retaliatorymeasures
Tradedefence
instruments(a-d CVDsubsidies)
TechnicalTBTs
(classi-ficationlabelingtesting)
Substantive TBTs
(process ampproductrequire-ments)
Subsidies GATS TRIPS TRIMS GPA Other
EU - US(EU asthirdparty)
6 9 (11) 1 (1) 1 3 1 2
EU - Restof World(RoW)
14 6 1 1 3 4 3 4
RoW ndash EU 12 3 4 2 1 1
US ndash EU(US asthirdparty)
8 (1) (1) 1 (1) 8 1 8
US - RoW 10 7 3 2 7 2 6 3 1
RoW ndash US 7 21 5 1 1 1
RoW ndash RoW 17 30 1 6 10 3
Sources Adapted from DG Trade WTO - Dispute Settlement (updated 15102) httpeuropaeuintcommtradepdfcasesxls accessed15202 and the WTOs dispute database (httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
21
22
Table 7 Methods of Dispute Resolution with Examples
Negotiated Agreement orUnilateral Action
WTO Dispute Settlement SimmeringDisputes
HushkitsMassachusettsMyanmar(public procurement)
Beef hormones(EU not in compliance)Irish Musiccopyright (EUUScompensation agreement)
GMOs
The sources of such regulatory disputes and the difficulties they posefor traditional dispute settlement procedures are illustrated below infour brief case studies focusing on (1) the US challenge to EUlegislation prohibiting the use of airplane lsquohush kitsrsquo (2) the USchallenge to the EUrsquos ban on hormone-treated beef and the relateddispute over the EUrsquos moratorium on the approval of geneticallymodified foods and crops (3) the EUrsquos challenge to the aforementionedMassachusetts public procurement law and (4) the EUrsquos challenge to aprovision of the US Copyright Act Although not a thorough review ofthe entire universe of EUUS regulatory disputes these four cases doillustrate the types of regulations adopted and challenged by both theEU and the US as well as the various methods of dispute resolutionmentioned above The policy implications of these cases are discussedin Section 36
32 Case Study Airplane lsquoHushkitsrsquo
Many EUUS disputes concern the technical barriers to trade (TBTs)caused by divergent national regulations setting technical standards inareas ranging from the specifications for industrial machinery andemissions standards for motor vehicles to nutritional labelingrequirements for packaged foods As Kenneth W Abbott has pointedout in a recent study many such national regulations are identified bybusiness or governments as TBTs within the transatlantic relationshipand a far smaller percentage of these have emerged as high-profiletrade disputes3 0 To date no disputes have been litigated between theEU and the US under the TBT Agreement although one particularlyprominent case did create significant tensions in the transatlanticrelationship namely the US challenge to the EUrsquos ban on airplanelsquohushkitsrsquo
Hushkits are equipment packages designed to reduce the noiseemissions of aircraft through the use of sound-absorbing materialswith the aim of bringing particularly older planes into compliance withthe so-called lsquoChapter 3rsquo noise pollution standards adopted within theInternational Civil Aviation Organization (ICAO) In 1999 theEuropean Union which had long pressed unsuccessfully for theadoption of stricter standards within the ICAO adopted a Regulation
23
establishing a ban on the registration of older aircraft fitted withhushkits on the grounds that such aircraft only barely complied withChapter 3 standards and were substantially more polluting thannewer planes The ban on new registrations was to enter into force inMay of 2000 from April 2002 moreover hushkitted aircraft registeredin third countries would not be allowed to operate within EU territory
Although nominally intended to decrease noise pollution aroundairports in heavily populated regions of Europe the EUrsquos hushkitsRegulation met with howls of protest in the United States where theuse of hushkits had been encouraged by US authorities as a cost-effective way of meeting Chapter 3 standards A ban on the registrationof hushkitted aircraft the US argued would therefore impose adisproportionate burden on US airlines which estimated that theRegulation cost them some $2 billion by depressing the value of theirexisting fleets while benefiting European carriers that had relied moreextensively on the purchase of new aircraft designed specifically tomeet Chapter 3 specifications In legal terms moreover the UnitedStates argued that the Regulation violated the terms of the ICAOagreement which simply set a performance standard for planes anddid not authorize parties to set more demanding standards or tomandate a specific design standard (eg a ban on the use ofhushkits) The US accordingly lodged a formal ICAO complaint againstthe 15 EU member states in March of 2000
After extensive bilateral discussion as well as multilateral negotiationswithin the ICAO in October 2001 the US and the EU reached asettlement of the case The first step in this settlement was themultilateral resolution adopted on 4 October in the ICAO assemblyurging states to pursue a lsquobalanced approachrsquo to noise reductionadopting local operating restrictions only where supported by anassessment of the costs and benefits and only after fully assessingalternative measures to reduce noise At the same time the ICAOagreed to a new and stricter set of lsquoChapter 4rsquo standards to take effectbeginning in 2006
Consistent with the provisions of the ICAO agreements the EU agreedon 25 October to withdraw the original Hushkits Regulation by April2002 (the date when it would have applied to third-country aircraft) inreturn for which the US agreed to withdraw its complaint before theICAO In place of the original Regulation the Commission issued aproposal in November 2001 for a new Directive replacing the generalban on hushkitted places with a more discriminating provisionallowing noise-sensitive airports in congested urban areas to limit theuse of planes that are lsquomarginallyrsquo compliant with Chapter 3standards3 1 This draft Directive was approved by the EuropeanParliament in its first reading in March 2002 and at this writing ispending adoption by the Council of Ministers and the Parliament
24
Despite the initial acrimony between the US and the EU the hushkitscase represents a successful effort at bilateral dispute resolution in abroader multilateral setting In this case the European Union agreedafter receiving assurance and guidance from the ICAO to adopt a morediscriminating and less trade-distorting regulatory approach whichsatisfies the trade concerns of the United States while allowing the EUto address the problems of noise pollution around the Unionrsquos mostcongested urban airports As we shall see presently however not allsuch regulatory conflicts have proven so amenable to negotiatedagreement
33 Case Study Hormone-Treated Beef andGenetically Modified Organisms
EU and US food-safety regulations constitute some of the mostimportant regulatory barriers to international trade and have been thesource of some of the most politically difficult and intractabletransatlantic regulatory disputes pitting each sidersquos sovereign right toregulate the safety of its food against its international obligationsunder WTO law3 2 Within the United States regulation of food safetywas among the earliest and most politically sensitive tasks of thefederal government which has delegated much of the power fordomestic regulation to agencies like the Food and Drug Administration(FDA) which has jealously guarded its reputation as an independentand impartial regulator making decisions on the basis of scientifictests rather than political pressures In the EU by contrast foodsafety regulation is carried out in part by national regulators and inpart by the EUrsquos political bodies including the Council of Ministersthe European Parliament and the Commission The deficiencies of thispatchwork regulatory process was painfully revealed however by aseries of food safety crises during the latter half of the 1990s includingmost notably the BSE crisis of 1996 and the Union has respondedforcefully with the creation of a European Food Safety Authority andwith an insistence on the application of the so-called lsquoprecautionaryprinciplersquo justifying regulatory action in the absence of clear scientificevidence and on the basis of consumer concerns and social andeconomic criteria
Precisely because food safety regulations can act as non-tariff barriersto trade in agricultural products the EU and the US have agreed tosubject their domestic regulations to the discipline of internationalguidelines such as the United Nations Codex AlimentariusCommission which establishes international standards for food safetyand more recently through the 1994 WTO Agreement on theApplication of Sanitary and Phytosanitary Measures (the SPSAgreement) The SPS Agreement does not establish bindinginternational standards for food safety nor does it automaticallypreempt the adoption of domestic standards that might constitute
25
non-tariff barriers to trade The agreement does however incorporateand promote the adoption of international standards as well asestablish trade rules that limit the ability of states to adopt food safetyregulations that are not scientifically grounded The terms of the SPSAgreement are moreover enforceable under the WTO disputesettlement procedure
The consequences of the divergent EU and US regulatory processesand the difficulties of resolving disputes through the WTO disputesettlement procedure can be illustrated most clearly by the long-standing EUUS dispute over the issue of hormone-treated beef Theconflict began in 1989 when the European Union announced a ban onthe sale and marketing of beef treated with any one of six growth-promoting hormones that had been tested and certified as safe by theFDA In 1995 following the entry into force of the SPS Agreement theUnited States took legal action before the WTO alleging that the EUban was inconsistent with the terms of the SPS Agreement since it wasnot based on scientific evidence risk assessment or internationalstandards After a protracted legal battle involving the issuing of apanel report and a subsequent appeal the WTO Appellate Body heldwith the United States that the EU had failed to base its ban on ascientific risk assessment and ordered the EU to bring its domesticregulations into compliance with WTO law
Despite the clear ruling against it the European Union faced withopposition from public opinion and hopeful of producing additionalscientific findings that would eventually justify the maintenance of theban failed to comply with the Appellate Bodyrsquos decision The UnitedStates therefore retaliated against the EU in May of 1999 imposingtariffs of $1168 million against EU agricultural products such as foiegras Roquefort cheese and Dijon mustard These US tariffs in turnsparked protests among French and European farmers who seized onthe beef-hormones case as a symbol of the threat posed byAmericanization and globalization to European regulations andtraditions Since 1999 the United States and the European Unionhave continued to consult regularly about this case but the Unionremains firm in its refusal to alter its domestic law and the UnitedStates persists in the application of retaliatory sanctions against theEU
The transatlantic dispute over the regulation of genetically modifiedorganisms (GMOs)mdashor more precisely genetically modified foods andcropsmdashis analytically similar to the beef hormones case although thepotential economic stakes in this area of GMOs are potentially fargreater Here again the US Food and Drug Administration decided inthe early 1990s that genetically modified foods were not substantiallydifferent from conventional foods and therefore required no specialprocedures for approval or marketing and on that basis US farmersand seed producers have quickly embraced the use of genetically
26
modified foods and crops By contrast the European Union has takena more cautious approach in a series of Directives and Regulationsrequiring specific approval procedures for genetically modified crops aswell as labeling of foods from genetically modified varieties Since1998 moreover the Council has maintained a de facto moratorium onthe approval of new GM varieties even though the EUrsquos scientificcommittees have continued to formally approve a number of varietiesas posing no health risks to consumers
The GMO issue has been the subject of intense consultation betweenthe US and the EU in recent years including the creation of an EU-USBiotechnology Forum which issued a joint report on the subject inDecember 20003 3 as well as a Biotech Working Group within theTransatlantic Economic Partnership Such fora have provided for auseful exchange of information among regulators as well as tradeofficials yet the positions of the two sides remain far apart with atbest modest signs of convergence in the EU and US approaches Thusfar the United States has refrained from bringing a case against theEU before the WTO partly of fear that the European Union facing apotential backlash against both GMOs and the WTO would be unableto comply The issue therefore remains a simmering irritant in thetransatlantic relationship with the potential to flare into a majordispute should the United States eventually decide to litigate the issuebefore the WTO
34 Public Procurement The MassachusettsMyanmar Case
The previous two cases involved US challenges to EU regulationssetting requirements for the marketing and use of industrial oragricultural products Regulatory disputes can however be directed atUS as well as EU regulations and they can concern regulationsgoverning questions other than product standards An excellentexample is the EUUS dispute over the 1996 Act adopted by the stateof Massachusetts regulating state contracts with companies doingbusiness in Myanmar (formerly Burma) The law in question wasadopted in June of 1996 by the Massachusetts State Legislature withthe avowed aim of securing human rights and democratic elections inMyanmar which was then under military rule and subject to sanctionsfrom the US federal government as well as the EU Specifically theMassachusetts law imposed sanctions on foreign as well as domesticfirms doing business in Myanmar with the aim of motivating suchfirms to withdraw from activities in that country
As Matthew Schaefer points out in an excellent analysis of the casethe MassachusettsMyanmar dispute illustrates two recurrenttensions in EUUS trade relations3 4 First the case illustrates theproblems encountered when individual US states like Massachusettswhich are not directly party to the WTO adopt laws and regulations in
27
possible contravention of WTO law Anticipating such problems duringthe negotiation of the 1994 Government Procurement Agreement(GPA) the European Union had emphasized the importance for the USof binding the states and the US federal government responded byasking each of the states to submit a voluntary lsquoletter of commitmentrsquoagreeing to be bound 37 states including Massachusetts submittedsuch letters resulting in a substantial but incomplete mechanism toensure state-level compliance with the GPA
Second the Massachusetts law in question also represents theextraterritorial application of US (state or federal) laws which employtrade and other economic provisions to secure a foreign policy aim (inthis case the cause of democracy and human rights in Myanmar)Specifically the Massachusetts law attempted to penalize not onlyAmerican firms but also foreign firms for investing in Myanmar even ifsuch investments were legal in those firmsrsquo home countries In thislatter sense the MassachusettsMyanmar case bears a strikingsimilarity to the extraterritorial sanctions applied by the US in thewell-known Helms-Burton and Iran-Libya Sanctions Acts in which theUS federal government adopted extraterritorial sanctions againstcorporations doing business in Cuba Iran and Libya (The latter caseswere resolved at least temporarily when President Clinton agreed in1998 to waive such sanctions in a bilateral agreement with the leadersof the European Union)
In the Massachusetts case the law was challenged before the WTO bythe European Union (joined by Japan) which sought to have the lawruled incompatible with US obligations under the GPA Before the WTOpanel could rule however the law was successfully challenged andoverruled under US federal law when the US Supreme Court held thatfederal action in this area (ie the federal sanctions law againstBurma) had pre-empted such sanctions by the State of Massachusettswhose law was therefore held to be unconstitutional
The successful resolution of the MassachusettsMyanmar disputesuggests several lessons for the prevention and settlement of similarcases in the future according to Schaefer In terms of disputeprevention he argues this case points to the importance of informingstate governors and legislators about the constitutional limitations onthe extraterritorial use of economic sanctions as well as theirobligations under WTO agreements (at least insofar as the statesthemselves agree to be bound by them) In terms of dispute settlementfinally the Massachusetts case suggests that litigation in domesticcourts under US law may be more a more effective and comprehensiveconstraint on state sanctions than WTO law which should thereforebe employed with restraint in such cases
28
35 Intellectual Property Rights The Irish Music Case
In addition to trade in goods and services and public procurementnational laws and regulations regarding intellectual property rightscan also have international trade repercussions even when thoseregulations apply without discrimination to domestic as well as foreignproducers Indeed protection of intellectual property has been thesubject of no fewer than 11 WTO disputes between the United Statesand the European Union since 1995 The challenges posed byintellectual property disputes are illustrated most strikingly by the so-called lsquoIrish music casersquo in which the European Union challengedprovisions of US copyright law before the World Trade Organization 3 5
The US law in question was the 1976 Copyright Act as amended bythe 1998 Fairness in Music Licensing Act Specifically Article 110(5) ofthe amended Act included a lsquobusiness exemptionrsquo according to whichestablishments such as bars shops and restaurants below a certainsize (ie 2000-3750 square feet) were allowed to play radio andtelevision music without paying fees to royalty-collecting bodies Therelevant provisions of the Act had been adopted only after long anddifficult negotiations between the representatives of US performingrights organizations on the one side and the National LicensedBeverage Association on the other and sought (however successfully)to balance the rights of copyright holders with the interests of smallrestaurant and bar owners
Although the US law applied equally to domestic as well as foreigncopyright holders in 1997 the Irish Music Rights Organization (IMRO)a collective music management company representing Irish musicianssuch as the rock group U2 filed a complaint about the law before theEuropean Commission IMRO claimed that the derogation in the lawwas in violation of US commitments under both the InternationalAgreement on Trade Related Aspects of International Property Rights(TRIPS) as well as the Berne Convention for the Protection of Literaryand Artistic Works since it failed to protect authorsrsquo rights resultingin an estimated loss of euro 121 million annually for IMROrsquos membersThe Commission having investigated the case agreed with IMRO thatthe law violated US obligations under the TRIPS agreement andinitiated a formal complaint before the World Trade Organization in1998
In June 2000 a WTO panel issued a decision in favour of theEuropean Union calling on the US to bring subparagraph (B) ofSection 110(5) of the Copyright Act (the aforementioned businessexemption) into conformity with the TRIPS agreement In response tothe panelrsquos report the United States announced that it would notappeal the panel decision but also that it would require time to amendits existing copyright legislation In the interim the United States andthe European Union agreed to establish a WTO arbitration panel
29
which would decide on the level of compensation to be granted by theUS to the EU pending modification of the Act In November 2001 thearbitrators accordingly assessed the annual losses suffered by EUcopyright owners and hence the level of compensation to be paid bythe United States at some $108 million In light of this finding EUTrade Commissioner Pascal Lamy and US Trade Representative (USTR)Robert Zoellick agreed the following month to a temporary solutionwhereby the USTR would seek authorization from Congress toestablish a special fund worth $33 million over three years to financeprojects and activities for the benefit of EU music creators pendingrevision of the US law
The December 2001 agreement between the US and the EU waspresented by EU Trade Commissioner Pascal Lamy as lsquoa good exampleof how we can manage our problems in a cooperative manner whilekeeping in mind our international commitmentsrsquo3 6 However while theUS and the EU have indeed reached an amicable three-year agreementon this issue the Irish Music case also serves as an additionalexample of the difficulties encountered by both sides in amendingdomestic regulations in response to trade concerns and WTO rulingsAlthough the European Union side insisted on the US obligation toamend its law and explicitly retained its right to return to the WTO inthe event of noncompliance at this writing there is no sign of anyimminent US effort to bring its domestic law into compliance and anextended US agreement to compensation remains a probablealternative for the foreseeable future
36 Dealing with Trade and Regulatory Conflicts
Transatlantic trade disputesmdashboth traditional disputes and new-styleregulatory conflictsmdashare inevitable in a relationship as close as EUUSrelationship and are not likely to disappear anytime in the nearfuture Many of these disputesmdashespecially old-style tariff quotasantidumping and subsidies disputesmdashare dealt with effectively by WTOdispute resolution New-style disputes however often involve domesticlaws adopted for legitimate purposes after democratic deliberation andlitigation in such cases can place severe strain on the WTO systemparticularly in cases like beef-hormones copyright and potentiallyGMOs where the losing party would have difficulty complying with anadverse WTO ruling
In light of these challenges scholars and practitioners haverecommended a range of potential reforms in US and EU domesticpolitics in the bilateral relationship and in the multilateral WTOsystem to prevent and settle regulatory disputes Although a complete
30
review of these recommendations is beyond the scope of this report3 7 some of the most promising proposed reforms include the following
bull Changes in Domestic Regulation Perhaps the most promisingsuggestions for reform are those that require no formal internationalagreement but rather domestic reforms that could be undertakeneither unilaterally or through an informal process of mutualcoordination The Transatlantic Business Dialogue for examplehas proposed that the United States and the European Union bothundertake to conduct lsquoTrade Impact Assessmentsrsquo of draftregulations so that legislators are made aware of the potential tradeimplications of proposed regulations before they are adopted Sucha procedural change could be undertaken within the respectivedomestic systems of the US and the EU and without compromisingthe regulatory sovereignty of either side and would have theadvantage of implicating legislators who thus far have been largelyabsent from the NTA process3 8 In a similar vein US observers haveadvocated the adoption by the EU of some form of advise-and-consent procedures for the adoption of regulations which wouldprovide domestic as well as foreign stakeholders with advancewarning of proposed regulations and improve the quality of EUgovernance more generally Finally as we have seen in theMassachusettsMyanmar case it has been proposed that theUnited States should do more in the future to implicate subfederalstates in international trade agreements and to inform them oftheir obligations under US constitutional as well as internationaltrade law
bull Changes in the Bilateral Relationship Notwithstanding theirincreasing complexity the institutions of the NTA and the TEP havenot prevented the rise of new regulatory disputes nor have theybeen able consistently to settle amicably all those that do arisegiven the difficulty for both sides of changing domestic regulationsadopted in response to legitimate public concerns Nevertheless anumber of bilateral reforms have recently been proposed includingmost notably the further development of the bilateral early warningsystem increased regulatory cooperation and the expansion of theTransatlantic Legislators Dialogue With regard to the firstinterviews with policy-makers on both sides of the Atlantic revealthat the early warning system has proven useful in identifyingobscure technical barriers to trade but the same policy-makersemphasize that increased early warning does not provide aguarantee that legislators or regulators will be willing or able toadjust domestic regulations and indeed the survey of regulatorydisputes undertaken above suggests that increased early warningwould not have been capable of resolving disputes over beefhormones or copyright where the primary impediment to resolutionof the disputes was not lack of information but the regulatorysovereignty of legislators and regulators on each side For this
31
reason particular emphasis has been placed on the promise ofenhanced regulatory cooperation (examined in detail in the nextsection) and on the further development of the TLD (where theprimary challenge will be to provide an incentive for domesticallyoriented parliamentarians and congressmen to participate intransatlantic consultations)
bull Reform of WTO Dispute Settlement The WTO Dispute SettlementUnderstanding establishes a binding and efficient system for theresolution of international trade disputes and most WTO memberstates are broadly satisfied with the operation of the systemNevertheless the WTO dispute resolution system is placed underparticular strain in regulatory disputes such as the beef-hormonesand Irish music cases reviewed above where it is called to balancetrade and regulatory objectives and where compliance is politicallydifficult for the losing parties In light of these weaknesses variousscholars and practitioners have suggested reforms to both WTOrules and to the DSU including most notably the clarification of thelsquoprecautionary principlersquo in WTO law and moving from retaliation tocompensation in cases of noncompliance with DSU rulings Both ofthese proposals merit further discussion in the coming review of theDispute Settlement Understanding (scheduled to be completed inMay 2003) and in the ongoing Doha Round of trade talks In themeantime the EU and the US would do well to continue theirgeneral pattern of restraint in addressing regulatory disputesbilaterally and avoiding any potential lsquooverloadingrsquo of the WTOdispute settlement procedure
Future negotiations between the EU and the US as well as futurestudies designed to inform those negotiations would do well to explorethe viability of these proposed reforms
32
ndash 4 ndashTransatlantic Regulatory Cooperation
One of the most striking features of the period since the 1995 NewTransatlantic Agenda has been the dramatic increase in both formaland informal cooperation among the regulatory authorities of theUnited States and the European Union In the past five years alonethe United States and the European Union have signed nine formalregulatory cooperation agreements in areas as diverse as competitionpolicy data privacy customs procedures veterinary standards andthe mutual recognition of testing and certification procedures (Table 8)These formal regulatory agreements moreover represent only afraction of the contacts that occur among US and EU regulators bothbilaterally and in various multilateral fora
41 Why Cooperate
The incentives for US and EU regulators to engage in formal andinformal cooperation vary across different issue-areas but cangenerally be classed into two broad categories3 9 First regulators maycooperate because they view such cooperation as useful in carrying outtheir essential rulemaking responsibilities in an increasingly integratedtransatlantic and global marketplace Such cooperation need not andtypically does not involve joint rulemaking activities but focusesinstead on exchanges of information identification of best practiceand early notification of new regulations being considered within eitherpolity In the area of food safety for example the EuropeanCommission and the US Food and Drug Administration have notidentified or implemented common standards for the reasonsdiscussed above yet the two regulators do engage in an ongoingdialogue both bilaterally and within the Codex Alimentarius (the globalbody for the establishment of food safety standards) and theCommission consulted extensively with its US counterparts in thedesign of the newly created European Food Safety Authority Similarbilateral exchanges occur regularly in other issue-areas as well aswithin multilateral standard-setting bodies such as the InternationalStandards Organization (for industrial standards) and theInternational Conference on Harmonization (for registration ofpharmaceuticals)
33
Table 8 Transatlantic Regulatory Cooperation Agreements
Agreement Targeted Regulations Year
Competition Policy Agreement Competition regulations 1991
ECUS Agreement on DrugPrecursors
Illicit drug regulations 1997
ECUS Customs and CooperationAgreement
Customs certifications 1997
EUUS General Mutual RecognitionAgreements
Conformity assessmenttesting in six sectorstelecommunicationsequipment electromagneticcompatibility electricalsafety recreational craftmedical devices andpharmaceutical goodmanufacturing practices
1997
EUUS Positive Comity Agreement Competition relations 1998
EUUS Agreement Concerning theEstablishment of Global TechnicalRegulations for Wheeled VehiclesEquipment and Parts
Technical regulations 1999
EUUS Veterinary EquivalenceAgreement
Animal export certifications 1999
EUUS Safe Harbour Agreement Data protection regulations 2000
Joint Declaration on USEUCooperation in the Field ofMetrology and MeasurementStandards
Measurement equivalence inproduct certification
2000
EUUS Agreement on MutualRecognition of Certificates ofConformity for Marine Equipment
Mutual recognition of marineequipment regulations
2001
EUUS Guidelines on RegulatoryCooperation and Transparency
Non-binding guidelines forcooperation among EU andUS regulators regardingtechnical barriers to trade
2002
Source European Commission DG TRADEhttpeuropaeuintcommtradebilateralusausahtm
34
A second and partially overlapping motivation for regulatorycooperation already touched on in Section 3 above is to avoid orresolve bilateral disputes about the potential trade-distorting effects ofnational regulations As we have seen domestic economic regulationscan become a source of transatlantic economic tension in two distinctways First domestic regulations in areas such as consumer orenvironmental protection food safety or copyright protection cancreate non-tariff barriers to international trade and investmentexamples include the recent disputes over the EUrsquos Data PrivacyDirective and its ban on hormone-treated beef as well as exemptionsto the US Copyright Act Second US and EU domestic regulators mayapply their domestic regulations in an extrajurisdictional fashion asfor example when EU and US competition authorities insist on theright to review mergers among firms in the other constituency insofaras the proposed merger creates effects in the regulatorrsquos domesticjurisdiction or when the US (or its constituent states) employs tradeand economic sanctions as an instrument of foreign policy In suchcases George Bermann has pointed out lsquothe line between simpleregulatory [cooperation] hellip and the settlement of trade disputes canbecome highly blurredrsquo4 0
The full range of regulatory cooperation agreements and practicesbetween the United States and the European Union is beyond thescope of this preliminary report Indeed interviews with practitionersfrom the United States and the European Union reveal thatconsiderable informal cooperation takes place across virtually everyconceivable area of US and EU regulation with little attention from thepress scholars or political actors Even in the absence of a full-scalecross-sectoral analysis however we can nevertheless undertake threebrief case studies of regulatory cooperation in the fields of competitionpolicy the negotiation of EUUS Mutual Recognition Agreements andthe Safe Harbour Agreement on data privacy regulation Takentogether these three cases illustrate the range of incentives forregulatory cooperation as well as the various means for suchcooperation and the significant obstacles that often stand in its way
42 Case Study Transatlantic Competition Policy Cooperation
One of the earliest regulatory cooperation agreements signed betweenEU and US authorities and one of the most successful concernscooperation in the enforcement of each sidersquos respective competitionpolicy laws including most notably the examination of proposedmergers and acquisitions
The incentives for cooperation in this area are substantial4 1 First asin other areas of regulation EU and US regulators confront similarproblems and are increasingly called upon to rule upon the samecases placing a premium on the sharing of information Second both
35
US and EU courts have ruled that their respective regulatorsmdashnamelythe Department of Justice and the Federal Trade Commission on theUS side and the Directorate-General for Competition on the EUsidemdashmay enforce domestic competition laws extraterritorially againstfirms based outside their domestic jurisdiction if and insofar thebehavior in question (eg a proposed merger) produces effects oncompetition in the domestic market Such extraterritorial applicationof both EU and US competition law raises serious issues about theduplication of effort by the two sets of regulators not to mention theadverse economic and political impact of inconsistent or conflictingdecisions on the same case by EU and US regulators
These concerns increased substantially in the early 1990s moreoverwith the rapid rise in cross-border mergers and acquisitions thataccompanied the completion of the Unionrsquos lsquo1992rsquo internal marketinitiative At approximately the same time moreover the EuropeanUnion adopted the 1990 Merger Control Regulation which gave theCommission regulatory authority to review mergers above certain sizethresholds and made the Commission an important interlocutor forthe EU in this area It was in this context of increasing cross-bordermergers and increasing EU authority over such mergers thatCompetition Commissioner Leon Brittan proposed in 1990 to expandEU competition policy cooperation with third countries beginning witha formal agreement with the United States US regulators respondedpositively to Brittanrsquos proposal and US and EU regulators agreed in1991 to adopt an agreement committing them to cooperation in thearea of competition policy including the sharing of non-confidentialinformation and coordination of enforcement activities This agreementwas later supplemented by two secondary agreements the 1998Positive Comity Agreement (which seeks to restrict the extra-territorialapplication of antitrust laws in non-merger cases but has beenformally invoked only once) and by the 1999 AdministrativeArrangements on Attendance in Hearings (which provide guidelines forthe participation of EU and US regulators in each otherrsquos hearings)
In the decade since the signature of the first Competition PolicyAgreement EUUS competition policy cooperation has generallyoperated smoothly and successfully with regulators from theCommission the Justice Department and the FTC sharing informationand coordinating enforcement activities on a daily basis andcooperating successfully on over 600 cases during the course of the1990s including almost 500 merger decisions The general success ofEUUS competition policy cooperation in the area of merger controlcan be attributed to the broad transatlantic agreement among EU andUS regulators about the basic scope and tools of policy which hasfacilitated the task of coordinating enforcement actions and generatingmutual trust among regulators
36
Nevertheless as Youri Devuyst points out in an excellent review oftransatlantic competition policy cooperation successful cooperationand conflict prevention between US and EU regulators can behampered by persistent differences in the scope and focus of US andEU competition law the procedures employed by both sides and theexigencies of confidentiality which limit the sharing of information byUS and EU agencies These limitations can be illustrated in theatypical but well-known BoeingMcDonnell Douglas merger (bothAmerican firms) which was approved by the FTC in July 1997 only tobe held up by Commission insistence that the companies agree toformal undertakings to satisfy its competition concerns Although thecase caused substantial strains in the transatlantic relationship thecompanies concerned eventually agreed to the Commissionrsquos proposedremedies allowing the merger to proceed4 2
An even more dramatic difference of opinion occurred with regard tothe proposed merger of two other US firms GE and Honeywell in2001 Here again US regulators approved the proposed merger only tosee the European Commission reject it in July 2001 after announcingthat the firmsrsquo proposed remedies had failed to satisfy theCommissionrsquos concerns Perhaps most strikingly and unlike theprevious case of EUUS disagreement in the BoeingMcDonnellDouglas merger a number of analysts claimed that the disagreementbetween US and EU regulators reflected an underlying andfundamental difference in the criteria for assessing proposedmergers4 3 Although the resulting predictions of other imminentUSEU conflicts are almost certainly overstated it is worthwhilenoting that the Commission in its December 2001 Green Paper on thereview of the Merger Control Regulation proposes to launch a debateon whether the Union should abandon its traditional lsquodominance testrsquo(ie assessing whether a proposed merger would create a dominantposition for the merged firm in the relevant market) in favour of alsquosubstantial lessening of competitionrsquo test (similar to that already usedin the US Canada and Australia)4 4 Whether the Union will move inthis direction remains unclear If so however it would represent astriking example of regulatory convergence among regulators alreadynotable for their similar (if not identical) regulatory philosophies andprocedures
43 Case Study EUUS Mutual Recognition Agreements4 5
As transatlantic tariff barriers have decreased firms have becomemore concerned with what they term duplicative regulatory compliancecosts and many have pressed for their removal This pressure hasincreased with rising transatlantic investment since divergent EU andUS standards and certification requirements most directly affecttransatlantic corporate groups and these groups more easilycoordinate lobbying on both sides of the Atlantic4 6 Transatlantic firms
37
under the auspices of the Transatlantic Business Dialogue inparticular have pressed for enhanced regulatory cooperation throughmutual recognition agreements culminating in the 1997 EUUSMutual Recognition Agreement (MRA) providing for mutual recognitionof testing and certification requirements and the more ambitious MRArelating to marine equipment signed in 2000 These agreements havebeen promoted as a major achievement of the New TransatlanticAgenda and as a flexible means of reconciling the regulatoryapproaches of the United States and the European Union andfacilitating access to both domestic markets
Notwithstanding these potential advantages however majorchallenges for transatlantic regulatory cooperation in this and otherareas are posed by the significant institutional asymmetries betweenthe United Statesrsquo and EUrsquos respective regulatory systems in an arrayof fields Where regulators adopt similar regulatory structures andsystems and enact similar substantive standards they more easilyunderstand and accept each otherrsquos regulatory determinationsRegulatory symmetry facilitates regulatory trust and confidenceenabling regulatory cooperation to occur as in the competition policycase examined above
In many issue-areas however US and EU regulators tend to work indifferent regulatory cultures Generally EU and national regulatorsoperate under the dual mission of ensuring free trade within theinternal market on the one hand while ensuring public safety throughhigh product and process standards on the other They thus are quiteaccustomed to interacting with foreign regulators and testing bodies onan ongoing basis As a consequence the Commissionrsquos DG Enterpriseand DG Trade units rarely tousled when negotiating and implementingthe 1997 Mutual Recognition Agreement The US Food and DrugAdministration (FDA) by contrast has traditionally defined its rolesolely as that of protecting US public health and has not operatedunder a dual mission of also facilitating market exchange Because theFDA is an independent regulatory authority anxious to protect itsregulatory autonomy US trade and commerce authorities encountermore difficulties in negotiating bilateral agreements concerning areaswithin the FDArsquos jurisdiction
Overall institutional adaptation for the negotiation andimplementation the 1997 MRA has been much easier for the EUwhich already has a mechanism for coordinating the mutualrecognition of product testing and certification among fifteen memberstates speaking eleven different languages This relatively deregulatedsystem consists of EU legislators setting lsquoessential requirementsrsquo in EUlsquonew approachrsquo directives which are supplemented by large numbersof harmonized lsquovoluntaryrsquo technical standards that in turn are widelyadopted Before marketing their products firms either self-certify theircompliance with these requirements or hire accredited testing and
38
certification laboratories Firms and laboratories remain subject topost-marketing member state regulatory controls as well as market-reputational constraints Member state regulators interact on a regularbasis through working groups committees and informalarrangements Overall this EU system can be characterized asgovernance by coordinated cross-border public-private networks
US regulatory officials however oversaw very different regulatorysystems in the areas covered by the 1997 MRA For example the USFederal Communications Commission (FCC) itself certified alltelecommunications equipment until the negotiation of thetransatlantic mutual recognition agreement at which time it adopted adecentralized EU model of certification The FDA continues to certifymost medical devices whereas EU authorities have permitted testingby private notified bodies since the mid-1990s The US OccupationalHealth and Safety Administration (OSHA) requires OSHA-accreditedlaboratories to certify all electrical safety equipment used in theworkplace whereas the EU has permitted manufacturers to self-certifythe equipmentrsquos conformity with European requirements since 1973
EU and US authorities began to seriously address issues of regulatorycoordination at the beginning of the 1990s In May 1989 US Secretaryof Commerce Robert Mosbacher and Commission Vice-PresidentMartin Bangemann agreed to explore the possibility of transatlanticmutual recognition agreements as well as mechanisms to grant USfirms greater access to EU standard-setting procedures After 1995these efforts were championed explicitly and repeatedly byTransatlantic Business Dialogue which became a prominent advocateof transatlantic MRAs4 7
EU and US negotiators initially discussed negotiating mutualrecognition arrangements in eleven sectors but ultimately whittledthis down to six4 8 In consequence the 1997 MRA consists of aframework agreement and six annexes respectively coveringtelecommunications equipment electromagnetic compatibilityelectrical safety recreational craft medical devices andpharmaceutical good manufacturing practices Each of the annexes isin fact a separate agreement for a separate sector covering definedcategories and lists of products
As with all trade negotiations the EU and the United States wereconcerned that the final results be lsquobalancedrsquo The United Stateswished to conclude an agreement on telecommunications equipmentfirst but the EU refused because it felt that US firms would benefitmore if the agreement covered only this sector EU negotiators thusinsisted that an agreement on pharmaceuticals and medical devices becompleted simultaneously The MRA sets up a new transatlanticstructure for overseeing its implementation First the MRA creates aJoint Committee which consists of US and EU trade officials who meet
39
twice annually Second the annexes create Joint Sectoral Committeesto oversee the annexesrsquo implementation
The 1997 Mutual Recognition Agreement does not cover recognition ofthe adequacy or equivalency of US and EU standards as such Ratherthe 1997 MRA only addresses mutual recognition by certificationbodies (known as lsquoConformity Assessment Bodiesrsquo) of each otherrsquosseparate standards4 9 Since neither the United States nor the EUrelinquishes sovereign control over the substance of their standardstrading firms still must meet the separate requirements of the worldrsquostwo largest markets In addition these assessment evaluations aresubject to certain pre-approval and post-approval conditions
Implementation of the 1997 MRA moreover remains uneven Thetelecommunications electromagnetic compatibility and recreationalcraft annexes all have been implemented as required In contrastimplementation of the electrical safety medical device andpharmaceutical GMP annexes remain in dispute in part because theFDA and OSHA have been slow to recognize the equivalency ofcertification by European government regulators or privatelaboratories and in part because of the magnitude and theunfamiliarity of US regulatorsrsquo task in assessing the equivalence ofstandards from 15 different member states submitting documentationin up to 11 different languages5 0 In the words of one FDA official theFDA has lsquorefused to compromise its mission of protecting public healthfor balance of trade purposesrsquo5 1 Thus all three annexes initiallydesired by the US administration are in operation while the threeannexes desired by the Commission are not Since the US executivehas less control over the US agencies responsible for implementationboth partiesrsquo choices are somewhat constrained
On June 12 2001 the United States and the EU initialed anAgreement on Mutual Recognition of Certificates of Conformity forMarine Equipment5 2 Unlike the 1997 Mutual Recognition Agreementand its six annexes this new agreement provides for mutualrecognition of each partiesrsquo standards and procedures as lsquoequivalentrsquofor purposes of certifications issued by conformity assessment bodieslocated in the partiesrsquo respective territories (Articles 3 and 4) Pre-existing harmonization of standards in this sector made possible thepartiesrsquo mutual recognition of lsquoequivalencersquo These standards wereagreed under the auspices of the International Maritime Organization(IMO) located in Geneva This new mutual recognition agreementshould be much easier to implement because less training andinformation exchange are required insofar as testing bodies will not becertifying under separate standards or procedures The parties alsoagreed up-front to recognize each otherrsquos existing conformityassessment bodies so that no application procedures are required forimplementation (Article 6) Thus while this agreement is relativelynarrow in product coverage it is much broader in scope
40
Transatlantic businesses that first touted the benefits of EUUSmutual recognition arrangements now realize their underestimation ofthe difficulties of implementation5 3 These constraints involve not justregulators and regulatory cultures but market forces as well Themarket has not reacted favourably to the recognition of newConformity Assessment Bodies as provided under the 1997 MRA Fromthe perspective of manufacturers they typically develop long-termworking relationships with certifying laboratories which constitute aform of cost-effective firm-laboratory partnership Moreover alaboratoryrsquos mark itself may be important in some markets so thatfirms may continue obtaining formal certification from EU notifiedbodies for the EU market and US laboratories for the United States Asa result most firms may continue using the same laboratories eventhough these laboratories cannot directly certify products asConformity Assessment Bodies but must work through sub-contracting arrangements with accredited laboratories on the otherside of the Atlantic5 4 As for laboratories they will not invest in theaccreditation procedures required to become a Conformity AssessmentBody if they fear that the benefits are limited or too uncertainAccreditation costs can be substantial involving seminars workshopstraining programs audits and joint inspections with authorities acrossthe Atlantic The MRArsquos success in consequence may requireconsiderable market promotion
Perhaps the most important lesson from the implementation of theEUUS MRAs is that agreements that both guarantee public safetyand reduce trade barriers cannot be accomplished on the cheap Theyrequire sustained political will of leaders in each jurisdiction to allocatesignificant resources to finance the coordination of cross-borderregulatory networks EU member states sustained such political willand dedicated such resources over decades in order to create thesingle market Even so they too have encountered significant setbacksand obstacles While it is far too early to pre-judge the 1997 MRA itseems clear that the full benefits of the agreement will be reaped only ifboth sides take concrete steps to ensure that sufficient regulatoryresources are made available to the regulators charged withimplementing the agreement in practice
44 Case Study Data Privacy and the Safe Harbour Agreement5 5
Data privacy protection became a transatlantic issue because of thegrowing interdependence of the US and European economies and therising importance of information technology US affiliates in Europeproduce over a trillion dollars of goods and services annuallyconstituting lsquoover half of all the foreign production of US companiesrsquo5 6
These companies depend on information flows not only with thirdparty suppliers customers consultants marketers and other serviceproviders but also internally within their complex networks of
41
affiliates joint ventures and partnerships The EUUS dispute overdata privacy protection and efforts at cooperation demonstrate theinherent interrelation between social regulation and open trade policieswhere regulation (or the lack thereof) has external effects Alleged USunder-regulation can jeopardize the privacy interests of EU residentsAlleged EU over-regulation can limit the commercial operations of USenterprises In an interdependent transatlantic economy US and EUauthorities attempt to manage the ensuing conflicts of norms andmesh where possible their divergent regulatory systems
On October 24 1998 Directive 9546EC on the Protection ofIndividuals with Regard to the Processing of Personal Data and theFree Movement of Such Data became effective The EU through itsDirective takes primarily a regulatory approach to data privacyprotection as opposed to private ordering through market processesExcept for public security criminal law and related exceptions theDirective covers all processing of all personal data by whatever meansand is not limited to action by government business sector or field ofuse (arts 2-3) The Directive prohibits data controllers from processinginformation unless the individual lsquounambiguouslyrsquo consents to theprocessing and that consent is informed (arts 7 8 10 14) TheDirective provides multiple means for enforcement It requires memberstates to grant individuals a permanent right of access to obtain copiesof the data about them and have it corrected or its use enjoined (arts12 28) It obliges member states to provide a judicial remedy forinfringements of data privacy rights including the right to receivedamages (arts 22-24) To support effective enforcement each memberstate must designate an independent public authority lsquoresponsible formonitoring the application within its territoryrsquo of the Directiversquosprovisions (art 28) These supervisory authorities are to be grantedsignificant powers (arts 18 28)5 7
In contrast the United States has stressed lsquoself-regulationrsquo by theprivate sector backed by regulation which tends to be sector-specificand less stringent Congressrsquos targeting of specific sectors andconcerns is reflected in the following statutory titles The DriverrsquosPrivacy Protection Act of 1994 the Video Privacy Protection Act of1988 The Electronic Communications Privacy Act of 1986 the CableCommunications Policy Act of 1984 and The Fair Credit Reporting Actof 1971 Overall the US approach is fragmented involving standard-setting and enforcement by a wide variety of actors including federaland state legislatures agencies and courts industry associationsindividual companies and market forces US legislation providescitizens with significantly greater protection against the collection anduse of personal information by government in particular the federalgovernment than by the private sector
Article 25 of the EU Directive provides that member states shallprohibit all data transfers to a third country if the Commission finds
42
that the country does not ensure lsquoan adequate level of protectionrsquo ofdata privacy Since it appeared that the United States might notprovide for lsquoadequatersquo data privacy protection under the Directiversquoscriteria US and EU authorities engaged in intensive negotiations toavoid a ban on data flows to the United States culminating in theiragreement on Safe Harbour Principles in March 20005 8 Under theagreement EU member states now must recognize that US firmsrsquoadherence to these Principles is sufficient to protect them frommember state challenge Member state authorities however may stillchallenge transfers to firms that do not adopt and comply with thePrinciples
The guidelines set forth seven core data privacy principles for industryto follow which respectively cover the following issues Notice ChoiceOnward Transfer Security Data Integrity Access and EnforcementThe parties supplemented the Principles with a document entitledlsquoFrequently Asked Questionsrsquo (FAQs) designed to guide firms andauthorities in the Principlesrsquo application Many of the FAQs specify thescope of exceptions thereby providing some leeway to US firms
Companies join the Safe Harbour program by annually certifying to theUS Department of Commerce that they will comply with the PrinciplesThe Department of Commerce then places the companyrsquos name on itsweb site list of certifying firms Self-regulatory organizations (such asBBB Online and TRUSTe) backed by the US Federal TradeCommission offer the primary means for the Principlesrsquo enforcementIn this way the Principlesrsquo application resembles the EUrsquos new andglobal approaches to internal market harmonization5 9 As under thenew approach the Safe Harbour Principles set forth lsquoessentialrequirementsrsquo that firms must meet As under the global approachfirms self-certify their adherence which certification is backed first byaudits from self-regulatory organizations and then (ultimately) by theauthority of the state As of February 23 2002 156 companies hadcertified their adherence to the Principles
The Directive also provides other ways to comply with it in particularthrough obtaining lsquounambiguousrsquo consent from the lsquodata subjectrsquo inEurope (art 7) and the signature of a lsquomodel contractrsquo with data privacyauthorities in member states (Article 26) In January 2002 theCommission approved standard contract clauses covering privacyprotection that can be applied to all data transfers from the EUregardless of a firmrsquos adherence to the Safe Harbour Principles Firmsalso can sign ad hoc contracts with individual member state dataprivacy authorities In addition firms can sign contracts with affiliateswhen transferring personal information such as information containedin personnel files
The Safe Harbour Principles are still at an inchoate stage so that itremains too early to assess their impact Some commentators have
43
questioned the effectiveness of the Principles given that relatively fewUS companies have signed them However some practitioners pointout that companies will not certify their procedures until theiroperations are in compliance6 0 For large companies this allegedly caninvolve considerable re-engineering of their information systemscreation of new internal policies and training of personnel
Nonetheless companies engaged in transatlantic business operate inthe shadow of the Directiversquos potential enforcement Under theDirective US businesses face potential litigation before Europeancourts and administrative bodies unless they adhere to the SafeHarbour Principles Even though privacy advocates have criticized theSafe Harbour Principles the agreement represents a potentially usefultool for such advocates In addition the agreement has increased thedemand for legal consulting and other privacy services within theUnited States For example the Better Business Bureau OnLinecreated a privacy seal program which incorporates the Safe HarbourPrinciples and the Electronic Frontier Foundation a public interestorganization has associated with information technology companies tolaunch a program named TRUSTe to rate the privacy protection ofInternet sites which program also is certified under Safe Harbour
In a world of increased economic interdependence the Safe HarbourPrinciples point to the importance of regulatory cooperation acrossborders involving public and private actors Certification groups suchas BBB OnLine meet with European data protection officials so thatthey become comfortable in the workings of an alternative USapproach Government officials including in Europe realize that theydo not have the resources to enforce the Directiversquos provisions solelyon their own and thus rely on public-private networks in an attemptto ensure better global practices affecting EU constituentsNonetheless to make the Principles work will require sustained cross-border cooperation
45 The Challenge of Transatlantic Regulatory Cooperation
Although brief and selective this review of cooperation across threesectors suggests several tentative conclusions about both the benefitsand the potential obstacles to transatlantic regulatory cooperation
With regard to the potential benefits of transatlantic regulatorycooperation we have identified two First as we have seen regulatorycooperation has the potential to enhance the efficiency of regulationthrough the exchange of information and best practice the provision ofearly warning of potential disputes the avoidance or management ofconflicting regulatory decisions and the gradual building of mutualtrust among regulators Second regulatory cooperation can facilitatetransatlantic trade and investment by removing duplicative regulatory
44
requirements and other non-tariff barriers within the transatlanticmarketplace Such cooperation moreover need not involve thecomplete harmonization or convergence of EU and US regulationsalthough there is some preliminary evidence of convergence in specificissue-areas including the acceptance by the United States of a mutualrecognition scheme similar to that long practiced in the EuropeanUnion and the EUrsquos active discussion of moving from its currentlsquodominance testrsquo to a possible new standard for regulatory mergerscloser to that employed by competition authorities in the UnitedStates
Yet despite the obvious promise of transatlantic regulatorycooperation a broad survey of EUUS cooperation in various areasincluding the three case studies analyzed above points to a number ofpotential obstacles to successful transatlantic regulatory cooperation
bull Regulatory Independence In a number of areas US regulatorsenjoy greater regulatory independence than their Europeancounterparts and may resist what they perceive to be an effort tocompromise domestic regulatory standards and processes in theinterests of international trade The result in some cases is that theUSTR and other central agencies of the federal governmentencounter difficulty guaranteeing compliance with regulatoryagreements by specific regulatory agencies such as the FDA andOSHA if and insofar as these agencies believe that implementationof those agreements would compromise established US regulatorystandards and procedures
bull Transparency and Administrative Law Requirements Across awide range of issue-areas US regulators express concern about thedifferent administrative-law requirements for regulators in the USand the European Union most notably in the area of transparencyIn the United States regulators are required to adhere to thelsquonotice-and-commentrsquo rulemaking procedures of the AdministrativeProcedure Act which requires agencies to provide public notice ofproposed regulations in the Federal Register allow individuals tosubmit comments prior to the final adoption of new rules and keepa public record of the regulatory process The EU rulemakingprocedure although typically characterized by widespreadconsultation of interested parties does not incorporate thesefeatures
bull Confidential Information T h e need to pr o tect con f id e n tia lin f or m a ti on of fir m s an d ot h er pr iva te pa r tie s also pla ce s lim i ts on th ea b i lity of both sid es to co op er a t e in th e ad o p tion an d im p lem en ta tion of reg ula tion s pa r ti cula r l y in th e en f or cem e n t of US an d EU com p etiti on la w s reg a r d in g ca r tel s an d con cen tr a tio n s wh er e fi r m sh a v e been mor e reluct a n t to ag r ee to th e sh a r in g of con f i d en tia lin f or m a ti on th a n in th e ar e a of mer g er con tr o l revi ew ed ab ove
45
bull Multi-Level Governance The United States and the EuropeanUnion are both federal or quasi-federal governance systems withregulatory powers divided in most sectors between the federalEUlevel on the one hand and individual statesmember states or evenlocal governments on the other In terms of regulatory cooperationthis division of regulatory powers means that US executive-branchnegotiators and EU Commission officials are frequently chargedwith negotiating regulatory agreements in areas where the statesretain at least partial regulatory competence and to charges fromboth sides that their counterparts are unable to lsquodeliver the statesrsquoExamples of such state regulatory powers on the US side includethe regulation of insurance and other services as well as publicprocurement where the EU has insisted that the participation ofindividual states is vital to the enforcement of regulatoryagreements6 1 Similar problems afflict the EU side whereCommission efforts to engage in regulatory cooperation may befrustrated by resistance among individual member states as in thecase of GMOs or by the slow adoption of EU-level regulations as inthe case of financial services
bull Regulatory Sovereignty Ultimately the adoption of the broadregulatory frameworks for economic activity consumer andenvironmental protection and other areas is entrusted on bothsides of the Atlantic to democratically accountable bodies such asthe Congress and President in the US and the Council of Ministersand European Parliament in the European Union Within theEuropean Union the harmonization and mutual recognition ofnational regulations has been accomplished in large part through adeliberate transfer of regulatory sovereignty to the European level(as in EU merger control) through the pooling of regulatorysovereignty in the Council of Ministers and the EuropeanParliament (as in data privacy and food safety) and through themutual recognition of standards as enforced by the European Courtof Justice To date however the European Union and the UnitedStates have proven unwilling to compromise their regulatorysovereignty in the various agreements reviewed above indeed eventhe most successful experiment in transatlantic regulatorycooperation that in competition policy is predicated explicitly oneach sidersquos ability to cooperate without any substantial change to itsdomestic regulatory objectives and procedures
The existence of these various obstacles does not of course mean thattransatlantic regulatory cooperation is doomed to failure Some areaslike competition policy are subject to relatively few obstacles tosuccessful cooperation while others such as food safety encountermultiple obstacles Even in difficult areas like food safety moreoverregular exchange of information has proven useful in allowingregulators on each side to understand each otherrsquos regulatoryphilosophies and procedures and gradually to build up the trust
46
among regulators that will be required for the successful operation offuture efforts at mutual recognition or harmonization of regulations
As a first step in this direction the European Union and the UnitedStates agreed in April 2002 to the adoption of a set of non-bindinglsquoEUUS Guidelines on Regulatory Cooperation and TransparencyrsquoAlthough this joint statement of principles does not bind either the USor the EU to any specific regulatory measures and explicitly excludesthe sensitive area of agriculture the agreement does call forregularized exchange of information between EU and US regulatorsand for consideration of harmonization or mutual recognition ofstandards lsquoas may be appropriate in specific casesrsquo to minimizeunnecessary technical barriers to trade In addition the documentsuggests that both EU and US regulators should apply potentially far-reaching principles of transparency in rule-making including publicnotification of and comment on proposed regulations Theimplementation of the guidelines is to be reviewed on an ongoing basisby the TEPTBT Working Group6 2
The significance of the new EUUS Guidelines will depend on theirimplementation in practice across an array of issue-areas in themonths and years to come Regardless of the success of this specificendeavor however regulatory cooperation remains an importantpriority for the European Union and the United States in achievingtheir respective regulatory aims while also preventing and resolvingpotential trade disputes For this reason the conclusion to this reportsuggests a careful and systematic study of current attempts atregulatory cooperation across issue-areas identifying key obstaclesand lsquobest practicersquo at overcoming those obstacles would represent asubstantial contribution to future efforts in this area
47
ndash 5 ndashThe European Union and the Americas
EUUS economic relations do not take place in a vacuum As wehave seen transatlantic efforts at trade liberalization regulatorycooperation and dispute resolution are nested within and frequentlymake explicit use of the rules-based multilateral trading system of theWorld Trade Organization the next round of which both the UnitedStates and the European Union have identified as a priority in thecoming years
Just as importantly the story of the EUrsquos ever-closer economicrelationship with the United States coincides with a second majordevelopment namely the rapid increase of EU trade with the countriesof North and South America Prior to the 1990s the United States wasthe most important trading partner and the largest source of foreigndirect investment in Canada Mexico and throughout most of LatinAmerica and this important role for the US has been further enhancedby the adoption and implementation of the North American Free TradeAgreement (NAFTA) with Mexico and Canada as well the earlynegotiations regarding the possible creation of a multilateral FreeTrade Area of the Americas During the course of the 1990s howeverthe European Union has developed an increasingly close andinstitutionalized relationship with Canada Mexico the Mercosurcustoms union and other countries of Central and South Americawhere it now rivals the economic importance of the United States
In institutional terms the EUUS relationship finds its closestcounterpart in the Unionrsquos bilateral relationship with Canadamdashthisdespite an EUCanada economic relationship that is dwarfed by eachsidersquos economic relationship with the US In economic terms theEUCanada relationship is substantially less important than Canadarsquosbilateral relationship with the United States which is far and awayCanadarsquos largest trading partner taking some 87 of total Canadianexports The integration of Canadarsquos economy with that of other Northand South American states moreover has increased in recent yearswith the implementation of NAFTA and a free trade agreement withChile Nevertheless the European Union ranks as Canadarsquos second-largest trading partner after the United States while Canada accountsfor approximately 17 of EU imports and 22 of total EU exports Asin the EUUS relationship moreover foreign direct investment has
48
outpaced trade as a source of interdependence in the EUCanadarelationship with Canada holding 32 of all FDI in the Union whilethe EU is the second largest investor in Canada after the US holdingsome 8 of all foreign direct investment in Canada6 3
Institutionally the EUCanada relationship is structured by a series ofbilateral agreements including the 1990 Declaration on EuropeanCommunity-Canada Relations and the 1996 Joint Political Declarationon EU-Canada Relations and its accompanying Joint EU-CanadaAction Plan and by a series of regular high-level summits that parallelthose held between the EU and the US The EU and Canada have alsosigned a number of important regulatory cooperation agreements inrecent years including a 1996 customs cooperation agreement a setof Mutual Recognition Agreements agreed in 1998 and agreements onveterinary equivalence and cooperation policy cooperation both signedin 1999 Trade disputes between the EU and Canada are relativelyrare and have generally been dealt with successfully through bilateralconsultation or through the WTO dispute resolution procedure6 4
The Union has come also to play an increasingly important economicrole in Latin America characterized by a sharp increase in both tradeand especially foreign direct investment in the region At the sametime the Union has pursued a wide range of trade and economicagreements with the countries of Latin America including a free tradeagreement with Mexico and other agreements with Mercosur andother Latin American countries In the rest of this section thereforewe examine the EUrsquos economic relationship with the countries of LatinAmerica focusing in turn on the changing patterns of EULatinAmerican trade and investment EU economic agreements with thecountries of the region and the remaining challenges for the EULatinAmerica relationship
51 The EU and Latin America Trade and Investment
The pattern of the trade relationships between the EU and the mainLatin American countries has changed substantially during the lastdecade Although none of them was a major trade partner the largercountries of Latin America already represented an importantproportion of EU exports and imports in 1990 when Mercosur plusMexico and Chile accounted for 43 of extra-EU exports and 32 ofits imports The trade balance was very favourable to the Europeanside with a deficit of over US$8 billion During the 1990s Europeconsolidated its Latin American export markets and increased itsmarket share in Argentina Mexico Chile and especially Brazil In2000 the EU maintained the proportion of its exports towards theanalysed countries while increasing the proportion of imports up to35 The trade balance has improved versus Argentina Mexicoand Brazil whereas the deficit has increased significantly with Chile
49
The total deficit with the countries has now turned into a surplus ofmore than 5 billion
Table 9 EULatin American Trade and Investment(ExportsImports and Foreign Direct Investment as apercentage of total extra-EU flows Trade Balances aremillions of US$)
of EUexports
of EUimports
Trade balance of EUFDI
1990 2000 1990 2000 1990 2000 1999 2000
Argentina 03 08 08 06 -2252 737 54 15
Brazil 25 18 09 17 -5711 -1031 38 53
MERCOSUR 28 25 19 23 -8368 301 92 68
Mexico 11 15 07 07 1231 6973 06 08
Chile 03 04 06 05 -1336 -1653 19 ---
Note figures with an asterisk correspond to year 1999Source European Commission DG-Trade
Moving from Latin America as a whole to individual countries andgroupings we come first to the Mercosur countries (Argentina BrazilParaguay and Uruguay) which created a customs union in 1994 andhave since increased partly thanks to their own process of economicintegration their openness towards the rest of the world6 5 The twosmallest countries are considerably more open (a tradeGDP ratio of70 in Paraguay and 33 in Uruguay in 1999) whereas thisproportion is 19 in Argentina and 15 in Brazil6 6 Although intra-area trade accounts for 20 of their total flows trade with NAFTA andthe EU has also increased during the nineties The financial crises ofthe end of the decade have especially since 1998 temporally put ahalt in the process and affected their external demand By 2000 theEU as a bloc had overtaken the United States as Mercosurrsquos singlelargest trade partner representing 30 of their exports and 35 oftheir imports
The EU and Mercosur can be considered complementary economicblocs in both agricultural and industrial products The EU is the mainexport market for Mercosur agriculture with a 40 share (the USrepresents only 9) More precisely 50 of Mercosur exports towardsthe EU are agricultural products and are concentrated in a smallrange of products such as oilseeds (particularly soy) and animal feedproducts We should also mention coffee (10 of EU imports fromMercosur) livestock and meat and derivatives fruit and derivativestobacco and fish products In contrast EU exports of agricultural
50
products to Mercosur are modest (approximately 6 of total) and areconcentrated in three groups of products alcoholic beverages dairyproducts and other edible animal products and cocoa derivatives Thetrade balance is negative for the EU in agricultural products althoughthe opposite happens in the case of industrial goods The EU is themain supplier of industrial and capital goods to the area includingmost importantly automobiles machinery and mechanical appliancesand a third group of products from the electrical industry (mainlyradiotelephony appliances and parts)
Economic relations between Argentina and the EU developed verypositively since the signature in 1990 of the ECArgentina frameworkagreement on trade and economic co-operation During the 1990sArgentina advanced towards being an open market economy and optedfor an outward-looking external policy where Mercosur and the EUplayed a key role The EU is Argentinarsquos second largest trading partner(after Brazil) overall trade with the EU has more than doubled duringthe last 10 years and represents around 25 of total trade Howeverthe crisis that started at the end of last decade has interrupted thispositive trend The main components of EU imports are agriculturalproducts and raw materials while EU exports to Argentina concentrateon machinery and transport equipment chemicals and manufacturedgoods
Brazil is the largest Latin American economy its GDP accounting for35 of the area or 65 of Mercosur Brazilrsquos domestic market with apopulation over 160 million people constitutes a potentially attractivedestination for both US and EU exports Brazil also signed a co-operation agreement in 1995 with the EU which is now its maintrading partner destination of 268 of its exports and origin of 252of its imports although the US follows very closely (243 and 233respectively) Although during the last years the EU has progressivelyreduced its share of the Brazilian market in favour of the US Brazilremains the EUrsquos main trade partner in Latin America Like Argentinathe process of opening to international competition started between1990 and 1993 As a result Brazilrsquos trade surpluses of the 1990squickly turned into substantial deficits later in the decade only slowlycorrected after the 1999 devaluation The main components of EUimports (1999 data) were vegetable products prepared foodstuffsmineral products transportation equipment wood and wood pulpproducts and machinery and mechanical appliances the latter alsoimportant in EU exports together with transportation equipmentchemical products base metals plastics and rubber
Mexico is the tenth-largest world economy and the most importantLatin-American exporter its total exports amounting to US$166 billionin 2000 In order to qualify its relative size it should be compared withBrazil the second larger exporter in the region (and ninth worldeconomy in terms of GDP) which exported only US$55 billion Mexico
51
is traditionally one of the EUrsquos most important trade partners in LatinAmerica sharing with Brazil its high potential for growth as an exportmarket Mexico has also followed a process of opening to internationalcompetition during the end of the eighties and all the nineties first byunilateral tariff reductions then by subscribing to ten free tradeagreements with the majority of the Latin American countries or areasCanada and the US (creating NAFTA) and in Europe with the EFTAand the EU
During the period 1994-2000 Mexican exports to the US increased240 while their composition has substantially diversified Oil-relatedexports represented only 98 of the total in 2000 compared to 248in 1990 Agricultural products did not account for more than 25 andthe rest of the exports were manufactured goods In contrast 75 ofMexicorsquos imports are intermediate goods 134 capital goods and theproportion of consumption goods is only 117 The EU is Mexicorsquossecond trading partner after the US although the data reveals theoverwhelming dependence of Mexico on the US economy 887 of itsexports are directed to the US and 73 of its imports come from it Inthe EU Germany and Spain represent Mexicorsquos largest export marketswith 09 each Germany is the main European supplier representinga 33 of Mexicorsquos imports As mentioned above Mexicorsquos tradebalance with the EU is highly deficitary
Chile is considered the most open stable and liberalized economy inLatin America Despite its relatively modest size Chile is an importanttrading nation due to its high tradeGDP ratio (over 40) Chile is thefifth Latin American exporter (US$182 billion in 2000) withagriculture and fishery accounting for 10 of the total and the other90 distributed between mining (449 ) and industry (442) Incontrast Chilersquos imports are concentrated in the industrial sector(77) with mining (135) and agriculture (22) lagging far behindIt should be stressed that Chilean trade is globally balanced andexhibits important surpluses with the European Union and Asia Incontrast Chile cumulates its largest deficit with Argentina its main oilsupplier
The EU is Chilersquos main trading partner taking in approximately 25 ofthe countries imports during 20016 7 Among the EU countries theUnited Kingdom and Italy accumulate 34 of Chilersquos trade each andFrance 3 Chile is not only a market for EU exporters of goods andservices but also an important source of imports both in agriculturaland industrial goods The main components of EU imports from Chileare manufactured goods raw materials agricultural products andbeverages and tobacco EU exports of goods are concentrated inmachinery and transport equipment chemical products andmanufactured goods
52
Latin America in general and particularly Mercosur has been involvedin the general trend that directed large capital flows towards emergingand developing economies In 1990 only 16 of overall foreign directinvestment was received by developing countries whereas in 2000 thisproportion had reached 37 Latin America and the Caribbeanreceived around 11 of these flows during the period 1995-99 Brazilreceived one third of the investment in the area whereas Argentinaand Chilersquos proportions were 16 and 8 respectively thanks to theacquisitions of domestic firms by the Spanish companies Repsol andEndesa However due to its instability Argentina has experienced asignificant reduction in foreign investment since 2000 Mexico is thesecond destination of FDI in Latin America (17 during the periodabove mentioned) and in contrast with other countries such asArgentina these flows exhibit a very stable behaviour
Although Mexico followed a process of capital movements liberalizationsimilar to the experiences of Brazil and Argentina a factor behind thestability of these movements is related to its process of regionalintegration with North America Many multinational enterprises haveinvested in Mexico as a platform to produce manufactured goodsdirected towards the US and Canadian markets As an examplebetween 1995 and 2000 more than 60 of cumulated FDI went to themanufacturing sector and 65 had its origin in the US Theseinvestment flows have contributed to the modernization of theindustrial sector and to a significant improvement in Mexicorsquoscompetitive position in the automobile electronic and textileindustries which can help to explain the excellent export performanceof this country in recent years Finally in 2000 the banking sector hascumulated 30 of the total flows of FDI received by Mexico whereasservices telecommunications and the oil industry have had a verylimited interest for foreign investors This fact is in contrast with theother large Latin American economies
The majority of the FDI that the Mercosur countries received in thesecond half of the nineties was directed towards the privatization of thepublic firms especially in the area of services (CEPAL 2001) Due tothis process FDI has abandoned its traditional destinations (forexample in 1995 55 of the FDI stock of Brazil was concentrated inmanufacturing) to be employed in mergers and acquisitions mainly inthe service sector According to Tansini and Vera in 1998 and 199978 of these acquisitions were directed towards Argentina and 18had Chile as destination6 8 In 1999 30 of the capital flows receivedby Brazil were absorbed by the privatizations although since then themajority of the resources were devoted to consolidating andrestructuring these firms
The European Unionrsquos share of foreign direct investment inLatin America increased dramatically during the 1990s with netinflows from the EU increasing from US$1077 billion in 1993 to
53
US$17068 billion in 1997 nearly overtaking total inflows to the regionfrom the United States Within Europe moreover there has been ashift in the primary investors in Latin America with Spain inparticular joining the United Kingdom and Germany as the leadingEuropean investors in the region (see Figure 2) During the 1980s theUK produced more than 50 of the cumulated FDI flows in Mercosurplus Chile6 9 followed by Germany (25) In the 1990s by contrastGermany increased its participation to more than 30 whereas Spainmore than doubled its share to 24 Germanyrsquos FDI concentrated inmanufacturing (such as the automobile industry) during the first halfof the decade especially in Argentina and Brazil with their largedomestic markets Since 1995 Spain is the main European investordirecting its interests in the privatization sectors bankingtelecommunications and energy Other EU countries with importantFDI flows in Mercosur and Chile during the nineties have beenthe Netherlands France and Portugal (the latter with Brazil as itsprimary destination) According to the EC Commission the EUrsquos stockof foreign direct investment in 1999 was euro 1 billion in Uruguayeuro 31 billion in Argentina and euro 34 billion in Brazil EU investment inParaguay is virtually non-existent whereas Chile cumulateseuro 104 billion although in this country the US is still the main foreigninvestor
52 EU Trade Agreements with Latin American Countries7 0
The first symbolic push for the intensification of EU relations withLatin America followed the 1969 lsquoDeclaration of Buenos Airesrsquo issuedby the Latin American members of the Special Committee for LatinAmerican Coordination and calling for an institutionalization of theEULatin America political dialogue and closer economic cooperationbetween both regions
Unlike some previous attempts this time the EU responded positivelyand a regular dialogue between the group of Latin Americanambassadors in Brussels (GRULA) and EC representatives wasinitiated The major substantive measure advanced in this dialoguewas the policy developed toward the Caribbean countries which wereincorporated together with other European former colonies in Africaand the Pacific in the so-called ACP Group and were accorded a specialregime as stated in the Lomeacute Convention of 19757 1 Apart from thatthe Communityrsquos official policy during this period was limited tobilateral economic treaties with the major Latin American countries(so-called first generation agreements) such as the non-preferentialtrade agreements with Argentina in 1970 Uruguay in 1973 Brazil in1973 and Mexico in 19757 2
54
Table 10 EULatin American Trade Agreements
Agreement Objectives Year ofentry into
fEUMexico FreeTrade Agreement(EconomicPartnershipPolitical Co-operation and Co-operationAgreement)
Liberalizes over 96 per cent of EU-Mexicotrade by 2007 at the latest fullyliberalizes industrial products by 2003for the EU and 2007 for Mexico withnegotiations on tariff phase-out ofagricultural items deferred until 2003includes rules on intellectual propertyand dispute settlements and providesEU access to the Mexican procurementand services markets similar to NAFTA
2000
CentralAmericaEUFramework Co-operationAgreement andRegionalProgramme for theReconstruction ofCentral America(PRRAC)
The Framework Agreement seeks tostrength the co-operation in theeconomic financial commercial socio-cultural areas and environment Asecond aim is to reinforce the CentralAmerican Integration System ThePPRAC is a specific program for recoveryfrom the effects caused by hurricaneMitch
Both since1999
AndeanCommunityEUCo-operationagreement andGSP
Political aspects anti-drug dialogueCommercial aspects since 1998 theGeneral System of Preferences is appliedunder a new regime As a result 75 ofproducts imported from the AndeanCommunity to the EU are exempt fromcustom duties Framework Co-operationAgreement to promote regionalintegration
1998(politicaldialogueand co-
operation)and 1999
(GSP)
EUChile AssociationAgreement
Governments concluded negotiations inApril 2002 on a wide-ranging AssociationAgreement including the creation of a free-trade area in goods and services anagreement on wines and spirits andprovisions on public procurementinvestment competition and intellectualproperty
Awaitingratificationby the EUand Chile
MercosurEuropeanUnion
Framework agreement came into force in1999 Negotiations on an interregionalfree-trade agreement began in 1999 andare ongoing
Frameworkagreementsince 1999Free-tradeagreementexpected in
2005
Source Flocircres (2001) DG Trade (European Commission) and Camarero andTamarit (2002)
55
Figure 2 EU Foreign Direct Investment in MERCOSUR + Chile(Cumulated flows Country shares EU = 100)
Source OECD International Direct Investment Statistics YearbookNote For clarity some EU countries with smaller investment shares in MERCOSURhave been excluded
From the mid-1970s to mid-1980s the official policy of the EC towardsLatin America was based mainly on the Inter-Parliamentary Dialoguebetween the European Parliament and Latin Americanparliamentarians and on bilateral economic treaties With regard tothe latter a new round of lsquosecond-generationrsquo agreements was signedbetween 1980 and 1985 with individual countries such as Argentina in1980 Uruguay in 1980 and Brazil in 1982 and with sub-regionssuch as the Andean Pact (created in 1969 between VenezuelaColombia Equator Peru and Bolivia) in 1983 and the CentralAmerican Common Market in 1986 7 3
From the mid-1980s onward Latin America became the focus of moresubstantial political and economic policies from the EU On thepolitical side a variety of multilateral fora have been set up The SanJoseacute Group was launched in Costa Rica in 1984 with the aim ofsupporting progress in the peace process and democracy in CentralAmerica From that date annual meetings have been organizedextending their aims to other fields like the rule of law and humanrights the fight against the trafficking of drugs and educationaltechnical and cultural co-operation The Rio Group was established in1986 again meeting on an annual basis with a membership includingall the South American countries as well as Mexico Finally twosummit meetingsmdashthe first in Rio de Janeiro in June 1999 and a
0
10
20
30
40
50
60
1980-90
1991-98
56
second held under the Spanish EU Presidency in Madrid in May2002mdashbrought together the leaders of 48 countries from the EU andLatin America The first summit in Rio agreed upon an Action Plan toincrease co-operation in the political and cultural spheres and calledfor negotiation of association agreements with Chile and Mercosurwhile the Madrid summit further developed political cooperation andconfirmed the conclusion of a bilateral EUChile AssociationAgreement7 4
The 1990s and early 2000s finally have witnessed the conclusion bythe EU of a round of so-called lsquothird-generationrsquo treaties between theEU and various Latin American countries and trade blocs The primaryagreements in force or under negotiation between the Union and thecountries of Latin America are summarized in Table 10 In all thecases the nature of these agreements is twofold encompassingpolitical agreements on questions such as democracy the environmentand human rights and as well as economic agreements regarding theliberalization of trade and investment
521 The EUMexico Free Trade Agreement
Since 1975 the EU has signed several agreements with MexicoAlthough these agreements were not significantly different from othersalready in force with other countries in the same geographic areaMexico had always received a particular treatment Thus in the 70sMexico benefited from the treatment of most favoured nationneglecting the fact that this country was not a member of the GATT atthat time Later Mexico was eligible under the GSP scheme benefitingfrom this treatment until 1995 when this system was revisited andMexico lost much of its preferential access to the EU marketNegotiations aiming at the establishment of an FTA with the EUstarted during the same year The primary reason was the concern inthe EU about possible trade diversion due to the Mexican entry intoNAFTA in 1994 A general agreement removing trade barriers betweenthe EU and Mexico would minimize any trade diversion effect
Although the most important part of the agreement is the creation of afree trade area between the EU and Mexico the so-called GlobalAgreement includes a rather wide package institutionalising a regularpolitical dialogue and extending the bilateral co-operation Thisagreement places the EU in a better position to compete for access tothe Mexican market In 2007 all industrial goods will be free of tariffsMoreover in trade volume 52 of EC exports will enter the Mexicanmarket duty free by 2003 and for the remaining 48 a maximum dutyof 5 will be applied This extremely quick dismantling calendar willplace economic operators on both sides on an equal footing with otherpreferential partners in real time Concerning agricultural and fisheriesproducts some European special sensitivities are respected allowingat the same time for preferential access to European and Mexican
57
exporters into their respective markets The agreement also includespreferential treatment in services providing service providers from theEU with access to the Mexican market which will be equivalent if notsuperior to that currently enjoyed by operators from Mexicorsquos otherpreferential partners in particular the US and Canada In the servicessector EU banks and insurance companies will be authorized tooperate and establish directly on the Mexican territory Theliberalization of investment and payments related to investments willtake place in 2003 The agreement also provides access to the Mexicanprocurement market similar to NAFTA Finally provisions are madeabout intellectual property competition and dispute settlement
The agreement covers other aspects apart from trade Thus the EUfosters co-operation programmes with Mexico for an annual amount onaverage of euro 13 million during the 1990-99 period There were alsosignificant activities under horizontal programmes such as AL-Invest(Latin American Investment Programmes) and ALFA (Latin AmericanAcademic Formation)
522 Relations with Central America
The most important part of the cooperation between the EU and LatinAmerica and more specifically with Central America has beenimplemented through the so-called cooperation agreements The firstbilateral agreements with individual Central American countries weresigned during the 1970s and early 1980s Later on a second wave ofagreements were adopted covering a wider range of areas topicsbeginning with the First Framework Agreement of Co-operation forCentral America signed in 1985 This agreement belongs to the mostadvanced second-generation type and covers areas such ascommercial promotion and well as agricultural industrial andeconomic co-operation The Second Framework Agreement of Co-operation signed in 1993 is considered as a lsquothird generationrsquo type7 5
This Agreement came into force in 1999 including two novelties apackage of aid for refugees and a programme to support democracyand human rights The previsions of financial technical and economicco-operation aid with these countries from 2000 to 2006 are close toeuro 500 million Furthermore the Commission has decided to participatein the initiative for highly indebted poor countries (HIPC) The eligibleLatin American countries are Honduras and Nicaragua which stand toreceive as much as euro 30 million Additionally the European InvestmentBank has made several loans to the Central American Bank forEconomic Integration (CABEI) in order to support reconstruction in theregion
58
523 Relations with the Andean Community and Chile
The EU has established a complete institutional framework with theAndean Community implementing different instruments in each field(political dialogue trade and co-operation) with a special emphasis onthe question of lsquoanti-drugrsquo measures
Trade relations between the EU and the Andean Community haveincreased 32 over the last nine years currently representing 08 ofthe EUrsquos total trade and 167 of total trade for the AndeanCommunity It is worthwhile to note that 90 of Andean exportsconsist of raw materials or primary production while 85 of the EUrsquosexports are manufactured products From 1999 on the EU hasgranted under the Generalized System of Preferences (GSP)preferential access for all industrial products as well as numerousagricultural products especially for those Andean countries committedto fighting against drug production and trafficking
In the area of political co-operation the Andean region was the first inLatin America to conclude a regional co-operation agreement with theEU The present regional framework agreement was signed in 1993and entered into force in 1998 The amount of the aid to the areareached some euro 6 millionyear for the period 1982-97
Finally the EU has also established several bilateral agreements withChile including the Framework Agreement signed in 1996 andcurrently in force This agreement covers political and economiccooperation and formed the cornerstone for a new EUChileAssociation Agreement the negotiation of which was completed inApril 2002 The agreement which is currently awaiting ratification byboth parties calls for the creation of a free-trade area in goods andservices an agreement on wines and spirits including both market-access questions and the use of protected names a Sanitary andPhytosanitary Agreement new rules on public procurementinvestment competition and intellectual property and a dispute-resolution mechanism7 6
524 The Launching of a Free Trade Area with Mercosur77
The EU is currently the main trade partner of Mercosur The EUgenerally imports agricultural and primary products from Mercosurwhile it exports primarily industrial commodities7 8 The EU has aFramework Agreement of co-operation similar to others with severalcountries or blocs in Latin America In June 2000 negotiations werere-opened aiming at signing a new Inter-regional AssociationAgreement This new agreement would cover not only commercialaspects but also many others like political dialogue or cooperation(social and humanitarian economic and development) between the twoblocs
59
The fifth round of negotiation between the EU and Mercosur took placein July 2001 The main point in this round was the presentation bythe EU of its offer for the reduction of tariff and non-tariff barriers inorder to liberalize trade in goods services and public procurementThese reductions would cover all the industrial products and 90 ofagricultural products over a period of no longer than ten yearsMercosurrsquos answer to that proposal was given during the sixth roundin October 2001 presenting its own offer in terms of tariff and non-tariff reduction and public procurement At the same time there hasbeen an exchange of views on political dialogue as well as someimprovement in the area of technical and scientific co-operationenergy transport telecommunications and information technologyNegotiations continue but conclusion of the agreement is not expecteduntil 2005
53 Challenges for EULatin American Economic Relations
As even this brief survey has made clear the European Union todayplays a substantial economic and political role in Latin America EUtrade with and foreign direct investment in the region have increaseddramatically during the course of the past decade with the EU nowemerging as the most important economic partner for Mercosur inparticular At the same time the EUrsquos political and economicagreements have demonstrated ever-greater ambition and anincreasingly broad economic agenda embracing not only tariff andquota reductions but also provisions on non-tariff barriersinvestment and public procurement as well as political provisionsregarding democracy and human rights
The completion of a more ambitious system of economic agreementswith the Latin American countries remains a goal for both the UnitedStates and the European Union However there are importantqualitative differences between the strategies of the two trade blocswhile the European Union is trying to keep the development of a hub-and-spoke system of bilateral agreements with individual countries or(as in the case of Mercosur) customs unions the United States hasannounced its desire to create a multilateral Free Trade Area of theAmericas The countries of the region for their part havedemonstrated a decades-long commitment to economic liberalizationlocked in place by a series of both multilateral and bilateral tradeagreements amongst themselves as well as with the United States andthe European Union although their commitment to proceeding alongthese lines has been tested by the recent economic crisis in Argentina
The EULatin America summit meeting held in Madrid in May 2002witnessed the conclusion of the EUChile free trade agreement whichis now awaiting ratification by both sides but further negotiations lieahead particularly in the case of the proposed EUMercosur
60
agreement which remains far from a conclusion not expected before2005 In these negotiations the EU should give special attention toexpanding market access for the Mercosur countries especially for so-called lsquosensitive productsrsquo Although the EU has presented itself as achampion of free trade within various multilateral fora it is clear thatthe Union has actively sought to preserve barriers in some industrialsubsectors and especially in the agricultural sector where theCommission has estimated that some 10-12 of all EU imports fromthe Mercosur countries are currently labelled as lsquosensitiversquo7 9 Removalof these barriers would benefit not only Latin American countries butalso European consumers who are currently playing higher prices foran amount equivalent to 5-7 of the Unionrsquos GDP8 0 In addition thenegotiation process should cover not only tariffs (since over 50 of allimports from Mercosur are eligible for an average tariff lower than25) but also other means of market-access protection such as tariffquotas which are applied extensively to agriculture and food productsAdditional areas for negotiation include trade in goods servicesinvestment public procurement intellectual property rights technicalstandards and rules of origin
Finally neither these EULatin American negotiations nor theextensive EUUS cooperation outlined in the previous sections of thisreport should distract the European Union or the United States fromtheir shared priority namely the successful completion of alsquoDevelopment Roundrsquo of multilateral trade talks within the WTODuring his recent trip to Argentina EU Trade Commissioner PascalLamy stressed the importance of ensuring that bilateral and inter-regional trade agreements such as those that the EU has concludedwith the countries of Latin America rest on the multilateral foundationof WTO trade law For this reason he argued bilateral andinterregional negotiations lsquomust not be allowed to detract our attentionfrom the pursuit of the Doha Development Agendarsquo8 1 Such acommitment should remain a central tenet of EU trade policy in theyears to come
61
ConclusionsThe New Transatlantic Economic Agenda
The United States and the European Union have an extraordinarilyclose and important economic relationship the health of which is vitalto the global economy as a whole Both partners stand to gain a greatdeal by making the relationship more productive Both stand to lose ifdisputes cause interruptions and acrimony and if the relationship failsto adapt to new pressures and new challenges
The agenda of transatlantic economic relations has evolved andexpanded to reflect the increasingly integrated nature of thetransatlantic marketplace To be sure traditional trade questionsmdashandtrade tensionsmdashpersist between the European Union and the UnitedStates Despite the generally low level of tariffs between the EU andUS tariff peaks and quotas remain for both sides in a number ofsensitive areas which can and should be subject to further reductionsin the Doha Round of trade liberalization talks within the World TradeOrganization In addition to tariffs and quotas a number of othertraditional trade measuresmdashincluding most notably antidumpingsubsidies and safeguard measuresmdashcontinue to plague thetransatlantic partnership most strikingly in the current dispute overUS safeguard actions in the steel sector Nevertheless while theseriousness of these disputes should not be underestimated themultilateral rules-based trading system of the World TradingOrganization is generally well equipped to address such issues andthe United States and the European Union should continue in theirefforts to use and support the WTO as a forum for both negotiationand dispute resolution
Perhaps the greatest challenge to the transatlantic economicrelationship however is the expansion of the transatlantic economicagenda to encompass domestic regulations that are adopted forlegitimate purposes but act in practice as non-tariff barriers to tradefragmenting the transatlantic market and in some cases leading tobitter and intractable trade disputes As we have seen these types ofdisputes also create enormous legal and political challenges to thedispute settlement procedure of the WTO where judgments in areassuch as the beef hormones and Irish music disputes have createdpolitical controversy without (at this writing) securing full compliancefrom the states concerned
62
For these reasons any attempt to deepen transatlantic economicintegration between the United States and the European Union mustaddress not only tariffs quotas and similar disputes about subsidiesantidumping actions and safeguard measures but also the new-styleregulatory disputes that are likely to become the most importantbarriers in the transatlantic marketplace and place the greateststrains on the EUUS relationship and the multilateral WTO systemin the medium- to long-term future
Addressing these challenges in turn will require a careful andextensive study and more comprehensive understanding not only oftraditional trade issues but also and especially the domestic sourcesof transatlantic regulatory disputes existing efforts to resolve suchdisputes and possible new mechanisms for preventing and settlingfuture regulatory disputes between the European Union and theUnited States
Such a study would necessarily be wide-ranging involving not onlyeconomists who would identify the potential benefits of economicliberalization but also political scientists political economists andlegal scholars who would identify the domestic sources oftransatlantic regulatory disputes the possibility of preventing suchdisputes through early warning andor regulatory cooperation and themost promising means of settling disputes either bilaterally ormultilaterally Any such study would therefore have to undertakethree fundamental tasks
1 A comprehensive listing and analysis based on publiclyavailable sources of EU and US regulations capable of restrictingtrade and investment between the European Union and the UnitedStates
This report has taken a first step towards such an analysis with thecompilation of regulatory barriers identified by the United States andthe EU in their respective trade barriers reports for 2001 (see Appendix1) but further research is required to identify both the sources and theseriousness of problematic regulations
bull In terms of sources a useful first step would be to identify whetherthe regulations in question were adopted by the local state orfederal (EU) levels of government and whether they were adoptedthrough legislation or by regulatory authorities
bull In terms of seriousness a preliminary effort should be made toidentify the economic impact of the regulations in question ontransatlantic trade and investment Such an analysis could draw onthe research done by the US and the EU as well as on the periodicreports of the World Trade Organization and the Transatlantic
63
Business Dialogue but should be conducted by independenteconomists it is to be accepted as authoritative by both parties
In addition an effort should be made by scholars and practitioners onboth sides of the Atlantic to identify new challenges to the relationshipparticularly those arising from the application of new technologiessuch as electronic commerce and biotechnology
2 A comprehensive survey and analysis of transatlanticregulatory cooperation including areas of informal cooperationamong regulators as well as areas of formal agreement
Section 4 of this report identified regulatory cooperation as aparticularly promising means of preventing as well as settlingtransatlantic regulatory disputes yet it also identified a number ofpolitical legal and institutional barriers which can hindermdashand havehinderedmdashcooperation across a range of issue-areas Given therecognized promise of regulatory cooperation among EU and USauthorities as a means of realizing our joint regulatory aims andavoiding future regulatory disputes more detailed studies oftransatlantic regulatory cooperation are vital in order to identifybarriers to regulatory cooperation as well as instances of lsquobest practicersquoin overcoming those barriers
3 A systematic analysis of various means of bilateral andmultilateral dispute resolution with particular emphasis on thespecific challenges of transatlantic regulatory disputes
Finally while emphasis can and should be placed on prevention ratherthan settlement of transatlantic disputes future studies should focuson new and innovative means of dispute settlement in regulatorydisputes given the acknowledged difficulties of litigating regulatorydisputes before the WTO Dispute Settlement Body At the domesticlevel the prospects for the adoption of lsquotrade impact assessmentsrsquo aswell as a more general move toward transparent regulatory procedureson both sides of the Atlantic should be examined At the bilaterallevel special attention should be directed toward the possibleexpansion of early warning as well as the possible use of bilateralarbitration and mediation outside the WTO At the multilateral levelfinally the EU and US should jointly examine the possible revision ofWTO rules to clarify the use of the precautionary principle and toconsider possible amendments to the WTO Dispute SettlementUnderstanding to be undertaken in May 2003
Appendix 1 EU-US Barriers to Trade in Goods Services and Foreign Investment
Type ofmeasure EU concerns about US rules US concerns about EU rules
Tariffs Tariff peaks Food products Textiles Footwear Leathergoods Jewelry Ceramics and glass Trucks Railway carsOptical fibers Tubes for computer monitorsSANCTIONS IN RETALIATION FOR THE EU BAN ON HORMONE-TREATED BEEFTariff quotas dairy products tobacco
BANANAS (tariff quota + discriminatorylicensing) (settled)CUMULATIVE RECOVERY SYSTEM (brown rice)ADMINISTRATION OF CUSTOMS DUTIES FOR RICE(B) (agreement 1101)
Trade defenceinstruments
1916 ANTIDUMPING ACTSAFEGUARD MEASURES ON STEEL WIRE ROD (32000)SAFEGUARD MEASURES ON WELDED STEEL PIPE (32000)BYRD AMENDMENT (ANTI-DUMPING DUTIES GO TO INJUREDINDUSTRY)FAILURE TO LIFT COUNTERVAILING DUTIES AFTER SUNSET REVIEWSQUOTA ON THE IMPORT OF WHEAT GLUTEN (WITHDRAWN 62001)METHODOLOGY OF COUNTERVAILING DUTIES WITH RESPECT TOBRITISH STEEL ANTI-DUMPING DUTIES ON SEAMLESS PIPE
Othercustomsbarriers
Excessive invoicing requirementsEU not recognized as a country of originTEXTILES amp LEATHER CUSTOMS FORMALITIES amp RULES OF ORIGINTuna (certification of origin)
Other leviesand charges
Customs fees (eg Merchandise Processing Fee)HARBOUR MAINTENANCE TAX and Harbour Services Fee50 tax on imported equipment for boats Taxes that falldisproportionately on European automakersbull Luxury tax (70)bull Gas Guzzler tax (85)bull CAFEacute penalties (~100)
65
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade
SHRIMP-TURTLE ndash to import shrimp countries must be certifiedas matching US efforts to protect sea turtles (EU third party)Tuna-dolphin ndash to import tuna countries must be approvedby the National Marine Fisheries ServiceGeneral prohibition on the importation of dairy productsmade from unpasturized milkEffective prohibition on the importation of yogurtMilk protein for yogurt must come from approved diariesDivergence from international standardsReliance on third-party conformity assessment (eg reelectrical equipment and domestic appliances)US and Canadian content labeling of carsApproval slower than for US-produced drugsOver-the-counter drug approval requires US market historyExtensive product description (textiles amp leather)Citrus fruits must be landed at North Atlantic portsRules on all imports of ruminant animals and animalproducts from all EU countries because of BSEBan on some uncooked meat productsStrict condition on imports of egg products (continuousinspection of production process)Low acid canned food (eg fish and dairy products) subject todetailed prior approval systemPre-clearance inspection of apples and pears from somemember states for pestsProhibition on imports of all animals and products from amember state where a disease exists (not just region wherefound)Approval of wine labels
HORMONE-TREATED BEEFLack of national treatment with respect toGEOGRAPHICAL INDICATIONS for agriculturalproducts and foodPoultry treated with chlorinated waterEffective moratorium on approval of GMproducts since 498Mandatory labeling of all foods containingmore than 1 GM ingredientsStringent certification of non-hormone-treated beef (new US program seemsadequate)Food feed and fertilizer containing specifiedrisk materials (narrower product range thanprevious rule)Treatment and traceability of raw materialsfor production of gelatine for humanconsumption (agreement near on healthcertificate that would enable US exports toresume)EU approval of 3rd country establishmentsexporting animal products (esp dairy)Derogation from EU standards required forUS wine (on-going negotiations to try toresolve)Heat or pressure treatment of softwoodpacking material (new EU rule similar todraft international standard)Metric-only labeling (implementation delayedto 2009)
66
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade(continued)
Excessive post-entry quarantine of hardy nursery stocksExporters of meat or meat products to the US may notprocess meat from countries that are not recognized as freefrom diseases of concern to the US
Slow and arbitrary new aircraft certificationHushkits (dispute brought to ICAO work onan ICAO standard)Labeling of TSP (fertilizer) disadvantages USexportsRestrictive limits on low frequency emissionsfrom electrical and electronic equipment
Regulatorybarriers totrade (USstate and EUmember statelevel)
Duplicate approval of wine labelsState-level safety certification and environmental protectionrequirements (especially of agricultural and food products)Ban on fuel additive MTBE (CA)
Bans on some approved GM products(A I amp L)No approvals for planting certain GMproducts (G P)Unresponsive to requests for field trials ofGM crops (Gr)Ban on GM in animal feed adopted (It) - notin forceHCFC bans by Sw amp FnAdditional navigation light requirements(Fn) ndash suspendedTesting of wheat leading to virtual ban onimports (transshipment recently permitted)(Gr)Harsh interpretation of EU SPSrequirements caused or threatened to causeproblems for processed meat productspoultry products game meat seafoodanimal feed wood products (It)Qualitative imports standards and high test-ing and registration fees for bull semen (It)
67
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Servicesbarriers
50 tax on all non-emergency repairs to US-owned shipscarried out outside the USBarriers in mobile communications (investment restrictionslengthy procedures)De-facto reciprocity requirements regarding satellite-basedcommunications servicesExclusive digital terrestrial television standard (ATSC ) differentfrom EU (DVB-T)Impractical for foreign securities firms to establish branches inorder to engage in broker-dealer activitiesForeign mutual funds unable to make public offerings becauseof registration conditionsForeign investment is restricted in coastal and domesticshippingPartnership with US entity required for granting of licenses forlandings sub-marine cablesOnly US citizens or corporations organized under US law canoperate or maintain power facilities on Federal landForeign stake in airlines capped at 49 (25 of voting stock)Foreign-built vessels prohibited from engaging in coastwisetrade either directly between or via a foreign port and cannot beregistered for dredging towing or salvage
State-level measures Prohibitions on EU exporters distributing rebottling or retailingtheir own wineSome states require insurance companies to already beestablished in another stateSome states require insurers to buy reinsurance from state-licensed insurance companies
European content requirements for TVbroadcastsAccess to the single aviation marketrestricted to firms majority-owned andcontrolled by EU nationalsBanking insurance and investmentservices rules require reciprocaltreatment by home country (no US firmsadversely affected)
Member state measures Content requirements for radiobroadcasts (Fr)Requirements that cinemas showEuropean films (It Sp)Nationality requirements affecting tovarying degrees the provision of legalservices (A Dk Fn Fr G It)Strict restrictions on advertising byforeign legal consultants (Dk)Nationality requirements affecting tovarying degrees the provision ofaccounting services (A Dk Fr)
68
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Foreigninvestmentbarriers
National security vetting (Exon-Florio Amendment)US subsidiary required to exploit deep-water ports or to fish inUS Exclusive Economic ZoneFishing-vessel-owning entities must be 75 owned andcontrolled by US citizensForeign individuals or foreign-controlled corporations cannotacquire licenses for using nuclear materialsConditional national treatment governs participation ingovernment research programmes (subsidiaries in US allowed toparticipate but eligibility process more cumbersome)
Mirror-image reciprocity applies toinvestments in the extraction ofhydrocarbons (no US firms adverselyaffected)
NotesIncludes measures in effect + those for which implementation has been suspended as a result of agreementDoes not include non-discriminatory measures systemic barriers (such as the presence of monopolies the pricing ofpharmaceuticals or delays and lack of transparency in standard setting) government procurement intellectual propertyprotection subsidies (including FSC) or issues being prosecuted under EU rules
Barriers in small caps are the subject of WTO proceedings (consultations have been requested)
Sources Commission Report on United States Barriers to Trade and Investment 2001 USTR National Trade Estimate ReportForeign Trade Barriers 2001
69
Appendix 2 WTO Cases by the EU against the US (excludes cases as third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS38Cuban Libertyand DemocraticSolidarity Act
Extraterritorial application of the USembargo of trade with Cuba in so far as itrestricts trade between the EU and Cubaor between the EU and the US Thecreation of a right of action in favour ofUS citizens to sue EU persons andcompanies in US courts in order to obtaincompensation for Cuban properties Thedenial of visas and exclusion from the USof persons involved in confiscating ortrafficking in confiscated property
GATT (V XI XIII)
GATS (II III VIXI XVI XVIIAnnex onMovement ofNaturalPersons)
596 1096 Understandingreached (497)
WTDS39Tariff increaseson productsfrom the EU
The measures were taken in response tothe adoption of EU legislation on the useof hormones in livestock farming andseek unilaterally to settle the issuewithout resorting to the mechanisms ofthe WTO
GATT (I II XXIII)
DSU (3 22 23)
496 996 [No report]
WTDS63Anti-dumpingmeasures onimports of solidurea from theformer GermanDemocraticRepublic
By maintaining the order against the fivestates of the former GDR the US hasignored de jure and de facto their fullintegration into the reunified FederalRepublic of Germany and thus theeconomic integration of their companiesinto the German market economy
Anti-Dumping(92 11)
1296 ndash
70
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS85Measuresaffecting textilesand apparelproducts
Changes to rules of origin of textile andapparel products which entered intoforce on 1 July 1996 adversely affectexports of EU fabrics scarves and otherflat textile products which are no longerrecognized as being of EU origin and losethe free access to the US that theyenjoyed before
Textiles (24 4244)
Rules of origin(2)
GATT (III)
TBT (2)
697 ndash Negotiatedsolution (997)
WTDS88Measureaffectinggovernmentprocurement
Massachusetts law regulating statecontracts with companies doing businesswith or in Burma (Myanmar)
GPA (VIIIb XXIII)
697 998 Law overturnedunder US law
WTDS100Measuresaffecting importsof poultryproducts
Ban on imports of poultry and poultryproducts produced in the EU until theUnited States is able to obtain additionalassurances of product safety No groundsgiven
GATT (I III XXI)
SPS (2 3 4 58 Annex C)
TBT (2 5)
897 ndash
WTDS108Tax treatmentfor Foreign SalesCorporation
The FSC scheme provides for anexemption to the general rulesestablished in the US Internal RevenueCode which results in substantial taxsavings for US companies exportingthrough FSCs
Subsidies (3)
Agriculture (8 910)
1197 798 Panel found infavour of the EUEU not considerFSCReplacement Actadequate Panelfound in favourof the EUAppellate Bodyreport check
71
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS118HarbourMaintenance Tax
Ad valorem tax (0125) on allwaterborne imports entering US ports
GATT (I II IIIVIII X)
298 ndash Reform proposed(HarbourServices Fee)but EU stillviews asproblematic
WTDS136Anti-dumpingAct of 1916
The Act imposes penal sanctions againstthe importation of goods and their sale inthe US when the price is lower than inthe country of production or in otherforeign countries where the goods areexported
GATT (III4 VI1and VI2)
WTO (XVI4)
Anti-Dumping(1234 amp 5)
698 1198 Appellate Bodyfound in favourof the EU
Implementationpending
WTDS138Imposition ofcountervailingduties on certainhot-rolled leadand bismuthcarbon steelproductsoriginating in theUK
Methodology relied on the presumption(based mostly on pre-WTO legislation andpractice) that benefits from priorsubsidies pass through without the needto show that a benefit continues to beconferred
Subsidies (11b10 14 194)
698 199 Appellate Bodyupheld Panelreport favouringEU (500)
WTDS151Measuresaffecting textilesand apparelproducts (II)
Same as WTDS85 Same asWTDS85
1198 ndash Negotiatedsolution (997)
72
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS152Sections 301-310 of the TradeAct of 1974
Imposes specific strict time limits withinwhich unilateral determinations must bemade that other WTO Members havefailed to comply with their WTOobligations and trade sanctions must betaken against such WTO Members
DSU (3 21 2223)
WTO (XVI4)
GATT (I II IIIVIII XI)
1198 199 US through aStatement ofAdministrativeActionundertaken toact consistentwith WTOobligationsPanel ruled thatso long asrespectedcompatible(1199)
WTDS160Section 110(5) ofUS CopyrightAct
Section 110(5) of the US Copyright Actpermits under certain conditions theplaying of radio and television music inpublic places without the payment of aroyalty fee
TRIPS (9(1) 13) 199 499 Panel found infavour of the EU(700) EU andUS havenegotiated anarrangement
Implementationpending
73
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS165Import measureson certainproducts fromthe EU
100 tariffs on certain product inretaliation for the EUs failure to bring itsbanana trade regime into compliance withWTO ruling
GATT (I II VIII)
DSU (3 21 2223)
399 599 Appellate Bodyfound in favourof the EU(1200)
US broughtsanctions intoagreement
Sanctionssuspended asresult of 401agreement
WTDS166Safeguardmeasures onimports of wheatgluten from theEU
Methodology not ensure that all injurydue to imports Imports from Canadawere excluded from the investigation
GATT (I XIX)
Agriculture (42)
Safeguard (214 5 8 12)
399 699 Appellate Body(1200) found infavour of the EU
WTDS176Section 211OmnibusAppropriationsAct
Section 211 provides that the registrationor renewal in the US of a trademarkpreviously abandoned by a trademarkowner whose business and assets havebeen confiscated under Cuban law is nolonger permitted without consent ofprevious owner No US court shallrecognize or enforce such rights
TRIPS (2 15 1641 42 62)
799 600 Appellate Bodyfound in favourof the EU (102)
74
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS186Section 337 ofthe Tariff Act of1930 andamendmentsthereto
Under Section 337 the US caninvestigate whether imported goodsinfringe US intellectual property rightsand can exclude them from entry into theUS Despite amendment the EUconsiders that the procedures andremedies are substantially different fromprocedures concerning domestic goodsand discriminate against Europeanindustries and goods
GATT (III)
TRIPS (2 3 927 41 42 4950 51)
100 ndash
WTDS200Section 306 ofthe Trade Act of1974 andamendmentsthereto(lsquocarouselrsquo)
Section 306 provides for a mandatorymodification (every 6 months) of theproducts subject to sanctions imposedagainst a WTO member which has notcomplied with a WTO panel ruling
DSU (3 21 2223)
GATT (I II XIXXIII)
600 ndash
WTDS212Countervailingmeasuresconcerningcertain productsfrom the EU (14cases)
US application of countervailing dutiesbased on an irrefutable presumption thatnon-recurring subsidies granted to aproducer prior to a change of ownershiplsquopass throughrsquo to the current producerfollowing the change of ownership
SCM (10 19 21) 1100 801 Panelestablished
75
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS213Countervailingduties on certaincorrosion-resistant carbonsteel flatproducts fromGermany
Results of a full sunset review whichmaintains CV duties The original dutywas imposed prior to entry into force ofWTO agreements EU considers that itwould not have been possible to imposethis duty (less than 1) if theinvestigation had been governed by theSCM agreement
SCM (10 11921)
1100 801 Panelestablished
WTDS214Definitivesafeguardmeasures onimports of steelwire rod andcircular weldedcarbon qualityline pipe
EU considers that Sections 201 and 202of the Trade Act of 1974 and Section 311of the NAFTA Implementation Act containprovisions which prevent the US fromrespecting Safeguards Agreement
Safeguards (2 34 5 8 12)
GATT (I XIX)
1100 801 Panelestablished
WTDS217Continueddumping andsubsidy OffsetAct of 2000(ByrdAmendment)
The Act mandates the distribution of theproceeds of duties levied pursuant to aCVD an AD order or a finding under theAntidumping Act of 1921 to the affecteddomestic producers
AD (5 8 18)
SCM (11 1832)
GATT (X)
WTO (XVI)
1200 701 Panelestablished andjoined with panelestablished byCanada andMexico(WTDS234)
76
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS225Anti-dumpingduties onseamless pipefrom Italy
Results of a sunset review which foundthat anti-dumping duties on imports ofseamless line and pressure pipe fromItaly will continue at a rate of 127 EUconsiders this finding is in breach of ADAgreement (duties not lower than 2)
AD (58 111113 17)
GATT (XXII1)
201 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 152027
7
Appendix 3 WTO Cases by the US against the EU and Its Member States(excludes cases as a third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS13Duties onimported grains
Reference price system used to determinethe duties applicable to imports of grainsappear to result in the application ofhigher rates of duties to shipments of USgrains than is permitted under the EUWTO tariff schedule and to discriminateagainst US exports of grains
GATT (I II VIIX)
Agreement onImplementingGATT Article VII(109 11 22Annex I)
795 397 Negotiatedagreement(1195)
Request forpanel withdrawnfollowingimplementation(497)
WTDS26Measuresaffecting meatand meatproducts(Hormones)
EU measures prohibiting the importationof meat and meat products that havebeen treated with growth hormones
GATT (III or XI)
SPS (2 3 5)
TBT (2)
Agriculture (4)
196 496 Appellate Bodyfound in favourof US (298)
Sanctions inplace
78
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS27Import regimefor bananas
EU regime for the importation sale anddistribution of bananas established byCouncil Reg No 40493 and subsequentlegislation regulations and administrativemeasures including those reflecting theprovisions of the Framework Agreementon Bananas which implementsupplement and amend that regime
GATT (I II III XXI XIII)
Licensing (1 3)
Agriculture
TRIMs (2)
GATS (II XVIXVII)
296 496 Appellate Bodyfound in favourof the US andEcuador (997)
Compliancepanel foundrevised EUregime stillincompatible(499)
US Ecuador andEU negotiatedsettlement(401)
WTDS37Portugal ndashPatent protectionunder theIndustrialProperty Act
The term granted existing patents underthe Portuguese Industrial Property Actappears to be inconsistent with Portugalsobligations under the TRIPS Agreement
(GATS (33 6570)
496 Negotiatedsolution (596)
WTDS62Customsclassification ofsome computerequipment
Reclassification of certain LAN adaptercards automatic data processingmachines and units thereof astelecommunications apparatus raised thetariff applied them
GATT (II) 1196 297 Appellate Bodyoverturned Panelreport favouringUS (698)
79
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS67UK ndash Customsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS68Ireland ndashCustomsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS80Belgium ndash-measuresaffectingcommercialtelephonedirectoryservices
Conditions for obtaining a license topublish commercial directories inBelgium
GATS (II VI VIIIXVII)
597 ndash
WTDS82Ireland ndashmeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPS Agreement
TRIPS (9-14 6365)
597 198
80
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS83Denmark ndashmeasuresaffecting theenforcement ofintellectualproperty rights
Denmark does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
597 ndash Negotiatedsolution (301)
WTDS86Sweden ndashMeasuresaffecting theenforcement ofintellectualproperty rights
Sweden does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
697 ndash Negotiatedsolution (697)
WTDS104Export subsidiesndash processedcheese
Export subsidies including under aninward processing arrangement in favourof processed cheese distort markets fordairy products and adversely affect USsales of dairy products
Agriculture (8 910 11)
Subsidies (3)
1097 ndash
WTDS115Ireland ndashMeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPs Agreement
TRIPS (9-14 6365 70)
198 198
81
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS124Enforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
TV stations in Greece regularly broadcastcopyrighted motion pictures and TVprograms without the authorization ofcopyright owners Effective remediesagainst copyright infringement do notappear to be provided or enforced
TRIPS (41 61) 598 ndash Negotiatedsolution (301)
WTDS125Greece ndashEnforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
Same as WTDS124 Same asWTDS124
Same asWTDS124
Sameas
WTDS124
Same asWTDS124
WTDS127Belgium ndashCertain incometax measuresconstitutingsubsidies
Belgian corporate taxpayers receive aspecial tax exemption for recruiting adepartmental head for exports
Subsidies (3) 598 ndash
82
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS128Netherlands ndashCertain incometax measuresconstitutingsubsidies
Dutch income tax law permits exportersto establish a special export reserve forincome derived from export sales
Subsidies (3) 598 ndash
WTDS129Greece ndash Certainincome taxmeasuresconstitutingsubsidies
Greek exporters are entitled to a specialannual tax deduction calculated as apercentage of export income
Subsidies (3) 598 ndash
WTDS130Ireland ndashCertain incometax measuresconstitutingsubsidies
Under Irish income tax law specialtrading houses qualify for a special taxrate in respect of trading income from theexport sale of Irish-manufactured goods
Subsidies (3) 598 ndash
WTDS131France ndash Certainincome taxmeasuresconstitutingsubsidies
French companies may deducttemporarily certain start-up expenses ofits foreign operations through a taxdeductible reserve account
Subsidies (3) 598 ndash
83
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS158Import regimefor bananas II
Failure to implement the DisputeSettlement Bodys recommendations andrulings in WTDS27 within a reasonableperiod
199 See WTDS27
WTDS172Measuresrelating to thedevelopment of aflightmanagementsystem
French government has agreed to grantand the Commission has approved aloan on preferential and non-commercialterms to develop a FMS for Airbusaircraft
Subsidies (5 6)
GATT (XXIII1b)
599 ndash
WTDS173France -Measuresrelating to thedevelopment of aflightmanagementsystem
See WTDS172 See WTDS172 SeeWTDS172
SeeWTDS172
See WTDS172
WTDS174Protection oftrademarks andgeographicalindications foragriculturalproducts andfoodstuffs
EU rule does not provide nationaltreatment with respect to geographicalIndications nor sufficient protection topre-existing trademarks that are similaror identical to a geographical indication
TRIPS (3 16 2463 65)
699 ndash
84
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS210Belgium -Administrationof measuresestablishingcustoms dutiesfor rice
Belgian customs values and duties forrice would lead to a denial of duty rebatesfor US rice and to duties in excess of thebound rate
GATT (I II VIIVIII X XI)
CVA (1)
TBT (2 3 5 67 9)
Agriculture (4)
1000 101 Negotiatedsolution (1101)
WTDS223Tariff-rate quotaon corn glutenfeed from the US
TRQ triggered by DSB ruling against theUS in WTDS166
Safeguards (8182 83)
GATT (I II XIX)
101 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
85
87
References and Recommended Reading
Primary Sources Web sites
European Commission DG TRADE Bilateral Trade Relations USAhttpeuropaeuintcommtradebilateralusausahtm
European Union Europa Web Site httpeuropaeuint
European Union Mission to the United Stateshttpwwweurunionorg
Transatlantic Business Dialogue httpwwwtabdcom
Transatlantic Consumers Dialogue httpwwwtacdorg
Transatlantic Environmental Dialoguehttpwwwtiesweborgtaedindexhtm
Transatlantic Legislators Dialoguehttpwwweuroparleuintintcooptlddefault_enhtm
Transatlantic Information Exchange Service httpwwwtiesweborg
United States Mission to the European Union httpwwwuseube
United States Trade Representative Western EuropeEU pagehttpwwwustrgovregionseu-medwesteurindexshtm
World Trade Organization httpwwwwtoorg
Primary Sources Official Government Documents
CEPAL 2001 Informe de la Inversioacuten Extranjera en Ameacuterica Latina y elCaribe Antildeo 2000 Naciones Unidas Chile
Commission of the European Communities 1998a The NewTransatlantic Marketplace Draft Communication from the Commissionto the Council the European Parliament and the Economic and SocialCommittee available athttpeuropaeuintcommdg01sectionahtm
Commission of the European Communities 1998b Commission staffworking paper concerning the establishment of an inter-regionalassociation between the European Union and Mercosurhttpeuropaeuintcommexternal_relation
88
Commission of the European Communities 2000 The TransatlanticEconomic Partnership Overview and Assessment Coordination DGTRADEE3 October
Commission of the European Communities 2001a Reinforcing theTransatlantic Relationship Focusing on Strategy and Delivering ResultsCOM(2001)154 of 20 March 2001 Available on-line athttpwwweurunionorgpartnerTransatlAgendapdf
Commission of the European Communities 2001b Report on UnitedStates Barriers to Trade and Investment July available on-line athttpeuropaeuintcommtradepdfusrbt2001pdf
Commission of the European Communities 2001c Green Paper on theReview of Council Regulation (EEC) No 406489 COM(2001)7456final of 11122001
UNCTAD 2001 Informe sobre las inversiones en el mundo UnitedNations New York and Geneva
US Department of Agriculture (1998) Agriculture in the WTOSituation and Outlook Series WRS-98-4 Washington EconomicResearch Service
United States Trade Representative 2001 2001 National TradeEstimate Report on Foreign Trade Barriers available on-line athttpwwwustrgovhtml2001_contentshtm
World Trade Organization 2000 Trade Policy Review The EuropeanUnion Report by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
World Trade Organization 2001 Trade Policy Review United StatesReport by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
Secondary Sources
Abbott Kenneth W 20001 lsquoDisputes over Technical Barriers toTrade Are the Rules and Procedures Adequatersquo paper prepared forthe Conference on Dispute Prevention and Dispute Settlement in theTransatlantic Partnership European University Institute Fiesole 5-6July
Atlantic Council of the United States 2001 Changing Terms of TradeManaging the New Transatlantic Economy Policy Paper April(Washington DC The Atlantic Council of the United States)
Barfield Claude E 2001 Free Trade Sovereignty Democracy TheFuture of the World Trade Organization (Washington AmericanEnterprise Institute Press)
Bermann George 1996 lsquoRegulatory Cooperation between theEuropean Commission and US Administrative Agenciesrsquo
89
Administrative Law Journal of the American University Vol 9 pp 933-983
Bermann George Matthias Herdegen and Peter Lindstreth eds2001 Transatlantic Regulatory Co-Operation Legal Problems andPolitical Prospects (New York Oxford University Press)
Bignami Francesca and Steve Charnovitz 2001 lsquoTransatlantic CivilSociety Dialoguesrsquo Chapter 10 in Pollack and Shaffer TransatlanticGovernance in the Global Economy
BP Chair in Transatlantic Relations 2001 Resolving and PresentingUS-EU Trade Disputes Six Prize-Winning Essays (Florence EuropeanUniversity Institute Robert Schuman Centre for Advanced Studies 9May 2001)
Busch Marc L and Eric Reinhardt 2001 lsquoTesting International TradeLaw Empirical Studies of GATTWTO Dispute Settlementrsquo in Daniel LM Kennedy and James D Southwick eds The Political Economy ofInternational Trade Law Essays in Honor of Robert E Hudec (NewYork Cambridge University Press)
Camarero M and CR Tamarit 2002 lsquoLa Unioacuten Europea y lasAmeacutericas consecuencias del establecimiento de un acuerdo deasociacioacuten interregional entre la UE y Mercosurrsquo Papeles de EconomiacuteaEspantildeola n 91 (forthcoming)
Charnovitz Steve 2001 lsquoRethinking WTO Trade Sanctionsrsquo AmericanJournal of International Law Vol 95 (October)
Claes Benedicte A 2000 lsquoComment Aircraft Noise Regulation in theEuropean Union The Hushkit Problemrsquo Southern Methodist UniversitySchool of Law Journal of Air Law and Commerce Vol 65 329-382
Cowles Maria Green 2001a lsquoThe New Transatlantic DialogueTransforming the New Transatlantic Dialoguersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 213-233
Cowles Maria Green 2001b lsquoTransatlantic Cooperation and Discordin the New Economy A Case Study of the Global Business Dialogue one-Commercersquo paper delivered at the Biennial Conference of theEuropean Community Studies Association Madison Wisconsin 31May
Damro Chad 2001 lsquoBuilding an International Identity The EU andExtraterritorial Competition Policyrsquo Journal of European Public PolicyVol 8 No 2 (April) 208-226
Devuyst Youri 2001 lsquoTransatlantic Competition Policy Cooperationrsquoin Mark A Pollack and Gregory Shaffer eds Transatlantic Governancein the Global Economy (Lanham MD Rowman amp Littlefield) pp 127-151
Evans David S 2002 lsquoThe New Trustbusters Brussels andWashington Part Waysrsquo Foreign Affairs JanuaryFebruary
90
Evenett Simon J Alexander Lehmann and Benn Steil 2000 AntitrustGoes Global What Future for Transatlantic Cooperation (WashingtonDC Brookings Institution Press)
Falke Andreas 2001 lsquoThe EU-US Conflict over Sanctions PolicyConfronting the Hegemonrsquo European Foreign Affairs Review Vol 5No 2 139-163
Featherstone Kevin and Roy Ginsberg 1996 The United States andthe European Union in the 1990s Partners in Transition (LondonPalgrave)
Flores R 2001 lsquoRegional Economic Integrationrsquo in Investing in LatinAmerican Growth Unlocking Opportunities in Brazil Mexico Argentinaand Chile EAU Australian Department of Foreign Affairs and TradeChap 12 pp 259-282
Frankel JA E Stein and SJ Wei 1998 lsquoContinental Trading BlocsAre they Natural or Supernaturalrsquo in JA Frankel ed TheRegionalization of the World Economy (Chicago The University ofChicago Press)
Frost Ellen 1997 Transatlantic Trade A Strategic Agenda(Washington DC Institute for International Economics)
Gardner Anthony 1997 A New Era in US-EU Relations The ClintonAdministration and the New Transatlantic Agenda (London Avebury)
Giordano P A Valladio and M-F Durand eds 2001 Vers un accordentre lrsquoEurope et le Mercosur (Presses de Science Po Paris)
Helfer Laurence R 2000 lsquoWorld Music on a US Stage ABerneTRIPS and Economic Analysis of the Fairness in MusicLicensing Actrsquo Boston University Law Review Vol 80 93-204
Helweg Jason 2000 lsquoThe Retreat of the State The MassachusettsBurma Law and Local Empowerment in the Context ofGlobalization(s)rsquo Wisconsin International Law Journal Vol 18 477-510
Hindley Michael 1999 lsquoNew Institutions for Transatlantic TradersquoInternational Affairs Vol 75 45-60
Hudec Robert 1998 lsquoThe New WTO Dispute Settlement Procedure AnOverview of the First Three Yearsrsquo Minnesota Journal of Global TradeVol 8 22-24
Kahler Miles 1995 Regional Futures and Transatlantic Relations (NewYork Council on Foreign Relations Press)
Keohane Robert O Andrew Moravcsik and Anne-Marie Slaughter2001 lsquoLegalized Dispute Resolution Interstate and TransnationalrsquoInternational Organization Vol 54 No 4 457-488
Knauss Jody and David Trubek 2001 lsquoThe Transatlantic LaborDialogue Minimal Action in a Weak Structurersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 235-254
91
Kolasky William J and Leon B Greenfield 2001 lsquoA View to a KillThe Lost GEHoneywell Deal Reveals a Trans-Atlantic Clash ofEssentialsrsquo Legal Times 30 July 2001 p 28
Kuner Christopher 2001 lsquoBeyond Safe Harbour European DataProtection Law and Electronic Commercersquo International Lawyer Vol31
LaFrance Mary 2001 lsquoCongress Trips Over International Law WTOFinds Unfairness in Music Licensing Actrsquo Journal of Art andEntertainment Law Vol 11 397-424
Lorvellec Louis 1997 lsquoBack to the Fields after the Storm Agriculturein the European Union after the Uruguay Round Agreementsrsquo DrakeJournal of Agricultural Law Vol 2 (Winter) p 411
Mazumdar Anandashankar 2002 lsquoEuropean Commission Gives FinalApproval to Model Clauses to Protect Personal Datarsquo InternationalTrade Reporter Vol 19 187 (31 January)
Mehta K 2002 lsquoInternational Competition Policy Cooperationrsquorevised version of a paper presented at the BP Chair Conference onDispute Prevention and Dispute Settlement in the TransatlanticPartnership European University Institute Florence July 2001
Messerlin Patrick A 2001a Measuring the Cost of Protection in Europe(Washington DC Institute for International Economics)
Messerlin Patrick A 2001b lsquoNiveau et coucircts du protectionnismeeuropeacuteenrsquo in Giordano P A Valladao y M-F Durand (eds) Vers unaccord entre lrsquoEurope et le Mercosur Presses de Science Po Paris
Mishkin FS and MA Savastano 2001 lsquoMonetary Policy Strategiesfor Latin Americarsquo Journal of Development Economics 66 415-444
Nagarajan N 1998 lsquoMercosur and Trade Diversion What Do theImport Figures Tell Usrsquo Economic Papers No 129 EuropeanCommission
Petersmann Ernst-Ulrich ed 1997 The GATTWTO DisputeSettlement System International Law International Organizations andDispute Settlement (Kluwer Law International)
Peterson John 1996 Europe and America Prospects for Partnership(New York St Martinrsquos Press 1996)
Peterson John 2001 lsquoGet Away from Me Closer Yoursquore Near Me TooFar Europe and America after the Uruguay Roundrsquo in Mark A Pollackand Gregory Shaffer eds Transatlantic Governance in the GlobalEconomy (Lanham MD Rowman amp Littlefield) pp 45-72
Peterson John and Maria Green Cowles 1998 lsquoUS EconomicDiplomacy What Makes the EU Differentrsquo Governance Vol 11 No 3pp 251-71
Philippart Eric and Pascaline Winand 2001 lsquoDeeds Not WordsEvaluating and Explaining the US-EU Policy Outputrsquo in Philippart and
92
Winand eds Ever Closer Partnership Policymaking in US-EU Relations(Brussels Peter Lang) pp 431-463
Pollack Mark A ed 2001 The New Transatlantic Agenda at Five ACritical Assessment (San Domenico di Fiesole BP Chair inTransatlantic Relations Robert Schuman Centre for AdvancedStudies European University Institute)
Pollack Mark A and Gregory C Shaffer 2001a lsquoTransatlanticGovernance in Historical and Theoretical Perspectiversquo in Mark APollack and Gregory Shaffer eds Transatlantic Governance in theGlobal Economy (Lanham MD Rowman amp Littlefield) pp 3-42
Pollack Mark A and Gregory C Shaffer 2001b lsquoThe Challenge ofReconciling Regulatory Differences Food Safety and GMOs in theTransatlantic Relationshiprsquo in Mark A Pollack and Gregory Shaffereds Transatlantic Governance in the Global Economy (Lanham MDRowman amp Littlefield) pp 153-178
Pollack Mark A and Gregory C Shaffer 2001c lsquoWho Governsrsquo inMark A Pollack and Gregory Shaffer eds Transatlantic Governance inthe Global Economy (Lanham MD Rowman amp Littlefield) pp 287-305
Reidenberg Joel 2001 lsquoE-Commerce and Trans-Atlantic PrivacyrsquoHouston Law Review Vol 8 717-49
Schaefer Matthew 2002 lsquoGovernment Procurement DisputesLessons from the Dispute over the Massachusetts 1996 Act RegulatingState Contracts with Companies Doing Business with Burma(Myanmar)rsquo paper presented at the Conference on Dispute Preventionand Dispute Settlement in the Transatlantic Partnership EuropeanUniversity Institute Florence 5-6 July 2001 final version submitted26 January 2002
Shaffer Gregory 1999 lsquoThe Power of EU Collective Action The Impactof EU Data Privacy Regulation on US Business Practicersquo EuropeanLaw Journal Vol 5
Shaffer Gregory 2000 lsquoGlobalization and Social Protection TheImpact of EU and International Rules in Ratcheting Up of US PrivacyStandardsrsquo Yale Journal of International Law Vol 25 pp 1-88
Shaffer Gregory C 2002 lsquoManaging US-EU Trade Relations throughMutual Recognition and Safe Harbour Agreements lsquoNewrsquo and lsquoGlobalrsquoApproaches to Transatlantic Economic Governancersquo in Ernst-UlrichPetersmann ed Dispute Avoidance and Dispute Settlement in theTransatlantic Partnership (unpublished manuscript) (working paper onfile with the author)
Sindelar Leslie 2001 lsquoNot So Fair After AllmdashInternational Aspects ofthe Fairness in Music Licensing Actrsquo The Transnational Lawyer Vol14 435-71
Steffenson Becky J 2001 The Institutionalization of EU-US RelationsDecision Making Institution Building and the New Transatlantic
93
Agenda unpublished PhD dissertation University of GlasgowDepartment of Politics
Tansini R and T Vera 2001 lsquoLos procesos de integracioacuten enAmeacuterica Latina El caso de Mercosurrsquo Informacioacuten Comercial EspantildeolaFebrero-Marzo nuacutem 790 107-117
Vogel David 1997 Barriers or Benefits Regulation in TransatlanticTrade (Washington DC Brookings Institution)
Vogel David 2001 Ships Passing in the Night The Changing Politics ofRisk Regulation in the United States and the European Union RSCASWorking Paper No 200116
Woolcock Stephen 2000 lsquoEuropean Trade Policy Global Pressuresand Domestic Constraintsrsquo in Helen Wallace and William Wallaceeds Policy-Making in the European Union (New York Oxford UniversityPress) pp 373-99
Yerkey Gary G 2000a lsquoEU Accuses US of Failing to ImplementMRAs on Electrical Safety Pharmaceuticalsrsquo International TradeReporter Vol 17 1662 (2 November)
Yerkey Gary G 2000b lsquoUS European CEOs Call on Governments toResolve Dispute Over MRA by Dec 18rsquo International Trade ReporterVol 17 1662 (30 November)
Young Alasdair 2001 Trading Up or Trading Blows US Politics andTransatlantic Trade in Genetically Modified Food RSCAS WorkingPaper No 200130
Young Alasdair R 2002 lsquoRisk Positive Integration and SystemFriction The Single European Market and World Tradersquo paperpresented at the Council of European Studies Conference 14-16March 2002
94
Notes
1 The EU and the 50 US States website of the European Union Mission tothe United Stateshttpwwweurunionorgpartnerusstatesusstateshtm
2 Ibid
3 As Miles Kahler wrote in 1995 lsquoIncreasingly the points of conflict amongthe industrialized countries are not the familiar ones of barriers toexchange at the border but an entire array of ldquodomesticrdquo policies thatproduce conflict by appearing to restrict market access or alter theterms of competition The agenda of behind-the-border issues that hasbecome more prominent in the 1990s will only grow as economicintegration continues and groups mobilize to seek new benchmarks foran international ldquolevel playing fieldrdquo rsquo (Kahler 1995 5) For gooddiscussions of regulatory barriers in USEU trade relations see alsoVogel 1997 Young 2002
4 This section draws on the analysis presented in Pollack and Shaffer2001a
5 For good discussions see Gardner 1997 Peterson and Cowles 1998
6 Pollack and Shaffer 2001c 291
7 lsquoTransatlantic Declarationrsquo text available on-line athttpwwweurunionorgpartnertransatldechtm
8 See eg Featherstone and Ginsburg 1996 Peterson 1996
9 lsquoThe New Transatlantic Agendarsquo text available on-line athttpwwweurunionorgpartneragendahtm
1 0 lsquoJoint US-EU Action Planrsquo text available on-line athttpwwweurunionorgpartneractplanhtm
1 1 Gardner 1997
1 2 Commission of the European Communities 1998a
1 3 lsquoTransatlantic Economic Partnership Action Planrsquo text available on-lineat httpeuropaeuintcommtradebilateralusa1109tephtm For auseful review of the TEP see Commission of the EuropeanCommunities 2000
95
1 5 For good discussions of the TABD see Cowles 2001a 2001b and thewebsite of the TABD at httpwwwtabdorg
1 6 lsquoCincinnati Recommendations Transatlantic Business DialoguersquoNovember 16-18 2000 p 4 Available on-line athttpwwwtabdorgrecommendationsCincinnati00pdf
1 7 Ibid page 5
1 8 Cowles 2001b
1 9 Steffenson 2001
2 0 Pollack ed 2001 12
2 1 For an excellent discussion of the TACD and its activities see Bignamiand Charnovitz 2001 and the TACD website at httpwwwtacdorg
2 2 For example sixty-five consumer groups issued a statement in 2000stating that the EU and the US had largely ignored consumer tradepolicy recommendations TACD press release lsquoUS amp EU ConsumerGroups Call for Swift Action to Balance Trade Dialoguersquo 30 March 2000
2 3 The USIA funding for the TAED ($100000) was subject to approval fromthe Senate Finance Committee In January 2000 the objection of SenatorJesse Helms to TAED funding blocked the approval of funds andstopped the State Department from issuing the grant The TAED arguedthat this demonstrated the US governmentrsquos lack of dedication to theproject See lsquoTransatlantic Environment Dialogue suspends its activitiesdue to the failure of US government to stick to its commitmentsrsquoaccessed on 12 March 2002 on the TAED websitehttpwwwtiesweborgtaedindexhtml For a good general discussionof the TAED see Bignami and Charnovitz 2001
2 4 To summarise the TAED recommended the removal of subsidies forenvironmentally unfriendly energy sources (such as coal) demanded thatsustainability assessments be applied to a number of WTO agreementsand expressed it opposition to the multilateral TRIPs Technical Barriersto Trade and SPS Agreements It aired concerns about biotechnologyeco-labelling and the Precautionary Principle the MRAs and Chemicaland Electrical Waste Management (WEEEs) It stressed transparency intransatlantic and multilateral decision making urged both governmentsto support the Kyoto Treaty and to stop challenging environmentallegislation at the WTO The message to the EUUS Summit Lisbon May31 2000 was that lsquoUntil such time as parity exists betweenenvironmental governance and multilateral trade rules we demand thatboth the United States and the European Union immediately agree tomutual moratorium on WTO challenges and threatened challengesrsquo Fora good discussion of the TAED and its activities see Bignami andCharnovitz 2001
2 5 For an excellent discussion of the TALD see Knauss and Trubek 2001
96
2 6 Commission of the European Communities 2001a
2 7 Philippart and Winand 2001
2 8 Kahler 1995 See also Vogel 1997 Young 2002
2 9 For excellent overviews of the WTO dispute resolution procedure and itspredecessor within the GATT see Petersmann 1997 Hudec 1998 Buschand Reinhardt 2001 and BP Chair in Transatlantic Relations 2001 Fora provocative challenge to the DSU see Barfield 2001
3 0 This section draws largely on Abbottrsquos (2001) account of transatlanticdisputes over TBTs in general and the hushkits case in particular Forother accounts of the hushkits dispute see also Claes 2000 andPeterson 2001 58-59
3 1 Commission of the European Communities lsquoCommission Proposes NewLegislation to Fight Aircraft Noisersquo Press Release IP 011683
3 2 For a detailed analyses of transatlantic disputes over food safety andgenetically modified organisms see Pollack and Shaffer 2001b Vogel2001 and Young 2001
3 3 The text of the report can be found athttpeuropaeuintcommexternal_relationsusbiotechbiotechhtm
3 4 Schaefer 2002 1-2 See also Hellweg 2000
3 5 For useful background on the case filed before the WTO as DS160 seeHelfer 2000 LaFrance 2001 and Sindelar 2001
3 6 Commission of the European Communities lsquoEU and US Agree onTemporary Compensation in Copyright Disputersquo Press Release IP011860
3 7 For good discussions of potential reforms of the bilateral relationship aswell as WTO dispute settlement including a wide range of proposals seeeg BP Chair in Transatlantic Relations 2001 Charnovitz 2001 Barfield2001 and Petersmann 2001
3 8 Some countries such as the United Kingdom have establishedguidelines for policymakers to take trade implications of proposedregulations into account but neither the US nor the EU currentlyemploys any statutory requirement to undertake such an impactassessment
3 9 Bermann 1996 961 For an excellent set of essays on various aspects oftransatlantic regulatory cooperation see also Bermann Herdegen andLindstreth (eds) 2001
4 0 Ibid p 966
97
4 1 For excellent analyses of USEU competition-policy cooperation fromwhich this analysis is largely drawn see eg Evenett Lehmann and Steil2000 Devuyst 2001 Damro 2001 and Mehta 2002
4 2 Devuyst 2001 142-145
4 3 See eg Kolasky and Greenfield 2001 Evans 2002
4 4 Commission 2001c 38-40
4 5 This section draws extensively from research reported in Shaffer 2002
4 6 Subsidiaries of US firms in the EC account for about one-third of ECimports from the United States while subsidiaries of EC firms in theUnited States account for about 38 of US imports from the EC SeePollack and Shaffer 2001a 14
4 7 Agreement on Mutual Recognition Between the European Communityand the United States of America Available on-line athttpeuropaeuintcommtradepdf0713mra-usenpdf
4 8 The five excluded sectors were information technology pressureequipment road safety equipment lawn mowers and personal protectiveequipment such as helmets
4 9 However as an exception tests of pharmaceutical good manufacturingpractices are to be performed by regulatory bodies and not privatelaboratories in accordance with that annex
5 0 Yerkey 2000a 2000b
5 1 Quoted in Shaffer 2002 23
5 2 Agreement Between the European Community and the United States ofAmerica on Mutual Recognition of Certificates of Conformity for MarineEquipment Available on-line athttpeuropaeuintcommtradepdfmareqpdf
5 3 See Shaffer 2002
5 4 See Shaffer 2002
5 5 This section draws extensively from research reported in Shaffer 2002
5 6 The above figures are from the prepared testimony of Assistant Secretaryof Commerce Franklin Vargo before the House Committee onInternational Relations See lsquoIssues in US-European Union TradeEuropean Privacy Legislation and BiotechnologyFood Safety PolicyrsquoFederal News Service (May 7 1998)
5 7 Mazumdar 2002 See also Shaffer 2000 Reidenberg 2001
5 8 Commission Decision of 26 July 2000 pursuant to Directive 9546ECof the European Parliament and of the Council on the adequacy of the
98
protection provided by the safe harbour privacy principals and relatedfrequently asked questions issued by the US Department of CommerceAvailable on-line athttpeuropaeuintcommtradepdfsafeharbourpdf For generalinformation on safe harbour documents see Safe Harbor Documentshttpwwwexportsgovsafeharborsh_documentshtm
5 9 Guide to the Implementation of Directives Based on the New Approachand the Global Approach Available on-line athttpeuropaeuintcommenterprisenewapproachlegislationguidedocument1999_1282_enpdf
6 0 See Shaffer 2002
6 1 For a good discussion of the obstacles posed by US federalism inregulatory cooperation see Commission of the European Communities2000
6 2 lsquoEU-US Guidelines on Regulatory Cooperation and Transparencyrsquoavailable on-line athttpeuropaeuintcommenterpriseenterprise_policygov_relationsregulcooptransathtm See also lsquoTransatlantic Bid to Cut Red TapersquoEuropean Report 10 April 2002 and Micheal Mann lsquoDrive to Head OffTrade Riftsrsquo Financial Times 13 April 2002
6 3 See the DG Trade website lsquoBilateral Trade Relations Canadarsquo accessedat httpeuropaeuintcommtradebilateralcanadacanadahtml
6 4 For useful and up-to-date reviews of the EUCanada relationship see inaddition to the DG Trade web page cited above the websites of theEuropean Union Delegation to Canadahttpwwweudelcanorgenglishindexcfm and the Canadian Missionto the European Union httpwwwdfait-maecigccaeu-missionconten_ehtml
6 5 For more information about Mercosur visit the following internetaddress httpwwwmercosurorg
6 6 Tansini and Vera 2001
6 7 lsquoEUChile Deal Reached on Free Trade Agreementrsquo European Report 27April 2002
6 8 Ibid
6 9 Camarero and Tamarit (2002) Source OECD International SectoralDatabase
7 0 For more information about the EU and Latin America visit the followinginternet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 1 The Lomeacute Convention replaced the Yaounde Convention of 1963 afterthe accession of the UK to the Community It was renewed in 1979
99
(Lomeacute II) 1985 (Lomeacute III) 1989 (Lomeacute IV) and 1995 (Lomeacute IV) andconsists of a system of preferences for imports in which industrial goodsalmost free of tariffs and agricultural receive different treatments InJune 2000 the Lomeacute Convention was replaced by the CotonouAgreement which stabilized what can be seen as a transitory regimeaiming to incorporate the ACP countries in the WTO general rules
7 2 What characterizes first-generation agreements is their conventionalbilateral and technical structure and their reference to possiblereciprocal cooperation In practical terms however these treaties onlyextended the Most Favoured Nation (MFN) status to its signatories
7 3 The second-generation agreements referred mainly to specificcommercial and cooperation questions
7 4 For the conclusions of the Madrid summit see the Latin America webpage of the Commissionrsquos Directorate-General for Tradehttpeuropaeuintcommtradebilaterallaclachtm
7 5 In October 1998 hurricane Mitch one of the worst natural disastersever to have hit the region caused a material damage equivalent to 10of the regionrsquos GDP The EU not only played a significant role in theinternational communityrsquos emergency aid but also launched in 1998a medium-term rehabilitation plan called the Regional Programme forthe Reconstruction of Central America (PRRAC) Funding was set ateuro 250 million committed for the 1999-2002 period but to beimplemented within six years The target countries were HondurasNicaragua El Salvador and Guatemala
7 6 For details on the provisions of the EU-Chile Association Agreement andthe status of the ratification procedure seehttpeuropaeuintcommexternal_relationschileintroindexhtm
7 7 The information about the results of the different negotiation rounds canbe updated at the following internet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 8 For an assessment of the trade-diverting effects of Mercosur seeNagarajan (1998)
7 9 Commission of the European Communities 1998b
8 0 Messerlin 2001b
8 1 Pascal Lamy lsquoFacing the Challenge of Globalization Regional Integrationor Multilateral Rulesrsquo Buenos Aires 1 March 2002 Reproduced on theDG Trade website athttpeuropaeuintcommtradespeeches_articlesspla99_enhtml
Lead Author
Mark A Pollack
The Political Economy ofthe Transatlantic Partnership
Robert Schuman Centrefor Advanced Studies
EUROPEAN UNIVERSITY INSTITUTE
Report prepared by theTransatlantic Programme
for and with the contribution of
Her Majestyrsquos TreasuryUnited Kingdom
Ministry of FinanceThe Netherlands
All rights reservedNo part of this paper may be reproduced in any form
without permission of theRobert Schuman Centre for Advanced Studies
copy 2003 Authors and theRobert Schuman Centre for Advanced Studies
Printed in Italy in June 2003European University Institute
Badia FiesolanaI - 50016 San Domenico di Fiesole (FI)
Italy
i
Table of Contents
Executive Summary iii
About the Authors vii
1 The Transatlantic Marketplace andthe Changing EUUS Economic Agenda 1
2 Institutions for Transatlantic Economic GovernanceOrigins and Effectiveness 5
21 Transatlantic Economic Agreements in the 1990s22 An Overview of Existing Transatlantic Institutions23 An Effective Framework for Economic Cooperation
3 Trade and Regulatory Disputesin the Transatlantic Economic Partnership 17
31 Classifying Disputes Traditional Trade Issues vslsquoBehind-the-Borderrsquo Regulatory Disputes
32 Case Study Airplane lsquoHushkitsrsquo33 Case Study Hormone-Treated Beef and
Genetically Modified Organisms34 Public Procurement
The MassachusettsMyanmar Case35 Intellectual Property Rights The Irish Music Case36 Dealing with Trade and Regulatory Conflicts
4 Transatlantic Regulatory Cooperation 3241 Why Cooperate42 Case Study Transatlantic Competition
Policy Cooperation43 Case Study EUUS Mutual Recognition
Agreements44 Case Study Data Privacy and
the Safe Harbour Agreement45 The Challenge of Transatlantic
Regulatory Cooperation
ii
5 The European Union and the Americas 4751 The EU and Latin America Trade and Investment52 EU Trade Agreements with
Latin American Countries53 Challenges for EULatin American
Economic Relations
Conclusion The New Transatlantic Economic Agenda 61
Appendix 1 EU-US Barriers to Trade in GoodsServices and Foreign Investment 65
Appendix 2 WTO Cases by the EU against the US(excludes cases as a third party) 70
Appendix 3 WTO Cases by the US against the EUand Its Member States(excludes cases as a third party) 78
References and Recommended Reading 87
Notes 94
iii
Executive Summary
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly in thecourse of the past decade During the 1990s the volume oftransatlantic trade more than doubled making the EU and the USeach otherrsquos most important trading partners Foreign directinvestment between the US and the EU has grown even more rapidlydoubling in value during the last three years of the 1990s aloneindeed it is estimated that some 35 million American jobs rely onforeign investment from the European Union with a similar number ofEuropeans employed by US firms
These developments reviewed briefly in Section 1 of this report havecreated a de facto transatlantic marketplace yet they have also led tonew strains on the transatlantic partnership and to a new andchallenging economic agenda for EUUS cooperation Prior to the1990s much of the transatlantic economic relationship was dominatedby traditional trade questions such as tariffs quotas and other directbarriers to trade typically imposed at US and EU borders With thedecline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade - most notably lsquobehind-the-borderrsquo domestic regulations adopted in response to legitimate publicconcerns about the environment consumer protection food safety anddata privacy - have emerged alongside traditional trade barriers as theprimary challenges to a mutually beneficial EUUS trade andinvestment relationship
In an effort to meet these challenges the United States and theEuropean Union have put into place an increasingly well developedinstitutional machinery for bilateral economic as well as foreign andsecurity policy cooperation These institutions examined in detail inSection 2 have fostered a regular dialogue between EU and USauthorities across a full range of issue-areas and have provided theframework for increasing efforts at regulatory cooperation and tradedispute resolution Nevertheless recent studies have demonstrated theuneven performance of these institutions across issue-areas as well asthe uneven development of the various transatlantic lsquocivil-societydialoguesrsquo and have suggested reforms to allow the EU and US tofocus more effectively on joint long-term objectives
iv
The transatlantic relationship has come under repeated strain duringthe past decade as a result of both traditional and new-style regulatorydisputes Such disputes the European Commission has pointed outconcern only an estimated 1-2 of the total value of transatlantictrade and investment yet these disputes could potentially spread toother areas of the transatlantic relationship it is therefore in theinterests of both sides to ensure that such disputes are prevented fromarising through timely consultations where possible and settledefficiently and amicably in other cases Many of thesedisputesmdashespecially traditional tariff quota antidumping andsubsidies disputesmdashare dealt with effectively through the disputesettlement procedure of the World Trade Organization (WTO) to whichthe EU and the US are both parties New-style regulatory disputeshowever often involve domestic laws adopted for legitimate purposesfollowing democratic deliberation and these disputes can placeconsiderable strain on the WTO system particularly in cases wherethe losing party would have difficulty complying with an adverse WTOruling
In such cases both the United States and the European Union shouldstrive proactively to consider the WTO compatibility of nationalregulations prior to adoption cooperate on common regulatoryproblems and seek to settle regulatory disputes through consultationswithin the WTO dispute settlement procedure wherever possibleSection 3 of the report therefore examines a range of potential reformsin US and EU domestic regulatory procedures in the bilateralrelationship and in the multilateral WTO dispute settlementprocedure
bull At the domestic level the US and the EU could commit themselvesto conducting lsquoTrade Impact Assessmentsrsquo of draft regulations sothat legislators are made aware of the potential trade implications ofproposed regulations before they are adopted
bull At the bilateral level both partners can engage in more extensiveearly warning of new rules as well as greater regulatory cooperationand greater contact among legislators to increase their awareness ofthe external impact of domestic laws Far from weakening themultilateral trading system bilateral economic cooperation can andshould strengthen the WTO by preventing difficult regulatorydisputes before they occur and by acting as a laboratory for theresolution of such disputes at the global level
bull At the multilateral level finally the EU and the US could committhemselves to modest reforms in the WTO and its disputesettlement procedure including a clarification of the lsquoprecautionaryprinciplersquo in WTO law and a possible move from retaliation tocompensation as the primary means of enforcement of WTO law
v
Of the aforementioned proposals the EU and the US have arguablymade the most progress in promoting cooperation among theirrespective domestic regulators with a growing number of formalregulatory agreements adopted since 1997 and an even larger numberof informal contacts among EU and US regulators taking place on aregular basis across a full range of issue-areas Such regulatorycontacts hold significant promise allowing regulators on both sides ofthe Atlantic to learn from each other coordinate their regulatoryefforts and avoid transatlantic regulatory disputes before they beginHowever as Section 4 of this report demonstrates in detail successfulregulatory cooperation is not a lsquomagic bulletrsquo for trade disputes butrather a lsquohothouse flowerrsquo which must be carefully nurtured and canbe easily frustrated by any of a number of potential obstaclesincluding the persistence of distinctive European and Americanregulatory philosophies and procedures the multi-level nature of theEU and US political systems and the insistence by both sides onmaintaining domestic regulatory sovereignty Overcoming theseobstacles will require the identification of lsquobest practicersquo in regulatorycooperation gradual increase in regulatory trust among EU and USregulators and a careful balancing by political leaders of domesticregulatory aims on the one hand and the importance of thetransatlantic economic relationship on the other
The EUrsquos ever-closer economic relationship with the United States hasnot developed in a vacuum but rather coincides with a second majordevelopment namely the rapid increase during the 1990s of EU tradeand foreign direct investment with the countries of North and SouthAmerica analyzed in Section 5 of the report Concurrent with itsgreater economic presence in the Americas the Union has pursued awide range of trade and economic agreements with the countries of theregion including an increasingly close trade and regulatoryrelationship with Canada a free trade agreement with Mexico andother agreements with Chile Mercosur and other Latin Americancountries
In May 2002 leaders of the European Union and Latin Americancountries met in Madrid for their second summit meeting confirmingthe conclusion of negotiations on an EUChile Association Agreementand calling for further development of bilateral ties including theeventual conclusion of a similar association agreement with MercosurIn these and future negotiations the EU should give special attentionto expanding market access for Latin American goods and servicesespecially for so-called lsquosensitive productsrsquo currently subject to high EUtariffs as well as focusing on the reduction of other means ofprotection such as tariff quotas that are applied trade in goodsservices investment public procurement intellectual property rightstechnical standards and rules of origin
vi
The European Unionrsquos economic relationships with the countries of theAmericas like its bilateral relationship with the United States isnested in turn within the multilateral trading system of the WorldTrade Organization the further development of which is a sharedpriority for both the European Union and the United States During hisrecent trip to Argentina EU Trade Commissioner Pascal Lamy stressedthe importance of ensuring that bilateral and inter-regional tradeagreements with the United States Canada and the countries of LatinAmerica rest on the multilateral foundation of WTO trade law For thisreason he argued bilateral and interregional negotiations lsquomust not beallowed to detract our attention from the pursuit of the DohaDevelopment Agendarsquo Such a commitment should remain a centraltenet of EU trade policy in the years to come
Within the multilateral rules-based trading system finally theEuropean Union and the United States should also seek to developfurther their bilateral relationship the health of which is vital to theglobal economy as a whole Addressing the full range of challenges tothe transatlantic economic partnership will in turn require a carefuland extensive study not only of traditional trade issues such as theliberalization of tariffs and quotas but also and especially the domesticsources of transatlantic regulatory disputes and successful means ofpreventing and settling such disputes More specifically such as studywould have to undertake three essential tasks
bull A comprehensive listing and analysis of EU and US regulationscapable of restricting trade and investment in the transatlanticsmarketplace
bull A comprehensive survey and analysis of formal and informalregulatory cooperation focusing on both the obstacles to suchcooperation and instances of lsquobest practicersquo in overcoming thoseobstacles and
bull A systematic analysis of various means of bilateral and multilateraldispute resolution with a particular emphasis on the specificchallenges of transatlantic regulatory disputes
The insights generated by such a study would inform not only thefurther development of the transatlantic economic partnership but alsothe development of the rules-based multilateral trading system of theWorld Trade Organization
vii
About the Authors
This report was prepared by the Transatlantic Programme of theRobert Schuman Centre for Advanced Studies at the EuropeanUniversity Institute Florence
The following persons contributed to the writing of one or moreportions of this reportRebecca Steffenson (European University Institute) contributed toSection 2Alasdair Young (University of Glasgow) contributed to Section 3including the preparation of Tables 5-7 as well as Appendices 1-3Gregory C Shaffer (University of Wisconsin School of Law) contributedtwo case studies in Section 4Mariam Camarero (Universidad Jaume I) Cecilio Tamarit (Universidadde Valencia) and Andrea Ribeiro Hoffmann (University of Tuumlbingen)contributed to Section 5 andMark A Pollack (European University InstituteUniversity ofWisconsin-Madison) served as lead author for the report andcontributed to the writing of various sections
The Transatlantic Programme is also grateful to the following personsfor comments on early drafts of the reportHelen Wallace (Director Robert Schuman Centre for AdvancedStudies)Patrick Messerlin (Institut de Sciences politiques Paris)Claus-Dieter Ehlermann (European University Institute)Ernst-Ulrich Petersmann (European University Institute) andMichael Artis (European University Institute)
The Transatlantic Programme was established in 2000 with a majorgift from BP
1
ndash 1 ndashThe Transatlantic Marketplace and
the Changing EUUS Economic Agenda
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly over thecourse of the past decade Taken together the US and the EU accountfor roughly one half of both world GDP and global trade
Table 1 Transatlantic Trade 1980-2000 in millions of Euros(share of EU total)
1980 1990 2000
EU imports from US 50733(181)
88957(205)
197992(193)
EU exports to US 29543(140)
82004(200)
232037(247)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
The European Union and the United States are also each otherrsquos mostimportant trading partners As Table 1 illustrates the volume ofEUUS trade more than doubled during the 1990s and the twocountries are currently each otherrsquos largest trading partners Indeedrecent data on trade in services summarized in Table 2 demonstrateseven more clearly the importance of the transatlantic traderelationship with the United States accounting for some 40 of theEUrsquos total imports and exports of services which in turn account forbetween one-third and one-half of total transatlantic tradeFurthermore EUUS trade has been largely balanced over the decadeof the 1990s
2
Table 2 Transatlantic Trade in Services in millions of Euros(share of EU total)
1998 1999 2000
EU imports from US 79874(360)
99042(409)
116474(407)
EU exports to US 77039(334)
92199(373)
117403(403)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
Notwithstanding the impressive growth of EUUS trade it is theinvestment relationship that most clearly distinguishes thecontemporary transatlantic marketplace As Table 3 makes clear theEuropean Union in 2000 was far and away the largest investor in theUnited States its euro 794 billion in foreign direct investment (FDI)constituting 65 of total FDI in the US1 The United States is similarlythe largest source of FDI in the European Union with someeuro 561 billion invested in 2000 These high levels of EU investment areestimated to provide roughly 35 million jobs in the United States witha similar number of European jobs relying on US investment in theUnion2 The large and growing investment relationship also explains aconsiderable portion of the recent growth in bilateral USEU tradesince an estimated 20-30 percent of all bilateral trade takes the form ofintrafirm trade within firms operating on both sides of the Atlantic
Table 3 Transatlantic Foreign Direct Investment in millions of Euros(share of EU total)
1998 1999 2000
US FDI flows into EU 60697(571)
83798(754)
121271(688)
EU FDI flows to US 133416(602)
196794(632)
172027(475)
US FDI stocks in EU 366462(60)
439928(609)
561199(625)
EU FDI stocks in US 398190(483)
622496(524)
794523(513)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
3
With the simultaneous growth of transatlantic trade and investmentand the gradual decline in EU and US tariffs and quotas followingsuccessive waves of trade liberalization the transatlantic economicagenda has been transformed Prior to the 1990s much of the EUUSeconomic relationship was dominated by trade questions andspecifically by cooperation and conflict over tariffs quotas and otherdirect barriers to trade typically imposed at US and EU borders Withthe decline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade have increased in importance aspotential sources of international trade tension Such non-tariffbarriers have been addressed in the European Union for decadesthrough the use of regulatory harmonization and more recentlythrough the mutual recognition of national standards Similarly theGATT system began as early as the Tokyo Round (1973-1979) toaddress non-tariff barriers to trade most notably through theTechnical Barriers to Trade (TBT) Agreement and more recentlythrough the 1994 Sanitary and Phytosanitary Standards (SPS)Agreement both of which apply international law disciplines to trade-distorting national regulations
Notwithstanding these new rules however lsquobehind-the-borderrsquo US andEU regulations on a diverse array of topicsmdashranging from theenvironment and food safety to consumer protection and dataprivacymdashhave emerged during the past decade as significant obstaclesto transatlantic and global trade and investment3 In some cases suchdomestic regulations have led to trade disputes between the UnitedStates and the European Union and to increasing demands frombusinesses on both sides of the Atlantic for cooperation among US andEuropean regulatory authorities to prevent and settle such disputesand facilitate access to the European and American markets
In sum the ever-increasing levels of transatlantic trade andinvestment have created a de facto transatlantic marketplace and withit an increasing incentive for the European Union and the UnitedStates to cooperate in an effort to manage that marketplace facilitatemutually beneficial economic exchange and prevent or settle the tradeand economic disputes that inevitably arise in such a closerelationship In that context this report aims to summarize the stateof our scholarly understanding about the political economy of thetransatlantic economic relationship with an emphasis on theinstitutions for joint economic governance the new challenges posedby regulatory disputes and the promise and limits of transatlanticregulatory cooperation Accordingly Section 2 of the report examinesthe development and growth of post-Cold War institutions for themanagement of the EUUS economic partnership while Section 3examines the persistence of trade and economic disputes between theEU and the US including the rise of new and potentially intractableregulatory disputes and Section 4 examines the prospects and limitsof transatlantic regulatory cooperation as a possible solution to such
4
conflicts The fifth section of the report places the EUUS bilateralrelationship in the broader context of the relationship between theEuropean Union and the various countries of the Americas and thesixth concludes with a review of potential areas for furthertransatlantic cooperation and promising areas for further study
5
ndash 2 ndashInstitutions for Transatlantic Economic Governance
Origins and Effectiveness
Transatlantic relations between the United States and the countries ofWestern Europe have long been based on common values and interestsin terms of both security and economic interdependence Throughoutthe Cold War transatlantic cooperation took place largely though theNorth Atlantic Treaty Organization (NATO) in the area of security andthrough common US and European participation in variousmultilateral economic forums including the Organization for EconomicCooperation and Development (OECD) the G-7 (now G-8) group ofhighly industrialized economies and the World Trade Organization
Cooperation between the United States and its European partners istherefore not new but the character of the relationship changedsubstantially during the 1990s with an ever-greater emphasis oneconomic as well as security cooperation and a greater recognition bythe United States of the European Union (in addition to its memberstates) as an important interlocutor Three transatlantic agreementssigned in the 1990s underpin this new transatlantic partnership andthe increasingly liberalized EUUS economic relationship TheTransatlantic Declaration (1990) the New Transatlantic Agenda (NTA1995) and the Transatlantic Economic Partnership (TEP 1998) haveeach played an important role in creating a transatlantic framework foreconomic co-operation and introducing formal transatlanticinstitutions to manage the relationship This upgrading of the EUUSrelationship in turn can be traced to several interrelateddevelopments during that decade including the end of the Cold Warthe maturation of the European Union as an economic and politicalactor and the relentless expansion of transatlantic economic exchangewhich created pressures for joint management of the emergingtransatlantic marketplace4
The end of the Cold War was clearly a precipitating cause for theupgrading of the transatlantic relationship As early as 1990 the USpresidential administration of George HW Bush proposed aTransatlantic Declaration to reaffirm USEuropean solidarity followingthe fall of the Iron Curtain and the collapse of the Soviet Union Whilethat Transatlantic Declaration itself focused largely on security issuesrather than economic cooperation the diminution of the security
6
threat from post-Soviet Russia facilitated an increasing emphasis oneconomic issues by the Clinton Administration reflected in both the1995 New Transatlantic Agenda and the 1998 Transatlantic EconomicPartnership5
This economic focus has in turn been reinforced by the maturation ofthe European Union which emerged during the late 1980s and early1990s as the worldrsquos largest internal market and the most importanttrading partner of the United States Simultaneous with thedevelopment of the EUrsquos internal market came the increasing influenceof EU political institutions including the European Commission(which plays a vital role in the EU legislative process as well as servingas trade negotiator and economic regulator in fields such ascompetition policy) and the Council of Ministers and EuropeanParliament (which collectively adopt an increasingly large portion ofEuropean economic legislation) Although the powers of the respectiveEU institutions still varies considerably across sectors theCommission has clearly emerged as the Unionrsquos primary interlocutorwith the United States on economic issues while the legislativeactivities of the Council and the Parliament have the potential toinfluence economic interests in the United States The institutions ofthe New Transatlantic Agenda have therefore attempted to incorporatethe Commission and the Council presidency through biannualsummits and other high-level meetings as well as members of theEuropean Parliament through the Transatlantic Legislatorsrsquo Dialogue(see below)
Beyond the end of the Cold War and the maturation of the EuropeanUnion finally lies the relentless increase of transatlantic economicexchange Increased transatlantic trade and investment have creatednew demands for market access and economic cooperation fromproducer groups such as the Transatlantic Business Dialogue whileother consumer labour and environmental groups have sought toensure that transatlantic cooperation takes into account their diverseinterests Indeed as we shall see below the increasingly closeeconomic relationship between the EU and the US has created newprospects for both trade conflicts and regulatory cooperation and hasresulted in what might be termed lsquoscuttle diplomacyrsquomdashthe scurrying ofEU and US government authorities to cope with the incessant conflictswhich although they compose only a small fraction of EUUSeconomic exchange threaten to poison a mutually advantageouseconomic relationship6 Largely for this reason the United States andthe European Union have established an increasingly complexinstitutional structure designed to facilitate economic and securitycooperation resolve and prevent disputes and integrate civil-societygroups into the process of transatlantic economic governance
7
21 Transatlantic Economic Agreements in the 1990s
211 The Transatlantic Declaration
The process of institutionalizing the EUUS relationship begansimultaneously with the end of the Cold War in 1989 when USPresident Bush and EU Commission President Jacques Delors agreedto work to ensure regular meetings between high-level EU and USofficials On 27 February 1990 this agreement bore fruit in the shapeof a lsquoTransatlantic Declarationrsquo pursuant to which the US and ECagreed to establish an institutional framework lsquofor regular andintensive consultationrsquo Specifically the Declaration called for biannualEUUS summit meetings between the presidents of the United Statesthe European Commission and the European Council as well asregular meetings between the US Secretary of State the ECCommission and the US Cabinet These meetings it was hoped wouldopen lines of communication create networks facilitate informationsharing and reduce the impact of disputes in transatlantic relations
In substantive terms the Transatlantic Declaration identified threemajor goals
bull economic liberalizationbull educational scientific and cultural co-operation andbull cooperation in fighting international crime terrorism and
environmental degradation7
While these policy areas were identified as priorities the agreementfailed to provide a more detailed agenda for meeting its goals Thecontent of the agreement has been described as cosmetic minimalistand lacking in substantive innovations and would soon besupplemented by other more detailed economic agreements8
212 The New Transatlantic Agenda
The next stage in developing the transatlantic economic relationshipcame with the New Transatlantic Agenda (NTA) which was signed atthe EUUS Summit in Madrid in 1995 and established four priorityareas for closer cooperation
1 promoting peace and stability democracy and development aroundthe world (in particular in Central and Eastern Europe Russia andthe Middle East)
2 responding to global challenges (with a focus on international crimedrug trafficking terrorism migration and health andenvironmental issues)
3 lsquocontributing to the expansion of world trade and promoting closereconomic relationsrsquo (including both bilateral and multilateralliberalization of trade and investment) and
8
4 building bridges across the Atlantic (specifically direct contactsamong lsquobusiness people scientists educators and othersrsquo)9
In addition to the six-page NTA itself the two partners also adopted amuch more detailed Joint Action Plan (JAP) which outlined specificpolicy areas where deeper cooperation could be pursued The economicchapter of the JAP was arguably the most ambitious of the four callingfor both the strengthening of the multilateral trading system and thecreation of liberalized lsquotransatlantic marketplacersquo with a special focuson bilateral regulatory cooperation1 0 The NTA itself also acknowledgedthe role of the Transatlantic Business Dialogue which would laterprove to be influential in setting the agenda for transatlantic economiccooperation
In institutional terms the New Transatlantic Agenda established newtransatlantic governance mechanisms and a more established policyprocess First it created a Senior Level Group of EU and US officialstogether with a lower-level NTA Task Force to help drive coordinatemonitor and implement the agenda of transatlantic relations betweenthe continuing EUUS summits Although this framework has sincebeen criticized as excessively bureaucratic and focused on summit-driven lsquodeliverablesrsquo (see below) the NTA framework has proven usefulin coordinating EU and US responses to both economic and securityissues and remains the overarching framework for transatlanticrelations today
213 The Transatlantic Economic Partnership
The drive for an ever-closer transatlantic economic relationship wasrevived in 1998 amidst revelations that cooperation in many policyareas had fallen short of initial expectations1 1 Despite the NTA and itsinstitutions high-profile trade disputes over bananas beef andextraterritorial sanctions continued highlighting the need for furthertransatlantic commitment to facilitate economic exchange and containconflict In that context the European Commission took the initiativein April 1998 calling for negotiations on a lsquosingle comprehensiveagreementrsquo to implement a lsquoNew Transatlantic Marketplacersquo TheCommissionrsquos proposal had four central objectives
1 the lsquoremoval of technical barriers to trade in goods through anextensive process of mutual recognition andor harmonizationrsquo
2 the elimination lsquoby 2010 of all industrial tariffs on an MFN basisrsquo3 the formation of a lsquofree trade area in servicesrsquo and4 further liberalization in the areas of government procurement
intellectual property rights and investment1 2
The United States had little time to respond however as the initiativefailed to secure the support of the Council of Ministers In its placethe US and the EU agreed in May 1998 to a somewhat less ambitious
9
Transatlantic Economic Partnership (TEP) which aimed to tacklebilateral regulatory barriers to trade and to identify common positionswithin multilateral trade negotiations In substantive terms the TEPand its accompanying Action Plan focused more directly than the NTAon regulatory cooperation and on the possible harmonization ofstandards as a means of removing technical barriers to trade and itcommitted both sides to negotiations in specific issue-areas includingservices intellectual property food safety and biotechnology1 3
In addition the TEP created a new set of institutions to manage theeconomic aspects of the relationship including a lsquoTEP Steering Grouprsquocharged with monitoring implementing and reviewing TEP objectivesas well as expert-level working groups The TEP also emphasized theimportance of early warning of potential trade and regulatory disputesand fostered the creation of an institutionalized lsquoearly warning systemrsquofollowing the Bonn EUUS summit in June 1999 Finally the TEPexplicitly encouraged the participation of not only business but othercivil society groups which would lead in time to the creation of thetransatlantic consumer environment and labour dialogues
Table 4 Transatlantic Cooperation Agreements at a Glance
Transatlantic Agreement Year Impact on the Economic Relationship
The TransatlanticDeclaration 1990 Contains a broad commitment to
economic liberalization
The New TransatlanticAgenda (NTA) and JointAction Plan (JAP)
1995
Includes a chapter on contributing tothe expansion of world trade andpromoting closer economic relationsJAP discusses building a lsquonewtransatlantic marketplacersquo throughincreased regulatory co-operation
Transatlantic EconomicPartnership (TEP) 1998
Outlines three main goals for thetransatlantic economic relationship1) market access gains for goods
services and agricultural products2) multilateral and bilateral trade
liberalization of goods services andcapital
3) deepening dialogue between non-governmental organizationsparliamentarians and government
10
22 An Overview of Existing Transatlantic Institutions
Todayrsquos transatlantic economic relationship is managed largely by a setof institutions that were created in stages by the TransatlanticDeclaration the NTA and the TEP Combined these institutionsconstitute a framework for long-term as well as day-to-day economiccooperation and dispute resolution
221 EUUS Summits
The biannual EUUS summit is the primary forum forintergovernmental exchange in the NTA process consisting of thehighest level of contact between the Presidents of the US the EUCommission and the Council Presidency The transatlantic policy cyclebegins and ends with these biannual summits where decisions arelsquomadersquo about the general scope for co-operation and wherelsquodeliverablesrsquo - in the form of new bilateral agreements about regulatorycooperation or the resolution of specific disputesmdashare announced Thesummits encourage policy co-ordination because they create deadlinesfor progress reports and exert pressure on lower-level officials toproduce results
222 Senior Level Group and the NTA Task Force
The Senior Level Group serves as a contact point between the EUUSSummit and the working level of the transatlantic dialogue It hasroughly six formal members including the US Undersecretary of Statefor Economic Affairs Commission delegates from the Directorates-General for external relations and trade Council Presidencyrepresentatives and representatives of the lsquoArticle 133 committeersquodealing with international trade matters The primary tasks of the SLGare to prepare the agenda of the biannual summits lsquoshopping fordeliverablesrsquo to be announced on those occasions and to monitor theimplementation of the NTA and the TEP
Logistically the SLG typically meets twice during each CouncilPresidency with the first meeting used to assess potential areas ofcooperation and conflict and the second meeting finalizing the agendafor the EUUS summit and confirming the contents of its progressreport which is presented to summit leaders Below the SLG an lsquoNTATask Forcersquo meets somewhat more frequently (often throughvideoconferencing) to follow specific dossiers in both the security andeconomic realms
223 TEP Steering Committee and Working Groups
The TEP institutions including the Steering Group and workinggroups bring together policy experts to deal with economic issues ingreater detail The Steering Group consists of the US Deputy Assistant
11
Secretary of State for Economic Affairs Commission officials at theHead-of-Unit level and a Council Presidency representative Originallydesigned to coordinate negotiating approaches within the WTO and toact as an lsquoearly warning systemrsquo to identify possible trade disputes theTEP Steering Group has evolved into the primary coordinating body fortransatlantic economic relations including negotiations aboutregulatory cooperation in specific areas
The Steering Group is assisted by the TEP working groups which aresector-specific and thus mirror the sectors laid out by the TEPincluding agriculture biotechnology trade services and globalelectronic commerce Their main task is to find areas where the EUand the US can work together under the TEP framework and to reportany progress or problems to the Steering Group
224 The Transatlantic Early Warning System
The 1998 TEP declaration highlighted the need to identify potentialtrade disputes before they emerge At the Bonn EUUS summit inJune 1999 the two sides announced plans to formalize an EarlyWarning System for this purpose1 4 Essentially the transatlantic earlywarning system sparks an inter-agency process to identify potentialeconomic disputes at an early stage most notably with regard todomestic EU or US legislation that might act as a barrier totransatlantic trade and investment The task of spotting such potentialdisputes is delegated to the TEP Steering Group which reports earlywarning items to the Senior Level Group which in turn may take theminto account when preparing the EUUS summit agenda The TEPSteering Group also assigns contact points facilitating consultationsand agreeing on timelines for reporting back on items highlighted aspotential transatlantic policy frictions Unlike similar early warningsystems within the European Union however the transatlantic earlywarning system does not require that either side pause or reconsiderits proposed legislation or regulations The result is a system whichwhile respecting the regulatory sovereignty of both sides does notguarantee prevention or resolution of potential conflicts
12
Figure 1 The Transatlantic Early Warning System
The EUUS SummitTop-level discussions on
potential and exiting disputes
The Senior Level GroupReviews friction points reports to summitorand refers back to TEP Steering Group
or NTA Task Force
TEP Steering GroupIdentifies and monitorseconomic friction points
225 The Transatlantic Legislatorsrsquo Dialogue
An underlying feature of the early warning concept is the desire to getboth EU and US domestic policy makers to consider the externalimplications of internal policies However the Early Warning System isa bureaucratic tool The important task of raising awareness betweenEU and US legislators lies with the Transatlantic Legislatorsrsquo Dialogue(TLD) another product of the NTArsquos lsquobuilding bridgesrsquo chapter The TLDbrings together members of the US Congress and the EuropeanParliament so as to create awareness on each side of the transatlantictrade impact of EU and US legislative acts
Thus far however the TLD has not lived up to initial expectations forthree reasons First TLD participation is largely limited to members ofthe US House of Representatives and the European Parliament with aparticular interest in transatlantic relations and may not includemembers of committees drafting legislation with transatlanticrepercussions the US Senate moreover is thus far excluded from theTLD Second there is insufficient contact between the TLD and otherparts of the transatlantic dialogue for example the SLG Thirdmeetings of the TLD have been held only rarely and typically withweak attendance on the US side and the Dialogue has yet to engage inor settle any serious economic disputes between the United States andthe European Union
226 The Transatlantic Civil Society Dialogues
The fourth and final chapter of the NTA encourages the establishmentof lsquopeople to peoplersquo links as a way of building bridges across the
13
Atlantic and bringing a civil-society component to transatlanticcooperation In addition to supporting ad hoc exchange betweeneducators and scientists the EU and the US have encouraged and insome cases subsidized the establishment of formal dialogues amongEuropean and American business consumer and environmentalgroups and labour unions The 1995 NTA made specific mention ofthe Transatlantic Business Dialogue (TABD) while the 1998 TEPinvited civil society input lsquoon issues relevant to international trade as aconstructive contribution to policy makingrsquo In practice however not alldialogues have been created or function as equals
The Transatlantic Business Dialogue
The TABD is the oldest best organized and most influential dialoguein the transatlantic economic relationship Launched in 1995 at theinitiative of the US Commerce Department and the EU Commissionthe TABD brings together some 200 European and American CEOs forannual meetings which make joint recommendations on thetransatlantic policy issues1 5 From the beginning the TABD focusedthe attention of US and European legislators and regulators on theimportance of non-tariff barriers to trade calling explicitly for EUUSregulatory cooperation and mutual recognition of standardsmdashanapproach it has labelled lsquoapproved once accepted everywherersquo1 6 Inkeeping with this approach the TABD has been active in pressing forthe adoption and implementation of specific agreements including the1997 Mutual Recognition Agreements and the 2000 Safe HarbourAgreement on data privacy (examined below) In addition the TABDparticipates actively in the transatlantic early warning systemidentifying in its annual reports those domestic laws and regulationsthat might create obstacles to transatlantic trade and investment1 7
One result of this process is that the TABD has become a valuablesource of information for EU and US policy makers Sixty percent ofthe TABDrsquos original recommendations resurfaced in the NTA and theJoint Action Plan1 8 Some members estimate that one-third of itsrecommendations have been taken on board by transatlantic policymakers1 9 Nevertheless there is an increasing perception within theTABD that much of the lsquolow-hanging fruitrsquo has been picked in terms oftransatlantic trade liberalization and regulatory cooperation and a fearthat governments lsquocanrsquot deliverrsquo regulatory reforms demanded bybusiness2 0 In addition the TABD faces the challenge of interactingwith the other officially recognized dialogues with which it may notalways agree
The Transatlantic Consumer Dialogue
The decision to include consumers environmentalists and workers inthe transatlantic dialogue was the result of pressure from NGOs theEuropean Commission and eventually the US State Department The
14
success of the TABD sparked criticism from the NGO communitywhich argued that the influence of the TABD was unbalanced by anabsence of civil society input In response to these concerns the StateDepartment and the European Commission both agreed to providefunds to establish a new Transatlantic Consumer Dialogue There wassome objection to government sponsorship of the groups particularlyin the US where it was feared that the consumer dialogue was a wayto lsquogreenwashrsquo the TEP There was also a divide among its membersover the issue of trade liberalization most notably at the first meetingof the TACD which was overshadowed by a dispute between groupssuch as Public Citizen which generally oppose trade liberalization andother groups such as Consumer Union which support tradeliberalization as a means of increasing consumer choice2 1
Despite this rocky start the TACD has become an efficientorganization with a secretariat in London and a Steering Committeethat has organized its roughly 60 members into working groups onfood electronic commerce and trade In its working groups annualmeetings and recommendations the TACD has focused largely ontransatlantic regulatory issuesmdashin areas such as data privacy foodsafety and the application of the lsquoprecautionary principlersquo in riskregulationmdashbecause many consumer groups feared a downward spiralof regulatory standards as a result of increasing trade liberalizationNevertheless despite its high level of activity some members of theTACD feel that they have not had a sufficient impact on the NTAprocess which they regard as being dominated by a free-tradeagenda2 2
The Transatlantic Environmental and Labour Dialogues
Attempts to forge a functioning dialogue between the European andAmerican environmental and labour movements have been the leastsuccessful Despite initial attempts to create an environmentaldialogue the TAED suspended its activities in 2000 citing a lack offunding from the US side2 3 The TAED had until this point held threemeetings and established a Steering Committee as well as WorkingGroups on Climate Protection Bio-diversity and Forest ConservationFood and Agriculture and Industry The TAED also offered a numberof official recommendations on safe energy sources biotechnologywaste management and emissions standards although TAEDmembers like their TACD counterparts argued that the TABDcontinued to enjoy privileged access to EU and US policymakers2 4
Finally while the Transatlantic Labour Dialogue is officially still afunctioning forum it is the least developed of the transatlantic civil-society dialogues The TALD is little more than a modest exchangebetween the European Trade Union Confederation (ETUC) and theAmerican Federation of Labour and the Congress of IndustrialOrganizations (AFL-CIO) with no organizational structure secretariat
15
or formal objectives The TALD did hold several meetings in 1998 and1999 and 2000 but produced only six recommendations from thosemeetings Simplifying only slightly the ETUC and AFL-CIO havechosen to emphasize their shared interests in a global labour dialogueand have demonstrated little commitment to a specificallytransatlantic agenda within the framework of the NTA or the TEP2 5
In sum the transatlantic civil-society dialogues have arguably served auseful purpose in fostering transatlantic discussion among businessesand non-governmental organizations (most notably in the businessand consumer sectors) and in producing concrete recommendationsfor transatlantic economic cooperation However the relative weight ofthese organizations remains highly uneven and the currentarrangement is highly segmented and marked by a lack of anylsquodialogue among the dialoguesrsquo which might lead to the creation of agenuine transatlantic public sphere
23 An Effective Framework for Economic Cooperation
In recent months both official reviews and academic studies havefocused on the institutions of the NTA and the TEP asking whetherthese institutions are an adequate framework for transatlanticeconomic as well as security cooperation In its 2001 review of theNTA for example the European Commission argued that institutionssuch as the TEP Steering Group the NTA Task Force and the SeniorLevel Group serve useful purposes in fostering dialogue andcooperation between EU officials and their US counterparts but alsonoted a number of weaknesses in the current structure including thesummit-driven demand for often artificial lsquodeliverablesrsquo at six-monthintervals and the difficulty in focusing on medium- to long-termpriorities given the inevitable demands of pressing short-term issuesThe Commission therefore proposed a number of reforms to thecurrent institutions including the establishment of explicit medium-term priorities and the possible reduction of the number of EUUSsummits to one per year2 6
By and large the Commissionrsquos recommendations were welcomed bythe United States government which agreed to the establishment of aset of medium-term priorities in the context of the June 2001 Goumlteborgsummit By contrast no progress has been made on the suggestion ofreducing the number of transatlantic summits largely because of thedifficulties posed by the rotating six-month presidency on the EU sideIn addition as we have seen a number of calls have been made inrecent years for a more transparent and accountable process oftransatlantic economic governance with more balanced input fromcivil society and with a greater role for democratically electedlegislators Thus far however these calls have met with no systematicresponse from either the US or the EU
16
Moving from institutions to lsquodeliverablesrsquo a recent study by EricPhilippart and Pascaline Winand has attempted to measure the policyoutputs of the NTA by examining the joint reports of the Senior LevelGroup since 1995 in order to determine to what extent and in whichareas the goals of the Joint Action Plan had been missed met orexceeded Summarizing a complex analysis Philippart and Winandfind that the extent and level of cooperation varies both across andwithin the four chapters of the NTA with genuine joint action in someareas and lower levels of cooperation (such as the exchange ofinformation) or inactivity in others In the area of foreign policycooperation for example the authors find that EUUS cooperation hasbeen most successful and resulted in the most extensive joint actionwithin Europe itself while yielding fewer and less binding outcomes inother regions In the area of economic cooperation the authors findthat the NTA has been most active in the establishment of alsquotransatlantic marketplacersquo with relatively extensive trade andregulatory cooperation but far less active and successful incoordinating economic policies in the World Trade Organization andother multilateral fora2 7 In the following two sections therefore weturn from a discussion of institutions and process to a more explicitanalysis of specific economic issues relating to the management oftrade disputes as well as bilateral efforts at regulatory cooperation
17
ndash 3 ndashTrade and Regulatory Disputes
in the Transatlantic Economic Partnership
Despite the obvious importance of EUUS trade and investmentrelationshipmdashor indeed because of itmdasheconomic disputes have beenand remain an important feature of the transatlantic partnershipIndeed the settlement and where possible prevention of suchdisputes was a large part of the motivation behind the establishment ofthe New Transatlantic Agenda and retains an important place inbilateral economic relations
31 Classifying Disputes Traditional Trade Issues vs NewlsquoBehind-the-Borderrsquo Regulatory Disputes
Transatlantic economic disputes arise from various sources and canbe settledmdashor left unsettledmdashby a similar variety of means In terms oftheir sources we can distinguish between two broad categories oftransatlantic trade disputes (1) lsquotraditionalrsquo trade disputes regardingdiscriminatory national measures such as tariffs and quotas imposedat the border as well as subsidies antidumping actions and safeguardmeasures which discriminate explicitly between domestic and foreignproducers and (2) lsquonew-stylersquo disputes about the trade-distortingeffects of lsquobehind-the-borderrsquo regulations that act as non-tariff barriersto international trade in goods services and intellectual property
With the gradual decline of tariffs and quotas as direct barriers toinvestment and the simultaneous increase in domestic economicregulation on both sides of the Atlantic in response to concerns aboutthe environment consumer protection public health and the like thefrequency of these new-style disputes has increased drastically duringthe course of the 1990s and early 2000s Some of these disputes likethe ongoing conflicts over the regulation and marketing of hormone-treated beef and genetically modified organisms (GMOs) havegenerated considerable controversy on both sides of the Atlantic andplaced strains on the transatlantic economic partnership
The rise of such transatlantic regulatory disputes in turn hasprompted questions about what Miles Kahler and others have termedlsquosystem frictionrsquo between the respective regulatory systems of the
18
European Union and the United States In a survey of transatlanticeconomic relations conducted in 1995 Kahler concluded that thereexisted at best partial evidence of system friction between the UnitedStates and the European Union noting that some issues (egagriculture and audiovisual services) did indeed divide the US and EUsystems fundamentally while on other lsquonewrsquo issues like labourstandards and the environment the EU and the US generally sharedcommon views2 8
Surveying the landscape of transatlantic economic relations sevenyears later it remains true that the European Union and the UnitedStates are united by many common values and common interestsNevertheless in a growing number of issue-areas including food safetydata privacy copyright protection taxation accountancy standardsand others the United States and the European Union have arguablyexperienced lsquosystem frictionrsquo in the form of a large number ofsimmering regulatory disputes summarized in Appendix 1 at the endof this report
Table 5 Classifying US-EU Trade Disputes
Agriculture Industrial goods Services
Border-measures
Bananas (alsoGATS)Belgian ricedutiesTariff-rate quotacorn gluten feed
Harbour taxAnti-dumping(steel uranium)CVD (steel)Safeguard actions(steel)
Tra
dit
ion
al
Subsidies Export subsidies AirbusFSC
Regulatorybarriers
Beef hormonesGMOs
Hush kitsPublicprocurement
Audio-visualProfessionalservicesTelecommuni-cationsData privacy
New
sty
le
IPR Havana Club Irish MusiccopyrightGreek protectionof movies
19
As Table 5 makes clear the contemporary transatlantic relationship ischaracterized by both traditional trade conflicts and new-styleregulatory disputes Indeed traditional disputes about tariffs andquotas (eg bananas) subsidies (eg Foreign Sales Corporations) anti-dumping measures and safeguard actions (eg steel) constitute someof the most high-profile disputes between the United States and theEuropean Union With a few exceptions however these disputesprimarily concern traditional trade measures that are within the lsquocorebusinessrsquo of the multilateral trading system which has wellestablished rules and an effective functioning dispute settlementprocedure within the World Trade Organization Put simply the WTODispute Settlement Understanding provides a body of multilateralrules governing the permissible use of tariffs quotas and other trade-restrictive practices a forum for consultation and if necessarylitigation among the parties to a dispute before WTO panels and theAppellate Body a binding requirement for member states to complywith DSU panel and Appellate body decisions and authorizedretaliation in the event of prolonged noncompliance with thosedecisions2 9
By contrast regulatory disputes implicate national laws andregulations that are often adopted for legitimate reasons of consumerand environmental protection or public health and after extensivedemocratic or administrative processes For this reason transatlanticregulatory disputes can be more bitter and intractable than traditionaltrade disputes insofar as both sides believe that they are lsquodoing theright thingrsquo and insofar as domestic political actors resistsubordinating domestic regulations to the exigencies of internationaltrade Such regulatory disputes also create particularly difficultquestions for the WTO dispute settlement procedure insofar as theycall for a politically sensitive balance between the economic imperativeof liberalized international trade on the one hand and the economicand non-economic motivations behind domestic regulations on theother hand
Largely for this reason both the United States and the EuropeanUnion have generally avoided bringing such regulatory conflicts beforethe World Trade Organization preferring in most instances to managetheir regulatory differences through bilateral consultation andcooperation Table 6 which summarizes EUUS WTO disputes bysubject matter demonstrates clearly the continuing dominance oftraditional trade issues (tariffs subsidies countervailing duties andantidumping) and the effort by both sides to keep politically sensitiveregulatory issues away from the WTO (For more information about thesubjects and status of all EUUS trade disputes before the WTO seeAppendices 2 and 3 at the end of this report)
Simplifying slightly existing regulatory as well as traditional tradedisputes can be addressed in any one of three ways (summarized in
20
Table 7 page 22) First the EU and the US may engage in directconsultations about regulatory barriers to trade and resolve thedispute without resorting to WTO dispute resolution examples includethe dispute over airplane lsquohush kitsrsquo resolved through a negotiatedsettlement between the EU and the US and the public procurementcase involving a Massachusetts state law imposing sanctions againstfirms doing business in Myanmar which was resolved unilaterallythrough the application of US federal law Second one party maychallenge the legality of the otherrsquos regulations before the WTO as inthe case of the US challenge to the EU ban on hormone-treated beefor the EU challenge to a provision of US copyright law in cases wherethe disputed regulation is ruled to be in violation of WTOrequirements however compliance has proven difficult Third andfinally given the difficulties of resolving such disputes through eitherbilateral negotiations or WTO litigation the bulk of regulatory disputesare allowed to simmer indefinitely with periodic consultations andexchange of information among the two sides but no resolution of theresulting trade tensions As Appendix 1 makes clear the overwhelmingmajority of current transatlantic regulatory disputes fall into this thirdcategory
Table 6 Transatlantic Trade Disputes in the WTO Overview and Context
Tariffsquotascustomsdutiesrules oforigin
retaliatorymeasures
Tradedefence
instruments(a-d CVDsubsidies)
TechnicalTBTs
(classi-ficationlabelingtesting)
Substantive TBTs
(process ampproductrequire-ments)
Subsidies GATS TRIPS TRIMS GPA Other
EU - US(EU asthirdparty)
6 9 (11) 1 (1) 1 3 1 2
EU - Restof World(RoW)
14 6 1 1 3 4 3 4
RoW ndash EU 12 3 4 2 1 1
US ndash EU(US asthirdparty)
8 (1) (1) 1 (1) 8 1 8
US - RoW 10 7 3 2 7 2 6 3 1
RoW ndash US 7 21 5 1 1 1
RoW ndash RoW 17 30 1 6 10 3
Sources Adapted from DG Trade WTO - Dispute Settlement (updated 15102) httpeuropaeuintcommtradepdfcasesxls accessed15202 and the WTOs dispute database (httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
21
22
Table 7 Methods of Dispute Resolution with Examples
Negotiated Agreement orUnilateral Action
WTO Dispute Settlement SimmeringDisputes
HushkitsMassachusettsMyanmar(public procurement)
Beef hormones(EU not in compliance)Irish Musiccopyright (EUUScompensation agreement)
GMOs
The sources of such regulatory disputes and the difficulties they posefor traditional dispute settlement procedures are illustrated below infour brief case studies focusing on (1) the US challenge to EUlegislation prohibiting the use of airplane lsquohush kitsrsquo (2) the USchallenge to the EUrsquos ban on hormone-treated beef and the relateddispute over the EUrsquos moratorium on the approval of geneticallymodified foods and crops (3) the EUrsquos challenge to the aforementionedMassachusetts public procurement law and (4) the EUrsquos challenge to aprovision of the US Copyright Act Although not a thorough review ofthe entire universe of EUUS regulatory disputes these four cases doillustrate the types of regulations adopted and challenged by both theEU and the US as well as the various methods of dispute resolutionmentioned above The policy implications of these cases are discussedin Section 36
32 Case Study Airplane lsquoHushkitsrsquo
Many EUUS disputes concern the technical barriers to trade (TBTs)caused by divergent national regulations setting technical standards inareas ranging from the specifications for industrial machinery andemissions standards for motor vehicles to nutritional labelingrequirements for packaged foods As Kenneth W Abbott has pointedout in a recent study many such national regulations are identified bybusiness or governments as TBTs within the transatlantic relationshipand a far smaller percentage of these have emerged as high-profiletrade disputes3 0 To date no disputes have been litigated between theEU and the US under the TBT Agreement although one particularlyprominent case did create significant tensions in the transatlanticrelationship namely the US challenge to the EUrsquos ban on airplanelsquohushkitsrsquo
Hushkits are equipment packages designed to reduce the noiseemissions of aircraft through the use of sound-absorbing materialswith the aim of bringing particularly older planes into compliance withthe so-called lsquoChapter 3rsquo noise pollution standards adopted within theInternational Civil Aviation Organization (ICAO) In 1999 theEuropean Union which had long pressed unsuccessfully for theadoption of stricter standards within the ICAO adopted a Regulation
23
establishing a ban on the registration of older aircraft fitted withhushkits on the grounds that such aircraft only barely complied withChapter 3 standards and were substantially more polluting thannewer planes The ban on new registrations was to enter into force inMay of 2000 from April 2002 moreover hushkitted aircraft registeredin third countries would not be allowed to operate within EU territory
Although nominally intended to decrease noise pollution aroundairports in heavily populated regions of Europe the EUrsquos hushkitsRegulation met with howls of protest in the United States where theuse of hushkits had been encouraged by US authorities as a cost-effective way of meeting Chapter 3 standards A ban on the registrationof hushkitted aircraft the US argued would therefore impose adisproportionate burden on US airlines which estimated that theRegulation cost them some $2 billion by depressing the value of theirexisting fleets while benefiting European carriers that had relied moreextensively on the purchase of new aircraft designed specifically tomeet Chapter 3 specifications In legal terms moreover the UnitedStates argued that the Regulation violated the terms of the ICAOagreement which simply set a performance standard for planes anddid not authorize parties to set more demanding standards or tomandate a specific design standard (eg a ban on the use ofhushkits) The US accordingly lodged a formal ICAO complaint againstthe 15 EU member states in March of 2000
After extensive bilateral discussion as well as multilateral negotiationswithin the ICAO in October 2001 the US and the EU reached asettlement of the case The first step in this settlement was themultilateral resolution adopted on 4 October in the ICAO assemblyurging states to pursue a lsquobalanced approachrsquo to noise reductionadopting local operating restrictions only where supported by anassessment of the costs and benefits and only after fully assessingalternative measures to reduce noise At the same time the ICAOagreed to a new and stricter set of lsquoChapter 4rsquo standards to take effectbeginning in 2006
Consistent with the provisions of the ICAO agreements the EU agreedon 25 October to withdraw the original Hushkits Regulation by April2002 (the date when it would have applied to third-country aircraft) inreturn for which the US agreed to withdraw its complaint before theICAO In place of the original Regulation the Commission issued aproposal in November 2001 for a new Directive replacing the generalban on hushkitted places with a more discriminating provisionallowing noise-sensitive airports in congested urban areas to limit theuse of planes that are lsquomarginallyrsquo compliant with Chapter 3standards3 1 This draft Directive was approved by the EuropeanParliament in its first reading in March 2002 and at this writing ispending adoption by the Council of Ministers and the Parliament
24
Despite the initial acrimony between the US and the EU the hushkitscase represents a successful effort at bilateral dispute resolution in abroader multilateral setting In this case the European Union agreedafter receiving assurance and guidance from the ICAO to adopt a morediscriminating and less trade-distorting regulatory approach whichsatisfies the trade concerns of the United States while allowing the EUto address the problems of noise pollution around the Unionrsquos mostcongested urban airports As we shall see presently however not allsuch regulatory conflicts have proven so amenable to negotiatedagreement
33 Case Study Hormone-Treated Beef andGenetically Modified Organisms
EU and US food-safety regulations constitute some of the mostimportant regulatory barriers to international trade and have been thesource of some of the most politically difficult and intractabletransatlantic regulatory disputes pitting each sidersquos sovereign right toregulate the safety of its food against its international obligationsunder WTO law3 2 Within the United States regulation of food safetywas among the earliest and most politically sensitive tasks of thefederal government which has delegated much of the power fordomestic regulation to agencies like the Food and Drug Administration(FDA) which has jealously guarded its reputation as an independentand impartial regulator making decisions on the basis of scientifictests rather than political pressures In the EU by contrast foodsafety regulation is carried out in part by national regulators and inpart by the EUrsquos political bodies including the Council of Ministersthe European Parliament and the Commission The deficiencies of thispatchwork regulatory process was painfully revealed however by aseries of food safety crises during the latter half of the 1990s includingmost notably the BSE crisis of 1996 and the Union has respondedforcefully with the creation of a European Food Safety Authority andwith an insistence on the application of the so-called lsquoprecautionaryprinciplersquo justifying regulatory action in the absence of clear scientificevidence and on the basis of consumer concerns and social andeconomic criteria
Precisely because food safety regulations can act as non-tariff barriersto trade in agricultural products the EU and the US have agreed tosubject their domestic regulations to the discipline of internationalguidelines such as the United Nations Codex AlimentariusCommission which establishes international standards for food safetyand more recently through the 1994 WTO Agreement on theApplication of Sanitary and Phytosanitary Measures (the SPSAgreement) The SPS Agreement does not establish bindinginternational standards for food safety nor does it automaticallypreempt the adoption of domestic standards that might constitute
25
non-tariff barriers to trade The agreement does however incorporateand promote the adoption of international standards as well asestablish trade rules that limit the ability of states to adopt food safetyregulations that are not scientifically grounded The terms of the SPSAgreement are moreover enforceable under the WTO disputesettlement procedure
The consequences of the divergent EU and US regulatory processesand the difficulties of resolving disputes through the WTO disputesettlement procedure can be illustrated most clearly by the long-standing EUUS dispute over the issue of hormone-treated beef Theconflict began in 1989 when the European Union announced a ban onthe sale and marketing of beef treated with any one of six growth-promoting hormones that had been tested and certified as safe by theFDA In 1995 following the entry into force of the SPS Agreement theUnited States took legal action before the WTO alleging that the EUban was inconsistent with the terms of the SPS Agreement since it wasnot based on scientific evidence risk assessment or internationalstandards After a protracted legal battle involving the issuing of apanel report and a subsequent appeal the WTO Appellate Body heldwith the United States that the EU had failed to base its ban on ascientific risk assessment and ordered the EU to bring its domesticregulations into compliance with WTO law
Despite the clear ruling against it the European Union faced withopposition from public opinion and hopeful of producing additionalscientific findings that would eventually justify the maintenance of theban failed to comply with the Appellate Bodyrsquos decision The UnitedStates therefore retaliated against the EU in May of 1999 imposingtariffs of $1168 million against EU agricultural products such as foiegras Roquefort cheese and Dijon mustard These US tariffs in turnsparked protests among French and European farmers who seized onthe beef-hormones case as a symbol of the threat posed byAmericanization and globalization to European regulations andtraditions Since 1999 the United States and the European Unionhave continued to consult regularly about this case but the Unionremains firm in its refusal to alter its domestic law and the UnitedStates persists in the application of retaliatory sanctions against theEU
The transatlantic dispute over the regulation of genetically modifiedorganisms (GMOs)mdashor more precisely genetically modified foods andcropsmdashis analytically similar to the beef hormones case although thepotential economic stakes in this area of GMOs are potentially fargreater Here again the US Food and Drug Administration decided inthe early 1990s that genetically modified foods were not substantiallydifferent from conventional foods and therefore required no specialprocedures for approval or marketing and on that basis US farmersand seed producers have quickly embraced the use of genetically
26
modified foods and crops By contrast the European Union has takena more cautious approach in a series of Directives and Regulationsrequiring specific approval procedures for genetically modified crops aswell as labeling of foods from genetically modified varieties Since1998 moreover the Council has maintained a de facto moratorium onthe approval of new GM varieties even though the EUrsquos scientificcommittees have continued to formally approve a number of varietiesas posing no health risks to consumers
The GMO issue has been the subject of intense consultation betweenthe US and the EU in recent years including the creation of an EU-USBiotechnology Forum which issued a joint report on the subject inDecember 20003 3 as well as a Biotech Working Group within theTransatlantic Economic Partnership Such fora have provided for auseful exchange of information among regulators as well as tradeofficials yet the positions of the two sides remain far apart with atbest modest signs of convergence in the EU and US approaches Thusfar the United States has refrained from bringing a case against theEU before the WTO partly of fear that the European Union facing apotential backlash against both GMOs and the WTO would be unableto comply The issue therefore remains a simmering irritant in thetransatlantic relationship with the potential to flare into a majordispute should the United States eventually decide to litigate the issuebefore the WTO
34 Public Procurement The MassachusettsMyanmar Case
The previous two cases involved US challenges to EU regulationssetting requirements for the marketing and use of industrial oragricultural products Regulatory disputes can however be directed atUS as well as EU regulations and they can concern regulationsgoverning questions other than product standards An excellentexample is the EUUS dispute over the 1996 Act adopted by the stateof Massachusetts regulating state contracts with companies doingbusiness in Myanmar (formerly Burma) The law in question wasadopted in June of 1996 by the Massachusetts State Legislature withthe avowed aim of securing human rights and democratic elections inMyanmar which was then under military rule and subject to sanctionsfrom the US federal government as well as the EU Specifically theMassachusetts law imposed sanctions on foreign as well as domesticfirms doing business in Myanmar with the aim of motivating suchfirms to withdraw from activities in that country
As Matthew Schaefer points out in an excellent analysis of the casethe MassachusettsMyanmar dispute illustrates two recurrenttensions in EUUS trade relations3 4 First the case illustrates theproblems encountered when individual US states like Massachusettswhich are not directly party to the WTO adopt laws and regulations in
27
possible contravention of WTO law Anticipating such problems duringthe negotiation of the 1994 Government Procurement Agreement(GPA) the European Union had emphasized the importance for the USof binding the states and the US federal government responded byasking each of the states to submit a voluntary lsquoletter of commitmentrsquoagreeing to be bound 37 states including Massachusetts submittedsuch letters resulting in a substantial but incomplete mechanism toensure state-level compliance with the GPA
Second the Massachusetts law in question also represents theextraterritorial application of US (state or federal) laws which employtrade and other economic provisions to secure a foreign policy aim (inthis case the cause of democracy and human rights in Myanmar)Specifically the Massachusetts law attempted to penalize not onlyAmerican firms but also foreign firms for investing in Myanmar even ifsuch investments were legal in those firmsrsquo home countries In thislatter sense the MassachusettsMyanmar case bears a strikingsimilarity to the extraterritorial sanctions applied by the US in thewell-known Helms-Burton and Iran-Libya Sanctions Acts in which theUS federal government adopted extraterritorial sanctions againstcorporations doing business in Cuba Iran and Libya (The latter caseswere resolved at least temporarily when President Clinton agreed in1998 to waive such sanctions in a bilateral agreement with the leadersof the European Union)
In the Massachusetts case the law was challenged before the WTO bythe European Union (joined by Japan) which sought to have the lawruled incompatible with US obligations under the GPA Before the WTOpanel could rule however the law was successfully challenged andoverruled under US federal law when the US Supreme Court held thatfederal action in this area (ie the federal sanctions law againstBurma) had pre-empted such sanctions by the State of Massachusettswhose law was therefore held to be unconstitutional
The successful resolution of the MassachusettsMyanmar disputesuggests several lessons for the prevention and settlement of similarcases in the future according to Schaefer In terms of disputeprevention he argues this case points to the importance of informingstate governors and legislators about the constitutional limitations onthe extraterritorial use of economic sanctions as well as theirobligations under WTO agreements (at least insofar as the statesthemselves agree to be bound by them) In terms of dispute settlementfinally the Massachusetts case suggests that litigation in domesticcourts under US law may be more a more effective and comprehensiveconstraint on state sanctions than WTO law which should thereforebe employed with restraint in such cases
28
35 Intellectual Property Rights The Irish Music Case
In addition to trade in goods and services and public procurementnational laws and regulations regarding intellectual property rightscan also have international trade repercussions even when thoseregulations apply without discrimination to domestic as well as foreignproducers Indeed protection of intellectual property has been thesubject of no fewer than 11 WTO disputes between the United Statesand the European Union since 1995 The challenges posed byintellectual property disputes are illustrated most strikingly by the so-called lsquoIrish music casersquo in which the European Union challengedprovisions of US copyright law before the World Trade Organization 3 5
The US law in question was the 1976 Copyright Act as amended bythe 1998 Fairness in Music Licensing Act Specifically Article 110(5) ofthe amended Act included a lsquobusiness exemptionrsquo according to whichestablishments such as bars shops and restaurants below a certainsize (ie 2000-3750 square feet) were allowed to play radio andtelevision music without paying fees to royalty-collecting bodies Therelevant provisions of the Act had been adopted only after long anddifficult negotiations between the representatives of US performingrights organizations on the one side and the National LicensedBeverage Association on the other and sought (however successfully)to balance the rights of copyright holders with the interests of smallrestaurant and bar owners
Although the US law applied equally to domestic as well as foreigncopyright holders in 1997 the Irish Music Rights Organization (IMRO)a collective music management company representing Irish musicianssuch as the rock group U2 filed a complaint about the law before theEuropean Commission IMRO claimed that the derogation in the lawwas in violation of US commitments under both the InternationalAgreement on Trade Related Aspects of International Property Rights(TRIPS) as well as the Berne Convention for the Protection of Literaryand Artistic Works since it failed to protect authorsrsquo rights resultingin an estimated loss of euro 121 million annually for IMROrsquos membersThe Commission having investigated the case agreed with IMRO thatthe law violated US obligations under the TRIPS agreement andinitiated a formal complaint before the World Trade Organization in1998
In June 2000 a WTO panel issued a decision in favour of theEuropean Union calling on the US to bring subparagraph (B) ofSection 110(5) of the Copyright Act (the aforementioned businessexemption) into conformity with the TRIPS agreement In response tothe panelrsquos report the United States announced that it would notappeal the panel decision but also that it would require time to amendits existing copyright legislation In the interim the United States andthe European Union agreed to establish a WTO arbitration panel
29
which would decide on the level of compensation to be granted by theUS to the EU pending modification of the Act In November 2001 thearbitrators accordingly assessed the annual losses suffered by EUcopyright owners and hence the level of compensation to be paid bythe United States at some $108 million In light of this finding EUTrade Commissioner Pascal Lamy and US Trade Representative (USTR)Robert Zoellick agreed the following month to a temporary solutionwhereby the USTR would seek authorization from Congress toestablish a special fund worth $33 million over three years to financeprojects and activities for the benefit of EU music creators pendingrevision of the US law
The December 2001 agreement between the US and the EU waspresented by EU Trade Commissioner Pascal Lamy as lsquoa good exampleof how we can manage our problems in a cooperative manner whilekeeping in mind our international commitmentsrsquo3 6 However while theUS and the EU have indeed reached an amicable three-year agreementon this issue the Irish Music case also serves as an additionalexample of the difficulties encountered by both sides in amendingdomestic regulations in response to trade concerns and WTO rulingsAlthough the European Union side insisted on the US obligation toamend its law and explicitly retained its right to return to the WTO inthe event of noncompliance at this writing there is no sign of anyimminent US effort to bring its domestic law into compliance and anextended US agreement to compensation remains a probablealternative for the foreseeable future
36 Dealing with Trade and Regulatory Conflicts
Transatlantic trade disputesmdashboth traditional disputes and new-styleregulatory conflictsmdashare inevitable in a relationship as close as EUUSrelationship and are not likely to disappear anytime in the nearfuture Many of these disputesmdashespecially old-style tariff quotasantidumping and subsidies disputesmdashare dealt with effectively by WTOdispute resolution New-style disputes however often involve domesticlaws adopted for legitimate purposes after democratic deliberation andlitigation in such cases can place severe strain on the WTO systemparticularly in cases like beef-hormones copyright and potentiallyGMOs where the losing party would have difficulty complying with anadverse WTO ruling
In light of these challenges scholars and practitioners haverecommended a range of potential reforms in US and EU domesticpolitics in the bilateral relationship and in the multilateral WTOsystem to prevent and settle regulatory disputes Although a complete
30
review of these recommendations is beyond the scope of this report3 7 some of the most promising proposed reforms include the following
bull Changes in Domestic Regulation Perhaps the most promisingsuggestions for reform are those that require no formal internationalagreement but rather domestic reforms that could be undertakeneither unilaterally or through an informal process of mutualcoordination The Transatlantic Business Dialogue for examplehas proposed that the United States and the European Union bothundertake to conduct lsquoTrade Impact Assessmentsrsquo of draftregulations so that legislators are made aware of the potential tradeimplications of proposed regulations before they are adopted Sucha procedural change could be undertaken within the respectivedomestic systems of the US and the EU and without compromisingthe regulatory sovereignty of either side and would have theadvantage of implicating legislators who thus far have been largelyabsent from the NTA process3 8 In a similar vein US observers haveadvocated the adoption by the EU of some form of advise-and-consent procedures for the adoption of regulations which wouldprovide domestic as well as foreign stakeholders with advancewarning of proposed regulations and improve the quality of EUgovernance more generally Finally as we have seen in theMassachusettsMyanmar case it has been proposed that theUnited States should do more in the future to implicate subfederalstates in international trade agreements and to inform them oftheir obligations under US constitutional as well as internationaltrade law
bull Changes in the Bilateral Relationship Notwithstanding theirincreasing complexity the institutions of the NTA and the TEP havenot prevented the rise of new regulatory disputes nor have theybeen able consistently to settle amicably all those that do arisegiven the difficulty for both sides of changing domestic regulationsadopted in response to legitimate public concerns Nevertheless anumber of bilateral reforms have recently been proposed includingmost notably the further development of the bilateral early warningsystem increased regulatory cooperation and the expansion of theTransatlantic Legislators Dialogue With regard to the firstinterviews with policy-makers on both sides of the Atlantic revealthat the early warning system has proven useful in identifyingobscure technical barriers to trade but the same policy-makersemphasize that increased early warning does not provide aguarantee that legislators or regulators will be willing or able toadjust domestic regulations and indeed the survey of regulatorydisputes undertaken above suggests that increased early warningwould not have been capable of resolving disputes over beefhormones or copyright where the primary impediment to resolutionof the disputes was not lack of information but the regulatorysovereignty of legislators and regulators on each side For this
31
reason particular emphasis has been placed on the promise ofenhanced regulatory cooperation (examined in detail in the nextsection) and on the further development of the TLD (where theprimary challenge will be to provide an incentive for domesticallyoriented parliamentarians and congressmen to participate intransatlantic consultations)
bull Reform of WTO Dispute Settlement The WTO Dispute SettlementUnderstanding establishes a binding and efficient system for theresolution of international trade disputes and most WTO memberstates are broadly satisfied with the operation of the systemNevertheless the WTO dispute resolution system is placed underparticular strain in regulatory disputes such as the beef-hormonesand Irish music cases reviewed above where it is called to balancetrade and regulatory objectives and where compliance is politicallydifficult for the losing parties In light of these weaknesses variousscholars and practitioners have suggested reforms to both WTOrules and to the DSU including most notably the clarification of thelsquoprecautionary principlersquo in WTO law and moving from retaliation tocompensation in cases of noncompliance with DSU rulings Both ofthese proposals merit further discussion in the coming review of theDispute Settlement Understanding (scheduled to be completed inMay 2003) and in the ongoing Doha Round of trade talks In themeantime the EU and the US would do well to continue theirgeneral pattern of restraint in addressing regulatory disputesbilaterally and avoiding any potential lsquooverloadingrsquo of the WTOdispute settlement procedure
Future negotiations between the EU and the US as well as futurestudies designed to inform those negotiations would do well to explorethe viability of these proposed reforms
32
ndash 4 ndashTransatlantic Regulatory Cooperation
One of the most striking features of the period since the 1995 NewTransatlantic Agenda has been the dramatic increase in both formaland informal cooperation among the regulatory authorities of theUnited States and the European Union In the past five years alonethe United States and the European Union have signed nine formalregulatory cooperation agreements in areas as diverse as competitionpolicy data privacy customs procedures veterinary standards andthe mutual recognition of testing and certification procedures (Table 8)These formal regulatory agreements moreover represent only afraction of the contacts that occur among US and EU regulators bothbilaterally and in various multilateral fora
41 Why Cooperate
The incentives for US and EU regulators to engage in formal andinformal cooperation vary across different issue-areas but cangenerally be classed into two broad categories3 9 First regulators maycooperate because they view such cooperation as useful in carrying outtheir essential rulemaking responsibilities in an increasingly integratedtransatlantic and global marketplace Such cooperation need not andtypically does not involve joint rulemaking activities but focusesinstead on exchanges of information identification of best practiceand early notification of new regulations being considered within eitherpolity In the area of food safety for example the EuropeanCommission and the US Food and Drug Administration have notidentified or implemented common standards for the reasonsdiscussed above yet the two regulators do engage in an ongoingdialogue both bilaterally and within the Codex Alimentarius (the globalbody for the establishment of food safety standards) and theCommission consulted extensively with its US counterparts in thedesign of the newly created European Food Safety Authority Similarbilateral exchanges occur regularly in other issue-areas as well aswithin multilateral standard-setting bodies such as the InternationalStandards Organization (for industrial standards) and theInternational Conference on Harmonization (for registration ofpharmaceuticals)
33
Table 8 Transatlantic Regulatory Cooperation Agreements
Agreement Targeted Regulations Year
Competition Policy Agreement Competition regulations 1991
ECUS Agreement on DrugPrecursors
Illicit drug regulations 1997
ECUS Customs and CooperationAgreement
Customs certifications 1997
EUUS General Mutual RecognitionAgreements
Conformity assessmenttesting in six sectorstelecommunicationsequipment electromagneticcompatibility electricalsafety recreational craftmedical devices andpharmaceutical goodmanufacturing practices
1997
EUUS Positive Comity Agreement Competition relations 1998
EUUS Agreement Concerning theEstablishment of Global TechnicalRegulations for Wheeled VehiclesEquipment and Parts
Technical regulations 1999
EUUS Veterinary EquivalenceAgreement
Animal export certifications 1999
EUUS Safe Harbour Agreement Data protection regulations 2000
Joint Declaration on USEUCooperation in the Field ofMetrology and MeasurementStandards
Measurement equivalence inproduct certification
2000
EUUS Agreement on MutualRecognition of Certificates ofConformity for Marine Equipment
Mutual recognition of marineequipment regulations
2001
EUUS Guidelines on RegulatoryCooperation and Transparency
Non-binding guidelines forcooperation among EU andUS regulators regardingtechnical barriers to trade
2002
Source European Commission DG TRADEhttpeuropaeuintcommtradebilateralusausahtm
34
A second and partially overlapping motivation for regulatorycooperation already touched on in Section 3 above is to avoid orresolve bilateral disputes about the potential trade-distorting effects ofnational regulations As we have seen domestic economic regulationscan become a source of transatlantic economic tension in two distinctways First domestic regulations in areas such as consumer orenvironmental protection food safety or copyright protection cancreate non-tariff barriers to international trade and investmentexamples include the recent disputes over the EUrsquos Data PrivacyDirective and its ban on hormone-treated beef as well as exemptionsto the US Copyright Act Second US and EU domestic regulators mayapply their domestic regulations in an extrajurisdictional fashion asfor example when EU and US competition authorities insist on theright to review mergers among firms in the other constituency insofaras the proposed merger creates effects in the regulatorrsquos domesticjurisdiction or when the US (or its constituent states) employs tradeand economic sanctions as an instrument of foreign policy In suchcases George Bermann has pointed out lsquothe line between simpleregulatory [cooperation] hellip and the settlement of trade disputes canbecome highly blurredrsquo4 0
The full range of regulatory cooperation agreements and practicesbetween the United States and the European Union is beyond thescope of this preliminary report Indeed interviews with practitionersfrom the United States and the European Union reveal thatconsiderable informal cooperation takes place across virtually everyconceivable area of US and EU regulation with little attention from thepress scholars or political actors Even in the absence of a full-scalecross-sectoral analysis however we can nevertheless undertake threebrief case studies of regulatory cooperation in the fields of competitionpolicy the negotiation of EUUS Mutual Recognition Agreements andthe Safe Harbour Agreement on data privacy regulation Takentogether these three cases illustrate the range of incentives forregulatory cooperation as well as the various means for suchcooperation and the significant obstacles that often stand in its way
42 Case Study Transatlantic Competition Policy Cooperation
One of the earliest regulatory cooperation agreements signed betweenEU and US authorities and one of the most successful concernscooperation in the enforcement of each sidersquos respective competitionpolicy laws including most notably the examination of proposedmergers and acquisitions
The incentives for cooperation in this area are substantial4 1 First asin other areas of regulation EU and US regulators confront similarproblems and are increasingly called upon to rule upon the samecases placing a premium on the sharing of information Second both
35
US and EU courts have ruled that their respective regulatorsmdashnamelythe Department of Justice and the Federal Trade Commission on theUS side and the Directorate-General for Competition on the EUsidemdashmay enforce domestic competition laws extraterritorially againstfirms based outside their domestic jurisdiction if and insofar thebehavior in question (eg a proposed merger) produces effects oncompetition in the domestic market Such extraterritorial applicationof both EU and US competition law raises serious issues about theduplication of effort by the two sets of regulators not to mention theadverse economic and political impact of inconsistent or conflictingdecisions on the same case by EU and US regulators
These concerns increased substantially in the early 1990s moreoverwith the rapid rise in cross-border mergers and acquisitions thataccompanied the completion of the Unionrsquos lsquo1992rsquo internal marketinitiative At approximately the same time moreover the EuropeanUnion adopted the 1990 Merger Control Regulation which gave theCommission regulatory authority to review mergers above certain sizethresholds and made the Commission an important interlocutor forthe EU in this area It was in this context of increasing cross-bordermergers and increasing EU authority over such mergers thatCompetition Commissioner Leon Brittan proposed in 1990 to expandEU competition policy cooperation with third countries beginning witha formal agreement with the United States US regulators respondedpositively to Brittanrsquos proposal and US and EU regulators agreed in1991 to adopt an agreement committing them to cooperation in thearea of competition policy including the sharing of non-confidentialinformation and coordination of enforcement activities This agreementwas later supplemented by two secondary agreements the 1998Positive Comity Agreement (which seeks to restrict the extra-territorialapplication of antitrust laws in non-merger cases but has beenformally invoked only once) and by the 1999 AdministrativeArrangements on Attendance in Hearings (which provide guidelines forthe participation of EU and US regulators in each otherrsquos hearings)
In the decade since the signature of the first Competition PolicyAgreement EUUS competition policy cooperation has generallyoperated smoothly and successfully with regulators from theCommission the Justice Department and the FTC sharing informationand coordinating enforcement activities on a daily basis andcooperating successfully on over 600 cases during the course of the1990s including almost 500 merger decisions The general success ofEUUS competition policy cooperation in the area of merger controlcan be attributed to the broad transatlantic agreement among EU andUS regulators about the basic scope and tools of policy which hasfacilitated the task of coordinating enforcement actions and generatingmutual trust among regulators
36
Nevertheless as Youri Devuyst points out in an excellent review oftransatlantic competition policy cooperation successful cooperationand conflict prevention between US and EU regulators can behampered by persistent differences in the scope and focus of US andEU competition law the procedures employed by both sides and theexigencies of confidentiality which limit the sharing of information byUS and EU agencies These limitations can be illustrated in theatypical but well-known BoeingMcDonnell Douglas merger (bothAmerican firms) which was approved by the FTC in July 1997 only tobe held up by Commission insistence that the companies agree toformal undertakings to satisfy its competition concerns Although thecase caused substantial strains in the transatlantic relationship thecompanies concerned eventually agreed to the Commissionrsquos proposedremedies allowing the merger to proceed4 2
An even more dramatic difference of opinion occurred with regard tothe proposed merger of two other US firms GE and Honeywell in2001 Here again US regulators approved the proposed merger only tosee the European Commission reject it in July 2001 after announcingthat the firmsrsquo proposed remedies had failed to satisfy theCommissionrsquos concerns Perhaps most strikingly and unlike theprevious case of EUUS disagreement in the BoeingMcDonnellDouglas merger a number of analysts claimed that the disagreementbetween US and EU regulators reflected an underlying andfundamental difference in the criteria for assessing proposedmergers4 3 Although the resulting predictions of other imminentUSEU conflicts are almost certainly overstated it is worthwhilenoting that the Commission in its December 2001 Green Paper on thereview of the Merger Control Regulation proposes to launch a debateon whether the Union should abandon its traditional lsquodominance testrsquo(ie assessing whether a proposed merger would create a dominantposition for the merged firm in the relevant market) in favour of alsquosubstantial lessening of competitionrsquo test (similar to that already usedin the US Canada and Australia)4 4 Whether the Union will move inthis direction remains unclear If so however it would represent astriking example of regulatory convergence among regulators alreadynotable for their similar (if not identical) regulatory philosophies andprocedures
43 Case Study EUUS Mutual Recognition Agreements4 5
As transatlantic tariff barriers have decreased firms have becomemore concerned with what they term duplicative regulatory compliancecosts and many have pressed for their removal This pressure hasincreased with rising transatlantic investment since divergent EU andUS standards and certification requirements most directly affecttransatlantic corporate groups and these groups more easilycoordinate lobbying on both sides of the Atlantic4 6 Transatlantic firms
37
under the auspices of the Transatlantic Business Dialogue inparticular have pressed for enhanced regulatory cooperation throughmutual recognition agreements culminating in the 1997 EUUSMutual Recognition Agreement (MRA) providing for mutual recognitionof testing and certification requirements and the more ambitious MRArelating to marine equipment signed in 2000 These agreements havebeen promoted as a major achievement of the New TransatlanticAgenda and as a flexible means of reconciling the regulatoryapproaches of the United States and the European Union andfacilitating access to both domestic markets
Notwithstanding these potential advantages however majorchallenges for transatlantic regulatory cooperation in this and otherareas are posed by the significant institutional asymmetries betweenthe United Statesrsquo and EUrsquos respective regulatory systems in an arrayof fields Where regulators adopt similar regulatory structures andsystems and enact similar substantive standards they more easilyunderstand and accept each otherrsquos regulatory determinationsRegulatory symmetry facilitates regulatory trust and confidenceenabling regulatory cooperation to occur as in the competition policycase examined above
In many issue-areas however US and EU regulators tend to work indifferent regulatory cultures Generally EU and national regulatorsoperate under the dual mission of ensuring free trade within theinternal market on the one hand while ensuring public safety throughhigh product and process standards on the other They thus are quiteaccustomed to interacting with foreign regulators and testing bodies onan ongoing basis As a consequence the Commissionrsquos DG Enterpriseand DG Trade units rarely tousled when negotiating and implementingthe 1997 Mutual Recognition Agreement The US Food and DrugAdministration (FDA) by contrast has traditionally defined its rolesolely as that of protecting US public health and has not operatedunder a dual mission of also facilitating market exchange Because theFDA is an independent regulatory authority anxious to protect itsregulatory autonomy US trade and commerce authorities encountermore difficulties in negotiating bilateral agreements concerning areaswithin the FDArsquos jurisdiction
Overall institutional adaptation for the negotiation andimplementation the 1997 MRA has been much easier for the EUwhich already has a mechanism for coordinating the mutualrecognition of product testing and certification among fifteen memberstates speaking eleven different languages This relatively deregulatedsystem consists of EU legislators setting lsquoessential requirementsrsquo in EUlsquonew approachrsquo directives which are supplemented by large numbersof harmonized lsquovoluntaryrsquo technical standards that in turn are widelyadopted Before marketing their products firms either self-certify theircompliance with these requirements or hire accredited testing and
38
certification laboratories Firms and laboratories remain subject topost-marketing member state regulatory controls as well as market-reputational constraints Member state regulators interact on a regularbasis through working groups committees and informalarrangements Overall this EU system can be characterized asgovernance by coordinated cross-border public-private networks
US regulatory officials however oversaw very different regulatorysystems in the areas covered by the 1997 MRA For example the USFederal Communications Commission (FCC) itself certified alltelecommunications equipment until the negotiation of thetransatlantic mutual recognition agreement at which time it adopted adecentralized EU model of certification The FDA continues to certifymost medical devices whereas EU authorities have permitted testingby private notified bodies since the mid-1990s The US OccupationalHealth and Safety Administration (OSHA) requires OSHA-accreditedlaboratories to certify all electrical safety equipment used in theworkplace whereas the EU has permitted manufacturers to self-certifythe equipmentrsquos conformity with European requirements since 1973
EU and US authorities began to seriously address issues of regulatorycoordination at the beginning of the 1990s In May 1989 US Secretaryof Commerce Robert Mosbacher and Commission Vice-PresidentMartin Bangemann agreed to explore the possibility of transatlanticmutual recognition agreements as well as mechanisms to grant USfirms greater access to EU standard-setting procedures After 1995these efforts were championed explicitly and repeatedly byTransatlantic Business Dialogue which became a prominent advocateof transatlantic MRAs4 7
EU and US negotiators initially discussed negotiating mutualrecognition arrangements in eleven sectors but ultimately whittledthis down to six4 8 In consequence the 1997 MRA consists of aframework agreement and six annexes respectively coveringtelecommunications equipment electromagnetic compatibilityelectrical safety recreational craft medical devices andpharmaceutical good manufacturing practices Each of the annexes isin fact a separate agreement for a separate sector covering definedcategories and lists of products
As with all trade negotiations the EU and the United States wereconcerned that the final results be lsquobalancedrsquo The United Stateswished to conclude an agreement on telecommunications equipmentfirst but the EU refused because it felt that US firms would benefitmore if the agreement covered only this sector EU negotiators thusinsisted that an agreement on pharmaceuticals and medical devices becompleted simultaneously The MRA sets up a new transatlanticstructure for overseeing its implementation First the MRA creates aJoint Committee which consists of US and EU trade officials who meet
39
twice annually Second the annexes create Joint Sectoral Committeesto oversee the annexesrsquo implementation
The 1997 Mutual Recognition Agreement does not cover recognition ofthe adequacy or equivalency of US and EU standards as such Ratherthe 1997 MRA only addresses mutual recognition by certificationbodies (known as lsquoConformity Assessment Bodiesrsquo) of each otherrsquosseparate standards4 9 Since neither the United States nor the EUrelinquishes sovereign control over the substance of their standardstrading firms still must meet the separate requirements of the worldrsquostwo largest markets In addition these assessment evaluations aresubject to certain pre-approval and post-approval conditions
Implementation of the 1997 MRA moreover remains uneven Thetelecommunications electromagnetic compatibility and recreationalcraft annexes all have been implemented as required In contrastimplementation of the electrical safety medical device andpharmaceutical GMP annexes remain in dispute in part because theFDA and OSHA have been slow to recognize the equivalency ofcertification by European government regulators or privatelaboratories and in part because of the magnitude and theunfamiliarity of US regulatorsrsquo task in assessing the equivalence ofstandards from 15 different member states submitting documentationin up to 11 different languages5 0 In the words of one FDA official theFDA has lsquorefused to compromise its mission of protecting public healthfor balance of trade purposesrsquo5 1 Thus all three annexes initiallydesired by the US administration are in operation while the threeannexes desired by the Commission are not Since the US executivehas less control over the US agencies responsible for implementationboth partiesrsquo choices are somewhat constrained
On June 12 2001 the United States and the EU initialed anAgreement on Mutual Recognition of Certificates of Conformity forMarine Equipment5 2 Unlike the 1997 Mutual Recognition Agreementand its six annexes this new agreement provides for mutualrecognition of each partiesrsquo standards and procedures as lsquoequivalentrsquofor purposes of certifications issued by conformity assessment bodieslocated in the partiesrsquo respective territories (Articles 3 and 4) Pre-existing harmonization of standards in this sector made possible thepartiesrsquo mutual recognition of lsquoequivalencersquo These standards wereagreed under the auspices of the International Maritime Organization(IMO) located in Geneva This new mutual recognition agreementshould be much easier to implement because less training andinformation exchange are required insofar as testing bodies will not becertifying under separate standards or procedures The parties alsoagreed up-front to recognize each otherrsquos existing conformityassessment bodies so that no application procedures are required forimplementation (Article 6) Thus while this agreement is relativelynarrow in product coverage it is much broader in scope
40
Transatlantic businesses that first touted the benefits of EUUSmutual recognition arrangements now realize their underestimation ofthe difficulties of implementation5 3 These constraints involve not justregulators and regulatory cultures but market forces as well Themarket has not reacted favourably to the recognition of newConformity Assessment Bodies as provided under the 1997 MRA Fromthe perspective of manufacturers they typically develop long-termworking relationships with certifying laboratories which constitute aform of cost-effective firm-laboratory partnership Moreover alaboratoryrsquos mark itself may be important in some markets so thatfirms may continue obtaining formal certification from EU notifiedbodies for the EU market and US laboratories for the United States Asa result most firms may continue using the same laboratories eventhough these laboratories cannot directly certify products asConformity Assessment Bodies but must work through sub-contracting arrangements with accredited laboratories on the otherside of the Atlantic5 4 As for laboratories they will not invest in theaccreditation procedures required to become a Conformity AssessmentBody if they fear that the benefits are limited or too uncertainAccreditation costs can be substantial involving seminars workshopstraining programs audits and joint inspections with authorities acrossthe Atlantic The MRArsquos success in consequence may requireconsiderable market promotion
Perhaps the most important lesson from the implementation of theEUUS MRAs is that agreements that both guarantee public safetyand reduce trade barriers cannot be accomplished on the cheap Theyrequire sustained political will of leaders in each jurisdiction to allocatesignificant resources to finance the coordination of cross-borderregulatory networks EU member states sustained such political willand dedicated such resources over decades in order to create thesingle market Even so they too have encountered significant setbacksand obstacles While it is far too early to pre-judge the 1997 MRA itseems clear that the full benefits of the agreement will be reaped only ifboth sides take concrete steps to ensure that sufficient regulatoryresources are made available to the regulators charged withimplementing the agreement in practice
44 Case Study Data Privacy and the Safe Harbour Agreement5 5
Data privacy protection became a transatlantic issue because of thegrowing interdependence of the US and European economies and therising importance of information technology US affiliates in Europeproduce over a trillion dollars of goods and services annuallyconstituting lsquoover half of all the foreign production of US companiesrsquo5 6
These companies depend on information flows not only with thirdparty suppliers customers consultants marketers and other serviceproviders but also internally within their complex networks of
41
affiliates joint ventures and partnerships The EUUS dispute overdata privacy protection and efforts at cooperation demonstrate theinherent interrelation between social regulation and open trade policieswhere regulation (or the lack thereof) has external effects Alleged USunder-regulation can jeopardize the privacy interests of EU residentsAlleged EU over-regulation can limit the commercial operations of USenterprises In an interdependent transatlantic economy US and EUauthorities attempt to manage the ensuing conflicts of norms andmesh where possible their divergent regulatory systems
On October 24 1998 Directive 9546EC on the Protection ofIndividuals with Regard to the Processing of Personal Data and theFree Movement of Such Data became effective The EU through itsDirective takes primarily a regulatory approach to data privacyprotection as opposed to private ordering through market processesExcept for public security criminal law and related exceptions theDirective covers all processing of all personal data by whatever meansand is not limited to action by government business sector or field ofuse (arts 2-3) The Directive prohibits data controllers from processinginformation unless the individual lsquounambiguouslyrsquo consents to theprocessing and that consent is informed (arts 7 8 10 14) TheDirective provides multiple means for enforcement It requires memberstates to grant individuals a permanent right of access to obtain copiesof the data about them and have it corrected or its use enjoined (arts12 28) It obliges member states to provide a judicial remedy forinfringements of data privacy rights including the right to receivedamages (arts 22-24) To support effective enforcement each memberstate must designate an independent public authority lsquoresponsible formonitoring the application within its territoryrsquo of the Directiversquosprovisions (art 28) These supervisory authorities are to be grantedsignificant powers (arts 18 28)5 7
In contrast the United States has stressed lsquoself-regulationrsquo by theprivate sector backed by regulation which tends to be sector-specificand less stringent Congressrsquos targeting of specific sectors andconcerns is reflected in the following statutory titles The DriverrsquosPrivacy Protection Act of 1994 the Video Privacy Protection Act of1988 The Electronic Communications Privacy Act of 1986 the CableCommunications Policy Act of 1984 and The Fair Credit Reporting Actof 1971 Overall the US approach is fragmented involving standard-setting and enforcement by a wide variety of actors including federaland state legislatures agencies and courts industry associationsindividual companies and market forces US legislation providescitizens with significantly greater protection against the collection anduse of personal information by government in particular the federalgovernment than by the private sector
Article 25 of the EU Directive provides that member states shallprohibit all data transfers to a third country if the Commission finds
42
that the country does not ensure lsquoan adequate level of protectionrsquo ofdata privacy Since it appeared that the United States might notprovide for lsquoadequatersquo data privacy protection under the Directiversquoscriteria US and EU authorities engaged in intensive negotiations toavoid a ban on data flows to the United States culminating in theiragreement on Safe Harbour Principles in March 20005 8 Under theagreement EU member states now must recognize that US firmsrsquoadherence to these Principles is sufficient to protect them frommember state challenge Member state authorities however may stillchallenge transfers to firms that do not adopt and comply with thePrinciples
The guidelines set forth seven core data privacy principles for industryto follow which respectively cover the following issues Notice ChoiceOnward Transfer Security Data Integrity Access and EnforcementThe parties supplemented the Principles with a document entitledlsquoFrequently Asked Questionsrsquo (FAQs) designed to guide firms andauthorities in the Principlesrsquo application Many of the FAQs specify thescope of exceptions thereby providing some leeway to US firms
Companies join the Safe Harbour program by annually certifying to theUS Department of Commerce that they will comply with the PrinciplesThe Department of Commerce then places the companyrsquos name on itsweb site list of certifying firms Self-regulatory organizations (such asBBB Online and TRUSTe) backed by the US Federal TradeCommission offer the primary means for the Principlesrsquo enforcementIn this way the Principlesrsquo application resembles the EUrsquos new andglobal approaches to internal market harmonization5 9 As under thenew approach the Safe Harbour Principles set forth lsquoessentialrequirementsrsquo that firms must meet As under the global approachfirms self-certify their adherence which certification is backed first byaudits from self-regulatory organizations and then (ultimately) by theauthority of the state As of February 23 2002 156 companies hadcertified their adherence to the Principles
The Directive also provides other ways to comply with it in particularthrough obtaining lsquounambiguousrsquo consent from the lsquodata subjectrsquo inEurope (art 7) and the signature of a lsquomodel contractrsquo with data privacyauthorities in member states (Article 26) In January 2002 theCommission approved standard contract clauses covering privacyprotection that can be applied to all data transfers from the EUregardless of a firmrsquos adherence to the Safe Harbour Principles Firmsalso can sign ad hoc contracts with individual member state dataprivacy authorities In addition firms can sign contracts with affiliateswhen transferring personal information such as information containedin personnel files
The Safe Harbour Principles are still at an inchoate stage so that itremains too early to assess their impact Some commentators have
43
questioned the effectiveness of the Principles given that relatively fewUS companies have signed them However some practitioners pointout that companies will not certify their procedures until theiroperations are in compliance6 0 For large companies this allegedly caninvolve considerable re-engineering of their information systemscreation of new internal policies and training of personnel
Nonetheless companies engaged in transatlantic business operate inthe shadow of the Directiversquos potential enforcement Under theDirective US businesses face potential litigation before Europeancourts and administrative bodies unless they adhere to the SafeHarbour Principles Even though privacy advocates have criticized theSafe Harbour Principles the agreement represents a potentially usefultool for such advocates In addition the agreement has increased thedemand for legal consulting and other privacy services within theUnited States For example the Better Business Bureau OnLinecreated a privacy seal program which incorporates the Safe HarbourPrinciples and the Electronic Frontier Foundation a public interestorganization has associated with information technology companies tolaunch a program named TRUSTe to rate the privacy protection ofInternet sites which program also is certified under Safe Harbour
In a world of increased economic interdependence the Safe HarbourPrinciples point to the importance of regulatory cooperation acrossborders involving public and private actors Certification groups suchas BBB OnLine meet with European data protection officials so thatthey become comfortable in the workings of an alternative USapproach Government officials including in Europe realize that theydo not have the resources to enforce the Directiversquos provisions solelyon their own and thus rely on public-private networks in an attemptto ensure better global practices affecting EU constituentsNonetheless to make the Principles work will require sustained cross-border cooperation
45 The Challenge of Transatlantic Regulatory Cooperation
Although brief and selective this review of cooperation across threesectors suggests several tentative conclusions about both the benefitsand the potential obstacles to transatlantic regulatory cooperation
With regard to the potential benefits of transatlantic regulatorycooperation we have identified two First as we have seen regulatorycooperation has the potential to enhance the efficiency of regulationthrough the exchange of information and best practice the provision ofearly warning of potential disputes the avoidance or management ofconflicting regulatory decisions and the gradual building of mutualtrust among regulators Second regulatory cooperation can facilitatetransatlantic trade and investment by removing duplicative regulatory
44
requirements and other non-tariff barriers within the transatlanticmarketplace Such cooperation moreover need not involve thecomplete harmonization or convergence of EU and US regulationsalthough there is some preliminary evidence of convergence in specificissue-areas including the acceptance by the United States of a mutualrecognition scheme similar to that long practiced in the EuropeanUnion and the EUrsquos active discussion of moving from its currentlsquodominance testrsquo to a possible new standard for regulatory mergerscloser to that employed by competition authorities in the UnitedStates
Yet despite the obvious promise of transatlantic regulatorycooperation a broad survey of EUUS cooperation in various areasincluding the three case studies analyzed above points to a number ofpotential obstacles to successful transatlantic regulatory cooperation
bull Regulatory Independence In a number of areas US regulatorsenjoy greater regulatory independence than their Europeancounterparts and may resist what they perceive to be an effort tocompromise domestic regulatory standards and processes in theinterests of international trade The result in some cases is that theUSTR and other central agencies of the federal governmentencounter difficulty guaranteeing compliance with regulatoryagreements by specific regulatory agencies such as the FDA andOSHA if and insofar as these agencies believe that implementationof those agreements would compromise established US regulatorystandards and procedures
bull Transparency and Administrative Law Requirements Across awide range of issue-areas US regulators express concern about thedifferent administrative-law requirements for regulators in the USand the European Union most notably in the area of transparencyIn the United States regulators are required to adhere to thelsquonotice-and-commentrsquo rulemaking procedures of the AdministrativeProcedure Act which requires agencies to provide public notice ofproposed regulations in the Federal Register allow individuals tosubmit comments prior to the final adoption of new rules and keepa public record of the regulatory process The EU rulemakingprocedure although typically characterized by widespreadconsultation of interested parties does not incorporate thesefeatures
bull Confidential Information T h e need to pr o tect con f id e n tia lin f or m a ti on of fir m s an d ot h er pr iva te pa r tie s also pla ce s lim i ts on th ea b i lity of both sid es to co op er a t e in th e ad o p tion an d im p lem en ta tion of reg ula tion s pa r ti cula r l y in th e en f or cem e n t of US an d EU com p etiti on la w s reg a r d in g ca r tel s an d con cen tr a tio n s wh er e fi r m sh a v e been mor e reluct a n t to ag r ee to th e sh a r in g of con f i d en tia lin f or m a ti on th a n in th e ar e a of mer g er con tr o l revi ew ed ab ove
45
bull Multi-Level Governance The United States and the EuropeanUnion are both federal or quasi-federal governance systems withregulatory powers divided in most sectors between the federalEUlevel on the one hand and individual statesmember states or evenlocal governments on the other In terms of regulatory cooperationthis division of regulatory powers means that US executive-branchnegotiators and EU Commission officials are frequently chargedwith negotiating regulatory agreements in areas where the statesretain at least partial regulatory competence and to charges fromboth sides that their counterparts are unable to lsquodeliver the statesrsquoExamples of such state regulatory powers on the US side includethe regulation of insurance and other services as well as publicprocurement where the EU has insisted that the participation ofindividual states is vital to the enforcement of regulatoryagreements6 1 Similar problems afflict the EU side whereCommission efforts to engage in regulatory cooperation may befrustrated by resistance among individual member states as in thecase of GMOs or by the slow adoption of EU-level regulations as inthe case of financial services
bull Regulatory Sovereignty Ultimately the adoption of the broadregulatory frameworks for economic activity consumer andenvironmental protection and other areas is entrusted on bothsides of the Atlantic to democratically accountable bodies such asthe Congress and President in the US and the Council of Ministersand European Parliament in the European Union Within theEuropean Union the harmonization and mutual recognition ofnational regulations has been accomplished in large part through adeliberate transfer of regulatory sovereignty to the European level(as in EU merger control) through the pooling of regulatorysovereignty in the Council of Ministers and the EuropeanParliament (as in data privacy and food safety) and through themutual recognition of standards as enforced by the European Courtof Justice To date however the European Union and the UnitedStates have proven unwilling to compromise their regulatorysovereignty in the various agreements reviewed above indeed eventhe most successful experiment in transatlantic regulatorycooperation that in competition policy is predicated explicitly oneach sidersquos ability to cooperate without any substantial change to itsdomestic regulatory objectives and procedures
The existence of these various obstacles does not of course mean thattransatlantic regulatory cooperation is doomed to failure Some areaslike competition policy are subject to relatively few obstacles tosuccessful cooperation while others such as food safety encountermultiple obstacles Even in difficult areas like food safety moreoverregular exchange of information has proven useful in allowingregulators on each side to understand each otherrsquos regulatoryphilosophies and procedures and gradually to build up the trust
46
among regulators that will be required for the successful operation offuture efforts at mutual recognition or harmonization of regulations
As a first step in this direction the European Union and the UnitedStates agreed in April 2002 to the adoption of a set of non-bindinglsquoEUUS Guidelines on Regulatory Cooperation and TransparencyrsquoAlthough this joint statement of principles does not bind either the USor the EU to any specific regulatory measures and explicitly excludesthe sensitive area of agriculture the agreement does call forregularized exchange of information between EU and US regulatorsand for consideration of harmonization or mutual recognition ofstandards lsquoas may be appropriate in specific casesrsquo to minimizeunnecessary technical barriers to trade In addition the documentsuggests that both EU and US regulators should apply potentially far-reaching principles of transparency in rule-making including publicnotification of and comment on proposed regulations Theimplementation of the guidelines is to be reviewed on an ongoing basisby the TEPTBT Working Group6 2
The significance of the new EUUS Guidelines will depend on theirimplementation in practice across an array of issue-areas in themonths and years to come Regardless of the success of this specificendeavor however regulatory cooperation remains an importantpriority for the European Union and the United States in achievingtheir respective regulatory aims while also preventing and resolvingpotential trade disputes For this reason the conclusion to this reportsuggests a careful and systematic study of current attempts atregulatory cooperation across issue-areas identifying key obstaclesand lsquobest practicersquo at overcoming those obstacles would represent asubstantial contribution to future efforts in this area
47
ndash 5 ndashThe European Union and the Americas
EUUS economic relations do not take place in a vacuum As wehave seen transatlantic efforts at trade liberalization regulatorycooperation and dispute resolution are nested within and frequentlymake explicit use of the rules-based multilateral trading system of theWorld Trade Organization the next round of which both the UnitedStates and the European Union have identified as a priority in thecoming years
Just as importantly the story of the EUrsquos ever-closer economicrelationship with the United States coincides with a second majordevelopment namely the rapid increase of EU trade with the countriesof North and South America Prior to the 1990s the United States wasthe most important trading partner and the largest source of foreigndirect investment in Canada Mexico and throughout most of LatinAmerica and this important role for the US has been further enhancedby the adoption and implementation of the North American Free TradeAgreement (NAFTA) with Mexico and Canada as well the earlynegotiations regarding the possible creation of a multilateral FreeTrade Area of the Americas During the course of the 1990s howeverthe European Union has developed an increasingly close andinstitutionalized relationship with Canada Mexico the Mercosurcustoms union and other countries of Central and South Americawhere it now rivals the economic importance of the United States
In institutional terms the EUUS relationship finds its closestcounterpart in the Unionrsquos bilateral relationship with Canadamdashthisdespite an EUCanada economic relationship that is dwarfed by eachsidersquos economic relationship with the US In economic terms theEUCanada relationship is substantially less important than Canadarsquosbilateral relationship with the United States which is far and awayCanadarsquos largest trading partner taking some 87 of total Canadianexports The integration of Canadarsquos economy with that of other Northand South American states moreover has increased in recent yearswith the implementation of NAFTA and a free trade agreement withChile Nevertheless the European Union ranks as Canadarsquos second-largest trading partner after the United States while Canada accountsfor approximately 17 of EU imports and 22 of total EU exports Asin the EUUS relationship moreover foreign direct investment has
48
outpaced trade as a source of interdependence in the EUCanadarelationship with Canada holding 32 of all FDI in the Union whilethe EU is the second largest investor in Canada after the US holdingsome 8 of all foreign direct investment in Canada6 3
Institutionally the EUCanada relationship is structured by a series ofbilateral agreements including the 1990 Declaration on EuropeanCommunity-Canada Relations and the 1996 Joint Political Declarationon EU-Canada Relations and its accompanying Joint EU-CanadaAction Plan and by a series of regular high-level summits that parallelthose held between the EU and the US The EU and Canada have alsosigned a number of important regulatory cooperation agreements inrecent years including a 1996 customs cooperation agreement a setof Mutual Recognition Agreements agreed in 1998 and agreements onveterinary equivalence and cooperation policy cooperation both signedin 1999 Trade disputes between the EU and Canada are relativelyrare and have generally been dealt with successfully through bilateralconsultation or through the WTO dispute resolution procedure6 4
The Union has come also to play an increasingly important economicrole in Latin America characterized by a sharp increase in both tradeand especially foreign direct investment in the region At the sametime the Union has pursued a wide range of trade and economicagreements with the countries of Latin America including a free tradeagreement with Mexico and other agreements with Mercosur andother Latin American countries In the rest of this section thereforewe examine the EUrsquos economic relationship with the countries of LatinAmerica focusing in turn on the changing patterns of EULatinAmerican trade and investment EU economic agreements with thecountries of the region and the remaining challenges for the EULatinAmerica relationship
51 The EU and Latin America Trade and Investment
The pattern of the trade relationships between the EU and the mainLatin American countries has changed substantially during the lastdecade Although none of them was a major trade partner the largercountries of Latin America already represented an importantproportion of EU exports and imports in 1990 when Mercosur plusMexico and Chile accounted for 43 of extra-EU exports and 32 ofits imports The trade balance was very favourable to the Europeanside with a deficit of over US$8 billion During the 1990s Europeconsolidated its Latin American export markets and increased itsmarket share in Argentina Mexico Chile and especially Brazil In2000 the EU maintained the proportion of its exports towards theanalysed countries while increasing the proportion of imports up to35 The trade balance has improved versus Argentina Mexicoand Brazil whereas the deficit has increased significantly with Chile
49
The total deficit with the countries has now turned into a surplus ofmore than 5 billion
Table 9 EULatin American Trade and Investment(ExportsImports and Foreign Direct Investment as apercentage of total extra-EU flows Trade Balances aremillions of US$)
of EUexports
of EUimports
Trade balance of EUFDI
1990 2000 1990 2000 1990 2000 1999 2000
Argentina 03 08 08 06 -2252 737 54 15
Brazil 25 18 09 17 -5711 -1031 38 53
MERCOSUR 28 25 19 23 -8368 301 92 68
Mexico 11 15 07 07 1231 6973 06 08
Chile 03 04 06 05 -1336 -1653 19 ---
Note figures with an asterisk correspond to year 1999Source European Commission DG-Trade
Moving from Latin America as a whole to individual countries andgroupings we come first to the Mercosur countries (Argentina BrazilParaguay and Uruguay) which created a customs union in 1994 andhave since increased partly thanks to their own process of economicintegration their openness towards the rest of the world6 5 The twosmallest countries are considerably more open (a tradeGDP ratio of70 in Paraguay and 33 in Uruguay in 1999) whereas thisproportion is 19 in Argentina and 15 in Brazil6 6 Although intra-area trade accounts for 20 of their total flows trade with NAFTA andthe EU has also increased during the nineties The financial crises ofthe end of the decade have especially since 1998 temporally put ahalt in the process and affected their external demand By 2000 theEU as a bloc had overtaken the United States as Mercosurrsquos singlelargest trade partner representing 30 of their exports and 35 oftheir imports
The EU and Mercosur can be considered complementary economicblocs in both agricultural and industrial products The EU is the mainexport market for Mercosur agriculture with a 40 share (the USrepresents only 9) More precisely 50 of Mercosur exports towardsthe EU are agricultural products and are concentrated in a smallrange of products such as oilseeds (particularly soy) and animal feedproducts We should also mention coffee (10 of EU imports fromMercosur) livestock and meat and derivatives fruit and derivativestobacco and fish products In contrast EU exports of agricultural
50
products to Mercosur are modest (approximately 6 of total) and areconcentrated in three groups of products alcoholic beverages dairyproducts and other edible animal products and cocoa derivatives Thetrade balance is negative for the EU in agricultural products althoughthe opposite happens in the case of industrial goods The EU is themain supplier of industrial and capital goods to the area includingmost importantly automobiles machinery and mechanical appliancesand a third group of products from the electrical industry (mainlyradiotelephony appliances and parts)
Economic relations between Argentina and the EU developed verypositively since the signature in 1990 of the ECArgentina frameworkagreement on trade and economic co-operation During the 1990sArgentina advanced towards being an open market economy and optedfor an outward-looking external policy where Mercosur and the EUplayed a key role The EU is Argentinarsquos second largest trading partner(after Brazil) overall trade with the EU has more than doubled duringthe last 10 years and represents around 25 of total trade Howeverthe crisis that started at the end of last decade has interrupted thispositive trend The main components of EU imports are agriculturalproducts and raw materials while EU exports to Argentina concentrateon machinery and transport equipment chemicals and manufacturedgoods
Brazil is the largest Latin American economy its GDP accounting for35 of the area or 65 of Mercosur Brazilrsquos domestic market with apopulation over 160 million people constitutes a potentially attractivedestination for both US and EU exports Brazil also signed a co-operation agreement in 1995 with the EU which is now its maintrading partner destination of 268 of its exports and origin of 252of its imports although the US follows very closely (243 and 233respectively) Although during the last years the EU has progressivelyreduced its share of the Brazilian market in favour of the US Brazilremains the EUrsquos main trade partner in Latin America Like Argentinathe process of opening to international competition started between1990 and 1993 As a result Brazilrsquos trade surpluses of the 1990squickly turned into substantial deficits later in the decade only slowlycorrected after the 1999 devaluation The main components of EUimports (1999 data) were vegetable products prepared foodstuffsmineral products transportation equipment wood and wood pulpproducts and machinery and mechanical appliances the latter alsoimportant in EU exports together with transportation equipmentchemical products base metals plastics and rubber
Mexico is the tenth-largest world economy and the most importantLatin-American exporter its total exports amounting to US$166 billionin 2000 In order to qualify its relative size it should be compared withBrazil the second larger exporter in the region (and ninth worldeconomy in terms of GDP) which exported only US$55 billion Mexico
51
is traditionally one of the EUrsquos most important trade partners in LatinAmerica sharing with Brazil its high potential for growth as an exportmarket Mexico has also followed a process of opening to internationalcompetition during the end of the eighties and all the nineties first byunilateral tariff reductions then by subscribing to ten free tradeagreements with the majority of the Latin American countries or areasCanada and the US (creating NAFTA) and in Europe with the EFTAand the EU
During the period 1994-2000 Mexican exports to the US increased240 while their composition has substantially diversified Oil-relatedexports represented only 98 of the total in 2000 compared to 248in 1990 Agricultural products did not account for more than 25 andthe rest of the exports were manufactured goods In contrast 75 ofMexicorsquos imports are intermediate goods 134 capital goods and theproportion of consumption goods is only 117 The EU is Mexicorsquossecond trading partner after the US although the data reveals theoverwhelming dependence of Mexico on the US economy 887 of itsexports are directed to the US and 73 of its imports come from it Inthe EU Germany and Spain represent Mexicorsquos largest export marketswith 09 each Germany is the main European supplier representinga 33 of Mexicorsquos imports As mentioned above Mexicorsquos tradebalance with the EU is highly deficitary
Chile is considered the most open stable and liberalized economy inLatin America Despite its relatively modest size Chile is an importanttrading nation due to its high tradeGDP ratio (over 40) Chile is thefifth Latin American exporter (US$182 billion in 2000) withagriculture and fishery accounting for 10 of the total and the other90 distributed between mining (449 ) and industry (442) Incontrast Chilersquos imports are concentrated in the industrial sector(77) with mining (135) and agriculture (22) lagging far behindIt should be stressed that Chilean trade is globally balanced andexhibits important surpluses with the European Union and Asia Incontrast Chile cumulates its largest deficit with Argentina its main oilsupplier
The EU is Chilersquos main trading partner taking in approximately 25 ofthe countries imports during 20016 7 Among the EU countries theUnited Kingdom and Italy accumulate 34 of Chilersquos trade each andFrance 3 Chile is not only a market for EU exporters of goods andservices but also an important source of imports both in agriculturaland industrial goods The main components of EU imports from Chileare manufactured goods raw materials agricultural products andbeverages and tobacco EU exports of goods are concentrated inmachinery and transport equipment chemical products andmanufactured goods
52
Latin America in general and particularly Mercosur has been involvedin the general trend that directed large capital flows towards emergingand developing economies In 1990 only 16 of overall foreign directinvestment was received by developing countries whereas in 2000 thisproportion had reached 37 Latin America and the Caribbeanreceived around 11 of these flows during the period 1995-99 Brazilreceived one third of the investment in the area whereas Argentinaand Chilersquos proportions were 16 and 8 respectively thanks to theacquisitions of domestic firms by the Spanish companies Repsol andEndesa However due to its instability Argentina has experienced asignificant reduction in foreign investment since 2000 Mexico is thesecond destination of FDI in Latin America (17 during the periodabove mentioned) and in contrast with other countries such asArgentina these flows exhibit a very stable behaviour
Although Mexico followed a process of capital movements liberalizationsimilar to the experiences of Brazil and Argentina a factor behind thestability of these movements is related to its process of regionalintegration with North America Many multinational enterprises haveinvested in Mexico as a platform to produce manufactured goodsdirected towards the US and Canadian markets As an examplebetween 1995 and 2000 more than 60 of cumulated FDI went to themanufacturing sector and 65 had its origin in the US Theseinvestment flows have contributed to the modernization of theindustrial sector and to a significant improvement in Mexicorsquoscompetitive position in the automobile electronic and textileindustries which can help to explain the excellent export performanceof this country in recent years Finally in 2000 the banking sector hascumulated 30 of the total flows of FDI received by Mexico whereasservices telecommunications and the oil industry have had a verylimited interest for foreign investors This fact is in contrast with theother large Latin American economies
The majority of the FDI that the Mercosur countries received in thesecond half of the nineties was directed towards the privatization of thepublic firms especially in the area of services (CEPAL 2001) Due tothis process FDI has abandoned its traditional destinations (forexample in 1995 55 of the FDI stock of Brazil was concentrated inmanufacturing) to be employed in mergers and acquisitions mainly inthe service sector According to Tansini and Vera in 1998 and 199978 of these acquisitions were directed towards Argentina and 18had Chile as destination6 8 In 1999 30 of the capital flows receivedby Brazil were absorbed by the privatizations although since then themajority of the resources were devoted to consolidating andrestructuring these firms
The European Unionrsquos share of foreign direct investment inLatin America increased dramatically during the 1990s with netinflows from the EU increasing from US$1077 billion in 1993 to
53
US$17068 billion in 1997 nearly overtaking total inflows to the regionfrom the United States Within Europe moreover there has been ashift in the primary investors in Latin America with Spain inparticular joining the United Kingdom and Germany as the leadingEuropean investors in the region (see Figure 2) During the 1980s theUK produced more than 50 of the cumulated FDI flows in Mercosurplus Chile6 9 followed by Germany (25) In the 1990s by contrastGermany increased its participation to more than 30 whereas Spainmore than doubled its share to 24 Germanyrsquos FDI concentrated inmanufacturing (such as the automobile industry) during the first halfof the decade especially in Argentina and Brazil with their largedomestic markets Since 1995 Spain is the main European investordirecting its interests in the privatization sectors bankingtelecommunications and energy Other EU countries with importantFDI flows in Mercosur and Chile during the nineties have beenthe Netherlands France and Portugal (the latter with Brazil as itsprimary destination) According to the EC Commission the EUrsquos stockof foreign direct investment in 1999 was euro 1 billion in Uruguayeuro 31 billion in Argentina and euro 34 billion in Brazil EU investment inParaguay is virtually non-existent whereas Chile cumulateseuro 104 billion although in this country the US is still the main foreigninvestor
52 EU Trade Agreements with Latin American Countries7 0
The first symbolic push for the intensification of EU relations withLatin America followed the 1969 lsquoDeclaration of Buenos Airesrsquo issuedby the Latin American members of the Special Committee for LatinAmerican Coordination and calling for an institutionalization of theEULatin America political dialogue and closer economic cooperationbetween both regions
Unlike some previous attempts this time the EU responded positivelyand a regular dialogue between the group of Latin Americanambassadors in Brussels (GRULA) and EC representatives wasinitiated The major substantive measure advanced in this dialoguewas the policy developed toward the Caribbean countries which wereincorporated together with other European former colonies in Africaand the Pacific in the so-called ACP Group and were accorded a specialregime as stated in the Lomeacute Convention of 19757 1 Apart from thatthe Communityrsquos official policy during this period was limited tobilateral economic treaties with the major Latin American countries(so-called first generation agreements) such as the non-preferentialtrade agreements with Argentina in 1970 Uruguay in 1973 Brazil in1973 and Mexico in 19757 2
54
Table 10 EULatin American Trade Agreements
Agreement Objectives Year ofentry into
fEUMexico FreeTrade Agreement(EconomicPartnershipPolitical Co-operation and Co-operationAgreement)
Liberalizes over 96 per cent of EU-Mexicotrade by 2007 at the latest fullyliberalizes industrial products by 2003for the EU and 2007 for Mexico withnegotiations on tariff phase-out ofagricultural items deferred until 2003includes rules on intellectual propertyand dispute settlements and providesEU access to the Mexican procurementand services markets similar to NAFTA
2000
CentralAmericaEUFramework Co-operationAgreement andRegionalProgramme for theReconstruction ofCentral America(PRRAC)
The Framework Agreement seeks tostrength the co-operation in theeconomic financial commercial socio-cultural areas and environment Asecond aim is to reinforce the CentralAmerican Integration System ThePPRAC is a specific program for recoveryfrom the effects caused by hurricaneMitch
Both since1999
AndeanCommunityEUCo-operationagreement andGSP
Political aspects anti-drug dialogueCommercial aspects since 1998 theGeneral System of Preferences is appliedunder a new regime As a result 75 ofproducts imported from the AndeanCommunity to the EU are exempt fromcustom duties Framework Co-operationAgreement to promote regionalintegration
1998(politicaldialogueand co-
operation)and 1999
(GSP)
EUChile AssociationAgreement
Governments concluded negotiations inApril 2002 on a wide-ranging AssociationAgreement including the creation of a free-trade area in goods and services anagreement on wines and spirits andprovisions on public procurementinvestment competition and intellectualproperty
Awaitingratificationby the EUand Chile
MercosurEuropeanUnion
Framework agreement came into force in1999 Negotiations on an interregionalfree-trade agreement began in 1999 andare ongoing
Frameworkagreementsince 1999Free-tradeagreementexpected in
2005
Source Flocircres (2001) DG Trade (European Commission) and Camarero andTamarit (2002)
55
Figure 2 EU Foreign Direct Investment in MERCOSUR + Chile(Cumulated flows Country shares EU = 100)
Source OECD International Direct Investment Statistics YearbookNote For clarity some EU countries with smaller investment shares in MERCOSURhave been excluded
From the mid-1970s to mid-1980s the official policy of the EC towardsLatin America was based mainly on the Inter-Parliamentary Dialoguebetween the European Parliament and Latin Americanparliamentarians and on bilateral economic treaties With regard tothe latter a new round of lsquosecond-generationrsquo agreements was signedbetween 1980 and 1985 with individual countries such as Argentina in1980 Uruguay in 1980 and Brazil in 1982 and with sub-regionssuch as the Andean Pact (created in 1969 between VenezuelaColombia Equator Peru and Bolivia) in 1983 and the CentralAmerican Common Market in 1986 7 3
From the mid-1980s onward Latin America became the focus of moresubstantial political and economic policies from the EU On thepolitical side a variety of multilateral fora have been set up The SanJoseacute Group was launched in Costa Rica in 1984 with the aim ofsupporting progress in the peace process and democracy in CentralAmerica From that date annual meetings have been organizedextending their aims to other fields like the rule of law and humanrights the fight against the trafficking of drugs and educationaltechnical and cultural co-operation The Rio Group was established in1986 again meeting on an annual basis with a membership includingall the South American countries as well as Mexico Finally twosummit meetingsmdashthe first in Rio de Janeiro in June 1999 and a
0
10
20
30
40
50
60
1980-90
1991-98
56
second held under the Spanish EU Presidency in Madrid in May2002mdashbrought together the leaders of 48 countries from the EU andLatin America The first summit in Rio agreed upon an Action Plan toincrease co-operation in the political and cultural spheres and calledfor negotiation of association agreements with Chile and Mercosurwhile the Madrid summit further developed political cooperation andconfirmed the conclusion of a bilateral EUChile AssociationAgreement7 4
The 1990s and early 2000s finally have witnessed the conclusion bythe EU of a round of so-called lsquothird-generationrsquo treaties between theEU and various Latin American countries and trade blocs The primaryagreements in force or under negotiation between the Union and thecountries of Latin America are summarized in Table 10 In all thecases the nature of these agreements is twofold encompassingpolitical agreements on questions such as democracy the environmentand human rights and as well as economic agreements regarding theliberalization of trade and investment
521 The EUMexico Free Trade Agreement
Since 1975 the EU has signed several agreements with MexicoAlthough these agreements were not significantly different from othersalready in force with other countries in the same geographic areaMexico had always received a particular treatment Thus in the 70sMexico benefited from the treatment of most favoured nationneglecting the fact that this country was not a member of the GATT atthat time Later Mexico was eligible under the GSP scheme benefitingfrom this treatment until 1995 when this system was revisited andMexico lost much of its preferential access to the EU marketNegotiations aiming at the establishment of an FTA with the EUstarted during the same year The primary reason was the concern inthe EU about possible trade diversion due to the Mexican entry intoNAFTA in 1994 A general agreement removing trade barriers betweenthe EU and Mexico would minimize any trade diversion effect
Although the most important part of the agreement is the creation of afree trade area between the EU and Mexico the so-called GlobalAgreement includes a rather wide package institutionalising a regularpolitical dialogue and extending the bilateral co-operation Thisagreement places the EU in a better position to compete for access tothe Mexican market In 2007 all industrial goods will be free of tariffsMoreover in trade volume 52 of EC exports will enter the Mexicanmarket duty free by 2003 and for the remaining 48 a maximum dutyof 5 will be applied This extremely quick dismantling calendar willplace economic operators on both sides on an equal footing with otherpreferential partners in real time Concerning agricultural and fisheriesproducts some European special sensitivities are respected allowingat the same time for preferential access to European and Mexican
57
exporters into their respective markets The agreement also includespreferential treatment in services providing service providers from theEU with access to the Mexican market which will be equivalent if notsuperior to that currently enjoyed by operators from Mexicorsquos otherpreferential partners in particular the US and Canada In the servicessector EU banks and insurance companies will be authorized tooperate and establish directly on the Mexican territory Theliberalization of investment and payments related to investments willtake place in 2003 The agreement also provides access to the Mexicanprocurement market similar to NAFTA Finally provisions are madeabout intellectual property competition and dispute settlement
The agreement covers other aspects apart from trade Thus the EUfosters co-operation programmes with Mexico for an annual amount onaverage of euro 13 million during the 1990-99 period There were alsosignificant activities under horizontal programmes such as AL-Invest(Latin American Investment Programmes) and ALFA (Latin AmericanAcademic Formation)
522 Relations with Central America
The most important part of the cooperation between the EU and LatinAmerica and more specifically with Central America has beenimplemented through the so-called cooperation agreements The firstbilateral agreements with individual Central American countries weresigned during the 1970s and early 1980s Later on a second wave ofagreements were adopted covering a wider range of areas topicsbeginning with the First Framework Agreement of Co-operation forCentral America signed in 1985 This agreement belongs to the mostadvanced second-generation type and covers areas such ascommercial promotion and well as agricultural industrial andeconomic co-operation The Second Framework Agreement of Co-operation signed in 1993 is considered as a lsquothird generationrsquo type7 5
This Agreement came into force in 1999 including two novelties apackage of aid for refugees and a programme to support democracyand human rights The previsions of financial technical and economicco-operation aid with these countries from 2000 to 2006 are close toeuro 500 million Furthermore the Commission has decided to participatein the initiative for highly indebted poor countries (HIPC) The eligibleLatin American countries are Honduras and Nicaragua which stand toreceive as much as euro 30 million Additionally the European InvestmentBank has made several loans to the Central American Bank forEconomic Integration (CABEI) in order to support reconstruction in theregion
58
523 Relations with the Andean Community and Chile
The EU has established a complete institutional framework with theAndean Community implementing different instruments in each field(political dialogue trade and co-operation) with a special emphasis onthe question of lsquoanti-drugrsquo measures
Trade relations between the EU and the Andean Community haveincreased 32 over the last nine years currently representing 08 ofthe EUrsquos total trade and 167 of total trade for the AndeanCommunity It is worthwhile to note that 90 of Andean exportsconsist of raw materials or primary production while 85 of the EUrsquosexports are manufactured products From 1999 on the EU hasgranted under the Generalized System of Preferences (GSP)preferential access for all industrial products as well as numerousagricultural products especially for those Andean countries committedto fighting against drug production and trafficking
In the area of political co-operation the Andean region was the first inLatin America to conclude a regional co-operation agreement with theEU The present regional framework agreement was signed in 1993and entered into force in 1998 The amount of the aid to the areareached some euro 6 millionyear for the period 1982-97
Finally the EU has also established several bilateral agreements withChile including the Framework Agreement signed in 1996 andcurrently in force This agreement covers political and economiccooperation and formed the cornerstone for a new EUChileAssociation Agreement the negotiation of which was completed inApril 2002 The agreement which is currently awaiting ratification byboth parties calls for the creation of a free-trade area in goods andservices an agreement on wines and spirits including both market-access questions and the use of protected names a Sanitary andPhytosanitary Agreement new rules on public procurementinvestment competition and intellectual property and a dispute-resolution mechanism7 6
524 The Launching of a Free Trade Area with Mercosur77
The EU is currently the main trade partner of Mercosur The EUgenerally imports agricultural and primary products from Mercosurwhile it exports primarily industrial commodities7 8 The EU has aFramework Agreement of co-operation similar to others with severalcountries or blocs in Latin America In June 2000 negotiations werere-opened aiming at signing a new Inter-regional AssociationAgreement This new agreement would cover not only commercialaspects but also many others like political dialogue or cooperation(social and humanitarian economic and development) between the twoblocs
59
The fifth round of negotiation between the EU and Mercosur took placein July 2001 The main point in this round was the presentation bythe EU of its offer for the reduction of tariff and non-tariff barriers inorder to liberalize trade in goods services and public procurementThese reductions would cover all the industrial products and 90 ofagricultural products over a period of no longer than ten yearsMercosurrsquos answer to that proposal was given during the sixth roundin October 2001 presenting its own offer in terms of tariff and non-tariff reduction and public procurement At the same time there hasbeen an exchange of views on political dialogue as well as someimprovement in the area of technical and scientific co-operationenergy transport telecommunications and information technologyNegotiations continue but conclusion of the agreement is not expecteduntil 2005
53 Challenges for EULatin American Economic Relations
As even this brief survey has made clear the European Union todayplays a substantial economic and political role in Latin America EUtrade with and foreign direct investment in the region have increaseddramatically during the course of the past decade with the EU nowemerging as the most important economic partner for Mercosur inparticular At the same time the EUrsquos political and economicagreements have demonstrated ever-greater ambition and anincreasingly broad economic agenda embracing not only tariff andquota reductions but also provisions on non-tariff barriersinvestment and public procurement as well as political provisionsregarding democracy and human rights
The completion of a more ambitious system of economic agreementswith the Latin American countries remains a goal for both the UnitedStates and the European Union However there are importantqualitative differences between the strategies of the two trade blocswhile the European Union is trying to keep the development of a hub-and-spoke system of bilateral agreements with individual countries or(as in the case of Mercosur) customs unions the United States hasannounced its desire to create a multilateral Free Trade Area of theAmericas The countries of the region for their part havedemonstrated a decades-long commitment to economic liberalizationlocked in place by a series of both multilateral and bilateral tradeagreements amongst themselves as well as with the United States andthe European Union although their commitment to proceeding alongthese lines has been tested by the recent economic crisis in Argentina
The EULatin America summit meeting held in Madrid in May 2002witnessed the conclusion of the EUChile free trade agreement whichis now awaiting ratification by both sides but further negotiations lieahead particularly in the case of the proposed EUMercosur
60
agreement which remains far from a conclusion not expected before2005 In these negotiations the EU should give special attention toexpanding market access for the Mercosur countries especially for so-called lsquosensitive productsrsquo Although the EU has presented itself as achampion of free trade within various multilateral fora it is clear thatthe Union has actively sought to preserve barriers in some industrialsubsectors and especially in the agricultural sector where theCommission has estimated that some 10-12 of all EU imports fromthe Mercosur countries are currently labelled as lsquosensitiversquo7 9 Removalof these barriers would benefit not only Latin American countries butalso European consumers who are currently playing higher prices foran amount equivalent to 5-7 of the Unionrsquos GDP8 0 In addition thenegotiation process should cover not only tariffs (since over 50 of allimports from Mercosur are eligible for an average tariff lower than25) but also other means of market-access protection such as tariffquotas which are applied extensively to agriculture and food productsAdditional areas for negotiation include trade in goods servicesinvestment public procurement intellectual property rights technicalstandards and rules of origin
Finally neither these EULatin American negotiations nor theextensive EUUS cooperation outlined in the previous sections of thisreport should distract the European Union or the United States fromtheir shared priority namely the successful completion of alsquoDevelopment Roundrsquo of multilateral trade talks within the WTODuring his recent trip to Argentina EU Trade Commissioner PascalLamy stressed the importance of ensuring that bilateral and inter-regional trade agreements such as those that the EU has concludedwith the countries of Latin America rest on the multilateral foundationof WTO trade law For this reason he argued bilateral andinterregional negotiations lsquomust not be allowed to detract our attentionfrom the pursuit of the Doha Development Agendarsquo8 1 Such acommitment should remain a central tenet of EU trade policy in theyears to come
61
ConclusionsThe New Transatlantic Economic Agenda
The United States and the European Union have an extraordinarilyclose and important economic relationship the health of which is vitalto the global economy as a whole Both partners stand to gain a greatdeal by making the relationship more productive Both stand to lose ifdisputes cause interruptions and acrimony and if the relationship failsto adapt to new pressures and new challenges
The agenda of transatlantic economic relations has evolved andexpanded to reflect the increasingly integrated nature of thetransatlantic marketplace To be sure traditional trade questionsmdashandtrade tensionsmdashpersist between the European Union and the UnitedStates Despite the generally low level of tariffs between the EU andUS tariff peaks and quotas remain for both sides in a number ofsensitive areas which can and should be subject to further reductionsin the Doha Round of trade liberalization talks within the World TradeOrganization In addition to tariffs and quotas a number of othertraditional trade measuresmdashincluding most notably antidumpingsubsidies and safeguard measuresmdashcontinue to plague thetransatlantic partnership most strikingly in the current dispute overUS safeguard actions in the steel sector Nevertheless while theseriousness of these disputes should not be underestimated themultilateral rules-based trading system of the World TradingOrganization is generally well equipped to address such issues andthe United States and the European Union should continue in theirefforts to use and support the WTO as a forum for both negotiationand dispute resolution
Perhaps the greatest challenge to the transatlantic economicrelationship however is the expansion of the transatlantic economicagenda to encompass domestic regulations that are adopted forlegitimate purposes but act in practice as non-tariff barriers to tradefragmenting the transatlantic market and in some cases leading tobitter and intractable trade disputes As we have seen these types ofdisputes also create enormous legal and political challenges to thedispute settlement procedure of the WTO where judgments in areassuch as the beef hormones and Irish music disputes have createdpolitical controversy without (at this writing) securing full compliancefrom the states concerned
62
For these reasons any attempt to deepen transatlantic economicintegration between the United States and the European Union mustaddress not only tariffs quotas and similar disputes about subsidiesantidumping actions and safeguard measures but also the new-styleregulatory disputes that are likely to become the most importantbarriers in the transatlantic marketplace and place the greateststrains on the EUUS relationship and the multilateral WTO systemin the medium- to long-term future
Addressing these challenges in turn will require a careful andextensive study and more comprehensive understanding not only oftraditional trade issues but also and especially the domestic sourcesof transatlantic regulatory disputes existing efforts to resolve suchdisputes and possible new mechanisms for preventing and settlingfuture regulatory disputes between the European Union and theUnited States
Such a study would necessarily be wide-ranging involving not onlyeconomists who would identify the potential benefits of economicliberalization but also political scientists political economists andlegal scholars who would identify the domestic sources oftransatlantic regulatory disputes the possibility of preventing suchdisputes through early warning andor regulatory cooperation and themost promising means of settling disputes either bilaterally ormultilaterally Any such study would therefore have to undertakethree fundamental tasks
1 A comprehensive listing and analysis based on publiclyavailable sources of EU and US regulations capable of restrictingtrade and investment between the European Union and the UnitedStates
This report has taken a first step towards such an analysis with thecompilation of regulatory barriers identified by the United States andthe EU in their respective trade barriers reports for 2001 (see Appendix1) but further research is required to identify both the sources and theseriousness of problematic regulations
bull In terms of sources a useful first step would be to identify whetherthe regulations in question were adopted by the local state orfederal (EU) levels of government and whether they were adoptedthrough legislation or by regulatory authorities
bull In terms of seriousness a preliminary effort should be made toidentify the economic impact of the regulations in question ontransatlantic trade and investment Such an analysis could draw onthe research done by the US and the EU as well as on the periodicreports of the World Trade Organization and the Transatlantic
63
Business Dialogue but should be conducted by independenteconomists it is to be accepted as authoritative by both parties
In addition an effort should be made by scholars and practitioners onboth sides of the Atlantic to identify new challenges to the relationshipparticularly those arising from the application of new technologiessuch as electronic commerce and biotechnology
2 A comprehensive survey and analysis of transatlanticregulatory cooperation including areas of informal cooperationamong regulators as well as areas of formal agreement
Section 4 of this report identified regulatory cooperation as aparticularly promising means of preventing as well as settlingtransatlantic regulatory disputes yet it also identified a number ofpolitical legal and institutional barriers which can hindermdashand havehinderedmdashcooperation across a range of issue-areas Given therecognized promise of regulatory cooperation among EU and USauthorities as a means of realizing our joint regulatory aims andavoiding future regulatory disputes more detailed studies oftransatlantic regulatory cooperation are vital in order to identifybarriers to regulatory cooperation as well as instances of lsquobest practicersquoin overcoming those barriers
3 A systematic analysis of various means of bilateral andmultilateral dispute resolution with particular emphasis on thespecific challenges of transatlantic regulatory disputes
Finally while emphasis can and should be placed on prevention ratherthan settlement of transatlantic disputes future studies should focuson new and innovative means of dispute settlement in regulatorydisputes given the acknowledged difficulties of litigating regulatorydisputes before the WTO Dispute Settlement Body At the domesticlevel the prospects for the adoption of lsquotrade impact assessmentsrsquo aswell as a more general move toward transparent regulatory procedureson both sides of the Atlantic should be examined At the bilaterallevel special attention should be directed toward the possibleexpansion of early warning as well as the possible use of bilateralarbitration and mediation outside the WTO At the multilateral levelfinally the EU and US should jointly examine the possible revision ofWTO rules to clarify the use of the precautionary principle and toconsider possible amendments to the WTO Dispute SettlementUnderstanding to be undertaken in May 2003
Appendix 1 EU-US Barriers to Trade in Goods Services and Foreign Investment
Type ofmeasure EU concerns about US rules US concerns about EU rules
Tariffs Tariff peaks Food products Textiles Footwear Leathergoods Jewelry Ceramics and glass Trucks Railway carsOptical fibers Tubes for computer monitorsSANCTIONS IN RETALIATION FOR THE EU BAN ON HORMONE-TREATED BEEFTariff quotas dairy products tobacco
BANANAS (tariff quota + discriminatorylicensing) (settled)CUMULATIVE RECOVERY SYSTEM (brown rice)ADMINISTRATION OF CUSTOMS DUTIES FOR RICE(B) (agreement 1101)
Trade defenceinstruments
1916 ANTIDUMPING ACTSAFEGUARD MEASURES ON STEEL WIRE ROD (32000)SAFEGUARD MEASURES ON WELDED STEEL PIPE (32000)BYRD AMENDMENT (ANTI-DUMPING DUTIES GO TO INJUREDINDUSTRY)FAILURE TO LIFT COUNTERVAILING DUTIES AFTER SUNSET REVIEWSQUOTA ON THE IMPORT OF WHEAT GLUTEN (WITHDRAWN 62001)METHODOLOGY OF COUNTERVAILING DUTIES WITH RESPECT TOBRITISH STEEL ANTI-DUMPING DUTIES ON SEAMLESS PIPE
Othercustomsbarriers
Excessive invoicing requirementsEU not recognized as a country of originTEXTILES amp LEATHER CUSTOMS FORMALITIES amp RULES OF ORIGINTuna (certification of origin)
Other leviesand charges
Customs fees (eg Merchandise Processing Fee)HARBOUR MAINTENANCE TAX and Harbour Services Fee50 tax on imported equipment for boats Taxes that falldisproportionately on European automakersbull Luxury tax (70)bull Gas Guzzler tax (85)bull CAFEacute penalties (~100)
65
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade
SHRIMP-TURTLE ndash to import shrimp countries must be certifiedas matching US efforts to protect sea turtles (EU third party)Tuna-dolphin ndash to import tuna countries must be approvedby the National Marine Fisheries ServiceGeneral prohibition on the importation of dairy productsmade from unpasturized milkEffective prohibition on the importation of yogurtMilk protein for yogurt must come from approved diariesDivergence from international standardsReliance on third-party conformity assessment (eg reelectrical equipment and domestic appliances)US and Canadian content labeling of carsApproval slower than for US-produced drugsOver-the-counter drug approval requires US market historyExtensive product description (textiles amp leather)Citrus fruits must be landed at North Atlantic portsRules on all imports of ruminant animals and animalproducts from all EU countries because of BSEBan on some uncooked meat productsStrict condition on imports of egg products (continuousinspection of production process)Low acid canned food (eg fish and dairy products) subject todetailed prior approval systemPre-clearance inspection of apples and pears from somemember states for pestsProhibition on imports of all animals and products from amember state where a disease exists (not just region wherefound)Approval of wine labels
HORMONE-TREATED BEEFLack of national treatment with respect toGEOGRAPHICAL INDICATIONS for agriculturalproducts and foodPoultry treated with chlorinated waterEffective moratorium on approval of GMproducts since 498Mandatory labeling of all foods containingmore than 1 GM ingredientsStringent certification of non-hormone-treated beef (new US program seemsadequate)Food feed and fertilizer containing specifiedrisk materials (narrower product range thanprevious rule)Treatment and traceability of raw materialsfor production of gelatine for humanconsumption (agreement near on healthcertificate that would enable US exports toresume)EU approval of 3rd country establishmentsexporting animal products (esp dairy)Derogation from EU standards required forUS wine (on-going negotiations to try toresolve)Heat or pressure treatment of softwoodpacking material (new EU rule similar todraft international standard)Metric-only labeling (implementation delayedto 2009)
66
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade(continued)
Excessive post-entry quarantine of hardy nursery stocksExporters of meat or meat products to the US may notprocess meat from countries that are not recognized as freefrom diseases of concern to the US
Slow and arbitrary new aircraft certificationHushkits (dispute brought to ICAO work onan ICAO standard)Labeling of TSP (fertilizer) disadvantages USexportsRestrictive limits on low frequency emissionsfrom electrical and electronic equipment
Regulatorybarriers totrade (USstate and EUmember statelevel)
Duplicate approval of wine labelsState-level safety certification and environmental protectionrequirements (especially of agricultural and food products)Ban on fuel additive MTBE (CA)
Bans on some approved GM products(A I amp L)No approvals for planting certain GMproducts (G P)Unresponsive to requests for field trials ofGM crops (Gr)Ban on GM in animal feed adopted (It) - notin forceHCFC bans by Sw amp FnAdditional navigation light requirements(Fn) ndash suspendedTesting of wheat leading to virtual ban onimports (transshipment recently permitted)(Gr)Harsh interpretation of EU SPSrequirements caused or threatened to causeproblems for processed meat productspoultry products game meat seafoodanimal feed wood products (It)Qualitative imports standards and high test-ing and registration fees for bull semen (It)
67
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Servicesbarriers
50 tax on all non-emergency repairs to US-owned shipscarried out outside the USBarriers in mobile communications (investment restrictionslengthy procedures)De-facto reciprocity requirements regarding satellite-basedcommunications servicesExclusive digital terrestrial television standard (ATSC ) differentfrom EU (DVB-T)Impractical for foreign securities firms to establish branches inorder to engage in broker-dealer activitiesForeign mutual funds unable to make public offerings becauseof registration conditionsForeign investment is restricted in coastal and domesticshippingPartnership with US entity required for granting of licenses forlandings sub-marine cablesOnly US citizens or corporations organized under US law canoperate or maintain power facilities on Federal landForeign stake in airlines capped at 49 (25 of voting stock)Foreign-built vessels prohibited from engaging in coastwisetrade either directly between or via a foreign port and cannot beregistered for dredging towing or salvage
State-level measures Prohibitions on EU exporters distributing rebottling or retailingtheir own wineSome states require insurance companies to already beestablished in another stateSome states require insurers to buy reinsurance from state-licensed insurance companies
European content requirements for TVbroadcastsAccess to the single aviation marketrestricted to firms majority-owned andcontrolled by EU nationalsBanking insurance and investmentservices rules require reciprocaltreatment by home country (no US firmsadversely affected)
Member state measures Content requirements for radiobroadcasts (Fr)Requirements that cinemas showEuropean films (It Sp)Nationality requirements affecting tovarying degrees the provision of legalservices (A Dk Fn Fr G It)Strict restrictions on advertising byforeign legal consultants (Dk)Nationality requirements affecting tovarying degrees the provision ofaccounting services (A Dk Fr)
68
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Foreigninvestmentbarriers
National security vetting (Exon-Florio Amendment)US subsidiary required to exploit deep-water ports or to fish inUS Exclusive Economic ZoneFishing-vessel-owning entities must be 75 owned andcontrolled by US citizensForeign individuals or foreign-controlled corporations cannotacquire licenses for using nuclear materialsConditional national treatment governs participation ingovernment research programmes (subsidiaries in US allowed toparticipate but eligibility process more cumbersome)
Mirror-image reciprocity applies toinvestments in the extraction ofhydrocarbons (no US firms adverselyaffected)
NotesIncludes measures in effect + those for which implementation has been suspended as a result of agreementDoes not include non-discriminatory measures systemic barriers (such as the presence of monopolies the pricing ofpharmaceuticals or delays and lack of transparency in standard setting) government procurement intellectual propertyprotection subsidies (including FSC) or issues being prosecuted under EU rules
Barriers in small caps are the subject of WTO proceedings (consultations have been requested)
Sources Commission Report on United States Barriers to Trade and Investment 2001 USTR National Trade Estimate ReportForeign Trade Barriers 2001
69
Appendix 2 WTO Cases by the EU against the US (excludes cases as third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS38Cuban Libertyand DemocraticSolidarity Act
Extraterritorial application of the USembargo of trade with Cuba in so far as itrestricts trade between the EU and Cubaor between the EU and the US Thecreation of a right of action in favour ofUS citizens to sue EU persons andcompanies in US courts in order to obtaincompensation for Cuban properties Thedenial of visas and exclusion from the USof persons involved in confiscating ortrafficking in confiscated property
GATT (V XI XIII)
GATS (II III VIXI XVI XVIIAnnex onMovement ofNaturalPersons)
596 1096 Understandingreached (497)
WTDS39Tariff increaseson productsfrom the EU
The measures were taken in response tothe adoption of EU legislation on the useof hormones in livestock farming andseek unilaterally to settle the issuewithout resorting to the mechanisms ofthe WTO
GATT (I II XXIII)
DSU (3 22 23)
496 996 [No report]
WTDS63Anti-dumpingmeasures onimports of solidurea from theformer GermanDemocraticRepublic
By maintaining the order against the fivestates of the former GDR the US hasignored de jure and de facto their fullintegration into the reunified FederalRepublic of Germany and thus theeconomic integration of their companiesinto the German market economy
Anti-Dumping(92 11)
1296 ndash
70
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS85Measuresaffecting textilesand apparelproducts
Changes to rules of origin of textile andapparel products which entered intoforce on 1 July 1996 adversely affectexports of EU fabrics scarves and otherflat textile products which are no longerrecognized as being of EU origin and losethe free access to the US that theyenjoyed before
Textiles (24 4244)
Rules of origin(2)
GATT (III)
TBT (2)
697 ndash Negotiatedsolution (997)
WTDS88Measureaffectinggovernmentprocurement
Massachusetts law regulating statecontracts with companies doing businesswith or in Burma (Myanmar)
GPA (VIIIb XXIII)
697 998 Law overturnedunder US law
WTDS100Measuresaffecting importsof poultryproducts
Ban on imports of poultry and poultryproducts produced in the EU until theUnited States is able to obtain additionalassurances of product safety No groundsgiven
GATT (I III XXI)
SPS (2 3 4 58 Annex C)
TBT (2 5)
897 ndash
WTDS108Tax treatmentfor Foreign SalesCorporation
The FSC scheme provides for anexemption to the general rulesestablished in the US Internal RevenueCode which results in substantial taxsavings for US companies exportingthrough FSCs
Subsidies (3)
Agriculture (8 910)
1197 798 Panel found infavour of the EUEU not considerFSCReplacement Actadequate Panelfound in favourof the EUAppellate Bodyreport check
71
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS118HarbourMaintenance Tax
Ad valorem tax (0125) on allwaterborne imports entering US ports
GATT (I II IIIVIII X)
298 ndash Reform proposed(HarbourServices Fee)but EU stillviews asproblematic
WTDS136Anti-dumpingAct of 1916
The Act imposes penal sanctions againstthe importation of goods and their sale inthe US when the price is lower than inthe country of production or in otherforeign countries where the goods areexported
GATT (III4 VI1and VI2)
WTO (XVI4)
Anti-Dumping(1234 amp 5)
698 1198 Appellate Bodyfound in favourof the EU
Implementationpending
WTDS138Imposition ofcountervailingduties on certainhot-rolled leadand bismuthcarbon steelproductsoriginating in theUK
Methodology relied on the presumption(based mostly on pre-WTO legislation andpractice) that benefits from priorsubsidies pass through without the needto show that a benefit continues to beconferred
Subsidies (11b10 14 194)
698 199 Appellate Bodyupheld Panelreport favouringEU (500)
WTDS151Measuresaffecting textilesand apparelproducts (II)
Same as WTDS85 Same asWTDS85
1198 ndash Negotiatedsolution (997)
72
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS152Sections 301-310 of the TradeAct of 1974
Imposes specific strict time limits withinwhich unilateral determinations must bemade that other WTO Members havefailed to comply with their WTOobligations and trade sanctions must betaken against such WTO Members
DSU (3 21 2223)
WTO (XVI4)
GATT (I II IIIVIII XI)
1198 199 US through aStatement ofAdministrativeActionundertaken toact consistentwith WTOobligationsPanel ruled thatso long asrespectedcompatible(1199)
WTDS160Section 110(5) ofUS CopyrightAct
Section 110(5) of the US Copyright Actpermits under certain conditions theplaying of radio and television music inpublic places without the payment of aroyalty fee
TRIPS (9(1) 13) 199 499 Panel found infavour of the EU(700) EU andUS havenegotiated anarrangement
Implementationpending
73
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS165Import measureson certainproducts fromthe EU
100 tariffs on certain product inretaliation for the EUs failure to bring itsbanana trade regime into compliance withWTO ruling
GATT (I II VIII)
DSU (3 21 2223)
399 599 Appellate Bodyfound in favourof the EU(1200)
US broughtsanctions intoagreement
Sanctionssuspended asresult of 401agreement
WTDS166Safeguardmeasures onimports of wheatgluten from theEU
Methodology not ensure that all injurydue to imports Imports from Canadawere excluded from the investigation
GATT (I XIX)
Agriculture (42)
Safeguard (214 5 8 12)
399 699 Appellate Body(1200) found infavour of the EU
WTDS176Section 211OmnibusAppropriationsAct
Section 211 provides that the registrationor renewal in the US of a trademarkpreviously abandoned by a trademarkowner whose business and assets havebeen confiscated under Cuban law is nolonger permitted without consent ofprevious owner No US court shallrecognize or enforce such rights
TRIPS (2 15 1641 42 62)
799 600 Appellate Bodyfound in favourof the EU (102)
74
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS186Section 337 ofthe Tariff Act of1930 andamendmentsthereto
Under Section 337 the US caninvestigate whether imported goodsinfringe US intellectual property rightsand can exclude them from entry into theUS Despite amendment the EUconsiders that the procedures andremedies are substantially different fromprocedures concerning domestic goodsand discriminate against Europeanindustries and goods
GATT (III)
TRIPS (2 3 927 41 42 4950 51)
100 ndash
WTDS200Section 306 ofthe Trade Act of1974 andamendmentsthereto(lsquocarouselrsquo)
Section 306 provides for a mandatorymodification (every 6 months) of theproducts subject to sanctions imposedagainst a WTO member which has notcomplied with a WTO panel ruling
DSU (3 21 2223)
GATT (I II XIXXIII)
600 ndash
WTDS212Countervailingmeasuresconcerningcertain productsfrom the EU (14cases)
US application of countervailing dutiesbased on an irrefutable presumption thatnon-recurring subsidies granted to aproducer prior to a change of ownershiplsquopass throughrsquo to the current producerfollowing the change of ownership
SCM (10 19 21) 1100 801 Panelestablished
75
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS213Countervailingduties on certaincorrosion-resistant carbonsteel flatproducts fromGermany
Results of a full sunset review whichmaintains CV duties The original dutywas imposed prior to entry into force ofWTO agreements EU considers that itwould not have been possible to imposethis duty (less than 1) if theinvestigation had been governed by theSCM agreement
SCM (10 11921)
1100 801 Panelestablished
WTDS214Definitivesafeguardmeasures onimports of steelwire rod andcircular weldedcarbon qualityline pipe
EU considers that Sections 201 and 202of the Trade Act of 1974 and Section 311of the NAFTA Implementation Act containprovisions which prevent the US fromrespecting Safeguards Agreement
Safeguards (2 34 5 8 12)
GATT (I XIX)
1100 801 Panelestablished
WTDS217Continueddumping andsubsidy OffsetAct of 2000(ByrdAmendment)
The Act mandates the distribution of theproceeds of duties levied pursuant to aCVD an AD order or a finding under theAntidumping Act of 1921 to the affecteddomestic producers
AD (5 8 18)
SCM (11 1832)
GATT (X)
WTO (XVI)
1200 701 Panelestablished andjoined with panelestablished byCanada andMexico(WTDS234)
76
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS225Anti-dumpingduties onseamless pipefrom Italy
Results of a sunset review which foundthat anti-dumping duties on imports ofseamless line and pressure pipe fromItaly will continue at a rate of 127 EUconsiders this finding is in breach of ADAgreement (duties not lower than 2)
AD (58 111113 17)
GATT (XXII1)
201 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 152027
7
Appendix 3 WTO Cases by the US against the EU and Its Member States(excludes cases as a third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS13Duties onimported grains
Reference price system used to determinethe duties applicable to imports of grainsappear to result in the application ofhigher rates of duties to shipments of USgrains than is permitted under the EUWTO tariff schedule and to discriminateagainst US exports of grains
GATT (I II VIIX)
Agreement onImplementingGATT Article VII(109 11 22Annex I)
795 397 Negotiatedagreement(1195)
Request forpanel withdrawnfollowingimplementation(497)
WTDS26Measuresaffecting meatand meatproducts(Hormones)
EU measures prohibiting the importationof meat and meat products that havebeen treated with growth hormones
GATT (III or XI)
SPS (2 3 5)
TBT (2)
Agriculture (4)
196 496 Appellate Bodyfound in favourof US (298)
Sanctions inplace
78
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS27Import regimefor bananas
EU regime for the importation sale anddistribution of bananas established byCouncil Reg No 40493 and subsequentlegislation regulations and administrativemeasures including those reflecting theprovisions of the Framework Agreementon Bananas which implementsupplement and amend that regime
GATT (I II III XXI XIII)
Licensing (1 3)
Agriculture
TRIMs (2)
GATS (II XVIXVII)
296 496 Appellate Bodyfound in favourof the US andEcuador (997)
Compliancepanel foundrevised EUregime stillincompatible(499)
US Ecuador andEU negotiatedsettlement(401)
WTDS37Portugal ndashPatent protectionunder theIndustrialProperty Act
The term granted existing patents underthe Portuguese Industrial Property Actappears to be inconsistent with Portugalsobligations under the TRIPS Agreement
(GATS (33 6570)
496 Negotiatedsolution (596)
WTDS62Customsclassification ofsome computerequipment
Reclassification of certain LAN adaptercards automatic data processingmachines and units thereof astelecommunications apparatus raised thetariff applied them
GATT (II) 1196 297 Appellate Bodyoverturned Panelreport favouringUS (698)
79
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS67UK ndash Customsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS68Ireland ndashCustomsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS80Belgium ndash-measuresaffectingcommercialtelephonedirectoryservices
Conditions for obtaining a license topublish commercial directories inBelgium
GATS (II VI VIIIXVII)
597 ndash
WTDS82Ireland ndashmeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPS Agreement
TRIPS (9-14 6365)
597 198
80
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS83Denmark ndashmeasuresaffecting theenforcement ofintellectualproperty rights
Denmark does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
597 ndash Negotiatedsolution (301)
WTDS86Sweden ndashMeasuresaffecting theenforcement ofintellectualproperty rights
Sweden does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
697 ndash Negotiatedsolution (697)
WTDS104Export subsidiesndash processedcheese
Export subsidies including under aninward processing arrangement in favourof processed cheese distort markets fordairy products and adversely affect USsales of dairy products
Agriculture (8 910 11)
Subsidies (3)
1097 ndash
WTDS115Ireland ndashMeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPs Agreement
TRIPS (9-14 6365 70)
198 198
81
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS124Enforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
TV stations in Greece regularly broadcastcopyrighted motion pictures and TVprograms without the authorization ofcopyright owners Effective remediesagainst copyright infringement do notappear to be provided or enforced
TRIPS (41 61) 598 ndash Negotiatedsolution (301)
WTDS125Greece ndashEnforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
Same as WTDS124 Same asWTDS124
Same asWTDS124
Sameas
WTDS124
Same asWTDS124
WTDS127Belgium ndashCertain incometax measuresconstitutingsubsidies
Belgian corporate taxpayers receive aspecial tax exemption for recruiting adepartmental head for exports
Subsidies (3) 598 ndash
82
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS128Netherlands ndashCertain incometax measuresconstitutingsubsidies
Dutch income tax law permits exportersto establish a special export reserve forincome derived from export sales
Subsidies (3) 598 ndash
WTDS129Greece ndash Certainincome taxmeasuresconstitutingsubsidies
Greek exporters are entitled to a specialannual tax deduction calculated as apercentage of export income
Subsidies (3) 598 ndash
WTDS130Ireland ndashCertain incometax measuresconstitutingsubsidies
Under Irish income tax law specialtrading houses qualify for a special taxrate in respect of trading income from theexport sale of Irish-manufactured goods
Subsidies (3) 598 ndash
WTDS131France ndash Certainincome taxmeasuresconstitutingsubsidies
French companies may deducttemporarily certain start-up expenses ofits foreign operations through a taxdeductible reserve account
Subsidies (3) 598 ndash
83
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS158Import regimefor bananas II
Failure to implement the DisputeSettlement Bodys recommendations andrulings in WTDS27 within a reasonableperiod
199 See WTDS27
WTDS172Measuresrelating to thedevelopment of aflightmanagementsystem
French government has agreed to grantand the Commission has approved aloan on preferential and non-commercialterms to develop a FMS for Airbusaircraft
Subsidies (5 6)
GATT (XXIII1b)
599 ndash
WTDS173France -Measuresrelating to thedevelopment of aflightmanagementsystem
See WTDS172 See WTDS172 SeeWTDS172
SeeWTDS172
See WTDS172
WTDS174Protection oftrademarks andgeographicalindications foragriculturalproducts andfoodstuffs
EU rule does not provide nationaltreatment with respect to geographicalIndications nor sufficient protection topre-existing trademarks that are similaror identical to a geographical indication
TRIPS (3 16 2463 65)
699 ndash
84
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS210Belgium -Administrationof measuresestablishingcustoms dutiesfor rice
Belgian customs values and duties forrice would lead to a denial of duty rebatesfor US rice and to duties in excess of thebound rate
GATT (I II VIIVIII X XI)
CVA (1)
TBT (2 3 5 67 9)
Agriculture (4)
1000 101 Negotiatedsolution (1101)
WTDS223Tariff-rate quotaon corn glutenfeed from the US
TRQ triggered by DSB ruling against theUS in WTDS166
Safeguards (8182 83)
GATT (I II XIX)
101 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
85
87
References and Recommended Reading
Primary Sources Web sites
European Commission DG TRADE Bilateral Trade Relations USAhttpeuropaeuintcommtradebilateralusausahtm
European Union Europa Web Site httpeuropaeuint
European Union Mission to the United Stateshttpwwweurunionorg
Transatlantic Business Dialogue httpwwwtabdcom
Transatlantic Consumers Dialogue httpwwwtacdorg
Transatlantic Environmental Dialoguehttpwwwtiesweborgtaedindexhtm
Transatlantic Legislators Dialoguehttpwwweuroparleuintintcooptlddefault_enhtm
Transatlantic Information Exchange Service httpwwwtiesweborg
United States Mission to the European Union httpwwwuseube
United States Trade Representative Western EuropeEU pagehttpwwwustrgovregionseu-medwesteurindexshtm
World Trade Organization httpwwwwtoorg
Primary Sources Official Government Documents
CEPAL 2001 Informe de la Inversioacuten Extranjera en Ameacuterica Latina y elCaribe Antildeo 2000 Naciones Unidas Chile
Commission of the European Communities 1998a The NewTransatlantic Marketplace Draft Communication from the Commissionto the Council the European Parliament and the Economic and SocialCommittee available athttpeuropaeuintcommdg01sectionahtm
Commission of the European Communities 1998b Commission staffworking paper concerning the establishment of an inter-regionalassociation between the European Union and Mercosurhttpeuropaeuintcommexternal_relation
88
Commission of the European Communities 2000 The TransatlanticEconomic Partnership Overview and Assessment Coordination DGTRADEE3 October
Commission of the European Communities 2001a Reinforcing theTransatlantic Relationship Focusing on Strategy and Delivering ResultsCOM(2001)154 of 20 March 2001 Available on-line athttpwwweurunionorgpartnerTransatlAgendapdf
Commission of the European Communities 2001b Report on UnitedStates Barriers to Trade and Investment July available on-line athttpeuropaeuintcommtradepdfusrbt2001pdf
Commission of the European Communities 2001c Green Paper on theReview of Council Regulation (EEC) No 406489 COM(2001)7456final of 11122001
UNCTAD 2001 Informe sobre las inversiones en el mundo UnitedNations New York and Geneva
US Department of Agriculture (1998) Agriculture in the WTOSituation and Outlook Series WRS-98-4 Washington EconomicResearch Service
United States Trade Representative 2001 2001 National TradeEstimate Report on Foreign Trade Barriers available on-line athttpwwwustrgovhtml2001_contentshtm
World Trade Organization 2000 Trade Policy Review The EuropeanUnion Report by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
World Trade Organization 2001 Trade Policy Review United StatesReport by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
Secondary Sources
Abbott Kenneth W 20001 lsquoDisputes over Technical Barriers toTrade Are the Rules and Procedures Adequatersquo paper prepared forthe Conference on Dispute Prevention and Dispute Settlement in theTransatlantic Partnership European University Institute Fiesole 5-6July
Atlantic Council of the United States 2001 Changing Terms of TradeManaging the New Transatlantic Economy Policy Paper April(Washington DC The Atlantic Council of the United States)
Barfield Claude E 2001 Free Trade Sovereignty Democracy TheFuture of the World Trade Organization (Washington AmericanEnterprise Institute Press)
Bermann George 1996 lsquoRegulatory Cooperation between theEuropean Commission and US Administrative Agenciesrsquo
89
Administrative Law Journal of the American University Vol 9 pp 933-983
Bermann George Matthias Herdegen and Peter Lindstreth eds2001 Transatlantic Regulatory Co-Operation Legal Problems andPolitical Prospects (New York Oxford University Press)
Bignami Francesca and Steve Charnovitz 2001 lsquoTransatlantic CivilSociety Dialoguesrsquo Chapter 10 in Pollack and Shaffer TransatlanticGovernance in the Global Economy
BP Chair in Transatlantic Relations 2001 Resolving and PresentingUS-EU Trade Disputes Six Prize-Winning Essays (Florence EuropeanUniversity Institute Robert Schuman Centre for Advanced Studies 9May 2001)
Busch Marc L and Eric Reinhardt 2001 lsquoTesting International TradeLaw Empirical Studies of GATTWTO Dispute Settlementrsquo in Daniel LM Kennedy and James D Southwick eds The Political Economy ofInternational Trade Law Essays in Honor of Robert E Hudec (NewYork Cambridge University Press)
Camarero M and CR Tamarit 2002 lsquoLa Unioacuten Europea y lasAmeacutericas consecuencias del establecimiento de un acuerdo deasociacioacuten interregional entre la UE y Mercosurrsquo Papeles de EconomiacuteaEspantildeola n 91 (forthcoming)
Charnovitz Steve 2001 lsquoRethinking WTO Trade Sanctionsrsquo AmericanJournal of International Law Vol 95 (October)
Claes Benedicte A 2000 lsquoComment Aircraft Noise Regulation in theEuropean Union The Hushkit Problemrsquo Southern Methodist UniversitySchool of Law Journal of Air Law and Commerce Vol 65 329-382
Cowles Maria Green 2001a lsquoThe New Transatlantic DialogueTransforming the New Transatlantic Dialoguersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 213-233
Cowles Maria Green 2001b lsquoTransatlantic Cooperation and Discordin the New Economy A Case Study of the Global Business Dialogue one-Commercersquo paper delivered at the Biennial Conference of theEuropean Community Studies Association Madison Wisconsin 31May
Damro Chad 2001 lsquoBuilding an International Identity The EU andExtraterritorial Competition Policyrsquo Journal of European Public PolicyVol 8 No 2 (April) 208-226
Devuyst Youri 2001 lsquoTransatlantic Competition Policy Cooperationrsquoin Mark A Pollack and Gregory Shaffer eds Transatlantic Governancein the Global Economy (Lanham MD Rowman amp Littlefield) pp 127-151
Evans David S 2002 lsquoThe New Trustbusters Brussels andWashington Part Waysrsquo Foreign Affairs JanuaryFebruary
90
Evenett Simon J Alexander Lehmann and Benn Steil 2000 AntitrustGoes Global What Future for Transatlantic Cooperation (WashingtonDC Brookings Institution Press)
Falke Andreas 2001 lsquoThe EU-US Conflict over Sanctions PolicyConfronting the Hegemonrsquo European Foreign Affairs Review Vol 5No 2 139-163
Featherstone Kevin and Roy Ginsberg 1996 The United States andthe European Union in the 1990s Partners in Transition (LondonPalgrave)
Flores R 2001 lsquoRegional Economic Integrationrsquo in Investing in LatinAmerican Growth Unlocking Opportunities in Brazil Mexico Argentinaand Chile EAU Australian Department of Foreign Affairs and TradeChap 12 pp 259-282
Frankel JA E Stein and SJ Wei 1998 lsquoContinental Trading BlocsAre they Natural or Supernaturalrsquo in JA Frankel ed TheRegionalization of the World Economy (Chicago The University ofChicago Press)
Frost Ellen 1997 Transatlantic Trade A Strategic Agenda(Washington DC Institute for International Economics)
Gardner Anthony 1997 A New Era in US-EU Relations The ClintonAdministration and the New Transatlantic Agenda (London Avebury)
Giordano P A Valladio and M-F Durand eds 2001 Vers un accordentre lrsquoEurope et le Mercosur (Presses de Science Po Paris)
Helfer Laurence R 2000 lsquoWorld Music on a US Stage ABerneTRIPS and Economic Analysis of the Fairness in MusicLicensing Actrsquo Boston University Law Review Vol 80 93-204
Helweg Jason 2000 lsquoThe Retreat of the State The MassachusettsBurma Law and Local Empowerment in the Context ofGlobalization(s)rsquo Wisconsin International Law Journal Vol 18 477-510
Hindley Michael 1999 lsquoNew Institutions for Transatlantic TradersquoInternational Affairs Vol 75 45-60
Hudec Robert 1998 lsquoThe New WTO Dispute Settlement Procedure AnOverview of the First Three Yearsrsquo Minnesota Journal of Global TradeVol 8 22-24
Kahler Miles 1995 Regional Futures and Transatlantic Relations (NewYork Council on Foreign Relations Press)
Keohane Robert O Andrew Moravcsik and Anne-Marie Slaughter2001 lsquoLegalized Dispute Resolution Interstate and TransnationalrsquoInternational Organization Vol 54 No 4 457-488
Knauss Jody and David Trubek 2001 lsquoThe Transatlantic LaborDialogue Minimal Action in a Weak Structurersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 235-254
91
Kolasky William J and Leon B Greenfield 2001 lsquoA View to a KillThe Lost GEHoneywell Deal Reveals a Trans-Atlantic Clash ofEssentialsrsquo Legal Times 30 July 2001 p 28
Kuner Christopher 2001 lsquoBeyond Safe Harbour European DataProtection Law and Electronic Commercersquo International Lawyer Vol31
LaFrance Mary 2001 lsquoCongress Trips Over International Law WTOFinds Unfairness in Music Licensing Actrsquo Journal of Art andEntertainment Law Vol 11 397-424
Lorvellec Louis 1997 lsquoBack to the Fields after the Storm Agriculturein the European Union after the Uruguay Round Agreementsrsquo DrakeJournal of Agricultural Law Vol 2 (Winter) p 411
Mazumdar Anandashankar 2002 lsquoEuropean Commission Gives FinalApproval to Model Clauses to Protect Personal Datarsquo InternationalTrade Reporter Vol 19 187 (31 January)
Mehta K 2002 lsquoInternational Competition Policy Cooperationrsquorevised version of a paper presented at the BP Chair Conference onDispute Prevention and Dispute Settlement in the TransatlanticPartnership European University Institute Florence July 2001
Messerlin Patrick A 2001a Measuring the Cost of Protection in Europe(Washington DC Institute for International Economics)
Messerlin Patrick A 2001b lsquoNiveau et coucircts du protectionnismeeuropeacuteenrsquo in Giordano P A Valladao y M-F Durand (eds) Vers unaccord entre lrsquoEurope et le Mercosur Presses de Science Po Paris
Mishkin FS and MA Savastano 2001 lsquoMonetary Policy Strategiesfor Latin Americarsquo Journal of Development Economics 66 415-444
Nagarajan N 1998 lsquoMercosur and Trade Diversion What Do theImport Figures Tell Usrsquo Economic Papers No 129 EuropeanCommission
Petersmann Ernst-Ulrich ed 1997 The GATTWTO DisputeSettlement System International Law International Organizations andDispute Settlement (Kluwer Law International)
Peterson John 1996 Europe and America Prospects for Partnership(New York St Martinrsquos Press 1996)
Peterson John 2001 lsquoGet Away from Me Closer Yoursquore Near Me TooFar Europe and America after the Uruguay Roundrsquo in Mark A Pollackand Gregory Shaffer eds Transatlantic Governance in the GlobalEconomy (Lanham MD Rowman amp Littlefield) pp 45-72
Peterson John and Maria Green Cowles 1998 lsquoUS EconomicDiplomacy What Makes the EU Differentrsquo Governance Vol 11 No 3pp 251-71
Philippart Eric and Pascaline Winand 2001 lsquoDeeds Not WordsEvaluating and Explaining the US-EU Policy Outputrsquo in Philippart and
92
Winand eds Ever Closer Partnership Policymaking in US-EU Relations(Brussels Peter Lang) pp 431-463
Pollack Mark A ed 2001 The New Transatlantic Agenda at Five ACritical Assessment (San Domenico di Fiesole BP Chair inTransatlantic Relations Robert Schuman Centre for AdvancedStudies European University Institute)
Pollack Mark A and Gregory C Shaffer 2001a lsquoTransatlanticGovernance in Historical and Theoretical Perspectiversquo in Mark APollack and Gregory Shaffer eds Transatlantic Governance in theGlobal Economy (Lanham MD Rowman amp Littlefield) pp 3-42
Pollack Mark A and Gregory C Shaffer 2001b lsquoThe Challenge ofReconciling Regulatory Differences Food Safety and GMOs in theTransatlantic Relationshiprsquo in Mark A Pollack and Gregory Shaffereds Transatlantic Governance in the Global Economy (Lanham MDRowman amp Littlefield) pp 153-178
Pollack Mark A and Gregory C Shaffer 2001c lsquoWho Governsrsquo inMark A Pollack and Gregory Shaffer eds Transatlantic Governance inthe Global Economy (Lanham MD Rowman amp Littlefield) pp 287-305
Reidenberg Joel 2001 lsquoE-Commerce and Trans-Atlantic PrivacyrsquoHouston Law Review Vol 8 717-49
Schaefer Matthew 2002 lsquoGovernment Procurement DisputesLessons from the Dispute over the Massachusetts 1996 Act RegulatingState Contracts with Companies Doing Business with Burma(Myanmar)rsquo paper presented at the Conference on Dispute Preventionand Dispute Settlement in the Transatlantic Partnership EuropeanUniversity Institute Florence 5-6 July 2001 final version submitted26 January 2002
Shaffer Gregory 1999 lsquoThe Power of EU Collective Action The Impactof EU Data Privacy Regulation on US Business Practicersquo EuropeanLaw Journal Vol 5
Shaffer Gregory 2000 lsquoGlobalization and Social Protection TheImpact of EU and International Rules in Ratcheting Up of US PrivacyStandardsrsquo Yale Journal of International Law Vol 25 pp 1-88
Shaffer Gregory C 2002 lsquoManaging US-EU Trade Relations throughMutual Recognition and Safe Harbour Agreements lsquoNewrsquo and lsquoGlobalrsquoApproaches to Transatlantic Economic Governancersquo in Ernst-UlrichPetersmann ed Dispute Avoidance and Dispute Settlement in theTransatlantic Partnership (unpublished manuscript) (working paper onfile with the author)
Sindelar Leslie 2001 lsquoNot So Fair After AllmdashInternational Aspects ofthe Fairness in Music Licensing Actrsquo The Transnational Lawyer Vol14 435-71
Steffenson Becky J 2001 The Institutionalization of EU-US RelationsDecision Making Institution Building and the New Transatlantic
93
Agenda unpublished PhD dissertation University of GlasgowDepartment of Politics
Tansini R and T Vera 2001 lsquoLos procesos de integracioacuten enAmeacuterica Latina El caso de Mercosurrsquo Informacioacuten Comercial EspantildeolaFebrero-Marzo nuacutem 790 107-117
Vogel David 1997 Barriers or Benefits Regulation in TransatlanticTrade (Washington DC Brookings Institution)
Vogel David 2001 Ships Passing in the Night The Changing Politics ofRisk Regulation in the United States and the European Union RSCASWorking Paper No 200116
Woolcock Stephen 2000 lsquoEuropean Trade Policy Global Pressuresand Domestic Constraintsrsquo in Helen Wallace and William Wallaceeds Policy-Making in the European Union (New York Oxford UniversityPress) pp 373-99
Yerkey Gary G 2000a lsquoEU Accuses US of Failing to ImplementMRAs on Electrical Safety Pharmaceuticalsrsquo International TradeReporter Vol 17 1662 (2 November)
Yerkey Gary G 2000b lsquoUS European CEOs Call on Governments toResolve Dispute Over MRA by Dec 18rsquo International Trade ReporterVol 17 1662 (30 November)
Young Alasdair 2001 Trading Up or Trading Blows US Politics andTransatlantic Trade in Genetically Modified Food RSCAS WorkingPaper No 200130
Young Alasdair R 2002 lsquoRisk Positive Integration and SystemFriction The Single European Market and World Tradersquo paperpresented at the Council of European Studies Conference 14-16March 2002
94
Notes
1 The EU and the 50 US States website of the European Union Mission tothe United Stateshttpwwweurunionorgpartnerusstatesusstateshtm
2 Ibid
3 As Miles Kahler wrote in 1995 lsquoIncreasingly the points of conflict amongthe industrialized countries are not the familiar ones of barriers toexchange at the border but an entire array of ldquodomesticrdquo policies thatproduce conflict by appearing to restrict market access or alter theterms of competition The agenda of behind-the-border issues that hasbecome more prominent in the 1990s will only grow as economicintegration continues and groups mobilize to seek new benchmarks foran international ldquolevel playing fieldrdquo rsquo (Kahler 1995 5) For gooddiscussions of regulatory barriers in USEU trade relations see alsoVogel 1997 Young 2002
4 This section draws on the analysis presented in Pollack and Shaffer2001a
5 For good discussions see Gardner 1997 Peterson and Cowles 1998
6 Pollack and Shaffer 2001c 291
7 lsquoTransatlantic Declarationrsquo text available on-line athttpwwweurunionorgpartnertransatldechtm
8 See eg Featherstone and Ginsburg 1996 Peterson 1996
9 lsquoThe New Transatlantic Agendarsquo text available on-line athttpwwweurunionorgpartneragendahtm
1 0 lsquoJoint US-EU Action Planrsquo text available on-line athttpwwweurunionorgpartneractplanhtm
1 1 Gardner 1997
1 2 Commission of the European Communities 1998a
1 3 lsquoTransatlantic Economic Partnership Action Planrsquo text available on-lineat httpeuropaeuintcommtradebilateralusa1109tephtm For auseful review of the TEP see Commission of the EuropeanCommunities 2000
95
1 5 For good discussions of the TABD see Cowles 2001a 2001b and thewebsite of the TABD at httpwwwtabdorg
1 6 lsquoCincinnati Recommendations Transatlantic Business DialoguersquoNovember 16-18 2000 p 4 Available on-line athttpwwwtabdorgrecommendationsCincinnati00pdf
1 7 Ibid page 5
1 8 Cowles 2001b
1 9 Steffenson 2001
2 0 Pollack ed 2001 12
2 1 For an excellent discussion of the TACD and its activities see Bignamiand Charnovitz 2001 and the TACD website at httpwwwtacdorg
2 2 For example sixty-five consumer groups issued a statement in 2000stating that the EU and the US had largely ignored consumer tradepolicy recommendations TACD press release lsquoUS amp EU ConsumerGroups Call for Swift Action to Balance Trade Dialoguersquo 30 March 2000
2 3 The USIA funding for the TAED ($100000) was subject to approval fromthe Senate Finance Committee In January 2000 the objection of SenatorJesse Helms to TAED funding blocked the approval of funds andstopped the State Department from issuing the grant The TAED arguedthat this demonstrated the US governmentrsquos lack of dedication to theproject See lsquoTransatlantic Environment Dialogue suspends its activitiesdue to the failure of US government to stick to its commitmentsrsquoaccessed on 12 March 2002 on the TAED websitehttpwwwtiesweborgtaedindexhtml For a good general discussionof the TAED see Bignami and Charnovitz 2001
2 4 To summarise the TAED recommended the removal of subsidies forenvironmentally unfriendly energy sources (such as coal) demanded thatsustainability assessments be applied to a number of WTO agreementsand expressed it opposition to the multilateral TRIPs Technical Barriersto Trade and SPS Agreements It aired concerns about biotechnologyeco-labelling and the Precautionary Principle the MRAs and Chemicaland Electrical Waste Management (WEEEs) It stressed transparency intransatlantic and multilateral decision making urged both governmentsto support the Kyoto Treaty and to stop challenging environmentallegislation at the WTO The message to the EUUS Summit Lisbon May31 2000 was that lsquoUntil such time as parity exists betweenenvironmental governance and multilateral trade rules we demand thatboth the United States and the European Union immediately agree tomutual moratorium on WTO challenges and threatened challengesrsquo Fora good discussion of the TAED and its activities see Bignami andCharnovitz 2001
2 5 For an excellent discussion of the TALD see Knauss and Trubek 2001
96
2 6 Commission of the European Communities 2001a
2 7 Philippart and Winand 2001
2 8 Kahler 1995 See also Vogel 1997 Young 2002
2 9 For excellent overviews of the WTO dispute resolution procedure and itspredecessor within the GATT see Petersmann 1997 Hudec 1998 Buschand Reinhardt 2001 and BP Chair in Transatlantic Relations 2001 Fora provocative challenge to the DSU see Barfield 2001
3 0 This section draws largely on Abbottrsquos (2001) account of transatlanticdisputes over TBTs in general and the hushkits case in particular Forother accounts of the hushkits dispute see also Claes 2000 andPeterson 2001 58-59
3 1 Commission of the European Communities lsquoCommission Proposes NewLegislation to Fight Aircraft Noisersquo Press Release IP 011683
3 2 For a detailed analyses of transatlantic disputes over food safety andgenetically modified organisms see Pollack and Shaffer 2001b Vogel2001 and Young 2001
3 3 The text of the report can be found athttpeuropaeuintcommexternal_relationsusbiotechbiotechhtm
3 4 Schaefer 2002 1-2 See also Hellweg 2000
3 5 For useful background on the case filed before the WTO as DS160 seeHelfer 2000 LaFrance 2001 and Sindelar 2001
3 6 Commission of the European Communities lsquoEU and US Agree onTemporary Compensation in Copyright Disputersquo Press Release IP011860
3 7 For good discussions of potential reforms of the bilateral relationship aswell as WTO dispute settlement including a wide range of proposals seeeg BP Chair in Transatlantic Relations 2001 Charnovitz 2001 Barfield2001 and Petersmann 2001
3 8 Some countries such as the United Kingdom have establishedguidelines for policymakers to take trade implications of proposedregulations into account but neither the US nor the EU currentlyemploys any statutory requirement to undertake such an impactassessment
3 9 Bermann 1996 961 For an excellent set of essays on various aspects oftransatlantic regulatory cooperation see also Bermann Herdegen andLindstreth (eds) 2001
4 0 Ibid p 966
97
4 1 For excellent analyses of USEU competition-policy cooperation fromwhich this analysis is largely drawn see eg Evenett Lehmann and Steil2000 Devuyst 2001 Damro 2001 and Mehta 2002
4 2 Devuyst 2001 142-145
4 3 See eg Kolasky and Greenfield 2001 Evans 2002
4 4 Commission 2001c 38-40
4 5 This section draws extensively from research reported in Shaffer 2002
4 6 Subsidiaries of US firms in the EC account for about one-third of ECimports from the United States while subsidiaries of EC firms in theUnited States account for about 38 of US imports from the EC SeePollack and Shaffer 2001a 14
4 7 Agreement on Mutual Recognition Between the European Communityand the United States of America Available on-line athttpeuropaeuintcommtradepdf0713mra-usenpdf
4 8 The five excluded sectors were information technology pressureequipment road safety equipment lawn mowers and personal protectiveequipment such as helmets
4 9 However as an exception tests of pharmaceutical good manufacturingpractices are to be performed by regulatory bodies and not privatelaboratories in accordance with that annex
5 0 Yerkey 2000a 2000b
5 1 Quoted in Shaffer 2002 23
5 2 Agreement Between the European Community and the United States ofAmerica on Mutual Recognition of Certificates of Conformity for MarineEquipment Available on-line athttpeuropaeuintcommtradepdfmareqpdf
5 3 See Shaffer 2002
5 4 See Shaffer 2002
5 5 This section draws extensively from research reported in Shaffer 2002
5 6 The above figures are from the prepared testimony of Assistant Secretaryof Commerce Franklin Vargo before the House Committee onInternational Relations See lsquoIssues in US-European Union TradeEuropean Privacy Legislation and BiotechnologyFood Safety PolicyrsquoFederal News Service (May 7 1998)
5 7 Mazumdar 2002 See also Shaffer 2000 Reidenberg 2001
5 8 Commission Decision of 26 July 2000 pursuant to Directive 9546ECof the European Parliament and of the Council on the adequacy of the
98
protection provided by the safe harbour privacy principals and relatedfrequently asked questions issued by the US Department of CommerceAvailable on-line athttpeuropaeuintcommtradepdfsafeharbourpdf For generalinformation on safe harbour documents see Safe Harbor Documentshttpwwwexportsgovsafeharborsh_documentshtm
5 9 Guide to the Implementation of Directives Based on the New Approachand the Global Approach Available on-line athttpeuropaeuintcommenterprisenewapproachlegislationguidedocument1999_1282_enpdf
6 0 See Shaffer 2002
6 1 For a good discussion of the obstacles posed by US federalism inregulatory cooperation see Commission of the European Communities2000
6 2 lsquoEU-US Guidelines on Regulatory Cooperation and Transparencyrsquoavailable on-line athttpeuropaeuintcommenterpriseenterprise_policygov_relationsregulcooptransathtm See also lsquoTransatlantic Bid to Cut Red TapersquoEuropean Report 10 April 2002 and Micheal Mann lsquoDrive to Head OffTrade Riftsrsquo Financial Times 13 April 2002
6 3 See the DG Trade website lsquoBilateral Trade Relations Canadarsquo accessedat httpeuropaeuintcommtradebilateralcanadacanadahtml
6 4 For useful and up-to-date reviews of the EUCanada relationship see inaddition to the DG Trade web page cited above the websites of theEuropean Union Delegation to Canadahttpwwweudelcanorgenglishindexcfm and the Canadian Missionto the European Union httpwwwdfait-maecigccaeu-missionconten_ehtml
6 5 For more information about Mercosur visit the following internetaddress httpwwwmercosurorg
6 6 Tansini and Vera 2001
6 7 lsquoEUChile Deal Reached on Free Trade Agreementrsquo European Report 27April 2002
6 8 Ibid
6 9 Camarero and Tamarit (2002) Source OECD International SectoralDatabase
7 0 For more information about the EU and Latin America visit the followinginternet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 1 The Lomeacute Convention replaced the Yaounde Convention of 1963 afterthe accession of the UK to the Community It was renewed in 1979
99
(Lomeacute II) 1985 (Lomeacute III) 1989 (Lomeacute IV) and 1995 (Lomeacute IV) andconsists of a system of preferences for imports in which industrial goodsalmost free of tariffs and agricultural receive different treatments InJune 2000 the Lomeacute Convention was replaced by the CotonouAgreement which stabilized what can be seen as a transitory regimeaiming to incorporate the ACP countries in the WTO general rules
7 2 What characterizes first-generation agreements is their conventionalbilateral and technical structure and their reference to possiblereciprocal cooperation In practical terms however these treaties onlyextended the Most Favoured Nation (MFN) status to its signatories
7 3 The second-generation agreements referred mainly to specificcommercial and cooperation questions
7 4 For the conclusions of the Madrid summit see the Latin America webpage of the Commissionrsquos Directorate-General for Tradehttpeuropaeuintcommtradebilaterallaclachtm
7 5 In October 1998 hurricane Mitch one of the worst natural disastersever to have hit the region caused a material damage equivalent to 10of the regionrsquos GDP The EU not only played a significant role in theinternational communityrsquos emergency aid but also launched in 1998a medium-term rehabilitation plan called the Regional Programme forthe Reconstruction of Central America (PRRAC) Funding was set ateuro 250 million committed for the 1999-2002 period but to beimplemented within six years The target countries were HondurasNicaragua El Salvador and Guatemala
7 6 For details on the provisions of the EU-Chile Association Agreement andthe status of the ratification procedure seehttpeuropaeuintcommexternal_relationschileintroindexhtm
7 7 The information about the results of the different negotiation rounds canbe updated at the following internet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 8 For an assessment of the trade-diverting effects of Mercosur seeNagarajan (1998)
7 9 Commission of the European Communities 1998b
8 0 Messerlin 2001b
8 1 Pascal Lamy lsquoFacing the Challenge of Globalization Regional Integrationor Multilateral Rulesrsquo Buenos Aires 1 March 2002 Reproduced on theDG Trade website athttpeuropaeuintcommtradespeeches_articlesspla99_enhtml
Lead Author
Mark A Pollack
The Political Economy ofthe Transatlantic Partnership
Robert Schuman Centrefor Advanced Studies
EUROPEAN UNIVERSITY INSTITUTE
Report prepared by theTransatlantic Programme
for and with the contribution of
Her Majestyrsquos TreasuryUnited Kingdom
Ministry of FinanceThe Netherlands
i
Table of Contents
Executive Summary iii
About the Authors vii
1 The Transatlantic Marketplace andthe Changing EUUS Economic Agenda 1
2 Institutions for Transatlantic Economic GovernanceOrigins and Effectiveness 5
21 Transatlantic Economic Agreements in the 1990s22 An Overview of Existing Transatlantic Institutions23 An Effective Framework for Economic Cooperation
3 Trade and Regulatory Disputesin the Transatlantic Economic Partnership 17
31 Classifying Disputes Traditional Trade Issues vslsquoBehind-the-Borderrsquo Regulatory Disputes
32 Case Study Airplane lsquoHushkitsrsquo33 Case Study Hormone-Treated Beef and
Genetically Modified Organisms34 Public Procurement
The MassachusettsMyanmar Case35 Intellectual Property Rights The Irish Music Case36 Dealing with Trade and Regulatory Conflicts
4 Transatlantic Regulatory Cooperation 3241 Why Cooperate42 Case Study Transatlantic Competition
Policy Cooperation43 Case Study EUUS Mutual Recognition
Agreements44 Case Study Data Privacy and
the Safe Harbour Agreement45 The Challenge of Transatlantic
Regulatory Cooperation
ii
5 The European Union and the Americas 4751 The EU and Latin America Trade and Investment52 EU Trade Agreements with
Latin American Countries53 Challenges for EULatin American
Economic Relations
Conclusion The New Transatlantic Economic Agenda 61
Appendix 1 EU-US Barriers to Trade in GoodsServices and Foreign Investment 65
Appendix 2 WTO Cases by the EU against the US(excludes cases as a third party) 70
Appendix 3 WTO Cases by the US against the EUand Its Member States(excludes cases as a third party) 78
References and Recommended Reading 87
Notes 94
iii
Executive Summary
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly in thecourse of the past decade During the 1990s the volume oftransatlantic trade more than doubled making the EU and the USeach otherrsquos most important trading partners Foreign directinvestment between the US and the EU has grown even more rapidlydoubling in value during the last three years of the 1990s aloneindeed it is estimated that some 35 million American jobs rely onforeign investment from the European Union with a similar number ofEuropeans employed by US firms
These developments reviewed briefly in Section 1 of this report havecreated a de facto transatlantic marketplace yet they have also led tonew strains on the transatlantic partnership and to a new andchallenging economic agenda for EUUS cooperation Prior to the1990s much of the transatlantic economic relationship was dominatedby traditional trade questions such as tariffs quotas and other directbarriers to trade typically imposed at US and EU borders With thedecline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade - most notably lsquobehind-the-borderrsquo domestic regulations adopted in response to legitimate publicconcerns about the environment consumer protection food safety anddata privacy - have emerged alongside traditional trade barriers as theprimary challenges to a mutually beneficial EUUS trade andinvestment relationship
In an effort to meet these challenges the United States and theEuropean Union have put into place an increasingly well developedinstitutional machinery for bilateral economic as well as foreign andsecurity policy cooperation These institutions examined in detail inSection 2 have fostered a regular dialogue between EU and USauthorities across a full range of issue-areas and have provided theframework for increasing efforts at regulatory cooperation and tradedispute resolution Nevertheless recent studies have demonstrated theuneven performance of these institutions across issue-areas as well asthe uneven development of the various transatlantic lsquocivil-societydialoguesrsquo and have suggested reforms to allow the EU and US tofocus more effectively on joint long-term objectives
iv
The transatlantic relationship has come under repeated strain duringthe past decade as a result of both traditional and new-style regulatorydisputes Such disputes the European Commission has pointed outconcern only an estimated 1-2 of the total value of transatlantictrade and investment yet these disputes could potentially spread toother areas of the transatlantic relationship it is therefore in theinterests of both sides to ensure that such disputes are prevented fromarising through timely consultations where possible and settledefficiently and amicably in other cases Many of thesedisputesmdashespecially traditional tariff quota antidumping andsubsidies disputesmdashare dealt with effectively through the disputesettlement procedure of the World Trade Organization (WTO) to whichthe EU and the US are both parties New-style regulatory disputeshowever often involve domestic laws adopted for legitimate purposesfollowing democratic deliberation and these disputes can placeconsiderable strain on the WTO system particularly in cases wherethe losing party would have difficulty complying with an adverse WTOruling
In such cases both the United States and the European Union shouldstrive proactively to consider the WTO compatibility of nationalregulations prior to adoption cooperate on common regulatoryproblems and seek to settle regulatory disputes through consultationswithin the WTO dispute settlement procedure wherever possibleSection 3 of the report therefore examines a range of potential reformsin US and EU domestic regulatory procedures in the bilateralrelationship and in the multilateral WTO dispute settlementprocedure
bull At the domestic level the US and the EU could commit themselvesto conducting lsquoTrade Impact Assessmentsrsquo of draft regulations sothat legislators are made aware of the potential trade implications ofproposed regulations before they are adopted
bull At the bilateral level both partners can engage in more extensiveearly warning of new rules as well as greater regulatory cooperationand greater contact among legislators to increase their awareness ofthe external impact of domestic laws Far from weakening themultilateral trading system bilateral economic cooperation can andshould strengthen the WTO by preventing difficult regulatorydisputes before they occur and by acting as a laboratory for theresolution of such disputes at the global level
bull At the multilateral level finally the EU and the US could committhemselves to modest reforms in the WTO and its disputesettlement procedure including a clarification of the lsquoprecautionaryprinciplersquo in WTO law and a possible move from retaliation tocompensation as the primary means of enforcement of WTO law
v
Of the aforementioned proposals the EU and the US have arguablymade the most progress in promoting cooperation among theirrespective domestic regulators with a growing number of formalregulatory agreements adopted since 1997 and an even larger numberof informal contacts among EU and US regulators taking place on aregular basis across a full range of issue-areas Such regulatorycontacts hold significant promise allowing regulators on both sides ofthe Atlantic to learn from each other coordinate their regulatoryefforts and avoid transatlantic regulatory disputes before they beginHowever as Section 4 of this report demonstrates in detail successfulregulatory cooperation is not a lsquomagic bulletrsquo for trade disputes butrather a lsquohothouse flowerrsquo which must be carefully nurtured and canbe easily frustrated by any of a number of potential obstaclesincluding the persistence of distinctive European and Americanregulatory philosophies and procedures the multi-level nature of theEU and US political systems and the insistence by both sides onmaintaining domestic regulatory sovereignty Overcoming theseobstacles will require the identification of lsquobest practicersquo in regulatorycooperation gradual increase in regulatory trust among EU and USregulators and a careful balancing by political leaders of domesticregulatory aims on the one hand and the importance of thetransatlantic economic relationship on the other
The EUrsquos ever-closer economic relationship with the United States hasnot developed in a vacuum but rather coincides with a second majordevelopment namely the rapid increase during the 1990s of EU tradeand foreign direct investment with the countries of North and SouthAmerica analyzed in Section 5 of the report Concurrent with itsgreater economic presence in the Americas the Union has pursued awide range of trade and economic agreements with the countries of theregion including an increasingly close trade and regulatoryrelationship with Canada a free trade agreement with Mexico andother agreements with Chile Mercosur and other Latin Americancountries
In May 2002 leaders of the European Union and Latin Americancountries met in Madrid for their second summit meeting confirmingthe conclusion of negotiations on an EUChile Association Agreementand calling for further development of bilateral ties including theeventual conclusion of a similar association agreement with MercosurIn these and future negotiations the EU should give special attentionto expanding market access for Latin American goods and servicesespecially for so-called lsquosensitive productsrsquo currently subject to high EUtariffs as well as focusing on the reduction of other means ofprotection such as tariff quotas that are applied trade in goodsservices investment public procurement intellectual property rightstechnical standards and rules of origin
vi
The European Unionrsquos economic relationships with the countries of theAmericas like its bilateral relationship with the United States isnested in turn within the multilateral trading system of the WorldTrade Organization the further development of which is a sharedpriority for both the European Union and the United States During hisrecent trip to Argentina EU Trade Commissioner Pascal Lamy stressedthe importance of ensuring that bilateral and inter-regional tradeagreements with the United States Canada and the countries of LatinAmerica rest on the multilateral foundation of WTO trade law For thisreason he argued bilateral and interregional negotiations lsquomust not beallowed to detract our attention from the pursuit of the DohaDevelopment Agendarsquo Such a commitment should remain a centraltenet of EU trade policy in the years to come
Within the multilateral rules-based trading system finally theEuropean Union and the United States should also seek to developfurther their bilateral relationship the health of which is vital to theglobal economy as a whole Addressing the full range of challenges tothe transatlantic economic partnership will in turn require a carefuland extensive study not only of traditional trade issues such as theliberalization of tariffs and quotas but also and especially the domesticsources of transatlantic regulatory disputes and successful means ofpreventing and settling such disputes More specifically such as studywould have to undertake three essential tasks
bull A comprehensive listing and analysis of EU and US regulationscapable of restricting trade and investment in the transatlanticsmarketplace
bull A comprehensive survey and analysis of formal and informalregulatory cooperation focusing on both the obstacles to suchcooperation and instances of lsquobest practicersquo in overcoming thoseobstacles and
bull A systematic analysis of various means of bilateral and multilateraldispute resolution with a particular emphasis on the specificchallenges of transatlantic regulatory disputes
The insights generated by such a study would inform not only thefurther development of the transatlantic economic partnership but alsothe development of the rules-based multilateral trading system of theWorld Trade Organization
vii
About the Authors
This report was prepared by the Transatlantic Programme of theRobert Schuman Centre for Advanced Studies at the EuropeanUniversity Institute Florence
The following persons contributed to the writing of one or moreportions of this reportRebecca Steffenson (European University Institute) contributed toSection 2Alasdair Young (University of Glasgow) contributed to Section 3including the preparation of Tables 5-7 as well as Appendices 1-3Gregory C Shaffer (University of Wisconsin School of Law) contributedtwo case studies in Section 4Mariam Camarero (Universidad Jaume I) Cecilio Tamarit (Universidadde Valencia) and Andrea Ribeiro Hoffmann (University of Tuumlbingen)contributed to Section 5 andMark A Pollack (European University InstituteUniversity ofWisconsin-Madison) served as lead author for the report andcontributed to the writing of various sections
The Transatlantic Programme is also grateful to the following personsfor comments on early drafts of the reportHelen Wallace (Director Robert Schuman Centre for AdvancedStudies)Patrick Messerlin (Institut de Sciences politiques Paris)Claus-Dieter Ehlermann (European University Institute)Ernst-Ulrich Petersmann (European University Institute) andMichael Artis (European University Institute)
The Transatlantic Programme was established in 2000 with a majorgift from BP
1
ndash 1 ndashThe Transatlantic Marketplace and
the Changing EUUS Economic Agenda
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly over thecourse of the past decade Taken together the US and the EU accountfor roughly one half of both world GDP and global trade
Table 1 Transatlantic Trade 1980-2000 in millions of Euros(share of EU total)
1980 1990 2000
EU imports from US 50733(181)
88957(205)
197992(193)
EU exports to US 29543(140)
82004(200)
232037(247)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
The European Union and the United States are also each otherrsquos mostimportant trading partners As Table 1 illustrates the volume ofEUUS trade more than doubled during the 1990s and the twocountries are currently each otherrsquos largest trading partners Indeedrecent data on trade in services summarized in Table 2 demonstrateseven more clearly the importance of the transatlantic traderelationship with the United States accounting for some 40 of theEUrsquos total imports and exports of services which in turn account forbetween one-third and one-half of total transatlantic tradeFurthermore EUUS trade has been largely balanced over the decadeof the 1990s
2
Table 2 Transatlantic Trade in Services in millions of Euros(share of EU total)
1998 1999 2000
EU imports from US 79874(360)
99042(409)
116474(407)
EU exports to US 77039(334)
92199(373)
117403(403)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
Notwithstanding the impressive growth of EUUS trade it is theinvestment relationship that most clearly distinguishes thecontemporary transatlantic marketplace As Table 3 makes clear theEuropean Union in 2000 was far and away the largest investor in theUnited States its euro 794 billion in foreign direct investment (FDI)constituting 65 of total FDI in the US1 The United States is similarlythe largest source of FDI in the European Union with someeuro 561 billion invested in 2000 These high levels of EU investment areestimated to provide roughly 35 million jobs in the United States witha similar number of European jobs relying on US investment in theUnion2 The large and growing investment relationship also explains aconsiderable portion of the recent growth in bilateral USEU tradesince an estimated 20-30 percent of all bilateral trade takes the form ofintrafirm trade within firms operating on both sides of the Atlantic
Table 3 Transatlantic Foreign Direct Investment in millions of Euros(share of EU total)
1998 1999 2000
US FDI flows into EU 60697(571)
83798(754)
121271(688)
EU FDI flows to US 133416(602)
196794(632)
172027(475)
US FDI stocks in EU 366462(60)
439928(609)
561199(625)
EU FDI stocks in US 398190(483)
622496(524)
794523(513)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
3
With the simultaneous growth of transatlantic trade and investmentand the gradual decline in EU and US tariffs and quotas followingsuccessive waves of trade liberalization the transatlantic economicagenda has been transformed Prior to the 1990s much of the EUUSeconomic relationship was dominated by trade questions andspecifically by cooperation and conflict over tariffs quotas and otherdirect barriers to trade typically imposed at US and EU borders Withthe decline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade have increased in importance aspotential sources of international trade tension Such non-tariffbarriers have been addressed in the European Union for decadesthrough the use of regulatory harmonization and more recentlythrough the mutual recognition of national standards Similarly theGATT system began as early as the Tokyo Round (1973-1979) toaddress non-tariff barriers to trade most notably through theTechnical Barriers to Trade (TBT) Agreement and more recentlythrough the 1994 Sanitary and Phytosanitary Standards (SPS)Agreement both of which apply international law disciplines to trade-distorting national regulations
Notwithstanding these new rules however lsquobehind-the-borderrsquo US andEU regulations on a diverse array of topicsmdashranging from theenvironment and food safety to consumer protection and dataprivacymdashhave emerged during the past decade as significant obstaclesto transatlantic and global trade and investment3 In some cases suchdomestic regulations have led to trade disputes between the UnitedStates and the European Union and to increasing demands frombusinesses on both sides of the Atlantic for cooperation among US andEuropean regulatory authorities to prevent and settle such disputesand facilitate access to the European and American markets
In sum the ever-increasing levels of transatlantic trade andinvestment have created a de facto transatlantic marketplace and withit an increasing incentive for the European Union and the UnitedStates to cooperate in an effort to manage that marketplace facilitatemutually beneficial economic exchange and prevent or settle the tradeand economic disputes that inevitably arise in such a closerelationship In that context this report aims to summarize the stateof our scholarly understanding about the political economy of thetransatlantic economic relationship with an emphasis on theinstitutions for joint economic governance the new challenges posedby regulatory disputes and the promise and limits of transatlanticregulatory cooperation Accordingly Section 2 of the report examinesthe development and growth of post-Cold War institutions for themanagement of the EUUS economic partnership while Section 3examines the persistence of trade and economic disputes between theEU and the US including the rise of new and potentially intractableregulatory disputes and Section 4 examines the prospects and limitsof transatlantic regulatory cooperation as a possible solution to such
4
conflicts The fifth section of the report places the EUUS bilateralrelationship in the broader context of the relationship between theEuropean Union and the various countries of the Americas and thesixth concludes with a review of potential areas for furthertransatlantic cooperation and promising areas for further study
5
ndash 2 ndashInstitutions for Transatlantic Economic Governance
Origins and Effectiveness
Transatlantic relations between the United States and the countries ofWestern Europe have long been based on common values and interestsin terms of both security and economic interdependence Throughoutthe Cold War transatlantic cooperation took place largely though theNorth Atlantic Treaty Organization (NATO) in the area of security andthrough common US and European participation in variousmultilateral economic forums including the Organization for EconomicCooperation and Development (OECD) the G-7 (now G-8) group ofhighly industrialized economies and the World Trade Organization
Cooperation between the United States and its European partners istherefore not new but the character of the relationship changedsubstantially during the 1990s with an ever-greater emphasis oneconomic as well as security cooperation and a greater recognition bythe United States of the European Union (in addition to its memberstates) as an important interlocutor Three transatlantic agreementssigned in the 1990s underpin this new transatlantic partnership andthe increasingly liberalized EUUS economic relationship TheTransatlantic Declaration (1990) the New Transatlantic Agenda (NTA1995) and the Transatlantic Economic Partnership (TEP 1998) haveeach played an important role in creating a transatlantic framework foreconomic co-operation and introducing formal transatlanticinstitutions to manage the relationship This upgrading of the EUUSrelationship in turn can be traced to several interrelateddevelopments during that decade including the end of the Cold Warthe maturation of the European Union as an economic and politicalactor and the relentless expansion of transatlantic economic exchangewhich created pressures for joint management of the emergingtransatlantic marketplace4
The end of the Cold War was clearly a precipitating cause for theupgrading of the transatlantic relationship As early as 1990 the USpresidential administration of George HW Bush proposed aTransatlantic Declaration to reaffirm USEuropean solidarity followingthe fall of the Iron Curtain and the collapse of the Soviet Union Whilethat Transatlantic Declaration itself focused largely on security issuesrather than economic cooperation the diminution of the security
6
threat from post-Soviet Russia facilitated an increasing emphasis oneconomic issues by the Clinton Administration reflected in both the1995 New Transatlantic Agenda and the 1998 Transatlantic EconomicPartnership5
This economic focus has in turn been reinforced by the maturation ofthe European Union which emerged during the late 1980s and early1990s as the worldrsquos largest internal market and the most importanttrading partner of the United States Simultaneous with thedevelopment of the EUrsquos internal market came the increasing influenceof EU political institutions including the European Commission(which plays a vital role in the EU legislative process as well as servingas trade negotiator and economic regulator in fields such ascompetition policy) and the Council of Ministers and EuropeanParliament (which collectively adopt an increasingly large portion ofEuropean economic legislation) Although the powers of the respectiveEU institutions still varies considerably across sectors theCommission has clearly emerged as the Unionrsquos primary interlocutorwith the United States on economic issues while the legislativeactivities of the Council and the Parliament have the potential toinfluence economic interests in the United States The institutions ofthe New Transatlantic Agenda have therefore attempted to incorporatethe Commission and the Council presidency through biannualsummits and other high-level meetings as well as members of theEuropean Parliament through the Transatlantic Legislatorsrsquo Dialogue(see below)
Beyond the end of the Cold War and the maturation of the EuropeanUnion finally lies the relentless increase of transatlantic economicexchange Increased transatlantic trade and investment have creatednew demands for market access and economic cooperation fromproducer groups such as the Transatlantic Business Dialogue whileother consumer labour and environmental groups have sought toensure that transatlantic cooperation takes into account their diverseinterests Indeed as we shall see below the increasingly closeeconomic relationship between the EU and the US has created newprospects for both trade conflicts and regulatory cooperation and hasresulted in what might be termed lsquoscuttle diplomacyrsquomdashthe scurrying ofEU and US government authorities to cope with the incessant conflictswhich although they compose only a small fraction of EUUSeconomic exchange threaten to poison a mutually advantageouseconomic relationship6 Largely for this reason the United States andthe European Union have established an increasingly complexinstitutional structure designed to facilitate economic and securitycooperation resolve and prevent disputes and integrate civil-societygroups into the process of transatlantic economic governance
7
21 Transatlantic Economic Agreements in the 1990s
211 The Transatlantic Declaration
The process of institutionalizing the EUUS relationship begansimultaneously with the end of the Cold War in 1989 when USPresident Bush and EU Commission President Jacques Delors agreedto work to ensure regular meetings between high-level EU and USofficials On 27 February 1990 this agreement bore fruit in the shapeof a lsquoTransatlantic Declarationrsquo pursuant to which the US and ECagreed to establish an institutional framework lsquofor regular andintensive consultationrsquo Specifically the Declaration called for biannualEUUS summit meetings between the presidents of the United Statesthe European Commission and the European Council as well asregular meetings between the US Secretary of State the ECCommission and the US Cabinet These meetings it was hoped wouldopen lines of communication create networks facilitate informationsharing and reduce the impact of disputes in transatlantic relations
In substantive terms the Transatlantic Declaration identified threemajor goals
bull economic liberalizationbull educational scientific and cultural co-operation andbull cooperation in fighting international crime terrorism and
environmental degradation7
While these policy areas were identified as priorities the agreementfailed to provide a more detailed agenda for meeting its goals Thecontent of the agreement has been described as cosmetic minimalistand lacking in substantive innovations and would soon besupplemented by other more detailed economic agreements8
212 The New Transatlantic Agenda
The next stage in developing the transatlantic economic relationshipcame with the New Transatlantic Agenda (NTA) which was signed atthe EUUS Summit in Madrid in 1995 and established four priorityareas for closer cooperation
1 promoting peace and stability democracy and development aroundthe world (in particular in Central and Eastern Europe Russia andthe Middle East)
2 responding to global challenges (with a focus on international crimedrug trafficking terrorism migration and health andenvironmental issues)
3 lsquocontributing to the expansion of world trade and promoting closereconomic relationsrsquo (including both bilateral and multilateralliberalization of trade and investment) and
8
4 building bridges across the Atlantic (specifically direct contactsamong lsquobusiness people scientists educators and othersrsquo)9
In addition to the six-page NTA itself the two partners also adopted amuch more detailed Joint Action Plan (JAP) which outlined specificpolicy areas where deeper cooperation could be pursued The economicchapter of the JAP was arguably the most ambitious of the four callingfor both the strengthening of the multilateral trading system and thecreation of liberalized lsquotransatlantic marketplacersquo with a special focuson bilateral regulatory cooperation1 0 The NTA itself also acknowledgedthe role of the Transatlantic Business Dialogue which would laterprove to be influential in setting the agenda for transatlantic economiccooperation
In institutional terms the New Transatlantic Agenda established newtransatlantic governance mechanisms and a more established policyprocess First it created a Senior Level Group of EU and US officialstogether with a lower-level NTA Task Force to help drive coordinatemonitor and implement the agenda of transatlantic relations betweenthe continuing EUUS summits Although this framework has sincebeen criticized as excessively bureaucratic and focused on summit-driven lsquodeliverablesrsquo (see below) the NTA framework has proven usefulin coordinating EU and US responses to both economic and securityissues and remains the overarching framework for transatlanticrelations today
213 The Transatlantic Economic Partnership
The drive for an ever-closer transatlantic economic relationship wasrevived in 1998 amidst revelations that cooperation in many policyareas had fallen short of initial expectations1 1 Despite the NTA and itsinstitutions high-profile trade disputes over bananas beef andextraterritorial sanctions continued highlighting the need for furthertransatlantic commitment to facilitate economic exchange and containconflict In that context the European Commission took the initiativein April 1998 calling for negotiations on a lsquosingle comprehensiveagreementrsquo to implement a lsquoNew Transatlantic Marketplacersquo TheCommissionrsquos proposal had four central objectives
1 the lsquoremoval of technical barriers to trade in goods through anextensive process of mutual recognition andor harmonizationrsquo
2 the elimination lsquoby 2010 of all industrial tariffs on an MFN basisrsquo3 the formation of a lsquofree trade area in servicesrsquo and4 further liberalization in the areas of government procurement
intellectual property rights and investment1 2
The United States had little time to respond however as the initiativefailed to secure the support of the Council of Ministers In its placethe US and the EU agreed in May 1998 to a somewhat less ambitious
9
Transatlantic Economic Partnership (TEP) which aimed to tacklebilateral regulatory barriers to trade and to identify common positionswithin multilateral trade negotiations In substantive terms the TEPand its accompanying Action Plan focused more directly than the NTAon regulatory cooperation and on the possible harmonization ofstandards as a means of removing technical barriers to trade and itcommitted both sides to negotiations in specific issue-areas includingservices intellectual property food safety and biotechnology1 3
In addition the TEP created a new set of institutions to manage theeconomic aspects of the relationship including a lsquoTEP Steering Grouprsquocharged with monitoring implementing and reviewing TEP objectivesas well as expert-level working groups The TEP also emphasized theimportance of early warning of potential trade and regulatory disputesand fostered the creation of an institutionalized lsquoearly warning systemrsquofollowing the Bonn EUUS summit in June 1999 Finally the TEPexplicitly encouraged the participation of not only business but othercivil society groups which would lead in time to the creation of thetransatlantic consumer environment and labour dialogues
Table 4 Transatlantic Cooperation Agreements at a Glance
Transatlantic Agreement Year Impact on the Economic Relationship
The TransatlanticDeclaration 1990 Contains a broad commitment to
economic liberalization
The New TransatlanticAgenda (NTA) and JointAction Plan (JAP)
1995
Includes a chapter on contributing tothe expansion of world trade andpromoting closer economic relationsJAP discusses building a lsquonewtransatlantic marketplacersquo throughincreased regulatory co-operation
Transatlantic EconomicPartnership (TEP) 1998
Outlines three main goals for thetransatlantic economic relationship1) market access gains for goods
services and agricultural products2) multilateral and bilateral trade
liberalization of goods services andcapital
3) deepening dialogue between non-governmental organizationsparliamentarians and government
10
22 An Overview of Existing Transatlantic Institutions
Todayrsquos transatlantic economic relationship is managed largely by a setof institutions that were created in stages by the TransatlanticDeclaration the NTA and the TEP Combined these institutionsconstitute a framework for long-term as well as day-to-day economiccooperation and dispute resolution
221 EUUS Summits
The biannual EUUS summit is the primary forum forintergovernmental exchange in the NTA process consisting of thehighest level of contact between the Presidents of the US the EUCommission and the Council Presidency The transatlantic policy cyclebegins and ends with these biannual summits where decisions arelsquomadersquo about the general scope for co-operation and wherelsquodeliverablesrsquo - in the form of new bilateral agreements about regulatorycooperation or the resolution of specific disputesmdashare announced Thesummits encourage policy co-ordination because they create deadlinesfor progress reports and exert pressure on lower-level officials toproduce results
222 Senior Level Group and the NTA Task Force
The Senior Level Group serves as a contact point between the EUUSSummit and the working level of the transatlantic dialogue It hasroughly six formal members including the US Undersecretary of Statefor Economic Affairs Commission delegates from the Directorates-General for external relations and trade Council Presidencyrepresentatives and representatives of the lsquoArticle 133 committeersquodealing with international trade matters The primary tasks of the SLGare to prepare the agenda of the biannual summits lsquoshopping fordeliverablesrsquo to be announced on those occasions and to monitor theimplementation of the NTA and the TEP
Logistically the SLG typically meets twice during each CouncilPresidency with the first meeting used to assess potential areas ofcooperation and conflict and the second meeting finalizing the agendafor the EUUS summit and confirming the contents of its progressreport which is presented to summit leaders Below the SLG an lsquoNTATask Forcersquo meets somewhat more frequently (often throughvideoconferencing) to follow specific dossiers in both the security andeconomic realms
223 TEP Steering Committee and Working Groups
The TEP institutions including the Steering Group and workinggroups bring together policy experts to deal with economic issues ingreater detail The Steering Group consists of the US Deputy Assistant
11
Secretary of State for Economic Affairs Commission officials at theHead-of-Unit level and a Council Presidency representative Originallydesigned to coordinate negotiating approaches within the WTO and toact as an lsquoearly warning systemrsquo to identify possible trade disputes theTEP Steering Group has evolved into the primary coordinating body fortransatlantic economic relations including negotiations aboutregulatory cooperation in specific areas
The Steering Group is assisted by the TEP working groups which aresector-specific and thus mirror the sectors laid out by the TEPincluding agriculture biotechnology trade services and globalelectronic commerce Their main task is to find areas where the EUand the US can work together under the TEP framework and to reportany progress or problems to the Steering Group
224 The Transatlantic Early Warning System
The 1998 TEP declaration highlighted the need to identify potentialtrade disputes before they emerge At the Bonn EUUS summit inJune 1999 the two sides announced plans to formalize an EarlyWarning System for this purpose1 4 Essentially the transatlantic earlywarning system sparks an inter-agency process to identify potentialeconomic disputes at an early stage most notably with regard todomestic EU or US legislation that might act as a barrier totransatlantic trade and investment The task of spotting such potentialdisputes is delegated to the TEP Steering Group which reports earlywarning items to the Senior Level Group which in turn may take theminto account when preparing the EUUS summit agenda The TEPSteering Group also assigns contact points facilitating consultationsand agreeing on timelines for reporting back on items highlighted aspotential transatlantic policy frictions Unlike similar early warningsystems within the European Union however the transatlantic earlywarning system does not require that either side pause or reconsiderits proposed legislation or regulations The result is a system whichwhile respecting the regulatory sovereignty of both sides does notguarantee prevention or resolution of potential conflicts
12
Figure 1 The Transatlantic Early Warning System
The EUUS SummitTop-level discussions on
potential and exiting disputes
The Senior Level GroupReviews friction points reports to summitorand refers back to TEP Steering Group
or NTA Task Force
TEP Steering GroupIdentifies and monitorseconomic friction points
225 The Transatlantic Legislatorsrsquo Dialogue
An underlying feature of the early warning concept is the desire to getboth EU and US domestic policy makers to consider the externalimplications of internal policies However the Early Warning System isa bureaucratic tool The important task of raising awareness betweenEU and US legislators lies with the Transatlantic Legislatorsrsquo Dialogue(TLD) another product of the NTArsquos lsquobuilding bridgesrsquo chapter The TLDbrings together members of the US Congress and the EuropeanParliament so as to create awareness on each side of the transatlantictrade impact of EU and US legislative acts
Thus far however the TLD has not lived up to initial expectations forthree reasons First TLD participation is largely limited to members ofthe US House of Representatives and the European Parliament with aparticular interest in transatlantic relations and may not includemembers of committees drafting legislation with transatlanticrepercussions the US Senate moreover is thus far excluded from theTLD Second there is insufficient contact between the TLD and otherparts of the transatlantic dialogue for example the SLG Thirdmeetings of the TLD have been held only rarely and typically withweak attendance on the US side and the Dialogue has yet to engage inor settle any serious economic disputes between the United States andthe European Union
226 The Transatlantic Civil Society Dialogues
The fourth and final chapter of the NTA encourages the establishmentof lsquopeople to peoplersquo links as a way of building bridges across the
13
Atlantic and bringing a civil-society component to transatlanticcooperation In addition to supporting ad hoc exchange betweeneducators and scientists the EU and the US have encouraged and insome cases subsidized the establishment of formal dialogues amongEuropean and American business consumer and environmentalgroups and labour unions The 1995 NTA made specific mention ofthe Transatlantic Business Dialogue (TABD) while the 1998 TEPinvited civil society input lsquoon issues relevant to international trade as aconstructive contribution to policy makingrsquo In practice however not alldialogues have been created or function as equals
The Transatlantic Business Dialogue
The TABD is the oldest best organized and most influential dialoguein the transatlantic economic relationship Launched in 1995 at theinitiative of the US Commerce Department and the EU Commissionthe TABD brings together some 200 European and American CEOs forannual meetings which make joint recommendations on thetransatlantic policy issues1 5 From the beginning the TABD focusedthe attention of US and European legislators and regulators on theimportance of non-tariff barriers to trade calling explicitly for EUUSregulatory cooperation and mutual recognition of standardsmdashanapproach it has labelled lsquoapproved once accepted everywherersquo1 6 Inkeeping with this approach the TABD has been active in pressing forthe adoption and implementation of specific agreements including the1997 Mutual Recognition Agreements and the 2000 Safe HarbourAgreement on data privacy (examined below) In addition the TABDparticipates actively in the transatlantic early warning systemidentifying in its annual reports those domestic laws and regulationsthat might create obstacles to transatlantic trade and investment1 7
One result of this process is that the TABD has become a valuablesource of information for EU and US policy makers Sixty percent ofthe TABDrsquos original recommendations resurfaced in the NTA and theJoint Action Plan1 8 Some members estimate that one-third of itsrecommendations have been taken on board by transatlantic policymakers1 9 Nevertheless there is an increasing perception within theTABD that much of the lsquolow-hanging fruitrsquo has been picked in terms oftransatlantic trade liberalization and regulatory cooperation and a fearthat governments lsquocanrsquot deliverrsquo regulatory reforms demanded bybusiness2 0 In addition the TABD faces the challenge of interactingwith the other officially recognized dialogues with which it may notalways agree
The Transatlantic Consumer Dialogue
The decision to include consumers environmentalists and workers inthe transatlantic dialogue was the result of pressure from NGOs theEuropean Commission and eventually the US State Department The
14
success of the TABD sparked criticism from the NGO communitywhich argued that the influence of the TABD was unbalanced by anabsence of civil society input In response to these concerns the StateDepartment and the European Commission both agreed to providefunds to establish a new Transatlantic Consumer Dialogue There wassome objection to government sponsorship of the groups particularlyin the US where it was feared that the consumer dialogue was a wayto lsquogreenwashrsquo the TEP There was also a divide among its membersover the issue of trade liberalization most notably at the first meetingof the TACD which was overshadowed by a dispute between groupssuch as Public Citizen which generally oppose trade liberalization andother groups such as Consumer Union which support tradeliberalization as a means of increasing consumer choice2 1
Despite this rocky start the TACD has become an efficientorganization with a secretariat in London and a Steering Committeethat has organized its roughly 60 members into working groups onfood electronic commerce and trade In its working groups annualmeetings and recommendations the TACD has focused largely ontransatlantic regulatory issuesmdashin areas such as data privacy foodsafety and the application of the lsquoprecautionary principlersquo in riskregulationmdashbecause many consumer groups feared a downward spiralof regulatory standards as a result of increasing trade liberalizationNevertheless despite its high level of activity some members of theTACD feel that they have not had a sufficient impact on the NTAprocess which they regard as being dominated by a free-tradeagenda2 2
The Transatlantic Environmental and Labour Dialogues
Attempts to forge a functioning dialogue between the European andAmerican environmental and labour movements have been the leastsuccessful Despite initial attempts to create an environmentaldialogue the TAED suspended its activities in 2000 citing a lack offunding from the US side2 3 The TAED had until this point held threemeetings and established a Steering Committee as well as WorkingGroups on Climate Protection Bio-diversity and Forest ConservationFood and Agriculture and Industry The TAED also offered a numberof official recommendations on safe energy sources biotechnologywaste management and emissions standards although TAEDmembers like their TACD counterparts argued that the TABDcontinued to enjoy privileged access to EU and US policymakers2 4
Finally while the Transatlantic Labour Dialogue is officially still afunctioning forum it is the least developed of the transatlantic civil-society dialogues The TALD is little more than a modest exchangebetween the European Trade Union Confederation (ETUC) and theAmerican Federation of Labour and the Congress of IndustrialOrganizations (AFL-CIO) with no organizational structure secretariat
15
or formal objectives The TALD did hold several meetings in 1998 and1999 and 2000 but produced only six recommendations from thosemeetings Simplifying only slightly the ETUC and AFL-CIO havechosen to emphasize their shared interests in a global labour dialogueand have demonstrated little commitment to a specificallytransatlantic agenda within the framework of the NTA or the TEP2 5
In sum the transatlantic civil-society dialogues have arguably served auseful purpose in fostering transatlantic discussion among businessesand non-governmental organizations (most notably in the businessand consumer sectors) and in producing concrete recommendationsfor transatlantic economic cooperation However the relative weight ofthese organizations remains highly uneven and the currentarrangement is highly segmented and marked by a lack of anylsquodialogue among the dialoguesrsquo which might lead to the creation of agenuine transatlantic public sphere
23 An Effective Framework for Economic Cooperation
In recent months both official reviews and academic studies havefocused on the institutions of the NTA and the TEP asking whetherthese institutions are an adequate framework for transatlanticeconomic as well as security cooperation In its 2001 review of theNTA for example the European Commission argued that institutionssuch as the TEP Steering Group the NTA Task Force and the SeniorLevel Group serve useful purposes in fostering dialogue andcooperation between EU officials and their US counterparts but alsonoted a number of weaknesses in the current structure including thesummit-driven demand for often artificial lsquodeliverablesrsquo at six-monthintervals and the difficulty in focusing on medium- to long-termpriorities given the inevitable demands of pressing short-term issuesThe Commission therefore proposed a number of reforms to thecurrent institutions including the establishment of explicit medium-term priorities and the possible reduction of the number of EUUSsummits to one per year2 6
By and large the Commissionrsquos recommendations were welcomed bythe United States government which agreed to the establishment of aset of medium-term priorities in the context of the June 2001 Goumlteborgsummit By contrast no progress has been made on the suggestion ofreducing the number of transatlantic summits largely because of thedifficulties posed by the rotating six-month presidency on the EU sideIn addition as we have seen a number of calls have been made inrecent years for a more transparent and accountable process oftransatlantic economic governance with more balanced input fromcivil society and with a greater role for democratically electedlegislators Thus far however these calls have met with no systematicresponse from either the US or the EU
16
Moving from institutions to lsquodeliverablesrsquo a recent study by EricPhilippart and Pascaline Winand has attempted to measure the policyoutputs of the NTA by examining the joint reports of the Senior LevelGroup since 1995 in order to determine to what extent and in whichareas the goals of the Joint Action Plan had been missed met orexceeded Summarizing a complex analysis Philippart and Winandfind that the extent and level of cooperation varies both across andwithin the four chapters of the NTA with genuine joint action in someareas and lower levels of cooperation (such as the exchange ofinformation) or inactivity in others In the area of foreign policycooperation for example the authors find that EUUS cooperation hasbeen most successful and resulted in the most extensive joint actionwithin Europe itself while yielding fewer and less binding outcomes inother regions In the area of economic cooperation the authors findthat the NTA has been most active in the establishment of alsquotransatlantic marketplacersquo with relatively extensive trade andregulatory cooperation but far less active and successful incoordinating economic policies in the World Trade Organization andother multilateral fora2 7 In the following two sections therefore weturn from a discussion of institutions and process to a more explicitanalysis of specific economic issues relating to the management oftrade disputes as well as bilateral efforts at regulatory cooperation
17
ndash 3 ndashTrade and Regulatory Disputes
in the Transatlantic Economic Partnership
Despite the obvious importance of EUUS trade and investmentrelationshipmdashor indeed because of itmdasheconomic disputes have beenand remain an important feature of the transatlantic partnershipIndeed the settlement and where possible prevention of suchdisputes was a large part of the motivation behind the establishment ofthe New Transatlantic Agenda and retains an important place inbilateral economic relations
31 Classifying Disputes Traditional Trade Issues vs NewlsquoBehind-the-Borderrsquo Regulatory Disputes
Transatlantic economic disputes arise from various sources and canbe settledmdashor left unsettledmdashby a similar variety of means In terms oftheir sources we can distinguish between two broad categories oftransatlantic trade disputes (1) lsquotraditionalrsquo trade disputes regardingdiscriminatory national measures such as tariffs and quotas imposedat the border as well as subsidies antidumping actions and safeguardmeasures which discriminate explicitly between domestic and foreignproducers and (2) lsquonew-stylersquo disputes about the trade-distortingeffects of lsquobehind-the-borderrsquo regulations that act as non-tariff barriersto international trade in goods services and intellectual property
With the gradual decline of tariffs and quotas as direct barriers toinvestment and the simultaneous increase in domestic economicregulation on both sides of the Atlantic in response to concerns aboutthe environment consumer protection public health and the like thefrequency of these new-style disputes has increased drastically duringthe course of the 1990s and early 2000s Some of these disputes likethe ongoing conflicts over the regulation and marketing of hormone-treated beef and genetically modified organisms (GMOs) havegenerated considerable controversy on both sides of the Atlantic andplaced strains on the transatlantic economic partnership
The rise of such transatlantic regulatory disputes in turn hasprompted questions about what Miles Kahler and others have termedlsquosystem frictionrsquo between the respective regulatory systems of the
18
European Union and the United States In a survey of transatlanticeconomic relations conducted in 1995 Kahler concluded that thereexisted at best partial evidence of system friction between the UnitedStates and the European Union noting that some issues (egagriculture and audiovisual services) did indeed divide the US and EUsystems fundamentally while on other lsquonewrsquo issues like labourstandards and the environment the EU and the US generally sharedcommon views2 8
Surveying the landscape of transatlantic economic relations sevenyears later it remains true that the European Union and the UnitedStates are united by many common values and common interestsNevertheless in a growing number of issue-areas including food safetydata privacy copyright protection taxation accountancy standardsand others the United States and the European Union have arguablyexperienced lsquosystem frictionrsquo in the form of a large number ofsimmering regulatory disputes summarized in Appendix 1 at the endof this report
Table 5 Classifying US-EU Trade Disputes
Agriculture Industrial goods Services
Border-measures
Bananas (alsoGATS)Belgian ricedutiesTariff-rate quotacorn gluten feed
Harbour taxAnti-dumping(steel uranium)CVD (steel)Safeguard actions(steel)
Tra
dit
ion
al
Subsidies Export subsidies AirbusFSC
Regulatorybarriers
Beef hormonesGMOs
Hush kitsPublicprocurement
Audio-visualProfessionalservicesTelecommuni-cationsData privacy
New
sty
le
IPR Havana Club Irish MusiccopyrightGreek protectionof movies
19
As Table 5 makes clear the contemporary transatlantic relationship ischaracterized by both traditional trade conflicts and new-styleregulatory disputes Indeed traditional disputes about tariffs andquotas (eg bananas) subsidies (eg Foreign Sales Corporations) anti-dumping measures and safeguard actions (eg steel) constitute someof the most high-profile disputes between the United States and theEuropean Union With a few exceptions however these disputesprimarily concern traditional trade measures that are within the lsquocorebusinessrsquo of the multilateral trading system which has wellestablished rules and an effective functioning dispute settlementprocedure within the World Trade Organization Put simply the WTODispute Settlement Understanding provides a body of multilateralrules governing the permissible use of tariffs quotas and other trade-restrictive practices a forum for consultation and if necessarylitigation among the parties to a dispute before WTO panels and theAppellate Body a binding requirement for member states to complywith DSU panel and Appellate body decisions and authorizedretaliation in the event of prolonged noncompliance with thosedecisions2 9
By contrast regulatory disputes implicate national laws andregulations that are often adopted for legitimate reasons of consumerand environmental protection or public health and after extensivedemocratic or administrative processes For this reason transatlanticregulatory disputes can be more bitter and intractable than traditionaltrade disputes insofar as both sides believe that they are lsquodoing theright thingrsquo and insofar as domestic political actors resistsubordinating domestic regulations to the exigencies of internationaltrade Such regulatory disputes also create particularly difficultquestions for the WTO dispute settlement procedure insofar as theycall for a politically sensitive balance between the economic imperativeof liberalized international trade on the one hand and the economicand non-economic motivations behind domestic regulations on theother hand
Largely for this reason both the United States and the EuropeanUnion have generally avoided bringing such regulatory conflicts beforethe World Trade Organization preferring in most instances to managetheir regulatory differences through bilateral consultation andcooperation Table 6 which summarizes EUUS WTO disputes bysubject matter demonstrates clearly the continuing dominance oftraditional trade issues (tariffs subsidies countervailing duties andantidumping) and the effort by both sides to keep politically sensitiveregulatory issues away from the WTO (For more information about thesubjects and status of all EUUS trade disputes before the WTO seeAppendices 2 and 3 at the end of this report)
Simplifying slightly existing regulatory as well as traditional tradedisputes can be addressed in any one of three ways (summarized in
20
Table 7 page 22) First the EU and the US may engage in directconsultations about regulatory barriers to trade and resolve thedispute without resorting to WTO dispute resolution examples includethe dispute over airplane lsquohush kitsrsquo resolved through a negotiatedsettlement between the EU and the US and the public procurementcase involving a Massachusetts state law imposing sanctions againstfirms doing business in Myanmar which was resolved unilaterallythrough the application of US federal law Second one party maychallenge the legality of the otherrsquos regulations before the WTO as inthe case of the US challenge to the EU ban on hormone-treated beefor the EU challenge to a provision of US copyright law in cases wherethe disputed regulation is ruled to be in violation of WTOrequirements however compliance has proven difficult Third andfinally given the difficulties of resolving such disputes through eitherbilateral negotiations or WTO litigation the bulk of regulatory disputesare allowed to simmer indefinitely with periodic consultations andexchange of information among the two sides but no resolution of theresulting trade tensions As Appendix 1 makes clear the overwhelmingmajority of current transatlantic regulatory disputes fall into this thirdcategory
Table 6 Transatlantic Trade Disputes in the WTO Overview and Context
Tariffsquotascustomsdutiesrules oforigin
retaliatorymeasures
Tradedefence
instruments(a-d CVDsubsidies)
TechnicalTBTs
(classi-ficationlabelingtesting)
Substantive TBTs
(process ampproductrequire-ments)
Subsidies GATS TRIPS TRIMS GPA Other
EU - US(EU asthirdparty)
6 9 (11) 1 (1) 1 3 1 2
EU - Restof World(RoW)
14 6 1 1 3 4 3 4
RoW ndash EU 12 3 4 2 1 1
US ndash EU(US asthirdparty)
8 (1) (1) 1 (1) 8 1 8
US - RoW 10 7 3 2 7 2 6 3 1
RoW ndash US 7 21 5 1 1 1
RoW ndash RoW 17 30 1 6 10 3
Sources Adapted from DG Trade WTO - Dispute Settlement (updated 15102) httpeuropaeuintcommtradepdfcasesxls accessed15202 and the WTOs dispute database (httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
21
22
Table 7 Methods of Dispute Resolution with Examples
Negotiated Agreement orUnilateral Action
WTO Dispute Settlement SimmeringDisputes
HushkitsMassachusettsMyanmar(public procurement)
Beef hormones(EU not in compliance)Irish Musiccopyright (EUUScompensation agreement)
GMOs
The sources of such regulatory disputes and the difficulties they posefor traditional dispute settlement procedures are illustrated below infour brief case studies focusing on (1) the US challenge to EUlegislation prohibiting the use of airplane lsquohush kitsrsquo (2) the USchallenge to the EUrsquos ban on hormone-treated beef and the relateddispute over the EUrsquos moratorium on the approval of geneticallymodified foods and crops (3) the EUrsquos challenge to the aforementionedMassachusetts public procurement law and (4) the EUrsquos challenge to aprovision of the US Copyright Act Although not a thorough review ofthe entire universe of EUUS regulatory disputes these four cases doillustrate the types of regulations adopted and challenged by both theEU and the US as well as the various methods of dispute resolutionmentioned above The policy implications of these cases are discussedin Section 36
32 Case Study Airplane lsquoHushkitsrsquo
Many EUUS disputes concern the technical barriers to trade (TBTs)caused by divergent national regulations setting technical standards inareas ranging from the specifications for industrial machinery andemissions standards for motor vehicles to nutritional labelingrequirements for packaged foods As Kenneth W Abbott has pointedout in a recent study many such national regulations are identified bybusiness or governments as TBTs within the transatlantic relationshipand a far smaller percentage of these have emerged as high-profiletrade disputes3 0 To date no disputes have been litigated between theEU and the US under the TBT Agreement although one particularlyprominent case did create significant tensions in the transatlanticrelationship namely the US challenge to the EUrsquos ban on airplanelsquohushkitsrsquo
Hushkits are equipment packages designed to reduce the noiseemissions of aircraft through the use of sound-absorbing materialswith the aim of bringing particularly older planes into compliance withthe so-called lsquoChapter 3rsquo noise pollution standards adopted within theInternational Civil Aviation Organization (ICAO) In 1999 theEuropean Union which had long pressed unsuccessfully for theadoption of stricter standards within the ICAO adopted a Regulation
23
establishing a ban on the registration of older aircraft fitted withhushkits on the grounds that such aircraft only barely complied withChapter 3 standards and were substantially more polluting thannewer planes The ban on new registrations was to enter into force inMay of 2000 from April 2002 moreover hushkitted aircraft registeredin third countries would not be allowed to operate within EU territory
Although nominally intended to decrease noise pollution aroundairports in heavily populated regions of Europe the EUrsquos hushkitsRegulation met with howls of protest in the United States where theuse of hushkits had been encouraged by US authorities as a cost-effective way of meeting Chapter 3 standards A ban on the registrationof hushkitted aircraft the US argued would therefore impose adisproportionate burden on US airlines which estimated that theRegulation cost them some $2 billion by depressing the value of theirexisting fleets while benefiting European carriers that had relied moreextensively on the purchase of new aircraft designed specifically tomeet Chapter 3 specifications In legal terms moreover the UnitedStates argued that the Regulation violated the terms of the ICAOagreement which simply set a performance standard for planes anddid not authorize parties to set more demanding standards or tomandate a specific design standard (eg a ban on the use ofhushkits) The US accordingly lodged a formal ICAO complaint againstthe 15 EU member states in March of 2000
After extensive bilateral discussion as well as multilateral negotiationswithin the ICAO in October 2001 the US and the EU reached asettlement of the case The first step in this settlement was themultilateral resolution adopted on 4 October in the ICAO assemblyurging states to pursue a lsquobalanced approachrsquo to noise reductionadopting local operating restrictions only where supported by anassessment of the costs and benefits and only after fully assessingalternative measures to reduce noise At the same time the ICAOagreed to a new and stricter set of lsquoChapter 4rsquo standards to take effectbeginning in 2006
Consistent with the provisions of the ICAO agreements the EU agreedon 25 October to withdraw the original Hushkits Regulation by April2002 (the date when it would have applied to third-country aircraft) inreturn for which the US agreed to withdraw its complaint before theICAO In place of the original Regulation the Commission issued aproposal in November 2001 for a new Directive replacing the generalban on hushkitted places with a more discriminating provisionallowing noise-sensitive airports in congested urban areas to limit theuse of planes that are lsquomarginallyrsquo compliant with Chapter 3standards3 1 This draft Directive was approved by the EuropeanParliament in its first reading in March 2002 and at this writing ispending adoption by the Council of Ministers and the Parliament
24
Despite the initial acrimony between the US and the EU the hushkitscase represents a successful effort at bilateral dispute resolution in abroader multilateral setting In this case the European Union agreedafter receiving assurance and guidance from the ICAO to adopt a morediscriminating and less trade-distorting regulatory approach whichsatisfies the trade concerns of the United States while allowing the EUto address the problems of noise pollution around the Unionrsquos mostcongested urban airports As we shall see presently however not allsuch regulatory conflicts have proven so amenable to negotiatedagreement
33 Case Study Hormone-Treated Beef andGenetically Modified Organisms
EU and US food-safety regulations constitute some of the mostimportant regulatory barriers to international trade and have been thesource of some of the most politically difficult and intractabletransatlantic regulatory disputes pitting each sidersquos sovereign right toregulate the safety of its food against its international obligationsunder WTO law3 2 Within the United States regulation of food safetywas among the earliest and most politically sensitive tasks of thefederal government which has delegated much of the power fordomestic regulation to agencies like the Food and Drug Administration(FDA) which has jealously guarded its reputation as an independentand impartial regulator making decisions on the basis of scientifictests rather than political pressures In the EU by contrast foodsafety regulation is carried out in part by national regulators and inpart by the EUrsquos political bodies including the Council of Ministersthe European Parliament and the Commission The deficiencies of thispatchwork regulatory process was painfully revealed however by aseries of food safety crises during the latter half of the 1990s includingmost notably the BSE crisis of 1996 and the Union has respondedforcefully with the creation of a European Food Safety Authority andwith an insistence on the application of the so-called lsquoprecautionaryprinciplersquo justifying regulatory action in the absence of clear scientificevidence and on the basis of consumer concerns and social andeconomic criteria
Precisely because food safety regulations can act as non-tariff barriersto trade in agricultural products the EU and the US have agreed tosubject their domestic regulations to the discipline of internationalguidelines such as the United Nations Codex AlimentariusCommission which establishes international standards for food safetyand more recently through the 1994 WTO Agreement on theApplication of Sanitary and Phytosanitary Measures (the SPSAgreement) The SPS Agreement does not establish bindinginternational standards for food safety nor does it automaticallypreempt the adoption of domestic standards that might constitute
25
non-tariff barriers to trade The agreement does however incorporateand promote the adoption of international standards as well asestablish trade rules that limit the ability of states to adopt food safetyregulations that are not scientifically grounded The terms of the SPSAgreement are moreover enforceable under the WTO disputesettlement procedure
The consequences of the divergent EU and US regulatory processesand the difficulties of resolving disputes through the WTO disputesettlement procedure can be illustrated most clearly by the long-standing EUUS dispute over the issue of hormone-treated beef Theconflict began in 1989 when the European Union announced a ban onthe sale and marketing of beef treated with any one of six growth-promoting hormones that had been tested and certified as safe by theFDA In 1995 following the entry into force of the SPS Agreement theUnited States took legal action before the WTO alleging that the EUban was inconsistent with the terms of the SPS Agreement since it wasnot based on scientific evidence risk assessment or internationalstandards After a protracted legal battle involving the issuing of apanel report and a subsequent appeal the WTO Appellate Body heldwith the United States that the EU had failed to base its ban on ascientific risk assessment and ordered the EU to bring its domesticregulations into compliance with WTO law
Despite the clear ruling against it the European Union faced withopposition from public opinion and hopeful of producing additionalscientific findings that would eventually justify the maintenance of theban failed to comply with the Appellate Bodyrsquos decision The UnitedStates therefore retaliated against the EU in May of 1999 imposingtariffs of $1168 million against EU agricultural products such as foiegras Roquefort cheese and Dijon mustard These US tariffs in turnsparked protests among French and European farmers who seized onthe beef-hormones case as a symbol of the threat posed byAmericanization and globalization to European regulations andtraditions Since 1999 the United States and the European Unionhave continued to consult regularly about this case but the Unionremains firm in its refusal to alter its domestic law and the UnitedStates persists in the application of retaliatory sanctions against theEU
The transatlantic dispute over the regulation of genetically modifiedorganisms (GMOs)mdashor more precisely genetically modified foods andcropsmdashis analytically similar to the beef hormones case although thepotential economic stakes in this area of GMOs are potentially fargreater Here again the US Food and Drug Administration decided inthe early 1990s that genetically modified foods were not substantiallydifferent from conventional foods and therefore required no specialprocedures for approval or marketing and on that basis US farmersand seed producers have quickly embraced the use of genetically
26
modified foods and crops By contrast the European Union has takena more cautious approach in a series of Directives and Regulationsrequiring specific approval procedures for genetically modified crops aswell as labeling of foods from genetically modified varieties Since1998 moreover the Council has maintained a de facto moratorium onthe approval of new GM varieties even though the EUrsquos scientificcommittees have continued to formally approve a number of varietiesas posing no health risks to consumers
The GMO issue has been the subject of intense consultation betweenthe US and the EU in recent years including the creation of an EU-USBiotechnology Forum which issued a joint report on the subject inDecember 20003 3 as well as a Biotech Working Group within theTransatlantic Economic Partnership Such fora have provided for auseful exchange of information among regulators as well as tradeofficials yet the positions of the two sides remain far apart with atbest modest signs of convergence in the EU and US approaches Thusfar the United States has refrained from bringing a case against theEU before the WTO partly of fear that the European Union facing apotential backlash against both GMOs and the WTO would be unableto comply The issue therefore remains a simmering irritant in thetransatlantic relationship with the potential to flare into a majordispute should the United States eventually decide to litigate the issuebefore the WTO
34 Public Procurement The MassachusettsMyanmar Case
The previous two cases involved US challenges to EU regulationssetting requirements for the marketing and use of industrial oragricultural products Regulatory disputes can however be directed atUS as well as EU regulations and they can concern regulationsgoverning questions other than product standards An excellentexample is the EUUS dispute over the 1996 Act adopted by the stateof Massachusetts regulating state contracts with companies doingbusiness in Myanmar (formerly Burma) The law in question wasadopted in June of 1996 by the Massachusetts State Legislature withthe avowed aim of securing human rights and democratic elections inMyanmar which was then under military rule and subject to sanctionsfrom the US federal government as well as the EU Specifically theMassachusetts law imposed sanctions on foreign as well as domesticfirms doing business in Myanmar with the aim of motivating suchfirms to withdraw from activities in that country
As Matthew Schaefer points out in an excellent analysis of the casethe MassachusettsMyanmar dispute illustrates two recurrenttensions in EUUS trade relations3 4 First the case illustrates theproblems encountered when individual US states like Massachusettswhich are not directly party to the WTO adopt laws and regulations in
27
possible contravention of WTO law Anticipating such problems duringthe negotiation of the 1994 Government Procurement Agreement(GPA) the European Union had emphasized the importance for the USof binding the states and the US federal government responded byasking each of the states to submit a voluntary lsquoletter of commitmentrsquoagreeing to be bound 37 states including Massachusetts submittedsuch letters resulting in a substantial but incomplete mechanism toensure state-level compliance with the GPA
Second the Massachusetts law in question also represents theextraterritorial application of US (state or federal) laws which employtrade and other economic provisions to secure a foreign policy aim (inthis case the cause of democracy and human rights in Myanmar)Specifically the Massachusetts law attempted to penalize not onlyAmerican firms but also foreign firms for investing in Myanmar even ifsuch investments were legal in those firmsrsquo home countries In thislatter sense the MassachusettsMyanmar case bears a strikingsimilarity to the extraterritorial sanctions applied by the US in thewell-known Helms-Burton and Iran-Libya Sanctions Acts in which theUS federal government adopted extraterritorial sanctions againstcorporations doing business in Cuba Iran and Libya (The latter caseswere resolved at least temporarily when President Clinton agreed in1998 to waive such sanctions in a bilateral agreement with the leadersof the European Union)
In the Massachusetts case the law was challenged before the WTO bythe European Union (joined by Japan) which sought to have the lawruled incompatible with US obligations under the GPA Before the WTOpanel could rule however the law was successfully challenged andoverruled under US federal law when the US Supreme Court held thatfederal action in this area (ie the federal sanctions law againstBurma) had pre-empted such sanctions by the State of Massachusettswhose law was therefore held to be unconstitutional
The successful resolution of the MassachusettsMyanmar disputesuggests several lessons for the prevention and settlement of similarcases in the future according to Schaefer In terms of disputeprevention he argues this case points to the importance of informingstate governors and legislators about the constitutional limitations onthe extraterritorial use of economic sanctions as well as theirobligations under WTO agreements (at least insofar as the statesthemselves agree to be bound by them) In terms of dispute settlementfinally the Massachusetts case suggests that litigation in domesticcourts under US law may be more a more effective and comprehensiveconstraint on state sanctions than WTO law which should thereforebe employed with restraint in such cases
28
35 Intellectual Property Rights The Irish Music Case
In addition to trade in goods and services and public procurementnational laws and regulations regarding intellectual property rightscan also have international trade repercussions even when thoseregulations apply without discrimination to domestic as well as foreignproducers Indeed protection of intellectual property has been thesubject of no fewer than 11 WTO disputes between the United Statesand the European Union since 1995 The challenges posed byintellectual property disputes are illustrated most strikingly by the so-called lsquoIrish music casersquo in which the European Union challengedprovisions of US copyright law before the World Trade Organization 3 5
The US law in question was the 1976 Copyright Act as amended bythe 1998 Fairness in Music Licensing Act Specifically Article 110(5) ofthe amended Act included a lsquobusiness exemptionrsquo according to whichestablishments such as bars shops and restaurants below a certainsize (ie 2000-3750 square feet) were allowed to play radio andtelevision music without paying fees to royalty-collecting bodies Therelevant provisions of the Act had been adopted only after long anddifficult negotiations between the representatives of US performingrights organizations on the one side and the National LicensedBeverage Association on the other and sought (however successfully)to balance the rights of copyright holders with the interests of smallrestaurant and bar owners
Although the US law applied equally to domestic as well as foreigncopyright holders in 1997 the Irish Music Rights Organization (IMRO)a collective music management company representing Irish musicianssuch as the rock group U2 filed a complaint about the law before theEuropean Commission IMRO claimed that the derogation in the lawwas in violation of US commitments under both the InternationalAgreement on Trade Related Aspects of International Property Rights(TRIPS) as well as the Berne Convention for the Protection of Literaryand Artistic Works since it failed to protect authorsrsquo rights resultingin an estimated loss of euro 121 million annually for IMROrsquos membersThe Commission having investigated the case agreed with IMRO thatthe law violated US obligations under the TRIPS agreement andinitiated a formal complaint before the World Trade Organization in1998
In June 2000 a WTO panel issued a decision in favour of theEuropean Union calling on the US to bring subparagraph (B) ofSection 110(5) of the Copyright Act (the aforementioned businessexemption) into conformity with the TRIPS agreement In response tothe panelrsquos report the United States announced that it would notappeal the panel decision but also that it would require time to amendits existing copyright legislation In the interim the United States andthe European Union agreed to establish a WTO arbitration panel
29
which would decide on the level of compensation to be granted by theUS to the EU pending modification of the Act In November 2001 thearbitrators accordingly assessed the annual losses suffered by EUcopyright owners and hence the level of compensation to be paid bythe United States at some $108 million In light of this finding EUTrade Commissioner Pascal Lamy and US Trade Representative (USTR)Robert Zoellick agreed the following month to a temporary solutionwhereby the USTR would seek authorization from Congress toestablish a special fund worth $33 million over three years to financeprojects and activities for the benefit of EU music creators pendingrevision of the US law
The December 2001 agreement between the US and the EU waspresented by EU Trade Commissioner Pascal Lamy as lsquoa good exampleof how we can manage our problems in a cooperative manner whilekeeping in mind our international commitmentsrsquo3 6 However while theUS and the EU have indeed reached an amicable three-year agreementon this issue the Irish Music case also serves as an additionalexample of the difficulties encountered by both sides in amendingdomestic regulations in response to trade concerns and WTO rulingsAlthough the European Union side insisted on the US obligation toamend its law and explicitly retained its right to return to the WTO inthe event of noncompliance at this writing there is no sign of anyimminent US effort to bring its domestic law into compliance and anextended US agreement to compensation remains a probablealternative for the foreseeable future
36 Dealing with Trade and Regulatory Conflicts
Transatlantic trade disputesmdashboth traditional disputes and new-styleregulatory conflictsmdashare inevitable in a relationship as close as EUUSrelationship and are not likely to disappear anytime in the nearfuture Many of these disputesmdashespecially old-style tariff quotasantidumping and subsidies disputesmdashare dealt with effectively by WTOdispute resolution New-style disputes however often involve domesticlaws adopted for legitimate purposes after democratic deliberation andlitigation in such cases can place severe strain on the WTO systemparticularly in cases like beef-hormones copyright and potentiallyGMOs where the losing party would have difficulty complying with anadverse WTO ruling
In light of these challenges scholars and practitioners haverecommended a range of potential reforms in US and EU domesticpolitics in the bilateral relationship and in the multilateral WTOsystem to prevent and settle regulatory disputes Although a complete
30
review of these recommendations is beyond the scope of this report3 7 some of the most promising proposed reforms include the following
bull Changes in Domestic Regulation Perhaps the most promisingsuggestions for reform are those that require no formal internationalagreement but rather domestic reforms that could be undertakeneither unilaterally or through an informal process of mutualcoordination The Transatlantic Business Dialogue for examplehas proposed that the United States and the European Union bothundertake to conduct lsquoTrade Impact Assessmentsrsquo of draftregulations so that legislators are made aware of the potential tradeimplications of proposed regulations before they are adopted Sucha procedural change could be undertaken within the respectivedomestic systems of the US and the EU and without compromisingthe regulatory sovereignty of either side and would have theadvantage of implicating legislators who thus far have been largelyabsent from the NTA process3 8 In a similar vein US observers haveadvocated the adoption by the EU of some form of advise-and-consent procedures for the adoption of regulations which wouldprovide domestic as well as foreign stakeholders with advancewarning of proposed regulations and improve the quality of EUgovernance more generally Finally as we have seen in theMassachusettsMyanmar case it has been proposed that theUnited States should do more in the future to implicate subfederalstates in international trade agreements and to inform them oftheir obligations under US constitutional as well as internationaltrade law
bull Changes in the Bilateral Relationship Notwithstanding theirincreasing complexity the institutions of the NTA and the TEP havenot prevented the rise of new regulatory disputes nor have theybeen able consistently to settle amicably all those that do arisegiven the difficulty for both sides of changing domestic regulationsadopted in response to legitimate public concerns Nevertheless anumber of bilateral reforms have recently been proposed includingmost notably the further development of the bilateral early warningsystem increased regulatory cooperation and the expansion of theTransatlantic Legislators Dialogue With regard to the firstinterviews with policy-makers on both sides of the Atlantic revealthat the early warning system has proven useful in identifyingobscure technical barriers to trade but the same policy-makersemphasize that increased early warning does not provide aguarantee that legislators or regulators will be willing or able toadjust domestic regulations and indeed the survey of regulatorydisputes undertaken above suggests that increased early warningwould not have been capable of resolving disputes over beefhormones or copyright where the primary impediment to resolutionof the disputes was not lack of information but the regulatorysovereignty of legislators and regulators on each side For this
31
reason particular emphasis has been placed on the promise ofenhanced regulatory cooperation (examined in detail in the nextsection) and on the further development of the TLD (where theprimary challenge will be to provide an incentive for domesticallyoriented parliamentarians and congressmen to participate intransatlantic consultations)
bull Reform of WTO Dispute Settlement The WTO Dispute SettlementUnderstanding establishes a binding and efficient system for theresolution of international trade disputes and most WTO memberstates are broadly satisfied with the operation of the systemNevertheless the WTO dispute resolution system is placed underparticular strain in regulatory disputes such as the beef-hormonesand Irish music cases reviewed above where it is called to balancetrade and regulatory objectives and where compliance is politicallydifficult for the losing parties In light of these weaknesses variousscholars and practitioners have suggested reforms to both WTOrules and to the DSU including most notably the clarification of thelsquoprecautionary principlersquo in WTO law and moving from retaliation tocompensation in cases of noncompliance with DSU rulings Both ofthese proposals merit further discussion in the coming review of theDispute Settlement Understanding (scheduled to be completed inMay 2003) and in the ongoing Doha Round of trade talks In themeantime the EU and the US would do well to continue theirgeneral pattern of restraint in addressing regulatory disputesbilaterally and avoiding any potential lsquooverloadingrsquo of the WTOdispute settlement procedure
Future negotiations between the EU and the US as well as futurestudies designed to inform those negotiations would do well to explorethe viability of these proposed reforms
32
ndash 4 ndashTransatlantic Regulatory Cooperation
One of the most striking features of the period since the 1995 NewTransatlantic Agenda has been the dramatic increase in both formaland informal cooperation among the regulatory authorities of theUnited States and the European Union In the past five years alonethe United States and the European Union have signed nine formalregulatory cooperation agreements in areas as diverse as competitionpolicy data privacy customs procedures veterinary standards andthe mutual recognition of testing and certification procedures (Table 8)These formal regulatory agreements moreover represent only afraction of the contacts that occur among US and EU regulators bothbilaterally and in various multilateral fora
41 Why Cooperate
The incentives for US and EU regulators to engage in formal andinformal cooperation vary across different issue-areas but cangenerally be classed into two broad categories3 9 First regulators maycooperate because they view such cooperation as useful in carrying outtheir essential rulemaking responsibilities in an increasingly integratedtransatlantic and global marketplace Such cooperation need not andtypically does not involve joint rulemaking activities but focusesinstead on exchanges of information identification of best practiceand early notification of new regulations being considered within eitherpolity In the area of food safety for example the EuropeanCommission and the US Food and Drug Administration have notidentified or implemented common standards for the reasonsdiscussed above yet the two regulators do engage in an ongoingdialogue both bilaterally and within the Codex Alimentarius (the globalbody for the establishment of food safety standards) and theCommission consulted extensively with its US counterparts in thedesign of the newly created European Food Safety Authority Similarbilateral exchanges occur regularly in other issue-areas as well aswithin multilateral standard-setting bodies such as the InternationalStandards Organization (for industrial standards) and theInternational Conference on Harmonization (for registration ofpharmaceuticals)
33
Table 8 Transatlantic Regulatory Cooperation Agreements
Agreement Targeted Regulations Year
Competition Policy Agreement Competition regulations 1991
ECUS Agreement on DrugPrecursors
Illicit drug regulations 1997
ECUS Customs and CooperationAgreement
Customs certifications 1997
EUUS General Mutual RecognitionAgreements
Conformity assessmenttesting in six sectorstelecommunicationsequipment electromagneticcompatibility electricalsafety recreational craftmedical devices andpharmaceutical goodmanufacturing practices
1997
EUUS Positive Comity Agreement Competition relations 1998
EUUS Agreement Concerning theEstablishment of Global TechnicalRegulations for Wheeled VehiclesEquipment and Parts
Technical regulations 1999
EUUS Veterinary EquivalenceAgreement
Animal export certifications 1999
EUUS Safe Harbour Agreement Data protection regulations 2000
Joint Declaration on USEUCooperation in the Field ofMetrology and MeasurementStandards
Measurement equivalence inproduct certification
2000
EUUS Agreement on MutualRecognition of Certificates ofConformity for Marine Equipment
Mutual recognition of marineequipment regulations
2001
EUUS Guidelines on RegulatoryCooperation and Transparency
Non-binding guidelines forcooperation among EU andUS regulators regardingtechnical barriers to trade
2002
Source European Commission DG TRADEhttpeuropaeuintcommtradebilateralusausahtm
34
A second and partially overlapping motivation for regulatorycooperation already touched on in Section 3 above is to avoid orresolve bilateral disputes about the potential trade-distorting effects ofnational regulations As we have seen domestic economic regulationscan become a source of transatlantic economic tension in two distinctways First domestic regulations in areas such as consumer orenvironmental protection food safety or copyright protection cancreate non-tariff barriers to international trade and investmentexamples include the recent disputes over the EUrsquos Data PrivacyDirective and its ban on hormone-treated beef as well as exemptionsto the US Copyright Act Second US and EU domestic regulators mayapply their domestic regulations in an extrajurisdictional fashion asfor example when EU and US competition authorities insist on theright to review mergers among firms in the other constituency insofaras the proposed merger creates effects in the regulatorrsquos domesticjurisdiction or when the US (or its constituent states) employs tradeand economic sanctions as an instrument of foreign policy In suchcases George Bermann has pointed out lsquothe line between simpleregulatory [cooperation] hellip and the settlement of trade disputes canbecome highly blurredrsquo4 0
The full range of regulatory cooperation agreements and practicesbetween the United States and the European Union is beyond thescope of this preliminary report Indeed interviews with practitionersfrom the United States and the European Union reveal thatconsiderable informal cooperation takes place across virtually everyconceivable area of US and EU regulation with little attention from thepress scholars or political actors Even in the absence of a full-scalecross-sectoral analysis however we can nevertheless undertake threebrief case studies of regulatory cooperation in the fields of competitionpolicy the negotiation of EUUS Mutual Recognition Agreements andthe Safe Harbour Agreement on data privacy regulation Takentogether these three cases illustrate the range of incentives forregulatory cooperation as well as the various means for suchcooperation and the significant obstacles that often stand in its way
42 Case Study Transatlantic Competition Policy Cooperation
One of the earliest regulatory cooperation agreements signed betweenEU and US authorities and one of the most successful concernscooperation in the enforcement of each sidersquos respective competitionpolicy laws including most notably the examination of proposedmergers and acquisitions
The incentives for cooperation in this area are substantial4 1 First asin other areas of regulation EU and US regulators confront similarproblems and are increasingly called upon to rule upon the samecases placing a premium on the sharing of information Second both
35
US and EU courts have ruled that their respective regulatorsmdashnamelythe Department of Justice and the Federal Trade Commission on theUS side and the Directorate-General for Competition on the EUsidemdashmay enforce domestic competition laws extraterritorially againstfirms based outside their domestic jurisdiction if and insofar thebehavior in question (eg a proposed merger) produces effects oncompetition in the domestic market Such extraterritorial applicationof both EU and US competition law raises serious issues about theduplication of effort by the two sets of regulators not to mention theadverse economic and political impact of inconsistent or conflictingdecisions on the same case by EU and US regulators
These concerns increased substantially in the early 1990s moreoverwith the rapid rise in cross-border mergers and acquisitions thataccompanied the completion of the Unionrsquos lsquo1992rsquo internal marketinitiative At approximately the same time moreover the EuropeanUnion adopted the 1990 Merger Control Regulation which gave theCommission regulatory authority to review mergers above certain sizethresholds and made the Commission an important interlocutor forthe EU in this area It was in this context of increasing cross-bordermergers and increasing EU authority over such mergers thatCompetition Commissioner Leon Brittan proposed in 1990 to expandEU competition policy cooperation with third countries beginning witha formal agreement with the United States US regulators respondedpositively to Brittanrsquos proposal and US and EU regulators agreed in1991 to adopt an agreement committing them to cooperation in thearea of competition policy including the sharing of non-confidentialinformation and coordination of enforcement activities This agreementwas later supplemented by two secondary agreements the 1998Positive Comity Agreement (which seeks to restrict the extra-territorialapplication of antitrust laws in non-merger cases but has beenformally invoked only once) and by the 1999 AdministrativeArrangements on Attendance in Hearings (which provide guidelines forthe participation of EU and US regulators in each otherrsquos hearings)
In the decade since the signature of the first Competition PolicyAgreement EUUS competition policy cooperation has generallyoperated smoothly and successfully with regulators from theCommission the Justice Department and the FTC sharing informationand coordinating enforcement activities on a daily basis andcooperating successfully on over 600 cases during the course of the1990s including almost 500 merger decisions The general success ofEUUS competition policy cooperation in the area of merger controlcan be attributed to the broad transatlantic agreement among EU andUS regulators about the basic scope and tools of policy which hasfacilitated the task of coordinating enforcement actions and generatingmutual trust among regulators
36
Nevertheless as Youri Devuyst points out in an excellent review oftransatlantic competition policy cooperation successful cooperationand conflict prevention between US and EU regulators can behampered by persistent differences in the scope and focus of US andEU competition law the procedures employed by both sides and theexigencies of confidentiality which limit the sharing of information byUS and EU agencies These limitations can be illustrated in theatypical but well-known BoeingMcDonnell Douglas merger (bothAmerican firms) which was approved by the FTC in July 1997 only tobe held up by Commission insistence that the companies agree toformal undertakings to satisfy its competition concerns Although thecase caused substantial strains in the transatlantic relationship thecompanies concerned eventually agreed to the Commissionrsquos proposedremedies allowing the merger to proceed4 2
An even more dramatic difference of opinion occurred with regard tothe proposed merger of two other US firms GE and Honeywell in2001 Here again US regulators approved the proposed merger only tosee the European Commission reject it in July 2001 after announcingthat the firmsrsquo proposed remedies had failed to satisfy theCommissionrsquos concerns Perhaps most strikingly and unlike theprevious case of EUUS disagreement in the BoeingMcDonnellDouglas merger a number of analysts claimed that the disagreementbetween US and EU regulators reflected an underlying andfundamental difference in the criteria for assessing proposedmergers4 3 Although the resulting predictions of other imminentUSEU conflicts are almost certainly overstated it is worthwhilenoting that the Commission in its December 2001 Green Paper on thereview of the Merger Control Regulation proposes to launch a debateon whether the Union should abandon its traditional lsquodominance testrsquo(ie assessing whether a proposed merger would create a dominantposition for the merged firm in the relevant market) in favour of alsquosubstantial lessening of competitionrsquo test (similar to that already usedin the US Canada and Australia)4 4 Whether the Union will move inthis direction remains unclear If so however it would represent astriking example of regulatory convergence among regulators alreadynotable for their similar (if not identical) regulatory philosophies andprocedures
43 Case Study EUUS Mutual Recognition Agreements4 5
As transatlantic tariff barriers have decreased firms have becomemore concerned with what they term duplicative regulatory compliancecosts and many have pressed for their removal This pressure hasincreased with rising transatlantic investment since divergent EU andUS standards and certification requirements most directly affecttransatlantic corporate groups and these groups more easilycoordinate lobbying on both sides of the Atlantic4 6 Transatlantic firms
37
under the auspices of the Transatlantic Business Dialogue inparticular have pressed for enhanced regulatory cooperation throughmutual recognition agreements culminating in the 1997 EUUSMutual Recognition Agreement (MRA) providing for mutual recognitionof testing and certification requirements and the more ambitious MRArelating to marine equipment signed in 2000 These agreements havebeen promoted as a major achievement of the New TransatlanticAgenda and as a flexible means of reconciling the regulatoryapproaches of the United States and the European Union andfacilitating access to both domestic markets
Notwithstanding these potential advantages however majorchallenges for transatlantic regulatory cooperation in this and otherareas are posed by the significant institutional asymmetries betweenthe United Statesrsquo and EUrsquos respective regulatory systems in an arrayof fields Where regulators adopt similar regulatory structures andsystems and enact similar substantive standards they more easilyunderstand and accept each otherrsquos regulatory determinationsRegulatory symmetry facilitates regulatory trust and confidenceenabling regulatory cooperation to occur as in the competition policycase examined above
In many issue-areas however US and EU regulators tend to work indifferent regulatory cultures Generally EU and national regulatorsoperate under the dual mission of ensuring free trade within theinternal market on the one hand while ensuring public safety throughhigh product and process standards on the other They thus are quiteaccustomed to interacting with foreign regulators and testing bodies onan ongoing basis As a consequence the Commissionrsquos DG Enterpriseand DG Trade units rarely tousled when negotiating and implementingthe 1997 Mutual Recognition Agreement The US Food and DrugAdministration (FDA) by contrast has traditionally defined its rolesolely as that of protecting US public health and has not operatedunder a dual mission of also facilitating market exchange Because theFDA is an independent regulatory authority anxious to protect itsregulatory autonomy US trade and commerce authorities encountermore difficulties in negotiating bilateral agreements concerning areaswithin the FDArsquos jurisdiction
Overall institutional adaptation for the negotiation andimplementation the 1997 MRA has been much easier for the EUwhich already has a mechanism for coordinating the mutualrecognition of product testing and certification among fifteen memberstates speaking eleven different languages This relatively deregulatedsystem consists of EU legislators setting lsquoessential requirementsrsquo in EUlsquonew approachrsquo directives which are supplemented by large numbersof harmonized lsquovoluntaryrsquo technical standards that in turn are widelyadopted Before marketing their products firms either self-certify theircompliance with these requirements or hire accredited testing and
38
certification laboratories Firms and laboratories remain subject topost-marketing member state regulatory controls as well as market-reputational constraints Member state regulators interact on a regularbasis through working groups committees and informalarrangements Overall this EU system can be characterized asgovernance by coordinated cross-border public-private networks
US regulatory officials however oversaw very different regulatorysystems in the areas covered by the 1997 MRA For example the USFederal Communications Commission (FCC) itself certified alltelecommunications equipment until the negotiation of thetransatlantic mutual recognition agreement at which time it adopted adecentralized EU model of certification The FDA continues to certifymost medical devices whereas EU authorities have permitted testingby private notified bodies since the mid-1990s The US OccupationalHealth and Safety Administration (OSHA) requires OSHA-accreditedlaboratories to certify all electrical safety equipment used in theworkplace whereas the EU has permitted manufacturers to self-certifythe equipmentrsquos conformity with European requirements since 1973
EU and US authorities began to seriously address issues of regulatorycoordination at the beginning of the 1990s In May 1989 US Secretaryof Commerce Robert Mosbacher and Commission Vice-PresidentMartin Bangemann agreed to explore the possibility of transatlanticmutual recognition agreements as well as mechanisms to grant USfirms greater access to EU standard-setting procedures After 1995these efforts were championed explicitly and repeatedly byTransatlantic Business Dialogue which became a prominent advocateof transatlantic MRAs4 7
EU and US negotiators initially discussed negotiating mutualrecognition arrangements in eleven sectors but ultimately whittledthis down to six4 8 In consequence the 1997 MRA consists of aframework agreement and six annexes respectively coveringtelecommunications equipment electromagnetic compatibilityelectrical safety recreational craft medical devices andpharmaceutical good manufacturing practices Each of the annexes isin fact a separate agreement for a separate sector covering definedcategories and lists of products
As with all trade negotiations the EU and the United States wereconcerned that the final results be lsquobalancedrsquo The United Stateswished to conclude an agreement on telecommunications equipmentfirst but the EU refused because it felt that US firms would benefitmore if the agreement covered only this sector EU negotiators thusinsisted that an agreement on pharmaceuticals and medical devices becompleted simultaneously The MRA sets up a new transatlanticstructure for overseeing its implementation First the MRA creates aJoint Committee which consists of US and EU trade officials who meet
39
twice annually Second the annexes create Joint Sectoral Committeesto oversee the annexesrsquo implementation
The 1997 Mutual Recognition Agreement does not cover recognition ofthe adequacy or equivalency of US and EU standards as such Ratherthe 1997 MRA only addresses mutual recognition by certificationbodies (known as lsquoConformity Assessment Bodiesrsquo) of each otherrsquosseparate standards4 9 Since neither the United States nor the EUrelinquishes sovereign control over the substance of their standardstrading firms still must meet the separate requirements of the worldrsquostwo largest markets In addition these assessment evaluations aresubject to certain pre-approval and post-approval conditions
Implementation of the 1997 MRA moreover remains uneven Thetelecommunications electromagnetic compatibility and recreationalcraft annexes all have been implemented as required In contrastimplementation of the electrical safety medical device andpharmaceutical GMP annexes remain in dispute in part because theFDA and OSHA have been slow to recognize the equivalency ofcertification by European government regulators or privatelaboratories and in part because of the magnitude and theunfamiliarity of US regulatorsrsquo task in assessing the equivalence ofstandards from 15 different member states submitting documentationin up to 11 different languages5 0 In the words of one FDA official theFDA has lsquorefused to compromise its mission of protecting public healthfor balance of trade purposesrsquo5 1 Thus all three annexes initiallydesired by the US administration are in operation while the threeannexes desired by the Commission are not Since the US executivehas less control over the US agencies responsible for implementationboth partiesrsquo choices are somewhat constrained
On June 12 2001 the United States and the EU initialed anAgreement on Mutual Recognition of Certificates of Conformity forMarine Equipment5 2 Unlike the 1997 Mutual Recognition Agreementand its six annexes this new agreement provides for mutualrecognition of each partiesrsquo standards and procedures as lsquoequivalentrsquofor purposes of certifications issued by conformity assessment bodieslocated in the partiesrsquo respective territories (Articles 3 and 4) Pre-existing harmonization of standards in this sector made possible thepartiesrsquo mutual recognition of lsquoequivalencersquo These standards wereagreed under the auspices of the International Maritime Organization(IMO) located in Geneva This new mutual recognition agreementshould be much easier to implement because less training andinformation exchange are required insofar as testing bodies will not becertifying under separate standards or procedures The parties alsoagreed up-front to recognize each otherrsquos existing conformityassessment bodies so that no application procedures are required forimplementation (Article 6) Thus while this agreement is relativelynarrow in product coverage it is much broader in scope
40
Transatlantic businesses that first touted the benefits of EUUSmutual recognition arrangements now realize their underestimation ofthe difficulties of implementation5 3 These constraints involve not justregulators and regulatory cultures but market forces as well Themarket has not reacted favourably to the recognition of newConformity Assessment Bodies as provided under the 1997 MRA Fromthe perspective of manufacturers they typically develop long-termworking relationships with certifying laboratories which constitute aform of cost-effective firm-laboratory partnership Moreover alaboratoryrsquos mark itself may be important in some markets so thatfirms may continue obtaining formal certification from EU notifiedbodies for the EU market and US laboratories for the United States Asa result most firms may continue using the same laboratories eventhough these laboratories cannot directly certify products asConformity Assessment Bodies but must work through sub-contracting arrangements with accredited laboratories on the otherside of the Atlantic5 4 As for laboratories they will not invest in theaccreditation procedures required to become a Conformity AssessmentBody if they fear that the benefits are limited or too uncertainAccreditation costs can be substantial involving seminars workshopstraining programs audits and joint inspections with authorities acrossthe Atlantic The MRArsquos success in consequence may requireconsiderable market promotion
Perhaps the most important lesson from the implementation of theEUUS MRAs is that agreements that both guarantee public safetyand reduce trade barriers cannot be accomplished on the cheap Theyrequire sustained political will of leaders in each jurisdiction to allocatesignificant resources to finance the coordination of cross-borderregulatory networks EU member states sustained such political willand dedicated such resources over decades in order to create thesingle market Even so they too have encountered significant setbacksand obstacles While it is far too early to pre-judge the 1997 MRA itseems clear that the full benefits of the agreement will be reaped only ifboth sides take concrete steps to ensure that sufficient regulatoryresources are made available to the regulators charged withimplementing the agreement in practice
44 Case Study Data Privacy and the Safe Harbour Agreement5 5
Data privacy protection became a transatlantic issue because of thegrowing interdependence of the US and European economies and therising importance of information technology US affiliates in Europeproduce over a trillion dollars of goods and services annuallyconstituting lsquoover half of all the foreign production of US companiesrsquo5 6
These companies depend on information flows not only with thirdparty suppliers customers consultants marketers and other serviceproviders but also internally within their complex networks of
41
affiliates joint ventures and partnerships The EUUS dispute overdata privacy protection and efforts at cooperation demonstrate theinherent interrelation between social regulation and open trade policieswhere regulation (or the lack thereof) has external effects Alleged USunder-regulation can jeopardize the privacy interests of EU residentsAlleged EU over-regulation can limit the commercial operations of USenterprises In an interdependent transatlantic economy US and EUauthorities attempt to manage the ensuing conflicts of norms andmesh where possible their divergent regulatory systems
On October 24 1998 Directive 9546EC on the Protection ofIndividuals with Regard to the Processing of Personal Data and theFree Movement of Such Data became effective The EU through itsDirective takes primarily a regulatory approach to data privacyprotection as opposed to private ordering through market processesExcept for public security criminal law and related exceptions theDirective covers all processing of all personal data by whatever meansand is not limited to action by government business sector or field ofuse (arts 2-3) The Directive prohibits data controllers from processinginformation unless the individual lsquounambiguouslyrsquo consents to theprocessing and that consent is informed (arts 7 8 10 14) TheDirective provides multiple means for enforcement It requires memberstates to grant individuals a permanent right of access to obtain copiesof the data about them and have it corrected or its use enjoined (arts12 28) It obliges member states to provide a judicial remedy forinfringements of data privacy rights including the right to receivedamages (arts 22-24) To support effective enforcement each memberstate must designate an independent public authority lsquoresponsible formonitoring the application within its territoryrsquo of the Directiversquosprovisions (art 28) These supervisory authorities are to be grantedsignificant powers (arts 18 28)5 7
In contrast the United States has stressed lsquoself-regulationrsquo by theprivate sector backed by regulation which tends to be sector-specificand less stringent Congressrsquos targeting of specific sectors andconcerns is reflected in the following statutory titles The DriverrsquosPrivacy Protection Act of 1994 the Video Privacy Protection Act of1988 The Electronic Communications Privacy Act of 1986 the CableCommunications Policy Act of 1984 and The Fair Credit Reporting Actof 1971 Overall the US approach is fragmented involving standard-setting and enforcement by a wide variety of actors including federaland state legislatures agencies and courts industry associationsindividual companies and market forces US legislation providescitizens with significantly greater protection against the collection anduse of personal information by government in particular the federalgovernment than by the private sector
Article 25 of the EU Directive provides that member states shallprohibit all data transfers to a third country if the Commission finds
42
that the country does not ensure lsquoan adequate level of protectionrsquo ofdata privacy Since it appeared that the United States might notprovide for lsquoadequatersquo data privacy protection under the Directiversquoscriteria US and EU authorities engaged in intensive negotiations toavoid a ban on data flows to the United States culminating in theiragreement on Safe Harbour Principles in March 20005 8 Under theagreement EU member states now must recognize that US firmsrsquoadherence to these Principles is sufficient to protect them frommember state challenge Member state authorities however may stillchallenge transfers to firms that do not adopt and comply with thePrinciples
The guidelines set forth seven core data privacy principles for industryto follow which respectively cover the following issues Notice ChoiceOnward Transfer Security Data Integrity Access and EnforcementThe parties supplemented the Principles with a document entitledlsquoFrequently Asked Questionsrsquo (FAQs) designed to guide firms andauthorities in the Principlesrsquo application Many of the FAQs specify thescope of exceptions thereby providing some leeway to US firms
Companies join the Safe Harbour program by annually certifying to theUS Department of Commerce that they will comply with the PrinciplesThe Department of Commerce then places the companyrsquos name on itsweb site list of certifying firms Self-regulatory organizations (such asBBB Online and TRUSTe) backed by the US Federal TradeCommission offer the primary means for the Principlesrsquo enforcementIn this way the Principlesrsquo application resembles the EUrsquos new andglobal approaches to internal market harmonization5 9 As under thenew approach the Safe Harbour Principles set forth lsquoessentialrequirementsrsquo that firms must meet As under the global approachfirms self-certify their adherence which certification is backed first byaudits from self-regulatory organizations and then (ultimately) by theauthority of the state As of February 23 2002 156 companies hadcertified their adherence to the Principles
The Directive also provides other ways to comply with it in particularthrough obtaining lsquounambiguousrsquo consent from the lsquodata subjectrsquo inEurope (art 7) and the signature of a lsquomodel contractrsquo with data privacyauthorities in member states (Article 26) In January 2002 theCommission approved standard contract clauses covering privacyprotection that can be applied to all data transfers from the EUregardless of a firmrsquos adherence to the Safe Harbour Principles Firmsalso can sign ad hoc contracts with individual member state dataprivacy authorities In addition firms can sign contracts with affiliateswhen transferring personal information such as information containedin personnel files
The Safe Harbour Principles are still at an inchoate stage so that itremains too early to assess their impact Some commentators have
43
questioned the effectiveness of the Principles given that relatively fewUS companies have signed them However some practitioners pointout that companies will not certify their procedures until theiroperations are in compliance6 0 For large companies this allegedly caninvolve considerable re-engineering of their information systemscreation of new internal policies and training of personnel
Nonetheless companies engaged in transatlantic business operate inthe shadow of the Directiversquos potential enforcement Under theDirective US businesses face potential litigation before Europeancourts and administrative bodies unless they adhere to the SafeHarbour Principles Even though privacy advocates have criticized theSafe Harbour Principles the agreement represents a potentially usefultool for such advocates In addition the agreement has increased thedemand for legal consulting and other privacy services within theUnited States For example the Better Business Bureau OnLinecreated a privacy seal program which incorporates the Safe HarbourPrinciples and the Electronic Frontier Foundation a public interestorganization has associated with information technology companies tolaunch a program named TRUSTe to rate the privacy protection ofInternet sites which program also is certified under Safe Harbour
In a world of increased economic interdependence the Safe HarbourPrinciples point to the importance of regulatory cooperation acrossborders involving public and private actors Certification groups suchas BBB OnLine meet with European data protection officials so thatthey become comfortable in the workings of an alternative USapproach Government officials including in Europe realize that theydo not have the resources to enforce the Directiversquos provisions solelyon their own and thus rely on public-private networks in an attemptto ensure better global practices affecting EU constituentsNonetheless to make the Principles work will require sustained cross-border cooperation
45 The Challenge of Transatlantic Regulatory Cooperation
Although brief and selective this review of cooperation across threesectors suggests several tentative conclusions about both the benefitsand the potential obstacles to transatlantic regulatory cooperation
With regard to the potential benefits of transatlantic regulatorycooperation we have identified two First as we have seen regulatorycooperation has the potential to enhance the efficiency of regulationthrough the exchange of information and best practice the provision ofearly warning of potential disputes the avoidance or management ofconflicting regulatory decisions and the gradual building of mutualtrust among regulators Second regulatory cooperation can facilitatetransatlantic trade and investment by removing duplicative regulatory
44
requirements and other non-tariff barriers within the transatlanticmarketplace Such cooperation moreover need not involve thecomplete harmonization or convergence of EU and US regulationsalthough there is some preliminary evidence of convergence in specificissue-areas including the acceptance by the United States of a mutualrecognition scheme similar to that long practiced in the EuropeanUnion and the EUrsquos active discussion of moving from its currentlsquodominance testrsquo to a possible new standard for regulatory mergerscloser to that employed by competition authorities in the UnitedStates
Yet despite the obvious promise of transatlantic regulatorycooperation a broad survey of EUUS cooperation in various areasincluding the three case studies analyzed above points to a number ofpotential obstacles to successful transatlantic regulatory cooperation
bull Regulatory Independence In a number of areas US regulatorsenjoy greater regulatory independence than their Europeancounterparts and may resist what they perceive to be an effort tocompromise domestic regulatory standards and processes in theinterests of international trade The result in some cases is that theUSTR and other central agencies of the federal governmentencounter difficulty guaranteeing compliance with regulatoryagreements by specific regulatory agencies such as the FDA andOSHA if and insofar as these agencies believe that implementationof those agreements would compromise established US regulatorystandards and procedures
bull Transparency and Administrative Law Requirements Across awide range of issue-areas US regulators express concern about thedifferent administrative-law requirements for regulators in the USand the European Union most notably in the area of transparencyIn the United States regulators are required to adhere to thelsquonotice-and-commentrsquo rulemaking procedures of the AdministrativeProcedure Act which requires agencies to provide public notice ofproposed regulations in the Federal Register allow individuals tosubmit comments prior to the final adoption of new rules and keepa public record of the regulatory process The EU rulemakingprocedure although typically characterized by widespreadconsultation of interested parties does not incorporate thesefeatures
bull Confidential Information T h e need to pr o tect con f id e n tia lin f or m a ti on of fir m s an d ot h er pr iva te pa r tie s also pla ce s lim i ts on th ea b i lity of both sid es to co op er a t e in th e ad o p tion an d im p lem en ta tion of reg ula tion s pa r ti cula r l y in th e en f or cem e n t of US an d EU com p etiti on la w s reg a r d in g ca r tel s an d con cen tr a tio n s wh er e fi r m sh a v e been mor e reluct a n t to ag r ee to th e sh a r in g of con f i d en tia lin f or m a ti on th a n in th e ar e a of mer g er con tr o l revi ew ed ab ove
45
bull Multi-Level Governance The United States and the EuropeanUnion are both federal or quasi-federal governance systems withregulatory powers divided in most sectors between the federalEUlevel on the one hand and individual statesmember states or evenlocal governments on the other In terms of regulatory cooperationthis division of regulatory powers means that US executive-branchnegotiators and EU Commission officials are frequently chargedwith negotiating regulatory agreements in areas where the statesretain at least partial regulatory competence and to charges fromboth sides that their counterparts are unable to lsquodeliver the statesrsquoExamples of such state regulatory powers on the US side includethe regulation of insurance and other services as well as publicprocurement where the EU has insisted that the participation ofindividual states is vital to the enforcement of regulatoryagreements6 1 Similar problems afflict the EU side whereCommission efforts to engage in regulatory cooperation may befrustrated by resistance among individual member states as in thecase of GMOs or by the slow adoption of EU-level regulations as inthe case of financial services
bull Regulatory Sovereignty Ultimately the adoption of the broadregulatory frameworks for economic activity consumer andenvironmental protection and other areas is entrusted on bothsides of the Atlantic to democratically accountable bodies such asthe Congress and President in the US and the Council of Ministersand European Parliament in the European Union Within theEuropean Union the harmonization and mutual recognition ofnational regulations has been accomplished in large part through adeliberate transfer of regulatory sovereignty to the European level(as in EU merger control) through the pooling of regulatorysovereignty in the Council of Ministers and the EuropeanParliament (as in data privacy and food safety) and through themutual recognition of standards as enforced by the European Courtof Justice To date however the European Union and the UnitedStates have proven unwilling to compromise their regulatorysovereignty in the various agreements reviewed above indeed eventhe most successful experiment in transatlantic regulatorycooperation that in competition policy is predicated explicitly oneach sidersquos ability to cooperate without any substantial change to itsdomestic regulatory objectives and procedures
The existence of these various obstacles does not of course mean thattransatlantic regulatory cooperation is doomed to failure Some areaslike competition policy are subject to relatively few obstacles tosuccessful cooperation while others such as food safety encountermultiple obstacles Even in difficult areas like food safety moreoverregular exchange of information has proven useful in allowingregulators on each side to understand each otherrsquos regulatoryphilosophies and procedures and gradually to build up the trust
46
among regulators that will be required for the successful operation offuture efforts at mutual recognition or harmonization of regulations
As a first step in this direction the European Union and the UnitedStates agreed in April 2002 to the adoption of a set of non-bindinglsquoEUUS Guidelines on Regulatory Cooperation and TransparencyrsquoAlthough this joint statement of principles does not bind either the USor the EU to any specific regulatory measures and explicitly excludesthe sensitive area of agriculture the agreement does call forregularized exchange of information between EU and US regulatorsand for consideration of harmonization or mutual recognition ofstandards lsquoas may be appropriate in specific casesrsquo to minimizeunnecessary technical barriers to trade In addition the documentsuggests that both EU and US regulators should apply potentially far-reaching principles of transparency in rule-making including publicnotification of and comment on proposed regulations Theimplementation of the guidelines is to be reviewed on an ongoing basisby the TEPTBT Working Group6 2
The significance of the new EUUS Guidelines will depend on theirimplementation in practice across an array of issue-areas in themonths and years to come Regardless of the success of this specificendeavor however regulatory cooperation remains an importantpriority for the European Union and the United States in achievingtheir respective regulatory aims while also preventing and resolvingpotential trade disputes For this reason the conclusion to this reportsuggests a careful and systematic study of current attempts atregulatory cooperation across issue-areas identifying key obstaclesand lsquobest practicersquo at overcoming those obstacles would represent asubstantial contribution to future efforts in this area
47
ndash 5 ndashThe European Union and the Americas
EUUS economic relations do not take place in a vacuum As wehave seen transatlantic efforts at trade liberalization regulatorycooperation and dispute resolution are nested within and frequentlymake explicit use of the rules-based multilateral trading system of theWorld Trade Organization the next round of which both the UnitedStates and the European Union have identified as a priority in thecoming years
Just as importantly the story of the EUrsquos ever-closer economicrelationship with the United States coincides with a second majordevelopment namely the rapid increase of EU trade with the countriesof North and South America Prior to the 1990s the United States wasthe most important trading partner and the largest source of foreigndirect investment in Canada Mexico and throughout most of LatinAmerica and this important role for the US has been further enhancedby the adoption and implementation of the North American Free TradeAgreement (NAFTA) with Mexico and Canada as well the earlynegotiations regarding the possible creation of a multilateral FreeTrade Area of the Americas During the course of the 1990s howeverthe European Union has developed an increasingly close andinstitutionalized relationship with Canada Mexico the Mercosurcustoms union and other countries of Central and South Americawhere it now rivals the economic importance of the United States
In institutional terms the EUUS relationship finds its closestcounterpart in the Unionrsquos bilateral relationship with Canadamdashthisdespite an EUCanada economic relationship that is dwarfed by eachsidersquos economic relationship with the US In economic terms theEUCanada relationship is substantially less important than Canadarsquosbilateral relationship with the United States which is far and awayCanadarsquos largest trading partner taking some 87 of total Canadianexports The integration of Canadarsquos economy with that of other Northand South American states moreover has increased in recent yearswith the implementation of NAFTA and a free trade agreement withChile Nevertheless the European Union ranks as Canadarsquos second-largest trading partner after the United States while Canada accountsfor approximately 17 of EU imports and 22 of total EU exports Asin the EUUS relationship moreover foreign direct investment has
48
outpaced trade as a source of interdependence in the EUCanadarelationship with Canada holding 32 of all FDI in the Union whilethe EU is the second largest investor in Canada after the US holdingsome 8 of all foreign direct investment in Canada6 3
Institutionally the EUCanada relationship is structured by a series ofbilateral agreements including the 1990 Declaration on EuropeanCommunity-Canada Relations and the 1996 Joint Political Declarationon EU-Canada Relations and its accompanying Joint EU-CanadaAction Plan and by a series of regular high-level summits that parallelthose held between the EU and the US The EU and Canada have alsosigned a number of important regulatory cooperation agreements inrecent years including a 1996 customs cooperation agreement a setof Mutual Recognition Agreements agreed in 1998 and agreements onveterinary equivalence and cooperation policy cooperation both signedin 1999 Trade disputes between the EU and Canada are relativelyrare and have generally been dealt with successfully through bilateralconsultation or through the WTO dispute resolution procedure6 4
The Union has come also to play an increasingly important economicrole in Latin America characterized by a sharp increase in both tradeand especially foreign direct investment in the region At the sametime the Union has pursued a wide range of trade and economicagreements with the countries of Latin America including a free tradeagreement with Mexico and other agreements with Mercosur andother Latin American countries In the rest of this section thereforewe examine the EUrsquos economic relationship with the countries of LatinAmerica focusing in turn on the changing patterns of EULatinAmerican trade and investment EU economic agreements with thecountries of the region and the remaining challenges for the EULatinAmerica relationship
51 The EU and Latin America Trade and Investment
The pattern of the trade relationships between the EU and the mainLatin American countries has changed substantially during the lastdecade Although none of them was a major trade partner the largercountries of Latin America already represented an importantproportion of EU exports and imports in 1990 when Mercosur plusMexico and Chile accounted for 43 of extra-EU exports and 32 ofits imports The trade balance was very favourable to the Europeanside with a deficit of over US$8 billion During the 1990s Europeconsolidated its Latin American export markets and increased itsmarket share in Argentina Mexico Chile and especially Brazil In2000 the EU maintained the proportion of its exports towards theanalysed countries while increasing the proportion of imports up to35 The trade balance has improved versus Argentina Mexicoand Brazil whereas the deficit has increased significantly with Chile
49
The total deficit with the countries has now turned into a surplus ofmore than 5 billion
Table 9 EULatin American Trade and Investment(ExportsImports and Foreign Direct Investment as apercentage of total extra-EU flows Trade Balances aremillions of US$)
of EUexports
of EUimports
Trade balance of EUFDI
1990 2000 1990 2000 1990 2000 1999 2000
Argentina 03 08 08 06 -2252 737 54 15
Brazil 25 18 09 17 -5711 -1031 38 53
MERCOSUR 28 25 19 23 -8368 301 92 68
Mexico 11 15 07 07 1231 6973 06 08
Chile 03 04 06 05 -1336 -1653 19 ---
Note figures with an asterisk correspond to year 1999Source European Commission DG-Trade
Moving from Latin America as a whole to individual countries andgroupings we come first to the Mercosur countries (Argentina BrazilParaguay and Uruguay) which created a customs union in 1994 andhave since increased partly thanks to their own process of economicintegration their openness towards the rest of the world6 5 The twosmallest countries are considerably more open (a tradeGDP ratio of70 in Paraguay and 33 in Uruguay in 1999) whereas thisproportion is 19 in Argentina and 15 in Brazil6 6 Although intra-area trade accounts for 20 of their total flows trade with NAFTA andthe EU has also increased during the nineties The financial crises ofthe end of the decade have especially since 1998 temporally put ahalt in the process and affected their external demand By 2000 theEU as a bloc had overtaken the United States as Mercosurrsquos singlelargest trade partner representing 30 of their exports and 35 oftheir imports
The EU and Mercosur can be considered complementary economicblocs in both agricultural and industrial products The EU is the mainexport market for Mercosur agriculture with a 40 share (the USrepresents only 9) More precisely 50 of Mercosur exports towardsthe EU are agricultural products and are concentrated in a smallrange of products such as oilseeds (particularly soy) and animal feedproducts We should also mention coffee (10 of EU imports fromMercosur) livestock and meat and derivatives fruit and derivativestobacco and fish products In contrast EU exports of agricultural
50
products to Mercosur are modest (approximately 6 of total) and areconcentrated in three groups of products alcoholic beverages dairyproducts and other edible animal products and cocoa derivatives Thetrade balance is negative for the EU in agricultural products althoughthe opposite happens in the case of industrial goods The EU is themain supplier of industrial and capital goods to the area includingmost importantly automobiles machinery and mechanical appliancesand a third group of products from the electrical industry (mainlyradiotelephony appliances and parts)
Economic relations between Argentina and the EU developed verypositively since the signature in 1990 of the ECArgentina frameworkagreement on trade and economic co-operation During the 1990sArgentina advanced towards being an open market economy and optedfor an outward-looking external policy where Mercosur and the EUplayed a key role The EU is Argentinarsquos second largest trading partner(after Brazil) overall trade with the EU has more than doubled duringthe last 10 years and represents around 25 of total trade Howeverthe crisis that started at the end of last decade has interrupted thispositive trend The main components of EU imports are agriculturalproducts and raw materials while EU exports to Argentina concentrateon machinery and transport equipment chemicals and manufacturedgoods
Brazil is the largest Latin American economy its GDP accounting for35 of the area or 65 of Mercosur Brazilrsquos domestic market with apopulation over 160 million people constitutes a potentially attractivedestination for both US and EU exports Brazil also signed a co-operation agreement in 1995 with the EU which is now its maintrading partner destination of 268 of its exports and origin of 252of its imports although the US follows very closely (243 and 233respectively) Although during the last years the EU has progressivelyreduced its share of the Brazilian market in favour of the US Brazilremains the EUrsquos main trade partner in Latin America Like Argentinathe process of opening to international competition started between1990 and 1993 As a result Brazilrsquos trade surpluses of the 1990squickly turned into substantial deficits later in the decade only slowlycorrected after the 1999 devaluation The main components of EUimports (1999 data) were vegetable products prepared foodstuffsmineral products transportation equipment wood and wood pulpproducts and machinery and mechanical appliances the latter alsoimportant in EU exports together with transportation equipmentchemical products base metals plastics and rubber
Mexico is the tenth-largest world economy and the most importantLatin-American exporter its total exports amounting to US$166 billionin 2000 In order to qualify its relative size it should be compared withBrazil the second larger exporter in the region (and ninth worldeconomy in terms of GDP) which exported only US$55 billion Mexico
51
is traditionally one of the EUrsquos most important trade partners in LatinAmerica sharing with Brazil its high potential for growth as an exportmarket Mexico has also followed a process of opening to internationalcompetition during the end of the eighties and all the nineties first byunilateral tariff reductions then by subscribing to ten free tradeagreements with the majority of the Latin American countries or areasCanada and the US (creating NAFTA) and in Europe with the EFTAand the EU
During the period 1994-2000 Mexican exports to the US increased240 while their composition has substantially diversified Oil-relatedexports represented only 98 of the total in 2000 compared to 248in 1990 Agricultural products did not account for more than 25 andthe rest of the exports were manufactured goods In contrast 75 ofMexicorsquos imports are intermediate goods 134 capital goods and theproportion of consumption goods is only 117 The EU is Mexicorsquossecond trading partner after the US although the data reveals theoverwhelming dependence of Mexico on the US economy 887 of itsexports are directed to the US and 73 of its imports come from it Inthe EU Germany and Spain represent Mexicorsquos largest export marketswith 09 each Germany is the main European supplier representinga 33 of Mexicorsquos imports As mentioned above Mexicorsquos tradebalance with the EU is highly deficitary
Chile is considered the most open stable and liberalized economy inLatin America Despite its relatively modest size Chile is an importanttrading nation due to its high tradeGDP ratio (over 40) Chile is thefifth Latin American exporter (US$182 billion in 2000) withagriculture and fishery accounting for 10 of the total and the other90 distributed between mining (449 ) and industry (442) Incontrast Chilersquos imports are concentrated in the industrial sector(77) with mining (135) and agriculture (22) lagging far behindIt should be stressed that Chilean trade is globally balanced andexhibits important surpluses with the European Union and Asia Incontrast Chile cumulates its largest deficit with Argentina its main oilsupplier
The EU is Chilersquos main trading partner taking in approximately 25 ofthe countries imports during 20016 7 Among the EU countries theUnited Kingdom and Italy accumulate 34 of Chilersquos trade each andFrance 3 Chile is not only a market for EU exporters of goods andservices but also an important source of imports both in agriculturaland industrial goods The main components of EU imports from Chileare manufactured goods raw materials agricultural products andbeverages and tobacco EU exports of goods are concentrated inmachinery and transport equipment chemical products andmanufactured goods
52
Latin America in general and particularly Mercosur has been involvedin the general trend that directed large capital flows towards emergingand developing economies In 1990 only 16 of overall foreign directinvestment was received by developing countries whereas in 2000 thisproportion had reached 37 Latin America and the Caribbeanreceived around 11 of these flows during the period 1995-99 Brazilreceived one third of the investment in the area whereas Argentinaand Chilersquos proportions were 16 and 8 respectively thanks to theacquisitions of domestic firms by the Spanish companies Repsol andEndesa However due to its instability Argentina has experienced asignificant reduction in foreign investment since 2000 Mexico is thesecond destination of FDI in Latin America (17 during the periodabove mentioned) and in contrast with other countries such asArgentina these flows exhibit a very stable behaviour
Although Mexico followed a process of capital movements liberalizationsimilar to the experiences of Brazil and Argentina a factor behind thestability of these movements is related to its process of regionalintegration with North America Many multinational enterprises haveinvested in Mexico as a platform to produce manufactured goodsdirected towards the US and Canadian markets As an examplebetween 1995 and 2000 more than 60 of cumulated FDI went to themanufacturing sector and 65 had its origin in the US Theseinvestment flows have contributed to the modernization of theindustrial sector and to a significant improvement in Mexicorsquoscompetitive position in the automobile electronic and textileindustries which can help to explain the excellent export performanceof this country in recent years Finally in 2000 the banking sector hascumulated 30 of the total flows of FDI received by Mexico whereasservices telecommunications and the oil industry have had a verylimited interest for foreign investors This fact is in contrast with theother large Latin American economies
The majority of the FDI that the Mercosur countries received in thesecond half of the nineties was directed towards the privatization of thepublic firms especially in the area of services (CEPAL 2001) Due tothis process FDI has abandoned its traditional destinations (forexample in 1995 55 of the FDI stock of Brazil was concentrated inmanufacturing) to be employed in mergers and acquisitions mainly inthe service sector According to Tansini and Vera in 1998 and 199978 of these acquisitions were directed towards Argentina and 18had Chile as destination6 8 In 1999 30 of the capital flows receivedby Brazil were absorbed by the privatizations although since then themajority of the resources were devoted to consolidating andrestructuring these firms
The European Unionrsquos share of foreign direct investment inLatin America increased dramatically during the 1990s with netinflows from the EU increasing from US$1077 billion in 1993 to
53
US$17068 billion in 1997 nearly overtaking total inflows to the regionfrom the United States Within Europe moreover there has been ashift in the primary investors in Latin America with Spain inparticular joining the United Kingdom and Germany as the leadingEuropean investors in the region (see Figure 2) During the 1980s theUK produced more than 50 of the cumulated FDI flows in Mercosurplus Chile6 9 followed by Germany (25) In the 1990s by contrastGermany increased its participation to more than 30 whereas Spainmore than doubled its share to 24 Germanyrsquos FDI concentrated inmanufacturing (such as the automobile industry) during the first halfof the decade especially in Argentina and Brazil with their largedomestic markets Since 1995 Spain is the main European investordirecting its interests in the privatization sectors bankingtelecommunications and energy Other EU countries with importantFDI flows in Mercosur and Chile during the nineties have beenthe Netherlands France and Portugal (the latter with Brazil as itsprimary destination) According to the EC Commission the EUrsquos stockof foreign direct investment in 1999 was euro 1 billion in Uruguayeuro 31 billion in Argentina and euro 34 billion in Brazil EU investment inParaguay is virtually non-existent whereas Chile cumulateseuro 104 billion although in this country the US is still the main foreigninvestor
52 EU Trade Agreements with Latin American Countries7 0
The first symbolic push for the intensification of EU relations withLatin America followed the 1969 lsquoDeclaration of Buenos Airesrsquo issuedby the Latin American members of the Special Committee for LatinAmerican Coordination and calling for an institutionalization of theEULatin America political dialogue and closer economic cooperationbetween both regions
Unlike some previous attempts this time the EU responded positivelyand a regular dialogue between the group of Latin Americanambassadors in Brussels (GRULA) and EC representatives wasinitiated The major substantive measure advanced in this dialoguewas the policy developed toward the Caribbean countries which wereincorporated together with other European former colonies in Africaand the Pacific in the so-called ACP Group and were accorded a specialregime as stated in the Lomeacute Convention of 19757 1 Apart from thatthe Communityrsquos official policy during this period was limited tobilateral economic treaties with the major Latin American countries(so-called first generation agreements) such as the non-preferentialtrade agreements with Argentina in 1970 Uruguay in 1973 Brazil in1973 and Mexico in 19757 2
54
Table 10 EULatin American Trade Agreements
Agreement Objectives Year ofentry into
fEUMexico FreeTrade Agreement(EconomicPartnershipPolitical Co-operation and Co-operationAgreement)
Liberalizes over 96 per cent of EU-Mexicotrade by 2007 at the latest fullyliberalizes industrial products by 2003for the EU and 2007 for Mexico withnegotiations on tariff phase-out ofagricultural items deferred until 2003includes rules on intellectual propertyand dispute settlements and providesEU access to the Mexican procurementand services markets similar to NAFTA
2000
CentralAmericaEUFramework Co-operationAgreement andRegionalProgramme for theReconstruction ofCentral America(PRRAC)
The Framework Agreement seeks tostrength the co-operation in theeconomic financial commercial socio-cultural areas and environment Asecond aim is to reinforce the CentralAmerican Integration System ThePPRAC is a specific program for recoveryfrom the effects caused by hurricaneMitch
Both since1999
AndeanCommunityEUCo-operationagreement andGSP
Political aspects anti-drug dialogueCommercial aspects since 1998 theGeneral System of Preferences is appliedunder a new regime As a result 75 ofproducts imported from the AndeanCommunity to the EU are exempt fromcustom duties Framework Co-operationAgreement to promote regionalintegration
1998(politicaldialogueand co-
operation)and 1999
(GSP)
EUChile AssociationAgreement
Governments concluded negotiations inApril 2002 on a wide-ranging AssociationAgreement including the creation of a free-trade area in goods and services anagreement on wines and spirits andprovisions on public procurementinvestment competition and intellectualproperty
Awaitingratificationby the EUand Chile
MercosurEuropeanUnion
Framework agreement came into force in1999 Negotiations on an interregionalfree-trade agreement began in 1999 andare ongoing
Frameworkagreementsince 1999Free-tradeagreementexpected in
2005
Source Flocircres (2001) DG Trade (European Commission) and Camarero andTamarit (2002)
55
Figure 2 EU Foreign Direct Investment in MERCOSUR + Chile(Cumulated flows Country shares EU = 100)
Source OECD International Direct Investment Statistics YearbookNote For clarity some EU countries with smaller investment shares in MERCOSURhave been excluded
From the mid-1970s to mid-1980s the official policy of the EC towardsLatin America was based mainly on the Inter-Parliamentary Dialoguebetween the European Parliament and Latin Americanparliamentarians and on bilateral economic treaties With regard tothe latter a new round of lsquosecond-generationrsquo agreements was signedbetween 1980 and 1985 with individual countries such as Argentina in1980 Uruguay in 1980 and Brazil in 1982 and with sub-regionssuch as the Andean Pact (created in 1969 between VenezuelaColombia Equator Peru and Bolivia) in 1983 and the CentralAmerican Common Market in 1986 7 3
From the mid-1980s onward Latin America became the focus of moresubstantial political and economic policies from the EU On thepolitical side a variety of multilateral fora have been set up The SanJoseacute Group was launched in Costa Rica in 1984 with the aim ofsupporting progress in the peace process and democracy in CentralAmerica From that date annual meetings have been organizedextending their aims to other fields like the rule of law and humanrights the fight against the trafficking of drugs and educationaltechnical and cultural co-operation The Rio Group was established in1986 again meeting on an annual basis with a membership includingall the South American countries as well as Mexico Finally twosummit meetingsmdashthe first in Rio de Janeiro in June 1999 and a
0
10
20
30
40
50
60
1980-90
1991-98
56
second held under the Spanish EU Presidency in Madrid in May2002mdashbrought together the leaders of 48 countries from the EU andLatin America The first summit in Rio agreed upon an Action Plan toincrease co-operation in the political and cultural spheres and calledfor negotiation of association agreements with Chile and Mercosurwhile the Madrid summit further developed political cooperation andconfirmed the conclusion of a bilateral EUChile AssociationAgreement7 4
The 1990s and early 2000s finally have witnessed the conclusion bythe EU of a round of so-called lsquothird-generationrsquo treaties between theEU and various Latin American countries and trade blocs The primaryagreements in force or under negotiation between the Union and thecountries of Latin America are summarized in Table 10 In all thecases the nature of these agreements is twofold encompassingpolitical agreements on questions such as democracy the environmentand human rights and as well as economic agreements regarding theliberalization of trade and investment
521 The EUMexico Free Trade Agreement
Since 1975 the EU has signed several agreements with MexicoAlthough these agreements were not significantly different from othersalready in force with other countries in the same geographic areaMexico had always received a particular treatment Thus in the 70sMexico benefited from the treatment of most favoured nationneglecting the fact that this country was not a member of the GATT atthat time Later Mexico was eligible under the GSP scheme benefitingfrom this treatment until 1995 when this system was revisited andMexico lost much of its preferential access to the EU marketNegotiations aiming at the establishment of an FTA with the EUstarted during the same year The primary reason was the concern inthe EU about possible trade diversion due to the Mexican entry intoNAFTA in 1994 A general agreement removing trade barriers betweenthe EU and Mexico would minimize any trade diversion effect
Although the most important part of the agreement is the creation of afree trade area between the EU and Mexico the so-called GlobalAgreement includes a rather wide package institutionalising a regularpolitical dialogue and extending the bilateral co-operation Thisagreement places the EU in a better position to compete for access tothe Mexican market In 2007 all industrial goods will be free of tariffsMoreover in trade volume 52 of EC exports will enter the Mexicanmarket duty free by 2003 and for the remaining 48 a maximum dutyof 5 will be applied This extremely quick dismantling calendar willplace economic operators on both sides on an equal footing with otherpreferential partners in real time Concerning agricultural and fisheriesproducts some European special sensitivities are respected allowingat the same time for preferential access to European and Mexican
57
exporters into their respective markets The agreement also includespreferential treatment in services providing service providers from theEU with access to the Mexican market which will be equivalent if notsuperior to that currently enjoyed by operators from Mexicorsquos otherpreferential partners in particular the US and Canada In the servicessector EU banks and insurance companies will be authorized tooperate and establish directly on the Mexican territory Theliberalization of investment and payments related to investments willtake place in 2003 The agreement also provides access to the Mexicanprocurement market similar to NAFTA Finally provisions are madeabout intellectual property competition and dispute settlement
The agreement covers other aspects apart from trade Thus the EUfosters co-operation programmes with Mexico for an annual amount onaverage of euro 13 million during the 1990-99 period There were alsosignificant activities under horizontal programmes such as AL-Invest(Latin American Investment Programmes) and ALFA (Latin AmericanAcademic Formation)
522 Relations with Central America
The most important part of the cooperation between the EU and LatinAmerica and more specifically with Central America has beenimplemented through the so-called cooperation agreements The firstbilateral agreements with individual Central American countries weresigned during the 1970s and early 1980s Later on a second wave ofagreements were adopted covering a wider range of areas topicsbeginning with the First Framework Agreement of Co-operation forCentral America signed in 1985 This agreement belongs to the mostadvanced second-generation type and covers areas such ascommercial promotion and well as agricultural industrial andeconomic co-operation The Second Framework Agreement of Co-operation signed in 1993 is considered as a lsquothird generationrsquo type7 5
This Agreement came into force in 1999 including two novelties apackage of aid for refugees and a programme to support democracyand human rights The previsions of financial technical and economicco-operation aid with these countries from 2000 to 2006 are close toeuro 500 million Furthermore the Commission has decided to participatein the initiative for highly indebted poor countries (HIPC) The eligibleLatin American countries are Honduras and Nicaragua which stand toreceive as much as euro 30 million Additionally the European InvestmentBank has made several loans to the Central American Bank forEconomic Integration (CABEI) in order to support reconstruction in theregion
58
523 Relations with the Andean Community and Chile
The EU has established a complete institutional framework with theAndean Community implementing different instruments in each field(political dialogue trade and co-operation) with a special emphasis onthe question of lsquoanti-drugrsquo measures
Trade relations between the EU and the Andean Community haveincreased 32 over the last nine years currently representing 08 ofthe EUrsquos total trade and 167 of total trade for the AndeanCommunity It is worthwhile to note that 90 of Andean exportsconsist of raw materials or primary production while 85 of the EUrsquosexports are manufactured products From 1999 on the EU hasgranted under the Generalized System of Preferences (GSP)preferential access for all industrial products as well as numerousagricultural products especially for those Andean countries committedto fighting against drug production and trafficking
In the area of political co-operation the Andean region was the first inLatin America to conclude a regional co-operation agreement with theEU The present regional framework agreement was signed in 1993and entered into force in 1998 The amount of the aid to the areareached some euro 6 millionyear for the period 1982-97
Finally the EU has also established several bilateral agreements withChile including the Framework Agreement signed in 1996 andcurrently in force This agreement covers political and economiccooperation and formed the cornerstone for a new EUChileAssociation Agreement the negotiation of which was completed inApril 2002 The agreement which is currently awaiting ratification byboth parties calls for the creation of a free-trade area in goods andservices an agreement on wines and spirits including both market-access questions and the use of protected names a Sanitary andPhytosanitary Agreement new rules on public procurementinvestment competition and intellectual property and a dispute-resolution mechanism7 6
524 The Launching of a Free Trade Area with Mercosur77
The EU is currently the main trade partner of Mercosur The EUgenerally imports agricultural and primary products from Mercosurwhile it exports primarily industrial commodities7 8 The EU has aFramework Agreement of co-operation similar to others with severalcountries or blocs in Latin America In June 2000 negotiations werere-opened aiming at signing a new Inter-regional AssociationAgreement This new agreement would cover not only commercialaspects but also many others like political dialogue or cooperation(social and humanitarian economic and development) between the twoblocs
59
The fifth round of negotiation between the EU and Mercosur took placein July 2001 The main point in this round was the presentation bythe EU of its offer for the reduction of tariff and non-tariff barriers inorder to liberalize trade in goods services and public procurementThese reductions would cover all the industrial products and 90 ofagricultural products over a period of no longer than ten yearsMercosurrsquos answer to that proposal was given during the sixth roundin October 2001 presenting its own offer in terms of tariff and non-tariff reduction and public procurement At the same time there hasbeen an exchange of views on political dialogue as well as someimprovement in the area of technical and scientific co-operationenergy transport telecommunications and information technologyNegotiations continue but conclusion of the agreement is not expecteduntil 2005
53 Challenges for EULatin American Economic Relations
As even this brief survey has made clear the European Union todayplays a substantial economic and political role in Latin America EUtrade with and foreign direct investment in the region have increaseddramatically during the course of the past decade with the EU nowemerging as the most important economic partner for Mercosur inparticular At the same time the EUrsquos political and economicagreements have demonstrated ever-greater ambition and anincreasingly broad economic agenda embracing not only tariff andquota reductions but also provisions on non-tariff barriersinvestment and public procurement as well as political provisionsregarding democracy and human rights
The completion of a more ambitious system of economic agreementswith the Latin American countries remains a goal for both the UnitedStates and the European Union However there are importantqualitative differences between the strategies of the two trade blocswhile the European Union is trying to keep the development of a hub-and-spoke system of bilateral agreements with individual countries or(as in the case of Mercosur) customs unions the United States hasannounced its desire to create a multilateral Free Trade Area of theAmericas The countries of the region for their part havedemonstrated a decades-long commitment to economic liberalizationlocked in place by a series of both multilateral and bilateral tradeagreements amongst themselves as well as with the United States andthe European Union although their commitment to proceeding alongthese lines has been tested by the recent economic crisis in Argentina
The EULatin America summit meeting held in Madrid in May 2002witnessed the conclusion of the EUChile free trade agreement whichis now awaiting ratification by both sides but further negotiations lieahead particularly in the case of the proposed EUMercosur
60
agreement which remains far from a conclusion not expected before2005 In these negotiations the EU should give special attention toexpanding market access for the Mercosur countries especially for so-called lsquosensitive productsrsquo Although the EU has presented itself as achampion of free trade within various multilateral fora it is clear thatthe Union has actively sought to preserve barriers in some industrialsubsectors and especially in the agricultural sector where theCommission has estimated that some 10-12 of all EU imports fromthe Mercosur countries are currently labelled as lsquosensitiversquo7 9 Removalof these barriers would benefit not only Latin American countries butalso European consumers who are currently playing higher prices foran amount equivalent to 5-7 of the Unionrsquos GDP8 0 In addition thenegotiation process should cover not only tariffs (since over 50 of allimports from Mercosur are eligible for an average tariff lower than25) but also other means of market-access protection such as tariffquotas which are applied extensively to agriculture and food productsAdditional areas for negotiation include trade in goods servicesinvestment public procurement intellectual property rights technicalstandards and rules of origin
Finally neither these EULatin American negotiations nor theextensive EUUS cooperation outlined in the previous sections of thisreport should distract the European Union or the United States fromtheir shared priority namely the successful completion of alsquoDevelopment Roundrsquo of multilateral trade talks within the WTODuring his recent trip to Argentina EU Trade Commissioner PascalLamy stressed the importance of ensuring that bilateral and inter-regional trade agreements such as those that the EU has concludedwith the countries of Latin America rest on the multilateral foundationof WTO trade law For this reason he argued bilateral andinterregional negotiations lsquomust not be allowed to detract our attentionfrom the pursuit of the Doha Development Agendarsquo8 1 Such acommitment should remain a central tenet of EU trade policy in theyears to come
61
ConclusionsThe New Transatlantic Economic Agenda
The United States and the European Union have an extraordinarilyclose and important economic relationship the health of which is vitalto the global economy as a whole Both partners stand to gain a greatdeal by making the relationship more productive Both stand to lose ifdisputes cause interruptions and acrimony and if the relationship failsto adapt to new pressures and new challenges
The agenda of transatlantic economic relations has evolved andexpanded to reflect the increasingly integrated nature of thetransatlantic marketplace To be sure traditional trade questionsmdashandtrade tensionsmdashpersist between the European Union and the UnitedStates Despite the generally low level of tariffs between the EU andUS tariff peaks and quotas remain for both sides in a number ofsensitive areas which can and should be subject to further reductionsin the Doha Round of trade liberalization talks within the World TradeOrganization In addition to tariffs and quotas a number of othertraditional trade measuresmdashincluding most notably antidumpingsubsidies and safeguard measuresmdashcontinue to plague thetransatlantic partnership most strikingly in the current dispute overUS safeguard actions in the steel sector Nevertheless while theseriousness of these disputes should not be underestimated themultilateral rules-based trading system of the World TradingOrganization is generally well equipped to address such issues andthe United States and the European Union should continue in theirefforts to use and support the WTO as a forum for both negotiationand dispute resolution
Perhaps the greatest challenge to the transatlantic economicrelationship however is the expansion of the transatlantic economicagenda to encompass domestic regulations that are adopted forlegitimate purposes but act in practice as non-tariff barriers to tradefragmenting the transatlantic market and in some cases leading tobitter and intractable trade disputes As we have seen these types ofdisputes also create enormous legal and political challenges to thedispute settlement procedure of the WTO where judgments in areassuch as the beef hormones and Irish music disputes have createdpolitical controversy without (at this writing) securing full compliancefrom the states concerned
62
For these reasons any attempt to deepen transatlantic economicintegration between the United States and the European Union mustaddress not only tariffs quotas and similar disputes about subsidiesantidumping actions and safeguard measures but also the new-styleregulatory disputes that are likely to become the most importantbarriers in the transatlantic marketplace and place the greateststrains on the EUUS relationship and the multilateral WTO systemin the medium- to long-term future
Addressing these challenges in turn will require a careful andextensive study and more comprehensive understanding not only oftraditional trade issues but also and especially the domestic sourcesof transatlantic regulatory disputes existing efforts to resolve suchdisputes and possible new mechanisms for preventing and settlingfuture regulatory disputes between the European Union and theUnited States
Such a study would necessarily be wide-ranging involving not onlyeconomists who would identify the potential benefits of economicliberalization but also political scientists political economists andlegal scholars who would identify the domestic sources oftransatlantic regulatory disputes the possibility of preventing suchdisputes through early warning andor regulatory cooperation and themost promising means of settling disputes either bilaterally ormultilaterally Any such study would therefore have to undertakethree fundamental tasks
1 A comprehensive listing and analysis based on publiclyavailable sources of EU and US regulations capable of restrictingtrade and investment between the European Union and the UnitedStates
This report has taken a first step towards such an analysis with thecompilation of regulatory barriers identified by the United States andthe EU in their respective trade barriers reports for 2001 (see Appendix1) but further research is required to identify both the sources and theseriousness of problematic regulations
bull In terms of sources a useful first step would be to identify whetherthe regulations in question were adopted by the local state orfederal (EU) levels of government and whether they were adoptedthrough legislation or by regulatory authorities
bull In terms of seriousness a preliminary effort should be made toidentify the economic impact of the regulations in question ontransatlantic trade and investment Such an analysis could draw onthe research done by the US and the EU as well as on the periodicreports of the World Trade Organization and the Transatlantic
63
Business Dialogue but should be conducted by independenteconomists it is to be accepted as authoritative by both parties
In addition an effort should be made by scholars and practitioners onboth sides of the Atlantic to identify new challenges to the relationshipparticularly those arising from the application of new technologiessuch as electronic commerce and biotechnology
2 A comprehensive survey and analysis of transatlanticregulatory cooperation including areas of informal cooperationamong regulators as well as areas of formal agreement
Section 4 of this report identified regulatory cooperation as aparticularly promising means of preventing as well as settlingtransatlantic regulatory disputes yet it also identified a number ofpolitical legal and institutional barriers which can hindermdashand havehinderedmdashcooperation across a range of issue-areas Given therecognized promise of regulatory cooperation among EU and USauthorities as a means of realizing our joint regulatory aims andavoiding future regulatory disputes more detailed studies oftransatlantic regulatory cooperation are vital in order to identifybarriers to regulatory cooperation as well as instances of lsquobest practicersquoin overcoming those barriers
3 A systematic analysis of various means of bilateral andmultilateral dispute resolution with particular emphasis on thespecific challenges of transatlantic regulatory disputes
Finally while emphasis can and should be placed on prevention ratherthan settlement of transatlantic disputes future studies should focuson new and innovative means of dispute settlement in regulatorydisputes given the acknowledged difficulties of litigating regulatorydisputes before the WTO Dispute Settlement Body At the domesticlevel the prospects for the adoption of lsquotrade impact assessmentsrsquo aswell as a more general move toward transparent regulatory procedureson both sides of the Atlantic should be examined At the bilaterallevel special attention should be directed toward the possibleexpansion of early warning as well as the possible use of bilateralarbitration and mediation outside the WTO At the multilateral levelfinally the EU and US should jointly examine the possible revision ofWTO rules to clarify the use of the precautionary principle and toconsider possible amendments to the WTO Dispute SettlementUnderstanding to be undertaken in May 2003
Appendix 1 EU-US Barriers to Trade in Goods Services and Foreign Investment
Type ofmeasure EU concerns about US rules US concerns about EU rules
Tariffs Tariff peaks Food products Textiles Footwear Leathergoods Jewelry Ceramics and glass Trucks Railway carsOptical fibers Tubes for computer monitorsSANCTIONS IN RETALIATION FOR THE EU BAN ON HORMONE-TREATED BEEFTariff quotas dairy products tobacco
BANANAS (tariff quota + discriminatorylicensing) (settled)CUMULATIVE RECOVERY SYSTEM (brown rice)ADMINISTRATION OF CUSTOMS DUTIES FOR RICE(B) (agreement 1101)
Trade defenceinstruments
1916 ANTIDUMPING ACTSAFEGUARD MEASURES ON STEEL WIRE ROD (32000)SAFEGUARD MEASURES ON WELDED STEEL PIPE (32000)BYRD AMENDMENT (ANTI-DUMPING DUTIES GO TO INJUREDINDUSTRY)FAILURE TO LIFT COUNTERVAILING DUTIES AFTER SUNSET REVIEWSQUOTA ON THE IMPORT OF WHEAT GLUTEN (WITHDRAWN 62001)METHODOLOGY OF COUNTERVAILING DUTIES WITH RESPECT TOBRITISH STEEL ANTI-DUMPING DUTIES ON SEAMLESS PIPE
Othercustomsbarriers
Excessive invoicing requirementsEU not recognized as a country of originTEXTILES amp LEATHER CUSTOMS FORMALITIES amp RULES OF ORIGINTuna (certification of origin)
Other leviesand charges
Customs fees (eg Merchandise Processing Fee)HARBOUR MAINTENANCE TAX and Harbour Services Fee50 tax on imported equipment for boats Taxes that falldisproportionately on European automakersbull Luxury tax (70)bull Gas Guzzler tax (85)bull CAFEacute penalties (~100)
65
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade
SHRIMP-TURTLE ndash to import shrimp countries must be certifiedas matching US efforts to protect sea turtles (EU third party)Tuna-dolphin ndash to import tuna countries must be approvedby the National Marine Fisheries ServiceGeneral prohibition on the importation of dairy productsmade from unpasturized milkEffective prohibition on the importation of yogurtMilk protein for yogurt must come from approved diariesDivergence from international standardsReliance on third-party conformity assessment (eg reelectrical equipment and domestic appliances)US and Canadian content labeling of carsApproval slower than for US-produced drugsOver-the-counter drug approval requires US market historyExtensive product description (textiles amp leather)Citrus fruits must be landed at North Atlantic portsRules on all imports of ruminant animals and animalproducts from all EU countries because of BSEBan on some uncooked meat productsStrict condition on imports of egg products (continuousinspection of production process)Low acid canned food (eg fish and dairy products) subject todetailed prior approval systemPre-clearance inspection of apples and pears from somemember states for pestsProhibition on imports of all animals and products from amember state where a disease exists (not just region wherefound)Approval of wine labels
HORMONE-TREATED BEEFLack of national treatment with respect toGEOGRAPHICAL INDICATIONS for agriculturalproducts and foodPoultry treated with chlorinated waterEffective moratorium on approval of GMproducts since 498Mandatory labeling of all foods containingmore than 1 GM ingredientsStringent certification of non-hormone-treated beef (new US program seemsadequate)Food feed and fertilizer containing specifiedrisk materials (narrower product range thanprevious rule)Treatment and traceability of raw materialsfor production of gelatine for humanconsumption (agreement near on healthcertificate that would enable US exports toresume)EU approval of 3rd country establishmentsexporting animal products (esp dairy)Derogation from EU standards required forUS wine (on-going negotiations to try toresolve)Heat or pressure treatment of softwoodpacking material (new EU rule similar todraft international standard)Metric-only labeling (implementation delayedto 2009)
66
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade(continued)
Excessive post-entry quarantine of hardy nursery stocksExporters of meat or meat products to the US may notprocess meat from countries that are not recognized as freefrom diseases of concern to the US
Slow and arbitrary new aircraft certificationHushkits (dispute brought to ICAO work onan ICAO standard)Labeling of TSP (fertilizer) disadvantages USexportsRestrictive limits on low frequency emissionsfrom electrical and electronic equipment
Regulatorybarriers totrade (USstate and EUmember statelevel)
Duplicate approval of wine labelsState-level safety certification and environmental protectionrequirements (especially of agricultural and food products)Ban on fuel additive MTBE (CA)
Bans on some approved GM products(A I amp L)No approvals for planting certain GMproducts (G P)Unresponsive to requests for field trials ofGM crops (Gr)Ban on GM in animal feed adopted (It) - notin forceHCFC bans by Sw amp FnAdditional navigation light requirements(Fn) ndash suspendedTesting of wheat leading to virtual ban onimports (transshipment recently permitted)(Gr)Harsh interpretation of EU SPSrequirements caused or threatened to causeproblems for processed meat productspoultry products game meat seafoodanimal feed wood products (It)Qualitative imports standards and high test-ing and registration fees for bull semen (It)
67
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Servicesbarriers
50 tax on all non-emergency repairs to US-owned shipscarried out outside the USBarriers in mobile communications (investment restrictionslengthy procedures)De-facto reciprocity requirements regarding satellite-basedcommunications servicesExclusive digital terrestrial television standard (ATSC ) differentfrom EU (DVB-T)Impractical for foreign securities firms to establish branches inorder to engage in broker-dealer activitiesForeign mutual funds unable to make public offerings becauseof registration conditionsForeign investment is restricted in coastal and domesticshippingPartnership with US entity required for granting of licenses forlandings sub-marine cablesOnly US citizens or corporations organized under US law canoperate or maintain power facilities on Federal landForeign stake in airlines capped at 49 (25 of voting stock)Foreign-built vessels prohibited from engaging in coastwisetrade either directly between or via a foreign port and cannot beregistered for dredging towing or salvage
State-level measures Prohibitions on EU exporters distributing rebottling or retailingtheir own wineSome states require insurance companies to already beestablished in another stateSome states require insurers to buy reinsurance from state-licensed insurance companies
European content requirements for TVbroadcastsAccess to the single aviation marketrestricted to firms majority-owned andcontrolled by EU nationalsBanking insurance and investmentservices rules require reciprocaltreatment by home country (no US firmsadversely affected)
Member state measures Content requirements for radiobroadcasts (Fr)Requirements that cinemas showEuropean films (It Sp)Nationality requirements affecting tovarying degrees the provision of legalservices (A Dk Fn Fr G It)Strict restrictions on advertising byforeign legal consultants (Dk)Nationality requirements affecting tovarying degrees the provision ofaccounting services (A Dk Fr)
68
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Foreigninvestmentbarriers
National security vetting (Exon-Florio Amendment)US subsidiary required to exploit deep-water ports or to fish inUS Exclusive Economic ZoneFishing-vessel-owning entities must be 75 owned andcontrolled by US citizensForeign individuals or foreign-controlled corporations cannotacquire licenses for using nuclear materialsConditional national treatment governs participation ingovernment research programmes (subsidiaries in US allowed toparticipate but eligibility process more cumbersome)
Mirror-image reciprocity applies toinvestments in the extraction ofhydrocarbons (no US firms adverselyaffected)
NotesIncludes measures in effect + those for which implementation has been suspended as a result of agreementDoes not include non-discriminatory measures systemic barriers (such as the presence of monopolies the pricing ofpharmaceuticals or delays and lack of transparency in standard setting) government procurement intellectual propertyprotection subsidies (including FSC) or issues being prosecuted under EU rules
Barriers in small caps are the subject of WTO proceedings (consultations have been requested)
Sources Commission Report on United States Barriers to Trade and Investment 2001 USTR National Trade Estimate ReportForeign Trade Barriers 2001
69
Appendix 2 WTO Cases by the EU against the US (excludes cases as third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS38Cuban Libertyand DemocraticSolidarity Act
Extraterritorial application of the USembargo of trade with Cuba in so far as itrestricts trade between the EU and Cubaor between the EU and the US Thecreation of a right of action in favour ofUS citizens to sue EU persons andcompanies in US courts in order to obtaincompensation for Cuban properties Thedenial of visas and exclusion from the USof persons involved in confiscating ortrafficking in confiscated property
GATT (V XI XIII)
GATS (II III VIXI XVI XVIIAnnex onMovement ofNaturalPersons)
596 1096 Understandingreached (497)
WTDS39Tariff increaseson productsfrom the EU
The measures were taken in response tothe adoption of EU legislation on the useof hormones in livestock farming andseek unilaterally to settle the issuewithout resorting to the mechanisms ofthe WTO
GATT (I II XXIII)
DSU (3 22 23)
496 996 [No report]
WTDS63Anti-dumpingmeasures onimports of solidurea from theformer GermanDemocraticRepublic
By maintaining the order against the fivestates of the former GDR the US hasignored de jure and de facto their fullintegration into the reunified FederalRepublic of Germany and thus theeconomic integration of their companiesinto the German market economy
Anti-Dumping(92 11)
1296 ndash
70
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS85Measuresaffecting textilesand apparelproducts
Changes to rules of origin of textile andapparel products which entered intoforce on 1 July 1996 adversely affectexports of EU fabrics scarves and otherflat textile products which are no longerrecognized as being of EU origin and losethe free access to the US that theyenjoyed before
Textiles (24 4244)
Rules of origin(2)
GATT (III)
TBT (2)
697 ndash Negotiatedsolution (997)
WTDS88Measureaffectinggovernmentprocurement
Massachusetts law regulating statecontracts with companies doing businesswith or in Burma (Myanmar)
GPA (VIIIb XXIII)
697 998 Law overturnedunder US law
WTDS100Measuresaffecting importsof poultryproducts
Ban on imports of poultry and poultryproducts produced in the EU until theUnited States is able to obtain additionalassurances of product safety No groundsgiven
GATT (I III XXI)
SPS (2 3 4 58 Annex C)
TBT (2 5)
897 ndash
WTDS108Tax treatmentfor Foreign SalesCorporation
The FSC scheme provides for anexemption to the general rulesestablished in the US Internal RevenueCode which results in substantial taxsavings for US companies exportingthrough FSCs
Subsidies (3)
Agriculture (8 910)
1197 798 Panel found infavour of the EUEU not considerFSCReplacement Actadequate Panelfound in favourof the EUAppellate Bodyreport check
71
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS118HarbourMaintenance Tax
Ad valorem tax (0125) on allwaterborne imports entering US ports
GATT (I II IIIVIII X)
298 ndash Reform proposed(HarbourServices Fee)but EU stillviews asproblematic
WTDS136Anti-dumpingAct of 1916
The Act imposes penal sanctions againstthe importation of goods and their sale inthe US when the price is lower than inthe country of production or in otherforeign countries where the goods areexported
GATT (III4 VI1and VI2)
WTO (XVI4)
Anti-Dumping(1234 amp 5)
698 1198 Appellate Bodyfound in favourof the EU
Implementationpending
WTDS138Imposition ofcountervailingduties on certainhot-rolled leadand bismuthcarbon steelproductsoriginating in theUK
Methodology relied on the presumption(based mostly on pre-WTO legislation andpractice) that benefits from priorsubsidies pass through without the needto show that a benefit continues to beconferred
Subsidies (11b10 14 194)
698 199 Appellate Bodyupheld Panelreport favouringEU (500)
WTDS151Measuresaffecting textilesand apparelproducts (II)
Same as WTDS85 Same asWTDS85
1198 ndash Negotiatedsolution (997)
72
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS152Sections 301-310 of the TradeAct of 1974
Imposes specific strict time limits withinwhich unilateral determinations must bemade that other WTO Members havefailed to comply with their WTOobligations and trade sanctions must betaken against such WTO Members
DSU (3 21 2223)
WTO (XVI4)
GATT (I II IIIVIII XI)
1198 199 US through aStatement ofAdministrativeActionundertaken toact consistentwith WTOobligationsPanel ruled thatso long asrespectedcompatible(1199)
WTDS160Section 110(5) ofUS CopyrightAct
Section 110(5) of the US Copyright Actpermits under certain conditions theplaying of radio and television music inpublic places without the payment of aroyalty fee
TRIPS (9(1) 13) 199 499 Panel found infavour of the EU(700) EU andUS havenegotiated anarrangement
Implementationpending
73
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS165Import measureson certainproducts fromthe EU
100 tariffs on certain product inretaliation for the EUs failure to bring itsbanana trade regime into compliance withWTO ruling
GATT (I II VIII)
DSU (3 21 2223)
399 599 Appellate Bodyfound in favourof the EU(1200)
US broughtsanctions intoagreement
Sanctionssuspended asresult of 401agreement
WTDS166Safeguardmeasures onimports of wheatgluten from theEU
Methodology not ensure that all injurydue to imports Imports from Canadawere excluded from the investigation
GATT (I XIX)
Agriculture (42)
Safeguard (214 5 8 12)
399 699 Appellate Body(1200) found infavour of the EU
WTDS176Section 211OmnibusAppropriationsAct
Section 211 provides that the registrationor renewal in the US of a trademarkpreviously abandoned by a trademarkowner whose business and assets havebeen confiscated under Cuban law is nolonger permitted without consent ofprevious owner No US court shallrecognize or enforce such rights
TRIPS (2 15 1641 42 62)
799 600 Appellate Bodyfound in favourof the EU (102)
74
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS186Section 337 ofthe Tariff Act of1930 andamendmentsthereto
Under Section 337 the US caninvestigate whether imported goodsinfringe US intellectual property rightsand can exclude them from entry into theUS Despite amendment the EUconsiders that the procedures andremedies are substantially different fromprocedures concerning domestic goodsand discriminate against Europeanindustries and goods
GATT (III)
TRIPS (2 3 927 41 42 4950 51)
100 ndash
WTDS200Section 306 ofthe Trade Act of1974 andamendmentsthereto(lsquocarouselrsquo)
Section 306 provides for a mandatorymodification (every 6 months) of theproducts subject to sanctions imposedagainst a WTO member which has notcomplied with a WTO panel ruling
DSU (3 21 2223)
GATT (I II XIXXIII)
600 ndash
WTDS212Countervailingmeasuresconcerningcertain productsfrom the EU (14cases)
US application of countervailing dutiesbased on an irrefutable presumption thatnon-recurring subsidies granted to aproducer prior to a change of ownershiplsquopass throughrsquo to the current producerfollowing the change of ownership
SCM (10 19 21) 1100 801 Panelestablished
75
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS213Countervailingduties on certaincorrosion-resistant carbonsteel flatproducts fromGermany
Results of a full sunset review whichmaintains CV duties The original dutywas imposed prior to entry into force ofWTO agreements EU considers that itwould not have been possible to imposethis duty (less than 1) if theinvestigation had been governed by theSCM agreement
SCM (10 11921)
1100 801 Panelestablished
WTDS214Definitivesafeguardmeasures onimports of steelwire rod andcircular weldedcarbon qualityline pipe
EU considers that Sections 201 and 202of the Trade Act of 1974 and Section 311of the NAFTA Implementation Act containprovisions which prevent the US fromrespecting Safeguards Agreement
Safeguards (2 34 5 8 12)
GATT (I XIX)
1100 801 Panelestablished
WTDS217Continueddumping andsubsidy OffsetAct of 2000(ByrdAmendment)
The Act mandates the distribution of theproceeds of duties levied pursuant to aCVD an AD order or a finding under theAntidumping Act of 1921 to the affecteddomestic producers
AD (5 8 18)
SCM (11 1832)
GATT (X)
WTO (XVI)
1200 701 Panelestablished andjoined with panelestablished byCanada andMexico(WTDS234)
76
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS225Anti-dumpingduties onseamless pipefrom Italy
Results of a sunset review which foundthat anti-dumping duties on imports ofseamless line and pressure pipe fromItaly will continue at a rate of 127 EUconsiders this finding is in breach of ADAgreement (duties not lower than 2)
AD (58 111113 17)
GATT (XXII1)
201 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 152027
7
Appendix 3 WTO Cases by the US against the EU and Its Member States(excludes cases as a third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS13Duties onimported grains
Reference price system used to determinethe duties applicable to imports of grainsappear to result in the application ofhigher rates of duties to shipments of USgrains than is permitted under the EUWTO tariff schedule and to discriminateagainst US exports of grains
GATT (I II VIIX)
Agreement onImplementingGATT Article VII(109 11 22Annex I)
795 397 Negotiatedagreement(1195)
Request forpanel withdrawnfollowingimplementation(497)
WTDS26Measuresaffecting meatand meatproducts(Hormones)
EU measures prohibiting the importationof meat and meat products that havebeen treated with growth hormones
GATT (III or XI)
SPS (2 3 5)
TBT (2)
Agriculture (4)
196 496 Appellate Bodyfound in favourof US (298)
Sanctions inplace
78
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS27Import regimefor bananas
EU regime for the importation sale anddistribution of bananas established byCouncil Reg No 40493 and subsequentlegislation regulations and administrativemeasures including those reflecting theprovisions of the Framework Agreementon Bananas which implementsupplement and amend that regime
GATT (I II III XXI XIII)
Licensing (1 3)
Agriculture
TRIMs (2)
GATS (II XVIXVII)
296 496 Appellate Bodyfound in favourof the US andEcuador (997)
Compliancepanel foundrevised EUregime stillincompatible(499)
US Ecuador andEU negotiatedsettlement(401)
WTDS37Portugal ndashPatent protectionunder theIndustrialProperty Act
The term granted existing patents underthe Portuguese Industrial Property Actappears to be inconsistent with Portugalsobligations under the TRIPS Agreement
(GATS (33 6570)
496 Negotiatedsolution (596)
WTDS62Customsclassification ofsome computerequipment
Reclassification of certain LAN adaptercards automatic data processingmachines and units thereof astelecommunications apparatus raised thetariff applied them
GATT (II) 1196 297 Appellate Bodyoverturned Panelreport favouringUS (698)
79
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS67UK ndash Customsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS68Ireland ndashCustomsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS80Belgium ndash-measuresaffectingcommercialtelephonedirectoryservices
Conditions for obtaining a license topublish commercial directories inBelgium
GATS (II VI VIIIXVII)
597 ndash
WTDS82Ireland ndashmeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPS Agreement
TRIPS (9-14 6365)
597 198
80
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS83Denmark ndashmeasuresaffecting theenforcement ofintellectualproperty rights
Denmark does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
597 ndash Negotiatedsolution (301)
WTDS86Sweden ndashMeasuresaffecting theenforcement ofintellectualproperty rights
Sweden does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
697 ndash Negotiatedsolution (697)
WTDS104Export subsidiesndash processedcheese
Export subsidies including under aninward processing arrangement in favourof processed cheese distort markets fordairy products and adversely affect USsales of dairy products
Agriculture (8 910 11)
Subsidies (3)
1097 ndash
WTDS115Ireland ndashMeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPs Agreement
TRIPS (9-14 6365 70)
198 198
81
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS124Enforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
TV stations in Greece regularly broadcastcopyrighted motion pictures and TVprograms without the authorization ofcopyright owners Effective remediesagainst copyright infringement do notappear to be provided or enforced
TRIPS (41 61) 598 ndash Negotiatedsolution (301)
WTDS125Greece ndashEnforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
Same as WTDS124 Same asWTDS124
Same asWTDS124
Sameas
WTDS124
Same asWTDS124
WTDS127Belgium ndashCertain incometax measuresconstitutingsubsidies
Belgian corporate taxpayers receive aspecial tax exemption for recruiting adepartmental head for exports
Subsidies (3) 598 ndash
82
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS128Netherlands ndashCertain incometax measuresconstitutingsubsidies
Dutch income tax law permits exportersto establish a special export reserve forincome derived from export sales
Subsidies (3) 598 ndash
WTDS129Greece ndash Certainincome taxmeasuresconstitutingsubsidies
Greek exporters are entitled to a specialannual tax deduction calculated as apercentage of export income
Subsidies (3) 598 ndash
WTDS130Ireland ndashCertain incometax measuresconstitutingsubsidies
Under Irish income tax law specialtrading houses qualify for a special taxrate in respect of trading income from theexport sale of Irish-manufactured goods
Subsidies (3) 598 ndash
WTDS131France ndash Certainincome taxmeasuresconstitutingsubsidies
French companies may deducttemporarily certain start-up expenses ofits foreign operations through a taxdeductible reserve account
Subsidies (3) 598 ndash
83
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS158Import regimefor bananas II
Failure to implement the DisputeSettlement Bodys recommendations andrulings in WTDS27 within a reasonableperiod
199 See WTDS27
WTDS172Measuresrelating to thedevelopment of aflightmanagementsystem
French government has agreed to grantand the Commission has approved aloan on preferential and non-commercialterms to develop a FMS for Airbusaircraft
Subsidies (5 6)
GATT (XXIII1b)
599 ndash
WTDS173France -Measuresrelating to thedevelopment of aflightmanagementsystem
See WTDS172 See WTDS172 SeeWTDS172
SeeWTDS172
See WTDS172
WTDS174Protection oftrademarks andgeographicalindications foragriculturalproducts andfoodstuffs
EU rule does not provide nationaltreatment with respect to geographicalIndications nor sufficient protection topre-existing trademarks that are similaror identical to a geographical indication
TRIPS (3 16 2463 65)
699 ndash
84
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS210Belgium -Administrationof measuresestablishingcustoms dutiesfor rice
Belgian customs values and duties forrice would lead to a denial of duty rebatesfor US rice and to duties in excess of thebound rate
GATT (I II VIIVIII X XI)
CVA (1)
TBT (2 3 5 67 9)
Agriculture (4)
1000 101 Negotiatedsolution (1101)
WTDS223Tariff-rate quotaon corn glutenfeed from the US
TRQ triggered by DSB ruling against theUS in WTDS166
Safeguards (8182 83)
GATT (I II XIX)
101 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
85
87
References and Recommended Reading
Primary Sources Web sites
European Commission DG TRADE Bilateral Trade Relations USAhttpeuropaeuintcommtradebilateralusausahtm
European Union Europa Web Site httpeuropaeuint
European Union Mission to the United Stateshttpwwweurunionorg
Transatlantic Business Dialogue httpwwwtabdcom
Transatlantic Consumers Dialogue httpwwwtacdorg
Transatlantic Environmental Dialoguehttpwwwtiesweborgtaedindexhtm
Transatlantic Legislators Dialoguehttpwwweuroparleuintintcooptlddefault_enhtm
Transatlantic Information Exchange Service httpwwwtiesweborg
United States Mission to the European Union httpwwwuseube
United States Trade Representative Western EuropeEU pagehttpwwwustrgovregionseu-medwesteurindexshtm
World Trade Organization httpwwwwtoorg
Primary Sources Official Government Documents
CEPAL 2001 Informe de la Inversioacuten Extranjera en Ameacuterica Latina y elCaribe Antildeo 2000 Naciones Unidas Chile
Commission of the European Communities 1998a The NewTransatlantic Marketplace Draft Communication from the Commissionto the Council the European Parliament and the Economic and SocialCommittee available athttpeuropaeuintcommdg01sectionahtm
Commission of the European Communities 1998b Commission staffworking paper concerning the establishment of an inter-regionalassociation between the European Union and Mercosurhttpeuropaeuintcommexternal_relation
88
Commission of the European Communities 2000 The TransatlanticEconomic Partnership Overview and Assessment Coordination DGTRADEE3 October
Commission of the European Communities 2001a Reinforcing theTransatlantic Relationship Focusing on Strategy and Delivering ResultsCOM(2001)154 of 20 March 2001 Available on-line athttpwwweurunionorgpartnerTransatlAgendapdf
Commission of the European Communities 2001b Report on UnitedStates Barriers to Trade and Investment July available on-line athttpeuropaeuintcommtradepdfusrbt2001pdf
Commission of the European Communities 2001c Green Paper on theReview of Council Regulation (EEC) No 406489 COM(2001)7456final of 11122001
UNCTAD 2001 Informe sobre las inversiones en el mundo UnitedNations New York and Geneva
US Department of Agriculture (1998) Agriculture in the WTOSituation and Outlook Series WRS-98-4 Washington EconomicResearch Service
United States Trade Representative 2001 2001 National TradeEstimate Report on Foreign Trade Barriers available on-line athttpwwwustrgovhtml2001_contentshtm
World Trade Organization 2000 Trade Policy Review The EuropeanUnion Report by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
World Trade Organization 2001 Trade Policy Review United StatesReport by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
Secondary Sources
Abbott Kenneth W 20001 lsquoDisputes over Technical Barriers toTrade Are the Rules and Procedures Adequatersquo paper prepared forthe Conference on Dispute Prevention and Dispute Settlement in theTransatlantic Partnership European University Institute Fiesole 5-6July
Atlantic Council of the United States 2001 Changing Terms of TradeManaging the New Transatlantic Economy Policy Paper April(Washington DC The Atlantic Council of the United States)
Barfield Claude E 2001 Free Trade Sovereignty Democracy TheFuture of the World Trade Organization (Washington AmericanEnterprise Institute Press)
Bermann George 1996 lsquoRegulatory Cooperation between theEuropean Commission and US Administrative Agenciesrsquo
89
Administrative Law Journal of the American University Vol 9 pp 933-983
Bermann George Matthias Herdegen and Peter Lindstreth eds2001 Transatlantic Regulatory Co-Operation Legal Problems andPolitical Prospects (New York Oxford University Press)
Bignami Francesca and Steve Charnovitz 2001 lsquoTransatlantic CivilSociety Dialoguesrsquo Chapter 10 in Pollack and Shaffer TransatlanticGovernance in the Global Economy
BP Chair in Transatlantic Relations 2001 Resolving and PresentingUS-EU Trade Disputes Six Prize-Winning Essays (Florence EuropeanUniversity Institute Robert Schuman Centre for Advanced Studies 9May 2001)
Busch Marc L and Eric Reinhardt 2001 lsquoTesting International TradeLaw Empirical Studies of GATTWTO Dispute Settlementrsquo in Daniel LM Kennedy and James D Southwick eds The Political Economy ofInternational Trade Law Essays in Honor of Robert E Hudec (NewYork Cambridge University Press)
Camarero M and CR Tamarit 2002 lsquoLa Unioacuten Europea y lasAmeacutericas consecuencias del establecimiento de un acuerdo deasociacioacuten interregional entre la UE y Mercosurrsquo Papeles de EconomiacuteaEspantildeola n 91 (forthcoming)
Charnovitz Steve 2001 lsquoRethinking WTO Trade Sanctionsrsquo AmericanJournal of International Law Vol 95 (October)
Claes Benedicte A 2000 lsquoComment Aircraft Noise Regulation in theEuropean Union The Hushkit Problemrsquo Southern Methodist UniversitySchool of Law Journal of Air Law and Commerce Vol 65 329-382
Cowles Maria Green 2001a lsquoThe New Transatlantic DialogueTransforming the New Transatlantic Dialoguersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 213-233
Cowles Maria Green 2001b lsquoTransatlantic Cooperation and Discordin the New Economy A Case Study of the Global Business Dialogue one-Commercersquo paper delivered at the Biennial Conference of theEuropean Community Studies Association Madison Wisconsin 31May
Damro Chad 2001 lsquoBuilding an International Identity The EU andExtraterritorial Competition Policyrsquo Journal of European Public PolicyVol 8 No 2 (April) 208-226
Devuyst Youri 2001 lsquoTransatlantic Competition Policy Cooperationrsquoin Mark A Pollack and Gregory Shaffer eds Transatlantic Governancein the Global Economy (Lanham MD Rowman amp Littlefield) pp 127-151
Evans David S 2002 lsquoThe New Trustbusters Brussels andWashington Part Waysrsquo Foreign Affairs JanuaryFebruary
90
Evenett Simon J Alexander Lehmann and Benn Steil 2000 AntitrustGoes Global What Future for Transatlantic Cooperation (WashingtonDC Brookings Institution Press)
Falke Andreas 2001 lsquoThe EU-US Conflict over Sanctions PolicyConfronting the Hegemonrsquo European Foreign Affairs Review Vol 5No 2 139-163
Featherstone Kevin and Roy Ginsberg 1996 The United States andthe European Union in the 1990s Partners in Transition (LondonPalgrave)
Flores R 2001 lsquoRegional Economic Integrationrsquo in Investing in LatinAmerican Growth Unlocking Opportunities in Brazil Mexico Argentinaand Chile EAU Australian Department of Foreign Affairs and TradeChap 12 pp 259-282
Frankel JA E Stein and SJ Wei 1998 lsquoContinental Trading BlocsAre they Natural or Supernaturalrsquo in JA Frankel ed TheRegionalization of the World Economy (Chicago The University ofChicago Press)
Frost Ellen 1997 Transatlantic Trade A Strategic Agenda(Washington DC Institute for International Economics)
Gardner Anthony 1997 A New Era in US-EU Relations The ClintonAdministration and the New Transatlantic Agenda (London Avebury)
Giordano P A Valladio and M-F Durand eds 2001 Vers un accordentre lrsquoEurope et le Mercosur (Presses de Science Po Paris)
Helfer Laurence R 2000 lsquoWorld Music on a US Stage ABerneTRIPS and Economic Analysis of the Fairness in MusicLicensing Actrsquo Boston University Law Review Vol 80 93-204
Helweg Jason 2000 lsquoThe Retreat of the State The MassachusettsBurma Law and Local Empowerment in the Context ofGlobalization(s)rsquo Wisconsin International Law Journal Vol 18 477-510
Hindley Michael 1999 lsquoNew Institutions for Transatlantic TradersquoInternational Affairs Vol 75 45-60
Hudec Robert 1998 lsquoThe New WTO Dispute Settlement Procedure AnOverview of the First Three Yearsrsquo Minnesota Journal of Global TradeVol 8 22-24
Kahler Miles 1995 Regional Futures and Transatlantic Relations (NewYork Council on Foreign Relations Press)
Keohane Robert O Andrew Moravcsik and Anne-Marie Slaughter2001 lsquoLegalized Dispute Resolution Interstate and TransnationalrsquoInternational Organization Vol 54 No 4 457-488
Knauss Jody and David Trubek 2001 lsquoThe Transatlantic LaborDialogue Minimal Action in a Weak Structurersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 235-254
91
Kolasky William J and Leon B Greenfield 2001 lsquoA View to a KillThe Lost GEHoneywell Deal Reveals a Trans-Atlantic Clash ofEssentialsrsquo Legal Times 30 July 2001 p 28
Kuner Christopher 2001 lsquoBeyond Safe Harbour European DataProtection Law and Electronic Commercersquo International Lawyer Vol31
LaFrance Mary 2001 lsquoCongress Trips Over International Law WTOFinds Unfairness in Music Licensing Actrsquo Journal of Art andEntertainment Law Vol 11 397-424
Lorvellec Louis 1997 lsquoBack to the Fields after the Storm Agriculturein the European Union after the Uruguay Round Agreementsrsquo DrakeJournal of Agricultural Law Vol 2 (Winter) p 411
Mazumdar Anandashankar 2002 lsquoEuropean Commission Gives FinalApproval to Model Clauses to Protect Personal Datarsquo InternationalTrade Reporter Vol 19 187 (31 January)
Mehta K 2002 lsquoInternational Competition Policy Cooperationrsquorevised version of a paper presented at the BP Chair Conference onDispute Prevention and Dispute Settlement in the TransatlanticPartnership European University Institute Florence July 2001
Messerlin Patrick A 2001a Measuring the Cost of Protection in Europe(Washington DC Institute for International Economics)
Messerlin Patrick A 2001b lsquoNiveau et coucircts du protectionnismeeuropeacuteenrsquo in Giordano P A Valladao y M-F Durand (eds) Vers unaccord entre lrsquoEurope et le Mercosur Presses de Science Po Paris
Mishkin FS and MA Savastano 2001 lsquoMonetary Policy Strategiesfor Latin Americarsquo Journal of Development Economics 66 415-444
Nagarajan N 1998 lsquoMercosur and Trade Diversion What Do theImport Figures Tell Usrsquo Economic Papers No 129 EuropeanCommission
Petersmann Ernst-Ulrich ed 1997 The GATTWTO DisputeSettlement System International Law International Organizations andDispute Settlement (Kluwer Law International)
Peterson John 1996 Europe and America Prospects for Partnership(New York St Martinrsquos Press 1996)
Peterson John 2001 lsquoGet Away from Me Closer Yoursquore Near Me TooFar Europe and America after the Uruguay Roundrsquo in Mark A Pollackand Gregory Shaffer eds Transatlantic Governance in the GlobalEconomy (Lanham MD Rowman amp Littlefield) pp 45-72
Peterson John and Maria Green Cowles 1998 lsquoUS EconomicDiplomacy What Makes the EU Differentrsquo Governance Vol 11 No 3pp 251-71
Philippart Eric and Pascaline Winand 2001 lsquoDeeds Not WordsEvaluating and Explaining the US-EU Policy Outputrsquo in Philippart and
92
Winand eds Ever Closer Partnership Policymaking in US-EU Relations(Brussels Peter Lang) pp 431-463
Pollack Mark A ed 2001 The New Transatlantic Agenda at Five ACritical Assessment (San Domenico di Fiesole BP Chair inTransatlantic Relations Robert Schuman Centre for AdvancedStudies European University Institute)
Pollack Mark A and Gregory C Shaffer 2001a lsquoTransatlanticGovernance in Historical and Theoretical Perspectiversquo in Mark APollack and Gregory Shaffer eds Transatlantic Governance in theGlobal Economy (Lanham MD Rowman amp Littlefield) pp 3-42
Pollack Mark A and Gregory C Shaffer 2001b lsquoThe Challenge ofReconciling Regulatory Differences Food Safety and GMOs in theTransatlantic Relationshiprsquo in Mark A Pollack and Gregory Shaffereds Transatlantic Governance in the Global Economy (Lanham MDRowman amp Littlefield) pp 153-178
Pollack Mark A and Gregory C Shaffer 2001c lsquoWho Governsrsquo inMark A Pollack and Gregory Shaffer eds Transatlantic Governance inthe Global Economy (Lanham MD Rowman amp Littlefield) pp 287-305
Reidenberg Joel 2001 lsquoE-Commerce and Trans-Atlantic PrivacyrsquoHouston Law Review Vol 8 717-49
Schaefer Matthew 2002 lsquoGovernment Procurement DisputesLessons from the Dispute over the Massachusetts 1996 Act RegulatingState Contracts with Companies Doing Business with Burma(Myanmar)rsquo paper presented at the Conference on Dispute Preventionand Dispute Settlement in the Transatlantic Partnership EuropeanUniversity Institute Florence 5-6 July 2001 final version submitted26 January 2002
Shaffer Gregory 1999 lsquoThe Power of EU Collective Action The Impactof EU Data Privacy Regulation on US Business Practicersquo EuropeanLaw Journal Vol 5
Shaffer Gregory 2000 lsquoGlobalization and Social Protection TheImpact of EU and International Rules in Ratcheting Up of US PrivacyStandardsrsquo Yale Journal of International Law Vol 25 pp 1-88
Shaffer Gregory C 2002 lsquoManaging US-EU Trade Relations throughMutual Recognition and Safe Harbour Agreements lsquoNewrsquo and lsquoGlobalrsquoApproaches to Transatlantic Economic Governancersquo in Ernst-UlrichPetersmann ed Dispute Avoidance and Dispute Settlement in theTransatlantic Partnership (unpublished manuscript) (working paper onfile with the author)
Sindelar Leslie 2001 lsquoNot So Fair After AllmdashInternational Aspects ofthe Fairness in Music Licensing Actrsquo The Transnational Lawyer Vol14 435-71
Steffenson Becky J 2001 The Institutionalization of EU-US RelationsDecision Making Institution Building and the New Transatlantic
93
Agenda unpublished PhD dissertation University of GlasgowDepartment of Politics
Tansini R and T Vera 2001 lsquoLos procesos de integracioacuten enAmeacuterica Latina El caso de Mercosurrsquo Informacioacuten Comercial EspantildeolaFebrero-Marzo nuacutem 790 107-117
Vogel David 1997 Barriers or Benefits Regulation in TransatlanticTrade (Washington DC Brookings Institution)
Vogel David 2001 Ships Passing in the Night The Changing Politics ofRisk Regulation in the United States and the European Union RSCASWorking Paper No 200116
Woolcock Stephen 2000 lsquoEuropean Trade Policy Global Pressuresand Domestic Constraintsrsquo in Helen Wallace and William Wallaceeds Policy-Making in the European Union (New York Oxford UniversityPress) pp 373-99
Yerkey Gary G 2000a lsquoEU Accuses US of Failing to ImplementMRAs on Electrical Safety Pharmaceuticalsrsquo International TradeReporter Vol 17 1662 (2 November)
Yerkey Gary G 2000b lsquoUS European CEOs Call on Governments toResolve Dispute Over MRA by Dec 18rsquo International Trade ReporterVol 17 1662 (30 November)
Young Alasdair 2001 Trading Up or Trading Blows US Politics andTransatlantic Trade in Genetically Modified Food RSCAS WorkingPaper No 200130
Young Alasdair R 2002 lsquoRisk Positive Integration and SystemFriction The Single European Market and World Tradersquo paperpresented at the Council of European Studies Conference 14-16March 2002
94
Notes
1 The EU and the 50 US States website of the European Union Mission tothe United Stateshttpwwweurunionorgpartnerusstatesusstateshtm
2 Ibid
3 As Miles Kahler wrote in 1995 lsquoIncreasingly the points of conflict amongthe industrialized countries are not the familiar ones of barriers toexchange at the border but an entire array of ldquodomesticrdquo policies thatproduce conflict by appearing to restrict market access or alter theterms of competition The agenda of behind-the-border issues that hasbecome more prominent in the 1990s will only grow as economicintegration continues and groups mobilize to seek new benchmarks foran international ldquolevel playing fieldrdquo rsquo (Kahler 1995 5) For gooddiscussions of regulatory barriers in USEU trade relations see alsoVogel 1997 Young 2002
4 This section draws on the analysis presented in Pollack and Shaffer2001a
5 For good discussions see Gardner 1997 Peterson and Cowles 1998
6 Pollack and Shaffer 2001c 291
7 lsquoTransatlantic Declarationrsquo text available on-line athttpwwweurunionorgpartnertransatldechtm
8 See eg Featherstone and Ginsburg 1996 Peterson 1996
9 lsquoThe New Transatlantic Agendarsquo text available on-line athttpwwweurunionorgpartneragendahtm
1 0 lsquoJoint US-EU Action Planrsquo text available on-line athttpwwweurunionorgpartneractplanhtm
1 1 Gardner 1997
1 2 Commission of the European Communities 1998a
1 3 lsquoTransatlantic Economic Partnership Action Planrsquo text available on-lineat httpeuropaeuintcommtradebilateralusa1109tephtm For auseful review of the TEP see Commission of the EuropeanCommunities 2000
95
1 5 For good discussions of the TABD see Cowles 2001a 2001b and thewebsite of the TABD at httpwwwtabdorg
1 6 lsquoCincinnati Recommendations Transatlantic Business DialoguersquoNovember 16-18 2000 p 4 Available on-line athttpwwwtabdorgrecommendationsCincinnati00pdf
1 7 Ibid page 5
1 8 Cowles 2001b
1 9 Steffenson 2001
2 0 Pollack ed 2001 12
2 1 For an excellent discussion of the TACD and its activities see Bignamiand Charnovitz 2001 and the TACD website at httpwwwtacdorg
2 2 For example sixty-five consumer groups issued a statement in 2000stating that the EU and the US had largely ignored consumer tradepolicy recommendations TACD press release lsquoUS amp EU ConsumerGroups Call for Swift Action to Balance Trade Dialoguersquo 30 March 2000
2 3 The USIA funding for the TAED ($100000) was subject to approval fromthe Senate Finance Committee In January 2000 the objection of SenatorJesse Helms to TAED funding blocked the approval of funds andstopped the State Department from issuing the grant The TAED arguedthat this demonstrated the US governmentrsquos lack of dedication to theproject See lsquoTransatlantic Environment Dialogue suspends its activitiesdue to the failure of US government to stick to its commitmentsrsquoaccessed on 12 March 2002 on the TAED websitehttpwwwtiesweborgtaedindexhtml For a good general discussionof the TAED see Bignami and Charnovitz 2001
2 4 To summarise the TAED recommended the removal of subsidies forenvironmentally unfriendly energy sources (such as coal) demanded thatsustainability assessments be applied to a number of WTO agreementsand expressed it opposition to the multilateral TRIPs Technical Barriersto Trade and SPS Agreements It aired concerns about biotechnologyeco-labelling and the Precautionary Principle the MRAs and Chemicaland Electrical Waste Management (WEEEs) It stressed transparency intransatlantic and multilateral decision making urged both governmentsto support the Kyoto Treaty and to stop challenging environmentallegislation at the WTO The message to the EUUS Summit Lisbon May31 2000 was that lsquoUntil such time as parity exists betweenenvironmental governance and multilateral trade rules we demand thatboth the United States and the European Union immediately agree tomutual moratorium on WTO challenges and threatened challengesrsquo Fora good discussion of the TAED and its activities see Bignami andCharnovitz 2001
2 5 For an excellent discussion of the TALD see Knauss and Trubek 2001
96
2 6 Commission of the European Communities 2001a
2 7 Philippart and Winand 2001
2 8 Kahler 1995 See also Vogel 1997 Young 2002
2 9 For excellent overviews of the WTO dispute resolution procedure and itspredecessor within the GATT see Petersmann 1997 Hudec 1998 Buschand Reinhardt 2001 and BP Chair in Transatlantic Relations 2001 Fora provocative challenge to the DSU see Barfield 2001
3 0 This section draws largely on Abbottrsquos (2001) account of transatlanticdisputes over TBTs in general and the hushkits case in particular Forother accounts of the hushkits dispute see also Claes 2000 andPeterson 2001 58-59
3 1 Commission of the European Communities lsquoCommission Proposes NewLegislation to Fight Aircraft Noisersquo Press Release IP 011683
3 2 For a detailed analyses of transatlantic disputes over food safety andgenetically modified organisms see Pollack and Shaffer 2001b Vogel2001 and Young 2001
3 3 The text of the report can be found athttpeuropaeuintcommexternal_relationsusbiotechbiotechhtm
3 4 Schaefer 2002 1-2 See also Hellweg 2000
3 5 For useful background on the case filed before the WTO as DS160 seeHelfer 2000 LaFrance 2001 and Sindelar 2001
3 6 Commission of the European Communities lsquoEU and US Agree onTemporary Compensation in Copyright Disputersquo Press Release IP011860
3 7 For good discussions of potential reforms of the bilateral relationship aswell as WTO dispute settlement including a wide range of proposals seeeg BP Chair in Transatlantic Relations 2001 Charnovitz 2001 Barfield2001 and Petersmann 2001
3 8 Some countries such as the United Kingdom have establishedguidelines for policymakers to take trade implications of proposedregulations into account but neither the US nor the EU currentlyemploys any statutory requirement to undertake such an impactassessment
3 9 Bermann 1996 961 For an excellent set of essays on various aspects oftransatlantic regulatory cooperation see also Bermann Herdegen andLindstreth (eds) 2001
4 0 Ibid p 966
97
4 1 For excellent analyses of USEU competition-policy cooperation fromwhich this analysis is largely drawn see eg Evenett Lehmann and Steil2000 Devuyst 2001 Damro 2001 and Mehta 2002
4 2 Devuyst 2001 142-145
4 3 See eg Kolasky and Greenfield 2001 Evans 2002
4 4 Commission 2001c 38-40
4 5 This section draws extensively from research reported in Shaffer 2002
4 6 Subsidiaries of US firms in the EC account for about one-third of ECimports from the United States while subsidiaries of EC firms in theUnited States account for about 38 of US imports from the EC SeePollack and Shaffer 2001a 14
4 7 Agreement on Mutual Recognition Between the European Communityand the United States of America Available on-line athttpeuropaeuintcommtradepdf0713mra-usenpdf
4 8 The five excluded sectors were information technology pressureequipment road safety equipment lawn mowers and personal protectiveequipment such as helmets
4 9 However as an exception tests of pharmaceutical good manufacturingpractices are to be performed by regulatory bodies and not privatelaboratories in accordance with that annex
5 0 Yerkey 2000a 2000b
5 1 Quoted in Shaffer 2002 23
5 2 Agreement Between the European Community and the United States ofAmerica on Mutual Recognition of Certificates of Conformity for MarineEquipment Available on-line athttpeuropaeuintcommtradepdfmareqpdf
5 3 See Shaffer 2002
5 4 See Shaffer 2002
5 5 This section draws extensively from research reported in Shaffer 2002
5 6 The above figures are from the prepared testimony of Assistant Secretaryof Commerce Franklin Vargo before the House Committee onInternational Relations See lsquoIssues in US-European Union TradeEuropean Privacy Legislation and BiotechnologyFood Safety PolicyrsquoFederal News Service (May 7 1998)
5 7 Mazumdar 2002 See also Shaffer 2000 Reidenberg 2001
5 8 Commission Decision of 26 July 2000 pursuant to Directive 9546ECof the European Parliament and of the Council on the adequacy of the
98
protection provided by the safe harbour privacy principals and relatedfrequently asked questions issued by the US Department of CommerceAvailable on-line athttpeuropaeuintcommtradepdfsafeharbourpdf For generalinformation on safe harbour documents see Safe Harbor Documentshttpwwwexportsgovsafeharborsh_documentshtm
5 9 Guide to the Implementation of Directives Based on the New Approachand the Global Approach Available on-line athttpeuropaeuintcommenterprisenewapproachlegislationguidedocument1999_1282_enpdf
6 0 See Shaffer 2002
6 1 For a good discussion of the obstacles posed by US federalism inregulatory cooperation see Commission of the European Communities2000
6 2 lsquoEU-US Guidelines on Regulatory Cooperation and Transparencyrsquoavailable on-line athttpeuropaeuintcommenterpriseenterprise_policygov_relationsregulcooptransathtm See also lsquoTransatlantic Bid to Cut Red TapersquoEuropean Report 10 April 2002 and Micheal Mann lsquoDrive to Head OffTrade Riftsrsquo Financial Times 13 April 2002
6 3 See the DG Trade website lsquoBilateral Trade Relations Canadarsquo accessedat httpeuropaeuintcommtradebilateralcanadacanadahtml
6 4 For useful and up-to-date reviews of the EUCanada relationship see inaddition to the DG Trade web page cited above the websites of theEuropean Union Delegation to Canadahttpwwweudelcanorgenglishindexcfm and the Canadian Missionto the European Union httpwwwdfait-maecigccaeu-missionconten_ehtml
6 5 For more information about Mercosur visit the following internetaddress httpwwwmercosurorg
6 6 Tansini and Vera 2001
6 7 lsquoEUChile Deal Reached on Free Trade Agreementrsquo European Report 27April 2002
6 8 Ibid
6 9 Camarero and Tamarit (2002) Source OECD International SectoralDatabase
7 0 For more information about the EU and Latin America visit the followinginternet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 1 The Lomeacute Convention replaced the Yaounde Convention of 1963 afterthe accession of the UK to the Community It was renewed in 1979
99
(Lomeacute II) 1985 (Lomeacute III) 1989 (Lomeacute IV) and 1995 (Lomeacute IV) andconsists of a system of preferences for imports in which industrial goodsalmost free of tariffs and agricultural receive different treatments InJune 2000 the Lomeacute Convention was replaced by the CotonouAgreement which stabilized what can be seen as a transitory regimeaiming to incorporate the ACP countries in the WTO general rules
7 2 What characterizes first-generation agreements is their conventionalbilateral and technical structure and their reference to possiblereciprocal cooperation In practical terms however these treaties onlyextended the Most Favoured Nation (MFN) status to its signatories
7 3 The second-generation agreements referred mainly to specificcommercial and cooperation questions
7 4 For the conclusions of the Madrid summit see the Latin America webpage of the Commissionrsquos Directorate-General for Tradehttpeuropaeuintcommtradebilaterallaclachtm
7 5 In October 1998 hurricane Mitch one of the worst natural disastersever to have hit the region caused a material damage equivalent to 10of the regionrsquos GDP The EU not only played a significant role in theinternational communityrsquos emergency aid but also launched in 1998a medium-term rehabilitation plan called the Regional Programme forthe Reconstruction of Central America (PRRAC) Funding was set ateuro 250 million committed for the 1999-2002 period but to beimplemented within six years The target countries were HondurasNicaragua El Salvador and Guatemala
7 6 For details on the provisions of the EU-Chile Association Agreement andthe status of the ratification procedure seehttpeuropaeuintcommexternal_relationschileintroindexhtm
7 7 The information about the results of the different negotiation rounds canbe updated at the following internet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 8 For an assessment of the trade-diverting effects of Mercosur seeNagarajan (1998)
7 9 Commission of the European Communities 1998b
8 0 Messerlin 2001b
8 1 Pascal Lamy lsquoFacing the Challenge of Globalization Regional Integrationor Multilateral Rulesrsquo Buenos Aires 1 March 2002 Reproduced on theDG Trade website athttpeuropaeuintcommtradespeeches_articlesspla99_enhtml
Lead Author
Mark A Pollack
The Political Economy ofthe Transatlantic Partnership
Robert Schuman Centrefor Advanced Studies
EUROPEAN UNIVERSITY INSTITUTE
Report prepared by theTransatlantic Programme
for and with the contribution of
Her Majestyrsquos TreasuryUnited Kingdom
Ministry of FinanceThe Netherlands
ii
5 The European Union and the Americas 4751 The EU and Latin America Trade and Investment52 EU Trade Agreements with
Latin American Countries53 Challenges for EULatin American
Economic Relations
Conclusion The New Transatlantic Economic Agenda 61
Appendix 1 EU-US Barriers to Trade in GoodsServices and Foreign Investment 65
Appendix 2 WTO Cases by the EU against the US(excludes cases as a third party) 70
Appendix 3 WTO Cases by the US against the EUand Its Member States(excludes cases as a third party) 78
References and Recommended Reading 87
Notes 94
iii
Executive Summary
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly in thecourse of the past decade During the 1990s the volume oftransatlantic trade more than doubled making the EU and the USeach otherrsquos most important trading partners Foreign directinvestment between the US and the EU has grown even more rapidlydoubling in value during the last three years of the 1990s aloneindeed it is estimated that some 35 million American jobs rely onforeign investment from the European Union with a similar number ofEuropeans employed by US firms
These developments reviewed briefly in Section 1 of this report havecreated a de facto transatlantic marketplace yet they have also led tonew strains on the transatlantic partnership and to a new andchallenging economic agenda for EUUS cooperation Prior to the1990s much of the transatlantic economic relationship was dominatedby traditional trade questions such as tariffs quotas and other directbarriers to trade typically imposed at US and EU borders With thedecline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade - most notably lsquobehind-the-borderrsquo domestic regulations adopted in response to legitimate publicconcerns about the environment consumer protection food safety anddata privacy - have emerged alongside traditional trade barriers as theprimary challenges to a mutually beneficial EUUS trade andinvestment relationship
In an effort to meet these challenges the United States and theEuropean Union have put into place an increasingly well developedinstitutional machinery for bilateral economic as well as foreign andsecurity policy cooperation These institutions examined in detail inSection 2 have fostered a regular dialogue between EU and USauthorities across a full range of issue-areas and have provided theframework for increasing efforts at regulatory cooperation and tradedispute resolution Nevertheless recent studies have demonstrated theuneven performance of these institutions across issue-areas as well asthe uneven development of the various transatlantic lsquocivil-societydialoguesrsquo and have suggested reforms to allow the EU and US tofocus more effectively on joint long-term objectives
iv
The transatlantic relationship has come under repeated strain duringthe past decade as a result of both traditional and new-style regulatorydisputes Such disputes the European Commission has pointed outconcern only an estimated 1-2 of the total value of transatlantictrade and investment yet these disputes could potentially spread toother areas of the transatlantic relationship it is therefore in theinterests of both sides to ensure that such disputes are prevented fromarising through timely consultations where possible and settledefficiently and amicably in other cases Many of thesedisputesmdashespecially traditional tariff quota antidumping andsubsidies disputesmdashare dealt with effectively through the disputesettlement procedure of the World Trade Organization (WTO) to whichthe EU and the US are both parties New-style regulatory disputeshowever often involve domestic laws adopted for legitimate purposesfollowing democratic deliberation and these disputes can placeconsiderable strain on the WTO system particularly in cases wherethe losing party would have difficulty complying with an adverse WTOruling
In such cases both the United States and the European Union shouldstrive proactively to consider the WTO compatibility of nationalregulations prior to adoption cooperate on common regulatoryproblems and seek to settle regulatory disputes through consultationswithin the WTO dispute settlement procedure wherever possibleSection 3 of the report therefore examines a range of potential reformsin US and EU domestic regulatory procedures in the bilateralrelationship and in the multilateral WTO dispute settlementprocedure
bull At the domestic level the US and the EU could commit themselvesto conducting lsquoTrade Impact Assessmentsrsquo of draft regulations sothat legislators are made aware of the potential trade implications ofproposed regulations before they are adopted
bull At the bilateral level both partners can engage in more extensiveearly warning of new rules as well as greater regulatory cooperationand greater contact among legislators to increase their awareness ofthe external impact of domestic laws Far from weakening themultilateral trading system bilateral economic cooperation can andshould strengthen the WTO by preventing difficult regulatorydisputes before they occur and by acting as a laboratory for theresolution of such disputes at the global level
bull At the multilateral level finally the EU and the US could committhemselves to modest reforms in the WTO and its disputesettlement procedure including a clarification of the lsquoprecautionaryprinciplersquo in WTO law and a possible move from retaliation tocompensation as the primary means of enforcement of WTO law
v
Of the aforementioned proposals the EU and the US have arguablymade the most progress in promoting cooperation among theirrespective domestic regulators with a growing number of formalregulatory agreements adopted since 1997 and an even larger numberof informal contacts among EU and US regulators taking place on aregular basis across a full range of issue-areas Such regulatorycontacts hold significant promise allowing regulators on both sides ofthe Atlantic to learn from each other coordinate their regulatoryefforts and avoid transatlantic regulatory disputes before they beginHowever as Section 4 of this report demonstrates in detail successfulregulatory cooperation is not a lsquomagic bulletrsquo for trade disputes butrather a lsquohothouse flowerrsquo which must be carefully nurtured and canbe easily frustrated by any of a number of potential obstaclesincluding the persistence of distinctive European and Americanregulatory philosophies and procedures the multi-level nature of theEU and US political systems and the insistence by both sides onmaintaining domestic regulatory sovereignty Overcoming theseobstacles will require the identification of lsquobest practicersquo in regulatorycooperation gradual increase in regulatory trust among EU and USregulators and a careful balancing by political leaders of domesticregulatory aims on the one hand and the importance of thetransatlantic economic relationship on the other
The EUrsquos ever-closer economic relationship with the United States hasnot developed in a vacuum but rather coincides with a second majordevelopment namely the rapid increase during the 1990s of EU tradeand foreign direct investment with the countries of North and SouthAmerica analyzed in Section 5 of the report Concurrent with itsgreater economic presence in the Americas the Union has pursued awide range of trade and economic agreements with the countries of theregion including an increasingly close trade and regulatoryrelationship with Canada a free trade agreement with Mexico andother agreements with Chile Mercosur and other Latin Americancountries
In May 2002 leaders of the European Union and Latin Americancountries met in Madrid for their second summit meeting confirmingthe conclusion of negotiations on an EUChile Association Agreementand calling for further development of bilateral ties including theeventual conclusion of a similar association agreement with MercosurIn these and future negotiations the EU should give special attentionto expanding market access for Latin American goods and servicesespecially for so-called lsquosensitive productsrsquo currently subject to high EUtariffs as well as focusing on the reduction of other means ofprotection such as tariff quotas that are applied trade in goodsservices investment public procurement intellectual property rightstechnical standards and rules of origin
vi
The European Unionrsquos economic relationships with the countries of theAmericas like its bilateral relationship with the United States isnested in turn within the multilateral trading system of the WorldTrade Organization the further development of which is a sharedpriority for both the European Union and the United States During hisrecent trip to Argentina EU Trade Commissioner Pascal Lamy stressedthe importance of ensuring that bilateral and inter-regional tradeagreements with the United States Canada and the countries of LatinAmerica rest on the multilateral foundation of WTO trade law For thisreason he argued bilateral and interregional negotiations lsquomust not beallowed to detract our attention from the pursuit of the DohaDevelopment Agendarsquo Such a commitment should remain a centraltenet of EU trade policy in the years to come
Within the multilateral rules-based trading system finally theEuropean Union and the United States should also seek to developfurther their bilateral relationship the health of which is vital to theglobal economy as a whole Addressing the full range of challenges tothe transatlantic economic partnership will in turn require a carefuland extensive study not only of traditional trade issues such as theliberalization of tariffs and quotas but also and especially the domesticsources of transatlantic regulatory disputes and successful means ofpreventing and settling such disputes More specifically such as studywould have to undertake three essential tasks
bull A comprehensive listing and analysis of EU and US regulationscapable of restricting trade and investment in the transatlanticsmarketplace
bull A comprehensive survey and analysis of formal and informalregulatory cooperation focusing on both the obstacles to suchcooperation and instances of lsquobest practicersquo in overcoming thoseobstacles and
bull A systematic analysis of various means of bilateral and multilateraldispute resolution with a particular emphasis on the specificchallenges of transatlantic regulatory disputes
The insights generated by such a study would inform not only thefurther development of the transatlantic economic partnership but alsothe development of the rules-based multilateral trading system of theWorld Trade Organization
vii
About the Authors
This report was prepared by the Transatlantic Programme of theRobert Schuman Centre for Advanced Studies at the EuropeanUniversity Institute Florence
The following persons contributed to the writing of one or moreportions of this reportRebecca Steffenson (European University Institute) contributed toSection 2Alasdair Young (University of Glasgow) contributed to Section 3including the preparation of Tables 5-7 as well as Appendices 1-3Gregory C Shaffer (University of Wisconsin School of Law) contributedtwo case studies in Section 4Mariam Camarero (Universidad Jaume I) Cecilio Tamarit (Universidadde Valencia) and Andrea Ribeiro Hoffmann (University of Tuumlbingen)contributed to Section 5 andMark A Pollack (European University InstituteUniversity ofWisconsin-Madison) served as lead author for the report andcontributed to the writing of various sections
The Transatlantic Programme is also grateful to the following personsfor comments on early drafts of the reportHelen Wallace (Director Robert Schuman Centre for AdvancedStudies)Patrick Messerlin (Institut de Sciences politiques Paris)Claus-Dieter Ehlermann (European University Institute)Ernst-Ulrich Petersmann (European University Institute) andMichael Artis (European University Institute)
The Transatlantic Programme was established in 2000 with a majorgift from BP
1
ndash 1 ndashThe Transatlantic Marketplace and
the Changing EUUS Economic Agenda
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly over thecourse of the past decade Taken together the US and the EU accountfor roughly one half of both world GDP and global trade
Table 1 Transatlantic Trade 1980-2000 in millions of Euros(share of EU total)
1980 1990 2000
EU imports from US 50733(181)
88957(205)
197992(193)
EU exports to US 29543(140)
82004(200)
232037(247)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
The European Union and the United States are also each otherrsquos mostimportant trading partners As Table 1 illustrates the volume ofEUUS trade more than doubled during the 1990s and the twocountries are currently each otherrsquos largest trading partners Indeedrecent data on trade in services summarized in Table 2 demonstrateseven more clearly the importance of the transatlantic traderelationship with the United States accounting for some 40 of theEUrsquos total imports and exports of services which in turn account forbetween one-third and one-half of total transatlantic tradeFurthermore EUUS trade has been largely balanced over the decadeof the 1990s
2
Table 2 Transatlantic Trade in Services in millions of Euros(share of EU total)
1998 1999 2000
EU imports from US 79874(360)
99042(409)
116474(407)
EU exports to US 77039(334)
92199(373)
117403(403)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
Notwithstanding the impressive growth of EUUS trade it is theinvestment relationship that most clearly distinguishes thecontemporary transatlantic marketplace As Table 3 makes clear theEuropean Union in 2000 was far and away the largest investor in theUnited States its euro 794 billion in foreign direct investment (FDI)constituting 65 of total FDI in the US1 The United States is similarlythe largest source of FDI in the European Union with someeuro 561 billion invested in 2000 These high levels of EU investment areestimated to provide roughly 35 million jobs in the United States witha similar number of European jobs relying on US investment in theUnion2 The large and growing investment relationship also explains aconsiderable portion of the recent growth in bilateral USEU tradesince an estimated 20-30 percent of all bilateral trade takes the form ofintrafirm trade within firms operating on both sides of the Atlantic
Table 3 Transatlantic Foreign Direct Investment in millions of Euros(share of EU total)
1998 1999 2000
US FDI flows into EU 60697(571)
83798(754)
121271(688)
EU FDI flows to US 133416(602)
196794(632)
172027(475)
US FDI stocks in EU 366462(60)
439928(609)
561199(625)
EU FDI stocks in US 398190(483)
622496(524)
794523(513)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
3
With the simultaneous growth of transatlantic trade and investmentand the gradual decline in EU and US tariffs and quotas followingsuccessive waves of trade liberalization the transatlantic economicagenda has been transformed Prior to the 1990s much of the EUUSeconomic relationship was dominated by trade questions andspecifically by cooperation and conflict over tariffs quotas and otherdirect barriers to trade typically imposed at US and EU borders Withthe decline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade have increased in importance aspotential sources of international trade tension Such non-tariffbarriers have been addressed in the European Union for decadesthrough the use of regulatory harmonization and more recentlythrough the mutual recognition of national standards Similarly theGATT system began as early as the Tokyo Round (1973-1979) toaddress non-tariff barriers to trade most notably through theTechnical Barriers to Trade (TBT) Agreement and more recentlythrough the 1994 Sanitary and Phytosanitary Standards (SPS)Agreement both of which apply international law disciplines to trade-distorting national regulations
Notwithstanding these new rules however lsquobehind-the-borderrsquo US andEU regulations on a diverse array of topicsmdashranging from theenvironment and food safety to consumer protection and dataprivacymdashhave emerged during the past decade as significant obstaclesto transatlantic and global trade and investment3 In some cases suchdomestic regulations have led to trade disputes between the UnitedStates and the European Union and to increasing demands frombusinesses on both sides of the Atlantic for cooperation among US andEuropean regulatory authorities to prevent and settle such disputesand facilitate access to the European and American markets
In sum the ever-increasing levels of transatlantic trade andinvestment have created a de facto transatlantic marketplace and withit an increasing incentive for the European Union and the UnitedStates to cooperate in an effort to manage that marketplace facilitatemutually beneficial economic exchange and prevent or settle the tradeand economic disputes that inevitably arise in such a closerelationship In that context this report aims to summarize the stateof our scholarly understanding about the political economy of thetransatlantic economic relationship with an emphasis on theinstitutions for joint economic governance the new challenges posedby regulatory disputes and the promise and limits of transatlanticregulatory cooperation Accordingly Section 2 of the report examinesthe development and growth of post-Cold War institutions for themanagement of the EUUS economic partnership while Section 3examines the persistence of trade and economic disputes between theEU and the US including the rise of new and potentially intractableregulatory disputes and Section 4 examines the prospects and limitsof transatlantic regulatory cooperation as a possible solution to such
4
conflicts The fifth section of the report places the EUUS bilateralrelationship in the broader context of the relationship between theEuropean Union and the various countries of the Americas and thesixth concludes with a review of potential areas for furthertransatlantic cooperation and promising areas for further study
5
ndash 2 ndashInstitutions for Transatlantic Economic Governance
Origins and Effectiveness
Transatlantic relations between the United States and the countries ofWestern Europe have long been based on common values and interestsin terms of both security and economic interdependence Throughoutthe Cold War transatlantic cooperation took place largely though theNorth Atlantic Treaty Organization (NATO) in the area of security andthrough common US and European participation in variousmultilateral economic forums including the Organization for EconomicCooperation and Development (OECD) the G-7 (now G-8) group ofhighly industrialized economies and the World Trade Organization
Cooperation between the United States and its European partners istherefore not new but the character of the relationship changedsubstantially during the 1990s with an ever-greater emphasis oneconomic as well as security cooperation and a greater recognition bythe United States of the European Union (in addition to its memberstates) as an important interlocutor Three transatlantic agreementssigned in the 1990s underpin this new transatlantic partnership andthe increasingly liberalized EUUS economic relationship TheTransatlantic Declaration (1990) the New Transatlantic Agenda (NTA1995) and the Transatlantic Economic Partnership (TEP 1998) haveeach played an important role in creating a transatlantic framework foreconomic co-operation and introducing formal transatlanticinstitutions to manage the relationship This upgrading of the EUUSrelationship in turn can be traced to several interrelateddevelopments during that decade including the end of the Cold Warthe maturation of the European Union as an economic and politicalactor and the relentless expansion of transatlantic economic exchangewhich created pressures for joint management of the emergingtransatlantic marketplace4
The end of the Cold War was clearly a precipitating cause for theupgrading of the transatlantic relationship As early as 1990 the USpresidential administration of George HW Bush proposed aTransatlantic Declaration to reaffirm USEuropean solidarity followingthe fall of the Iron Curtain and the collapse of the Soviet Union Whilethat Transatlantic Declaration itself focused largely on security issuesrather than economic cooperation the diminution of the security
6
threat from post-Soviet Russia facilitated an increasing emphasis oneconomic issues by the Clinton Administration reflected in both the1995 New Transatlantic Agenda and the 1998 Transatlantic EconomicPartnership5
This economic focus has in turn been reinforced by the maturation ofthe European Union which emerged during the late 1980s and early1990s as the worldrsquos largest internal market and the most importanttrading partner of the United States Simultaneous with thedevelopment of the EUrsquos internal market came the increasing influenceof EU political institutions including the European Commission(which plays a vital role in the EU legislative process as well as servingas trade negotiator and economic regulator in fields such ascompetition policy) and the Council of Ministers and EuropeanParliament (which collectively adopt an increasingly large portion ofEuropean economic legislation) Although the powers of the respectiveEU institutions still varies considerably across sectors theCommission has clearly emerged as the Unionrsquos primary interlocutorwith the United States on economic issues while the legislativeactivities of the Council and the Parliament have the potential toinfluence economic interests in the United States The institutions ofthe New Transatlantic Agenda have therefore attempted to incorporatethe Commission and the Council presidency through biannualsummits and other high-level meetings as well as members of theEuropean Parliament through the Transatlantic Legislatorsrsquo Dialogue(see below)
Beyond the end of the Cold War and the maturation of the EuropeanUnion finally lies the relentless increase of transatlantic economicexchange Increased transatlantic trade and investment have creatednew demands for market access and economic cooperation fromproducer groups such as the Transatlantic Business Dialogue whileother consumer labour and environmental groups have sought toensure that transatlantic cooperation takes into account their diverseinterests Indeed as we shall see below the increasingly closeeconomic relationship between the EU and the US has created newprospects for both trade conflicts and regulatory cooperation and hasresulted in what might be termed lsquoscuttle diplomacyrsquomdashthe scurrying ofEU and US government authorities to cope with the incessant conflictswhich although they compose only a small fraction of EUUSeconomic exchange threaten to poison a mutually advantageouseconomic relationship6 Largely for this reason the United States andthe European Union have established an increasingly complexinstitutional structure designed to facilitate economic and securitycooperation resolve and prevent disputes and integrate civil-societygroups into the process of transatlantic economic governance
7
21 Transatlantic Economic Agreements in the 1990s
211 The Transatlantic Declaration
The process of institutionalizing the EUUS relationship begansimultaneously with the end of the Cold War in 1989 when USPresident Bush and EU Commission President Jacques Delors agreedto work to ensure regular meetings between high-level EU and USofficials On 27 February 1990 this agreement bore fruit in the shapeof a lsquoTransatlantic Declarationrsquo pursuant to which the US and ECagreed to establish an institutional framework lsquofor regular andintensive consultationrsquo Specifically the Declaration called for biannualEUUS summit meetings between the presidents of the United Statesthe European Commission and the European Council as well asregular meetings between the US Secretary of State the ECCommission and the US Cabinet These meetings it was hoped wouldopen lines of communication create networks facilitate informationsharing and reduce the impact of disputes in transatlantic relations
In substantive terms the Transatlantic Declaration identified threemajor goals
bull economic liberalizationbull educational scientific and cultural co-operation andbull cooperation in fighting international crime terrorism and
environmental degradation7
While these policy areas were identified as priorities the agreementfailed to provide a more detailed agenda for meeting its goals Thecontent of the agreement has been described as cosmetic minimalistand lacking in substantive innovations and would soon besupplemented by other more detailed economic agreements8
212 The New Transatlantic Agenda
The next stage in developing the transatlantic economic relationshipcame with the New Transatlantic Agenda (NTA) which was signed atthe EUUS Summit in Madrid in 1995 and established four priorityareas for closer cooperation
1 promoting peace and stability democracy and development aroundthe world (in particular in Central and Eastern Europe Russia andthe Middle East)
2 responding to global challenges (with a focus on international crimedrug trafficking terrorism migration and health andenvironmental issues)
3 lsquocontributing to the expansion of world trade and promoting closereconomic relationsrsquo (including both bilateral and multilateralliberalization of trade and investment) and
8
4 building bridges across the Atlantic (specifically direct contactsamong lsquobusiness people scientists educators and othersrsquo)9
In addition to the six-page NTA itself the two partners also adopted amuch more detailed Joint Action Plan (JAP) which outlined specificpolicy areas where deeper cooperation could be pursued The economicchapter of the JAP was arguably the most ambitious of the four callingfor both the strengthening of the multilateral trading system and thecreation of liberalized lsquotransatlantic marketplacersquo with a special focuson bilateral regulatory cooperation1 0 The NTA itself also acknowledgedthe role of the Transatlantic Business Dialogue which would laterprove to be influential in setting the agenda for transatlantic economiccooperation
In institutional terms the New Transatlantic Agenda established newtransatlantic governance mechanisms and a more established policyprocess First it created a Senior Level Group of EU and US officialstogether with a lower-level NTA Task Force to help drive coordinatemonitor and implement the agenda of transatlantic relations betweenthe continuing EUUS summits Although this framework has sincebeen criticized as excessively bureaucratic and focused on summit-driven lsquodeliverablesrsquo (see below) the NTA framework has proven usefulin coordinating EU and US responses to both economic and securityissues and remains the overarching framework for transatlanticrelations today
213 The Transatlantic Economic Partnership
The drive for an ever-closer transatlantic economic relationship wasrevived in 1998 amidst revelations that cooperation in many policyareas had fallen short of initial expectations1 1 Despite the NTA and itsinstitutions high-profile trade disputes over bananas beef andextraterritorial sanctions continued highlighting the need for furthertransatlantic commitment to facilitate economic exchange and containconflict In that context the European Commission took the initiativein April 1998 calling for negotiations on a lsquosingle comprehensiveagreementrsquo to implement a lsquoNew Transatlantic Marketplacersquo TheCommissionrsquos proposal had four central objectives
1 the lsquoremoval of technical barriers to trade in goods through anextensive process of mutual recognition andor harmonizationrsquo
2 the elimination lsquoby 2010 of all industrial tariffs on an MFN basisrsquo3 the formation of a lsquofree trade area in servicesrsquo and4 further liberalization in the areas of government procurement
intellectual property rights and investment1 2
The United States had little time to respond however as the initiativefailed to secure the support of the Council of Ministers In its placethe US and the EU agreed in May 1998 to a somewhat less ambitious
9
Transatlantic Economic Partnership (TEP) which aimed to tacklebilateral regulatory barriers to trade and to identify common positionswithin multilateral trade negotiations In substantive terms the TEPand its accompanying Action Plan focused more directly than the NTAon regulatory cooperation and on the possible harmonization ofstandards as a means of removing technical barriers to trade and itcommitted both sides to negotiations in specific issue-areas includingservices intellectual property food safety and biotechnology1 3
In addition the TEP created a new set of institutions to manage theeconomic aspects of the relationship including a lsquoTEP Steering Grouprsquocharged with monitoring implementing and reviewing TEP objectivesas well as expert-level working groups The TEP also emphasized theimportance of early warning of potential trade and regulatory disputesand fostered the creation of an institutionalized lsquoearly warning systemrsquofollowing the Bonn EUUS summit in June 1999 Finally the TEPexplicitly encouraged the participation of not only business but othercivil society groups which would lead in time to the creation of thetransatlantic consumer environment and labour dialogues
Table 4 Transatlantic Cooperation Agreements at a Glance
Transatlantic Agreement Year Impact on the Economic Relationship
The TransatlanticDeclaration 1990 Contains a broad commitment to
economic liberalization
The New TransatlanticAgenda (NTA) and JointAction Plan (JAP)
1995
Includes a chapter on contributing tothe expansion of world trade andpromoting closer economic relationsJAP discusses building a lsquonewtransatlantic marketplacersquo throughincreased regulatory co-operation
Transatlantic EconomicPartnership (TEP) 1998
Outlines three main goals for thetransatlantic economic relationship1) market access gains for goods
services and agricultural products2) multilateral and bilateral trade
liberalization of goods services andcapital
3) deepening dialogue between non-governmental organizationsparliamentarians and government
10
22 An Overview of Existing Transatlantic Institutions
Todayrsquos transatlantic economic relationship is managed largely by a setof institutions that were created in stages by the TransatlanticDeclaration the NTA and the TEP Combined these institutionsconstitute a framework for long-term as well as day-to-day economiccooperation and dispute resolution
221 EUUS Summits
The biannual EUUS summit is the primary forum forintergovernmental exchange in the NTA process consisting of thehighest level of contact between the Presidents of the US the EUCommission and the Council Presidency The transatlantic policy cyclebegins and ends with these biannual summits where decisions arelsquomadersquo about the general scope for co-operation and wherelsquodeliverablesrsquo - in the form of new bilateral agreements about regulatorycooperation or the resolution of specific disputesmdashare announced Thesummits encourage policy co-ordination because they create deadlinesfor progress reports and exert pressure on lower-level officials toproduce results
222 Senior Level Group and the NTA Task Force
The Senior Level Group serves as a contact point between the EUUSSummit and the working level of the transatlantic dialogue It hasroughly six formal members including the US Undersecretary of Statefor Economic Affairs Commission delegates from the Directorates-General for external relations and trade Council Presidencyrepresentatives and representatives of the lsquoArticle 133 committeersquodealing with international trade matters The primary tasks of the SLGare to prepare the agenda of the biannual summits lsquoshopping fordeliverablesrsquo to be announced on those occasions and to monitor theimplementation of the NTA and the TEP
Logistically the SLG typically meets twice during each CouncilPresidency with the first meeting used to assess potential areas ofcooperation and conflict and the second meeting finalizing the agendafor the EUUS summit and confirming the contents of its progressreport which is presented to summit leaders Below the SLG an lsquoNTATask Forcersquo meets somewhat more frequently (often throughvideoconferencing) to follow specific dossiers in both the security andeconomic realms
223 TEP Steering Committee and Working Groups
The TEP institutions including the Steering Group and workinggroups bring together policy experts to deal with economic issues ingreater detail The Steering Group consists of the US Deputy Assistant
11
Secretary of State for Economic Affairs Commission officials at theHead-of-Unit level and a Council Presidency representative Originallydesigned to coordinate negotiating approaches within the WTO and toact as an lsquoearly warning systemrsquo to identify possible trade disputes theTEP Steering Group has evolved into the primary coordinating body fortransatlantic economic relations including negotiations aboutregulatory cooperation in specific areas
The Steering Group is assisted by the TEP working groups which aresector-specific and thus mirror the sectors laid out by the TEPincluding agriculture biotechnology trade services and globalelectronic commerce Their main task is to find areas where the EUand the US can work together under the TEP framework and to reportany progress or problems to the Steering Group
224 The Transatlantic Early Warning System
The 1998 TEP declaration highlighted the need to identify potentialtrade disputes before they emerge At the Bonn EUUS summit inJune 1999 the two sides announced plans to formalize an EarlyWarning System for this purpose1 4 Essentially the transatlantic earlywarning system sparks an inter-agency process to identify potentialeconomic disputes at an early stage most notably with regard todomestic EU or US legislation that might act as a barrier totransatlantic trade and investment The task of spotting such potentialdisputes is delegated to the TEP Steering Group which reports earlywarning items to the Senior Level Group which in turn may take theminto account when preparing the EUUS summit agenda The TEPSteering Group also assigns contact points facilitating consultationsand agreeing on timelines for reporting back on items highlighted aspotential transatlantic policy frictions Unlike similar early warningsystems within the European Union however the transatlantic earlywarning system does not require that either side pause or reconsiderits proposed legislation or regulations The result is a system whichwhile respecting the regulatory sovereignty of both sides does notguarantee prevention or resolution of potential conflicts
12
Figure 1 The Transatlantic Early Warning System
The EUUS SummitTop-level discussions on
potential and exiting disputes
The Senior Level GroupReviews friction points reports to summitorand refers back to TEP Steering Group
or NTA Task Force
TEP Steering GroupIdentifies and monitorseconomic friction points
225 The Transatlantic Legislatorsrsquo Dialogue
An underlying feature of the early warning concept is the desire to getboth EU and US domestic policy makers to consider the externalimplications of internal policies However the Early Warning System isa bureaucratic tool The important task of raising awareness betweenEU and US legislators lies with the Transatlantic Legislatorsrsquo Dialogue(TLD) another product of the NTArsquos lsquobuilding bridgesrsquo chapter The TLDbrings together members of the US Congress and the EuropeanParliament so as to create awareness on each side of the transatlantictrade impact of EU and US legislative acts
Thus far however the TLD has not lived up to initial expectations forthree reasons First TLD participation is largely limited to members ofthe US House of Representatives and the European Parliament with aparticular interest in transatlantic relations and may not includemembers of committees drafting legislation with transatlanticrepercussions the US Senate moreover is thus far excluded from theTLD Second there is insufficient contact between the TLD and otherparts of the transatlantic dialogue for example the SLG Thirdmeetings of the TLD have been held only rarely and typically withweak attendance on the US side and the Dialogue has yet to engage inor settle any serious economic disputes between the United States andthe European Union
226 The Transatlantic Civil Society Dialogues
The fourth and final chapter of the NTA encourages the establishmentof lsquopeople to peoplersquo links as a way of building bridges across the
13
Atlantic and bringing a civil-society component to transatlanticcooperation In addition to supporting ad hoc exchange betweeneducators and scientists the EU and the US have encouraged and insome cases subsidized the establishment of formal dialogues amongEuropean and American business consumer and environmentalgroups and labour unions The 1995 NTA made specific mention ofthe Transatlantic Business Dialogue (TABD) while the 1998 TEPinvited civil society input lsquoon issues relevant to international trade as aconstructive contribution to policy makingrsquo In practice however not alldialogues have been created or function as equals
The Transatlantic Business Dialogue
The TABD is the oldest best organized and most influential dialoguein the transatlantic economic relationship Launched in 1995 at theinitiative of the US Commerce Department and the EU Commissionthe TABD brings together some 200 European and American CEOs forannual meetings which make joint recommendations on thetransatlantic policy issues1 5 From the beginning the TABD focusedthe attention of US and European legislators and regulators on theimportance of non-tariff barriers to trade calling explicitly for EUUSregulatory cooperation and mutual recognition of standardsmdashanapproach it has labelled lsquoapproved once accepted everywherersquo1 6 Inkeeping with this approach the TABD has been active in pressing forthe adoption and implementation of specific agreements including the1997 Mutual Recognition Agreements and the 2000 Safe HarbourAgreement on data privacy (examined below) In addition the TABDparticipates actively in the transatlantic early warning systemidentifying in its annual reports those domestic laws and regulationsthat might create obstacles to transatlantic trade and investment1 7
One result of this process is that the TABD has become a valuablesource of information for EU and US policy makers Sixty percent ofthe TABDrsquos original recommendations resurfaced in the NTA and theJoint Action Plan1 8 Some members estimate that one-third of itsrecommendations have been taken on board by transatlantic policymakers1 9 Nevertheless there is an increasing perception within theTABD that much of the lsquolow-hanging fruitrsquo has been picked in terms oftransatlantic trade liberalization and regulatory cooperation and a fearthat governments lsquocanrsquot deliverrsquo regulatory reforms demanded bybusiness2 0 In addition the TABD faces the challenge of interactingwith the other officially recognized dialogues with which it may notalways agree
The Transatlantic Consumer Dialogue
The decision to include consumers environmentalists and workers inthe transatlantic dialogue was the result of pressure from NGOs theEuropean Commission and eventually the US State Department The
14
success of the TABD sparked criticism from the NGO communitywhich argued that the influence of the TABD was unbalanced by anabsence of civil society input In response to these concerns the StateDepartment and the European Commission both agreed to providefunds to establish a new Transatlantic Consumer Dialogue There wassome objection to government sponsorship of the groups particularlyin the US where it was feared that the consumer dialogue was a wayto lsquogreenwashrsquo the TEP There was also a divide among its membersover the issue of trade liberalization most notably at the first meetingof the TACD which was overshadowed by a dispute between groupssuch as Public Citizen which generally oppose trade liberalization andother groups such as Consumer Union which support tradeliberalization as a means of increasing consumer choice2 1
Despite this rocky start the TACD has become an efficientorganization with a secretariat in London and a Steering Committeethat has organized its roughly 60 members into working groups onfood electronic commerce and trade In its working groups annualmeetings and recommendations the TACD has focused largely ontransatlantic regulatory issuesmdashin areas such as data privacy foodsafety and the application of the lsquoprecautionary principlersquo in riskregulationmdashbecause many consumer groups feared a downward spiralof regulatory standards as a result of increasing trade liberalizationNevertheless despite its high level of activity some members of theTACD feel that they have not had a sufficient impact on the NTAprocess which they regard as being dominated by a free-tradeagenda2 2
The Transatlantic Environmental and Labour Dialogues
Attempts to forge a functioning dialogue between the European andAmerican environmental and labour movements have been the leastsuccessful Despite initial attempts to create an environmentaldialogue the TAED suspended its activities in 2000 citing a lack offunding from the US side2 3 The TAED had until this point held threemeetings and established a Steering Committee as well as WorkingGroups on Climate Protection Bio-diversity and Forest ConservationFood and Agriculture and Industry The TAED also offered a numberof official recommendations on safe energy sources biotechnologywaste management and emissions standards although TAEDmembers like their TACD counterparts argued that the TABDcontinued to enjoy privileged access to EU and US policymakers2 4
Finally while the Transatlantic Labour Dialogue is officially still afunctioning forum it is the least developed of the transatlantic civil-society dialogues The TALD is little more than a modest exchangebetween the European Trade Union Confederation (ETUC) and theAmerican Federation of Labour and the Congress of IndustrialOrganizations (AFL-CIO) with no organizational structure secretariat
15
or formal objectives The TALD did hold several meetings in 1998 and1999 and 2000 but produced only six recommendations from thosemeetings Simplifying only slightly the ETUC and AFL-CIO havechosen to emphasize their shared interests in a global labour dialogueand have demonstrated little commitment to a specificallytransatlantic agenda within the framework of the NTA or the TEP2 5
In sum the transatlantic civil-society dialogues have arguably served auseful purpose in fostering transatlantic discussion among businessesand non-governmental organizations (most notably in the businessand consumer sectors) and in producing concrete recommendationsfor transatlantic economic cooperation However the relative weight ofthese organizations remains highly uneven and the currentarrangement is highly segmented and marked by a lack of anylsquodialogue among the dialoguesrsquo which might lead to the creation of agenuine transatlantic public sphere
23 An Effective Framework for Economic Cooperation
In recent months both official reviews and academic studies havefocused on the institutions of the NTA and the TEP asking whetherthese institutions are an adequate framework for transatlanticeconomic as well as security cooperation In its 2001 review of theNTA for example the European Commission argued that institutionssuch as the TEP Steering Group the NTA Task Force and the SeniorLevel Group serve useful purposes in fostering dialogue andcooperation between EU officials and their US counterparts but alsonoted a number of weaknesses in the current structure including thesummit-driven demand for often artificial lsquodeliverablesrsquo at six-monthintervals and the difficulty in focusing on medium- to long-termpriorities given the inevitable demands of pressing short-term issuesThe Commission therefore proposed a number of reforms to thecurrent institutions including the establishment of explicit medium-term priorities and the possible reduction of the number of EUUSsummits to one per year2 6
By and large the Commissionrsquos recommendations were welcomed bythe United States government which agreed to the establishment of aset of medium-term priorities in the context of the June 2001 Goumlteborgsummit By contrast no progress has been made on the suggestion ofreducing the number of transatlantic summits largely because of thedifficulties posed by the rotating six-month presidency on the EU sideIn addition as we have seen a number of calls have been made inrecent years for a more transparent and accountable process oftransatlantic economic governance with more balanced input fromcivil society and with a greater role for democratically electedlegislators Thus far however these calls have met with no systematicresponse from either the US or the EU
16
Moving from institutions to lsquodeliverablesrsquo a recent study by EricPhilippart and Pascaline Winand has attempted to measure the policyoutputs of the NTA by examining the joint reports of the Senior LevelGroup since 1995 in order to determine to what extent and in whichareas the goals of the Joint Action Plan had been missed met orexceeded Summarizing a complex analysis Philippart and Winandfind that the extent and level of cooperation varies both across andwithin the four chapters of the NTA with genuine joint action in someareas and lower levels of cooperation (such as the exchange ofinformation) or inactivity in others In the area of foreign policycooperation for example the authors find that EUUS cooperation hasbeen most successful and resulted in the most extensive joint actionwithin Europe itself while yielding fewer and less binding outcomes inother regions In the area of economic cooperation the authors findthat the NTA has been most active in the establishment of alsquotransatlantic marketplacersquo with relatively extensive trade andregulatory cooperation but far less active and successful incoordinating economic policies in the World Trade Organization andother multilateral fora2 7 In the following two sections therefore weturn from a discussion of institutions and process to a more explicitanalysis of specific economic issues relating to the management oftrade disputes as well as bilateral efforts at regulatory cooperation
17
ndash 3 ndashTrade and Regulatory Disputes
in the Transatlantic Economic Partnership
Despite the obvious importance of EUUS trade and investmentrelationshipmdashor indeed because of itmdasheconomic disputes have beenand remain an important feature of the transatlantic partnershipIndeed the settlement and where possible prevention of suchdisputes was a large part of the motivation behind the establishment ofthe New Transatlantic Agenda and retains an important place inbilateral economic relations
31 Classifying Disputes Traditional Trade Issues vs NewlsquoBehind-the-Borderrsquo Regulatory Disputes
Transatlantic economic disputes arise from various sources and canbe settledmdashor left unsettledmdashby a similar variety of means In terms oftheir sources we can distinguish between two broad categories oftransatlantic trade disputes (1) lsquotraditionalrsquo trade disputes regardingdiscriminatory national measures such as tariffs and quotas imposedat the border as well as subsidies antidumping actions and safeguardmeasures which discriminate explicitly between domestic and foreignproducers and (2) lsquonew-stylersquo disputes about the trade-distortingeffects of lsquobehind-the-borderrsquo regulations that act as non-tariff barriersto international trade in goods services and intellectual property
With the gradual decline of tariffs and quotas as direct barriers toinvestment and the simultaneous increase in domestic economicregulation on both sides of the Atlantic in response to concerns aboutthe environment consumer protection public health and the like thefrequency of these new-style disputes has increased drastically duringthe course of the 1990s and early 2000s Some of these disputes likethe ongoing conflicts over the regulation and marketing of hormone-treated beef and genetically modified organisms (GMOs) havegenerated considerable controversy on both sides of the Atlantic andplaced strains on the transatlantic economic partnership
The rise of such transatlantic regulatory disputes in turn hasprompted questions about what Miles Kahler and others have termedlsquosystem frictionrsquo between the respective regulatory systems of the
18
European Union and the United States In a survey of transatlanticeconomic relations conducted in 1995 Kahler concluded that thereexisted at best partial evidence of system friction between the UnitedStates and the European Union noting that some issues (egagriculture and audiovisual services) did indeed divide the US and EUsystems fundamentally while on other lsquonewrsquo issues like labourstandards and the environment the EU and the US generally sharedcommon views2 8
Surveying the landscape of transatlantic economic relations sevenyears later it remains true that the European Union and the UnitedStates are united by many common values and common interestsNevertheless in a growing number of issue-areas including food safetydata privacy copyright protection taxation accountancy standardsand others the United States and the European Union have arguablyexperienced lsquosystem frictionrsquo in the form of a large number ofsimmering regulatory disputes summarized in Appendix 1 at the endof this report
Table 5 Classifying US-EU Trade Disputes
Agriculture Industrial goods Services
Border-measures
Bananas (alsoGATS)Belgian ricedutiesTariff-rate quotacorn gluten feed
Harbour taxAnti-dumping(steel uranium)CVD (steel)Safeguard actions(steel)
Tra
dit
ion
al
Subsidies Export subsidies AirbusFSC
Regulatorybarriers
Beef hormonesGMOs
Hush kitsPublicprocurement
Audio-visualProfessionalservicesTelecommuni-cationsData privacy
New
sty
le
IPR Havana Club Irish MusiccopyrightGreek protectionof movies
19
As Table 5 makes clear the contemporary transatlantic relationship ischaracterized by both traditional trade conflicts and new-styleregulatory disputes Indeed traditional disputes about tariffs andquotas (eg bananas) subsidies (eg Foreign Sales Corporations) anti-dumping measures and safeguard actions (eg steel) constitute someof the most high-profile disputes between the United States and theEuropean Union With a few exceptions however these disputesprimarily concern traditional trade measures that are within the lsquocorebusinessrsquo of the multilateral trading system which has wellestablished rules and an effective functioning dispute settlementprocedure within the World Trade Organization Put simply the WTODispute Settlement Understanding provides a body of multilateralrules governing the permissible use of tariffs quotas and other trade-restrictive practices a forum for consultation and if necessarylitigation among the parties to a dispute before WTO panels and theAppellate Body a binding requirement for member states to complywith DSU panel and Appellate body decisions and authorizedretaliation in the event of prolonged noncompliance with thosedecisions2 9
By contrast regulatory disputes implicate national laws andregulations that are often adopted for legitimate reasons of consumerand environmental protection or public health and after extensivedemocratic or administrative processes For this reason transatlanticregulatory disputes can be more bitter and intractable than traditionaltrade disputes insofar as both sides believe that they are lsquodoing theright thingrsquo and insofar as domestic political actors resistsubordinating domestic regulations to the exigencies of internationaltrade Such regulatory disputes also create particularly difficultquestions for the WTO dispute settlement procedure insofar as theycall for a politically sensitive balance between the economic imperativeof liberalized international trade on the one hand and the economicand non-economic motivations behind domestic regulations on theother hand
Largely for this reason both the United States and the EuropeanUnion have generally avoided bringing such regulatory conflicts beforethe World Trade Organization preferring in most instances to managetheir regulatory differences through bilateral consultation andcooperation Table 6 which summarizes EUUS WTO disputes bysubject matter demonstrates clearly the continuing dominance oftraditional trade issues (tariffs subsidies countervailing duties andantidumping) and the effort by both sides to keep politically sensitiveregulatory issues away from the WTO (For more information about thesubjects and status of all EUUS trade disputes before the WTO seeAppendices 2 and 3 at the end of this report)
Simplifying slightly existing regulatory as well as traditional tradedisputes can be addressed in any one of three ways (summarized in
20
Table 7 page 22) First the EU and the US may engage in directconsultations about regulatory barriers to trade and resolve thedispute without resorting to WTO dispute resolution examples includethe dispute over airplane lsquohush kitsrsquo resolved through a negotiatedsettlement between the EU and the US and the public procurementcase involving a Massachusetts state law imposing sanctions againstfirms doing business in Myanmar which was resolved unilaterallythrough the application of US federal law Second one party maychallenge the legality of the otherrsquos regulations before the WTO as inthe case of the US challenge to the EU ban on hormone-treated beefor the EU challenge to a provision of US copyright law in cases wherethe disputed regulation is ruled to be in violation of WTOrequirements however compliance has proven difficult Third andfinally given the difficulties of resolving such disputes through eitherbilateral negotiations or WTO litigation the bulk of regulatory disputesare allowed to simmer indefinitely with periodic consultations andexchange of information among the two sides but no resolution of theresulting trade tensions As Appendix 1 makes clear the overwhelmingmajority of current transatlantic regulatory disputes fall into this thirdcategory
Table 6 Transatlantic Trade Disputes in the WTO Overview and Context
Tariffsquotascustomsdutiesrules oforigin
retaliatorymeasures
Tradedefence
instruments(a-d CVDsubsidies)
TechnicalTBTs
(classi-ficationlabelingtesting)
Substantive TBTs
(process ampproductrequire-ments)
Subsidies GATS TRIPS TRIMS GPA Other
EU - US(EU asthirdparty)
6 9 (11) 1 (1) 1 3 1 2
EU - Restof World(RoW)
14 6 1 1 3 4 3 4
RoW ndash EU 12 3 4 2 1 1
US ndash EU(US asthirdparty)
8 (1) (1) 1 (1) 8 1 8
US - RoW 10 7 3 2 7 2 6 3 1
RoW ndash US 7 21 5 1 1 1
RoW ndash RoW 17 30 1 6 10 3
Sources Adapted from DG Trade WTO - Dispute Settlement (updated 15102) httpeuropaeuintcommtradepdfcasesxls accessed15202 and the WTOs dispute database (httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
21
22
Table 7 Methods of Dispute Resolution with Examples
Negotiated Agreement orUnilateral Action
WTO Dispute Settlement SimmeringDisputes
HushkitsMassachusettsMyanmar(public procurement)
Beef hormones(EU not in compliance)Irish Musiccopyright (EUUScompensation agreement)
GMOs
The sources of such regulatory disputes and the difficulties they posefor traditional dispute settlement procedures are illustrated below infour brief case studies focusing on (1) the US challenge to EUlegislation prohibiting the use of airplane lsquohush kitsrsquo (2) the USchallenge to the EUrsquos ban on hormone-treated beef and the relateddispute over the EUrsquos moratorium on the approval of geneticallymodified foods and crops (3) the EUrsquos challenge to the aforementionedMassachusetts public procurement law and (4) the EUrsquos challenge to aprovision of the US Copyright Act Although not a thorough review ofthe entire universe of EUUS regulatory disputes these four cases doillustrate the types of regulations adopted and challenged by both theEU and the US as well as the various methods of dispute resolutionmentioned above The policy implications of these cases are discussedin Section 36
32 Case Study Airplane lsquoHushkitsrsquo
Many EUUS disputes concern the technical barriers to trade (TBTs)caused by divergent national regulations setting technical standards inareas ranging from the specifications for industrial machinery andemissions standards for motor vehicles to nutritional labelingrequirements for packaged foods As Kenneth W Abbott has pointedout in a recent study many such national regulations are identified bybusiness or governments as TBTs within the transatlantic relationshipand a far smaller percentage of these have emerged as high-profiletrade disputes3 0 To date no disputes have been litigated between theEU and the US under the TBT Agreement although one particularlyprominent case did create significant tensions in the transatlanticrelationship namely the US challenge to the EUrsquos ban on airplanelsquohushkitsrsquo
Hushkits are equipment packages designed to reduce the noiseemissions of aircraft through the use of sound-absorbing materialswith the aim of bringing particularly older planes into compliance withthe so-called lsquoChapter 3rsquo noise pollution standards adopted within theInternational Civil Aviation Organization (ICAO) In 1999 theEuropean Union which had long pressed unsuccessfully for theadoption of stricter standards within the ICAO adopted a Regulation
23
establishing a ban on the registration of older aircraft fitted withhushkits on the grounds that such aircraft only barely complied withChapter 3 standards and were substantially more polluting thannewer planes The ban on new registrations was to enter into force inMay of 2000 from April 2002 moreover hushkitted aircraft registeredin third countries would not be allowed to operate within EU territory
Although nominally intended to decrease noise pollution aroundairports in heavily populated regions of Europe the EUrsquos hushkitsRegulation met with howls of protest in the United States where theuse of hushkits had been encouraged by US authorities as a cost-effective way of meeting Chapter 3 standards A ban on the registrationof hushkitted aircraft the US argued would therefore impose adisproportionate burden on US airlines which estimated that theRegulation cost them some $2 billion by depressing the value of theirexisting fleets while benefiting European carriers that had relied moreextensively on the purchase of new aircraft designed specifically tomeet Chapter 3 specifications In legal terms moreover the UnitedStates argued that the Regulation violated the terms of the ICAOagreement which simply set a performance standard for planes anddid not authorize parties to set more demanding standards or tomandate a specific design standard (eg a ban on the use ofhushkits) The US accordingly lodged a formal ICAO complaint againstthe 15 EU member states in March of 2000
After extensive bilateral discussion as well as multilateral negotiationswithin the ICAO in October 2001 the US and the EU reached asettlement of the case The first step in this settlement was themultilateral resolution adopted on 4 October in the ICAO assemblyurging states to pursue a lsquobalanced approachrsquo to noise reductionadopting local operating restrictions only where supported by anassessment of the costs and benefits and only after fully assessingalternative measures to reduce noise At the same time the ICAOagreed to a new and stricter set of lsquoChapter 4rsquo standards to take effectbeginning in 2006
Consistent with the provisions of the ICAO agreements the EU agreedon 25 October to withdraw the original Hushkits Regulation by April2002 (the date when it would have applied to third-country aircraft) inreturn for which the US agreed to withdraw its complaint before theICAO In place of the original Regulation the Commission issued aproposal in November 2001 for a new Directive replacing the generalban on hushkitted places with a more discriminating provisionallowing noise-sensitive airports in congested urban areas to limit theuse of planes that are lsquomarginallyrsquo compliant with Chapter 3standards3 1 This draft Directive was approved by the EuropeanParliament in its first reading in March 2002 and at this writing ispending adoption by the Council of Ministers and the Parliament
24
Despite the initial acrimony between the US and the EU the hushkitscase represents a successful effort at bilateral dispute resolution in abroader multilateral setting In this case the European Union agreedafter receiving assurance and guidance from the ICAO to adopt a morediscriminating and less trade-distorting regulatory approach whichsatisfies the trade concerns of the United States while allowing the EUto address the problems of noise pollution around the Unionrsquos mostcongested urban airports As we shall see presently however not allsuch regulatory conflicts have proven so amenable to negotiatedagreement
33 Case Study Hormone-Treated Beef andGenetically Modified Organisms
EU and US food-safety regulations constitute some of the mostimportant regulatory barriers to international trade and have been thesource of some of the most politically difficult and intractabletransatlantic regulatory disputes pitting each sidersquos sovereign right toregulate the safety of its food against its international obligationsunder WTO law3 2 Within the United States regulation of food safetywas among the earliest and most politically sensitive tasks of thefederal government which has delegated much of the power fordomestic regulation to agencies like the Food and Drug Administration(FDA) which has jealously guarded its reputation as an independentand impartial regulator making decisions on the basis of scientifictests rather than political pressures In the EU by contrast foodsafety regulation is carried out in part by national regulators and inpart by the EUrsquos political bodies including the Council of Ministersthe European Parliament and the Commission The deficiencies of thispatchwork regulatory process was painfully revealed however by aseries of food safety crises during the latter half of the 1990s includingmost notably the BSE crisis of 1996 and the Union has respondedforcefully with the creation of a European Food Safety Authority andwith an insistence on the application of the so-called lsquoprecautionaryprinciplersquo justifying regulatory action in the absence of clear scientificevidence and on the basis of consumer concerns and social andeconomic criteria
Precisely because food safety regulations can act as non-tariff barriersto trade in agricultural products the EU and the US have agreed tosubject their domestic regulations to the discipline of internationalguidelines such as the United Nations Codex AlimentariusCommission which establishes international standards for food safetyand more recently through the 1994 WTO Agreement on theApplication of Sanitary and Phytosanitary Measures (the SPSAgreement) The SPS Agreement does not establish bindinginternational standards for food safety nor does it automaticallypreempt the adoption of domestic standards that might constitute
25
non-tariff barriers to trade The agreement does however incorporateand promote the adoption of international standards as well asestablish trade rules that limit the ability of states to adopt food safetyregulations that are not scientifically grounded The terms of the SPSAgreement are moreover enforceable under the WTO disputesettlement procedure
The consequences of the divergent EU and US regulatory processesand the difficulties of resolving disputes through the WTO disputesettlement procedure can be illustrated most clearly by the long-standing EUUS dispute over the issue of hormone-treated beef Theconflict began in 1989 when the European Union announced a ban onthe sale and marketing of beef treated with any one of six growth-promoting hormones that had been tested and certified as safe by theFDA In 1995 following the entry into force of the SPS Agreement theUnited States took legal action before the WTO alleging that the EUban was inconsistent with the terms of the SPS Agreement since it wasnot based on scientific evidence risk assessment or internationalstandards After a protracted legal battle involving the issuing of apanel report and a subsequent appeal the WTO Appellate Body heldwith the United States that the EU had failed to base its ban on ascientific risk assessment and ordered the EU to bring its domesticregulations into compliance with WTO law
Despite the clear ruling against it the European Union faced withopposition from public opinion and hopeful of producing additionalscientific findings that would eventually justify the maintenance of theban failed to comply with the Appellate Bodyrsquos decision The UnitedStates therefore retaliated against the EU in May of 1999 imposingtariffs of $1168 million against EU agricultural products such as foiegras Roquefort cheese and Dijon mustard These US tariffs in turnsparked protests among French and European farmers who seized onthe beef-hormones case as a symbol of the threat posed byAmericanization and globalization to European regulations andtraditions Since 1999 the United States and the European Unionhave continued to consult regularly about this case but the Unionremains firm in its refusal to alter its domestic law and the UnitedStates persists in the application of retaliatory sanctions against theEU
The transatlantic dispute over the regulation of genetically modifiedorganisms (GMOs)mdashor more precisely genetically modified foods andcropsmdashis analytically similar to the beef hormones case although thepotential economic stakes in this area of GMOs are potentially fargreater Here again the US Food and Drug Administration decided inthe early 1990s that genetically modified foods were not substantiallydifferent from conventional foods and therefore required no specialprocedures for approval or marketing and on that basis US farmersand seed producers have quickly embraced the use of genetically
26
modified foods and crops By contrast the European Union has takena more cautious approach in a series of Directives and Regulationsrequiring specific approval procedures for genetically modified crops aswell as labeling of foods from genetically modified varieties Since1998 moreover the Council has maintained a de facto moratorium onthe approval of new GM varieties even though the EUrsquos scientificcommittees have continued to formally approve a number of varietiesas posing no health risks to consumers
The GMO issue has been the subject of intense consultation betweenthe US and the EU in recent years including the creation of an EU-USBiotechnology Forum which issued a joint report on the subject inDecember 20003 3 as well as a Biotech Working Group within theTransatlantic Economic Partnership Such fora have provided for auseful exchange of information among regulators as well as tradeofficials yet the positions of the two sides remain far apart with atbest modest signs of convergence in the EU and US approaches Thusfar the United States has refrained from bringing a case against theEU before the WTO partly of fear that the European Union facing apotential backlash against both GMOs and the WTO would be unableto comply The issue therefore remains a simmering irritant in thetransatlantic relationship with the potential to flare into a majordispute should the United States eventually decide to litigate the issuebefore the WTO
34 Public Procurement The MassachusettsMyanmar Case
The previous two cases involved US challenges to EU regulationssetting requirements for the marketing and use of industrial oragricultural products Regulatory disputes can however be directed atUS as well as EU regulations and they can concern regulationsgoverning questions other than product standards An excellentexample is the EUUS dispute over the 1996 Act adopted by the stateof Massachusetts regulating state contracts with companies doingbusiness in Myanmar (formerly Burma) The law in question wasadopted in June of 1996 by the Massachusetts State Legislature withthe avowed aim of securing human rights and democratic elections inMyanmar which was then under military rule and subject to sanctionsfrom the US federal government as well as the EU Specifically theMassachusetts law imposed sanctions on foreign as well as domesticfirms doing business in Myanmar with the aim of motivating suchfirms to withdraw from activities in that country
As Matthew Schaefer points out in an excellent analysis of the casethe MassachusettsMyanmar dispute illustrates two recurrenttensions in EUUS trade relations3 4 First the case illustrates theproblems encountered when individual US states like Massachusettswhich are not directly party to the WTO adopt laws and regulations in
27
possible contravention of WTO law Anticipating such problems duringthe negotiation of the 1994 Government Procurement Agreement(GPA) the European Union had emphasized the importance for the USof binding the states and the US federal government responded byasking each of the states to submit a voluntary lsquoletter of commitmentrsquoagreeing to be bound 37 states including Massachusetts submittedsuch letters resulting in a substantial but incomplete mechanism toensure state-level compliance with the GPA
Second the Massachusetts law in question also represents theextraterritorial application of US (state or federal) laws which employtrade and other economic provisions to secure a foreign policy aim (inthis case the cause of democracy and human rights in Myanmar)Specifically the Massachusetts law attempted to penalize not onlyAmerican firms but also foreign firms for investing in Myanmar even ifsuch investments were legal in those firmsrsquo home countries In thislatter sense the MassachusettsMyanmar case bears a strikingsimilarity to the extraterritorial sanctions applied by the US in thewell-known Helms-Burton and Iran-Libya Sanctions Acts in which theUS federal government adopted extraterritorial sanctions againstcorporations doing business in Cuba Iran and Libya (The latter caseswere resolved at least temporarily when President Clinton agreed in1998 to waive such sanctions in a bilateral agreement with the leadersof the European Union)
In the Massachusetts case the law was challenged before the WTO bythe European Union (joined by Japan) which sought to have the lawruled incompatible with US obligations under the GPA Before the WTOpanel could rule however the law was successfully challenged andoverruled under US federal law when the US Supreme Court held thatfederal action in this area (ie the federal sanctions law againstBurma) had pre-empted such sanctions by the State of Massachusettswhose law was therefore held to be unconstitutional
The successful resolution of the MassachusettsMyanmar disputesuggests several lessons for the prevention and settlement of similarcases in the future according to Schaefer In terms of disputeprevention he argues this case points to the importance of informingstate governors and legislators about the constitutional limitations onthe extraterritorial use of economic sanctions as well as theirobligations under WTO agreements (at least insofar as the statesthemselves agree to be bound by them) In terms of dispute settlementfinally the Massachusetts case suggests that litigation in domesticcourts under US law may be more a more effective and comprehensiveconstraint on state sanctions than WTO law which should thereforebe employed with restraint in such cases
28
35 Intellectual Property Rights The Irish Music Case
In addition to trade in goods and services and public procurementnational laws and regulations regarding intellectual property rightscan also have international trade repercussions even when thoseregulations apply without discrimination to domestic as well as foreignproducers Indeed protection of intellectual property has been thesubject of no fewer than 11 WTO disputes between the United Statesand the European Union since 1995 The challenges posed byintellectual property disputes are illustrated most strikingly by the so-called lsquoIrish music casersquo in which the European Union challengedprovisions of US copyright law before the World Trade Organization 3 5
The US law in question was the 1976 Copyright Act as amended bythe 1998 Fairness in Music Licensing Act Specifically Article 110(5) ofthe amended Act included a lsquobusiness exemptionrsquo according to whichestablishments such as bars shops and restaurants below a certainsize (ie 2000-3750 square feet) were allowed to play radio andtelevision music without paying fees to royalty-collecting bodies Therelevant provisions of the Act had been adopted only after long anddifficult negotiations between the representatives of US performingrights organizations on the one side and the National LicensedBeverage Association on the other and sought (however successfully)to balance the rights of copyright holders with the interests of smallrestaurant and bar owners
Although the US law applied equally to domestic as well as foreigncopyright holders in 1997 the Irish Music Rights Organization (IMRO)a collective music management company representing Irish musicianssuch as the rock group U2 filed a complaint about the law before theEuropean Commission IMRO claimed that the derogation in the lawwas in violation of US commitments under both the InternationalAgreement on Trade Related Aspects of International Property Rights(TRIPS) as well as the Berne Convention for the Protection of Literaryand Artistic Works since it failed to protect authorsrsquo rights resultingin an estimated loss of euro 121 million annually for IMROrsquos membersThe Commission having investigated the case agreed with IMRO thatthe law violated US obligations under the TRIPS agreement andinitiated a formal complaint before the World Trade Organization in1998
In June 2000 a WTO panel issued a decision in favour of theEuropean Union calling on the US to bring subparagraph (B) ofSection 110(5) of the Copyright Act (the aforementioned businessexemption) into conformity with the TRIPS agreement In response tothe panelrsquos report the United States announced that it would notappeal the panel decision but also that it would require time to amendits existing copyright legislation In the interim the United States andthe European Union agreed to establish a WTO arbitration panel
29
which would decide on the level of compensation to be granted by theUS to the EU pending modification of the Act In November 2001 thearbitrators accordingly assessed the annual losses suffered by EUcopyright owners and hence the level of compensation to be paid bythe United States at some $108 million In light of this finding EUTrade Commissioner Pascal Lamy and US Trade Representative (USTR)Robert Zoellick agreed the following month to a temporary solutionwhereby the USTR would seek authorization from Congress toestablish a special fund worth $33 million over three years to financeprojects and activities for the benefit of EU music creators pendingrevision of the US law
The December 2001 agreement between the US and the EU waspresented by EU Trade Commissioner Pascal Lamy as lsquoa good exampleof how we can manage our problems in a cooperative manner whilekeeping in mind our international commitmentsrsquo3 6 However while theUS and the EU have indeed reached an amicable three-year agreementon this issue the Irish Music case also serves as an additionalexample of the difficulties encountered by both sides in amendingdomestic regulations in response to trade concerns and WTO rulingsAlthough the European Union side insisted on the US obligation toamend its law and explicitly retained its right to return to the WTO inthe event of noncompliance at this writing there is no sign of anyimminent US effort to bring its domestic law into compliance and anextended US agreement to compensation remains a probablealternative for the foreseeable future
36 Dealing with Trade and Regulatory Conflicts
Transatlantic trade disputesmdashboth traditional disputes and new-styleregulatory conflictsmdashare inevitable in a relationship as close as EUUSrelationship and are not likely to disappear anytime in the nearfuture Many of these disputesmdashespecially old-style tariff quotasantidumping and subsidies disputesmdashare dealt with effectively by WTOdispute resolution New-style disputes however often involve domesticlaws adopted for legitimate purposes after democratic deliberation andlitigation in such cases can place severe strain on the WTO systemparticularly in cases like beef-hormones copyright and potentiallyGMOs where the losing party would have difficulty complying with anadverse WTO ruling
In light of these challenges scholars and practitioners haverecommended a range of potential reforms in US and EU domesticpolitics in the bilateral relationship and in the multilateral WTOsystem to prevent and settle regulatory disputes Although a complete
30
review of these recommendations is beyond the scope of this report3 7 some of the most promising proposed reforms include the following
bull Changes in Domestic Regulation Perhaps the most promisingsuggestions for reform are those that require no formal internationalagreement but rather domestic reforms that could be undertakeneither unilaterally or through an informal process of mutualcoordination The Transatlantic Business Dialogue for examplehas proposed that the United States and the European Union bothundertake to conduct lsquoTrade Impact Assessmentsrsquo of draftregulations so that legislators are made aware of the potential tradeimplications of proposed regulations before they are adopted Sucha procedural change could be undertaken within the respectivedomestic systems of the US and the EU and without compromisingthe regulatory sovereignty of either side and would have theadvantage of implicating legislators who thus far have been largelyabsent from the NTA process3 8 In a similar vein US observers haveadvocated the adoption by the EU of some form of advise-and-consent procedures for the adoption of regulations which wouldprovide domestic as well as foreign stakeholders with advancewarning of proposed regulations and improve the quality of EUgovernance more generally Finally as we have seen in theMassachusettsMyanmar case it has been proposed that theUnited States should do more in the future to implicate subfederalstates in international trade agreements and to inform them oftheir obligations under US constitutional as well as internationaltrade law
bull Changes in the Bilateral Relationship Notwithstanding theirincreasing complexity the institutions of the NTA and the TEP havenot prevented the rise of new regulatory disputes nor have theybeen able consistently to settle amicably all those that do arisegiven the difficulty for both sides of changing domestic regulationsadopted in response to legitimate public concerns Nevertheless anumber of bilateral reforms have recently been proposed includingmost notably the further development of the bilateral early warningsystem increased regulatory cooperation and the expansion of theTransatlantic Legislators Dialogue With regard to the firstinterviews with policy-makers on both sides of the Atlantic revealthat the early warning system has proven useful in identifyingobscure technical barriers to trade but the same policy-makersemphasize that increased early warning does not provide aguarantee that legislators or regulators will be willing or able toadjust domestic regulations and indeed the survey of regulatorydisputes undertaken above suggests that increased early warningwould not have been capable of resolving disputes over beefhormones or copyright where the primary impediment to resolutionof the disputes was not lack of information but the regulatorysovereignty of legislators and regulators on each side For this
31
reason particular emphasis has been placed on the promise ofenhanced regulatory cooperation (examined in detail in the nextsection) and on the further development of the TLD (where theprimary challenge will be to provide an incentive for domesticallyoriented parliamentarians and congressmen to participate intransatlantic consultations)
bull Reform of WTO Dispute Settlement The WTO Dispute SettlementUnderstanding establishes a binding and efficient system for theresolution of international trade disputes and most WTO memberstates are broadly satisfied with the operation of the systemNevertheless the WTO dispute resolution system is placed underparticular strain in regulatory disputes such as the beef-hormonesand Irish music cases reviewed above where it is called to balancetrade and regulatory objectives and where compliance is politicallydifficult for the losing parties In light of these weaknesses variousscholars and practitioners have suggested reforms to both WTOrules and to the DSU including most notably the clarification of thelsquoprecautionary principlersquo in WTO law and moving from retaliation tocompensation in cases of noncompliance with DSU rulings Both ofthese proposals merit further discussion in the coming review of theDispute Settlement Understanding (scheduled to be completed inMay 2003) and in the ongoing Doha Round of trade talks In themeantime the EU and the US would do well to continue theirgeneral pattern of restraint in addressing regulatory disputesbilaterally and avoiding any potential lsquooverloadingrsquo of the WTOdispute settlement procedure
Future negotiations between the EU and the US as well as futurestudies designed to inform those negotiations would do well to explorethe viability of these proposed reforms
32
ndash 4 ndashTransatlantic Regulatory Cooperation
One of the most striking features of the period since the 1995 NewTransatlantic Agenda has been the dramatic increase in both formaland informal cooperation among the regulatory authorities of theUnited States and the European Union In the past five years alonethe United States and the European Union have signed nine formalregulatory cooperation agreements in areas as diverse as competitionpolicy data privacy customs procedures veterinary standards andthe mutual recognition of testing and certification procedures (Table 8)These formal regulatory agreements moreover represent only afraction of the contacts that occur among US and EU regulators bothbilaterally and in various multilateral fora
41 Why Cooperate
The incentives for US and EU regulators to engage in formal andinformal cooperation vary across different issue-areas but cangenerally be classed into two broad categories3 9 First regulators maycooperate because they view such cooperation as useful in carrying outtheir essential rulemaking responsibilities in an increasingly integratedtransatlantic and global marketplace Such cooperation need not andtypically does not involve joint rulemaking activities but focusesinstead on exchanges of information identification of best practiceand early notification of new regulations being considered within eitherpolity In the area of food safety for example the EuropeanCommission and the US Food and Drug Administration have notidentified or implemented common standards for the reasonsdiscussed above yet the two regulators do engage in an ongoingdialogue both bilaterally and within the Codex Alimentarius (the globalbody for the establishment of food safety standards) and theCommission consulted extensively with its US counterparts in thedesign of the newly created European Food Safety Authority Similarbilateral exchanges occur regularly in other issue-areas as well aswithin multilateral standard-setting bodies such as the InternationalStandards Organization (for industrial standards) and theInternational Conference on Harmonization (for registration ofpharmaceuticals)
33
Table 8 Transatlantic Regulatory Cooperation Agreements
Agreement Targeted Regulations Year
Competition Policy Agreement Competition regulations 1991
ECUS Agreement on DrugPrecursors
Illicit drug regulations 1997
ECUS Customs and CooperationAgreement
Customs certifications 1997
EUUS General Mutual RecognitionAgreements
Conformity assessmenttesting in six sectorstelecommunicationsequipment electromagneticcompatibility electricalsafety recreational craftmedical devices andpharmaceutical goodmanufacturing practices
1997
EUUS Positive Comity Agreement Competition relations 1998
EUUS Agreement Concerning theEstablishment of Global TechnicalRegulations for Wheeled VehiclesEquipment and Parts
Technical regulations 1999
EUUS Veterinary EquivalenceAgreement
Animal export certifications 1999
EUUS Safe Harbour Agreement Data protection regulations 2000
Joint Declaration on USEUCooperation in the Field ofMetrology and MeasurementStandards
Measurement equivalence inproduct certification
2000
EUUS Agreement on MutualRecognition of Certificates ofConformity for Marine Equipment
Mutual recognition of marineequipment regulations
2001
EUUS Guidelines on RegulatoryCooperation and Transparency
Non-binding guidelines forcooperation among EU andUS regulators regardingtechnical barriers to trade
2002
Source European Commission DG TRADEhttpeuropaeuintcommtradebilateralusausahtm
34
A second and partially overlapping motivation for regulatorycooperation already touched on in Section 3 above is to avoid orresolve bilateral disputes about the potential trade-distorting effects ofnational regulations As we have seen domestic economic regulationscan become a source of transatlantic economic tension in two distinctways First domestic regulations in areas such as consumer orenvironmental protection food safety or copyright protection cancreate non-tariff barriers to international trade and investmentexamples include the recent disputes over the EUrsquos Data PrivacyDirective and its ban on hormone-treated beef as well as exemptionsto the US Copyright Act Second US and EU domestic regulators mayapply their domestic regulations in an extrajurisdictional fashion asfor example when EU and US competition authorities insist on theright to review mergers among firms in the other constituency insofaras the proposed merger creates effects in the regulatorrsquos domesticjurisdiction or when the US (or its constituent states) employs tradeand economic sanctions as an instrument of foreign policy In suchcases George Bermann has pointed out lsquothe line between simpleregulatory [cooperation] hellip and the settlement of trade disputes canbecome highly blurredrsquo4 0
The full range of regulatory cooperation agreements and practicesbetween the United States and the European Union is beyond thescope of this preliminary report Indeed interviews with practitionersfrom the United States and the European Union reveal thatconsiderable informal cooperation takes place across virtually everyconceivable area of US and EU regulation with little attention from thepress scholars or political actors Even in the absence of a full-scalecross-sectoral analysis however we can nevertheless undertake threebrief case studies of regulatory cooperation in the fields of competitionpolicy the negotiation of EUUS Mutual Recognition Agreements andthe Safe Harbour Agreement on data privacy regulation Takentogether these three cases illustrate the range of incentives forregulatory cooperation as well as the various means for suchcooperation and the significant obstacles that often stand in its way
42 Case Study Transatlantic Competition Policy Cooperation
One of the earliest regulatory cooperation agreements signed betweenEU and US authorities and one of the most successful concernscooperation in the enforcement of each sidersquos respective competitionpolicy laws including most notably the examination of proposedmergers and acquisitions
The incentives for cooperation in this area are substantial4 1 First asin other areas of regulation EU and US regulators confront similarproblems and are increasingly called upon to rule upon the samecases placing a premium on the sharing of information Second both
35
US and EU courts have ruled that their respective regulatorsmdashnamelythe Department of Justice and the Federal Trade Commission on theUS side and the Directorate-General for Competition on the EUsidemdashmay enforce domestic competition laws extraterritorially againstfirms based outside their domestic jurisdiction if and insofar thebehavior in question (eg a proposed merger) produces effects oncompetition in the domestic market Such extraterritorial applicationof both EU and US competition law raises serious issues about theduplication of effort by the two sets of regulators not to mention theadverse economic and political impact of inconsistent or conflictingdecisions on the same case by EU and US regulators
These concerns increased substantially in the early 1990s moreoverwith the rapid rise in cross-border mergers and acquisitions thataccompanied the completion of the Unionrsquos lsquo1992rsquo internal marketinitiative At approximately the same time moreover the EuropeanUnion adopted the 1990 Merger Control Regulation which gave theCommission regulatory authority to review mergers above certain sizethresholds and made the Commission an important interlocutor forthe EU in this area It was in this context of increasing cross-bordermergers and increasing EU authority over such mergers thatCompetition Commissioner Leon Brittan proposed in 1990 to expandEU competition policy cooperation with third countries beginning witha formal agreement with the United States US regulators respondedpositively to Brittanrsquos proposal and US and EU regulators agreed in1991 to adopt an agreement committing them to cooperation in thearea of competition policy including the sharing of non-confidentialinformation and coordination of enforcement activities This agreementwas later supplemented by two secondary agreements the 1998Positive Comity Agreement (which seeks to restrict the extra-territorialapplication of antitrust laws in non-merger cases but has beenformally invoked only once) and by the 1999 AdministrativeArrangements on Attendance in Hearings (which provide guidelines forthe participation of EU and US regulators in each otherrsquos hearings)
In the decade since the signature of the first Competition PolicyAgreement EUUS competition policy cooperation has generallyoperated smoothly and successfully with regulators from theCommission the Justice Department and the FTC sharing informationand coordinating enforcement activities on a daily basis andcooperating successfully on over 600 cases during the course of the1990s including almost 500 merger decisions The general success ofEUUS competition policy cooperation in the area of merger controlcan be attributed to the broad transatlantic agreement among EU andUS regulators about the basic scope and tools of policy which hasfacilitated the task of coordinating enforcement actions and generatingmutual trust among regulators
36
Nevertheless as Youri Devuyst points out in an excellent review oftransatlantic competition policy cooperation successful cooperationand conflict prevention between US and EU regulators can behampered by persistent differences in the scope and focus of US andEU competition law the procedures employed by both sides and theexigencies of confidentiality which limit the sharing of information byUS and EU agencies These limitations can be illustrated in theatypical but well-known BoeingMcDonnell Douglas merger (bothAmerican firms) which was approved by the FTC in July 1997 only tobe held up by Commission insistence that the companies agree toformal undertakings to satisfy its competition concerns Although thecase caused substantial strains in the transatlantic relationship thecompanies concerned eventually agreed to the Commissionrsquos proposedremedies allowing the merger to proceed4 2
An even more dramatic difference of opinion occurred with regard tothe proposed merger of two other US firms GE and Honeywell in2001 Here again US regulators approved the proposed merger only tosee the European Commission reject it in July 2001 after announcingthat the firmsrsquo proposed remedies had failed to satisfy theCommissionrsquos concerns Perhaps most strikingly and unlike theprevious case of EUUS disagreement in the BoeingMcDonnellDouglas merger a number of analysts claimed that the disagreementbetween US and EU regulators reflected an underlying andfundamental difference in the criteria for assessing proposedmergers4 3 Although the resulting predictions of other imminentUSEU conflicts are almost certainly overstated it is worthwhilenoting that the Commission in its December 2001 Green Paper on thereview of the Merger Control Regulation proposes to launch a debateon whether the Union should abandon its traditional lsquodominance testrsquo(ie assessing whether a proposed merger would create a dominantposition for the merged firm in the relevant market) in favour of alsquosubstantial lessening of competitionrsquo test (similar to that already usedin the US Canada and Australia)4 4 Whether the Union will move inthis direction remains unclear If so however it would represent astriking example of regulatory convergence among regulators alreadynotable for their similar (if not identical) regulatory philosophies andprocedures
43 Case Study EUUS Mutual Recognition Agreements4 5
As transatlantic tariff barriers have decreased firms have becomemore concerned with what they term duplicative regulatory compliancecosts and many have pressed for their removal This pressure hasincreased with rising transatlantic investment since divergent EU andUS standards and certification requirements most directly affecttransatlantic corporate groups and these groups more easilycoordinate lobbying on both sides of the Atlantic4 6 Transatlantic firms
37
under the auspices of the Transatlantic Business Dialogue inparticular have pressed for enhanced regulatory cooperation throughmutual recognition agreements culminating in the 1997 EUUSMutual Recognition Agreement (MRA) providing for mutual recognitionof testing and certification requirements and the more ambitious MRArelating to marine equipment signed in 2000 These agreements havebeen promoted as a major achievement of the New TransatlanticAgenda and as a flexible means of reconciling the regulatoryapproaches of the United States and the European Union andfacilitating access to both domestic markets
Notwithstanding these potential advantages however majorchallenges for transatlantic regulatory cooperation in this and otherareas are posed by the significant institutional asymmetries betweenthe United Statesrsquo and EUrsquos respective regulatory systems in an arrayof fields Where regulators adopt similar regulatory structures andsystems and enact similar substantive standards they more easilyunderstand and accept each otherrsquos regulatory determinationsRegulatory symmetry facilitates regulatory trust and confidenceenabling regulatory cooperation to occur as in the competition policycase examined above
In many issue-areas however US and EU regulators tend to work indifferent regulatory cultures Generally EU and national regulatorsoperate under the dual mission of ensuring free trade within theinternal market on the one hand while ensuring public safety throughhigh product and process standards on the other They thus are quiteaccustomed to interacting with foreign regulators and testing bodies onan ongoing basis As a consequence the Commissionrsquos DG Enterpriseand DG Trade units rarely tousled when negotiating and implementingthe 1997 Mutual Recognition Agreement The US Food and DrugAdministration (FDA) by contrast has traditionally defined its rolesolely as that of protecting US public health and has not operatedunder a dual mission of also facilitating market exchange Because theFDA is an independent regulatory authority anxious to protect itsregulatory autonomy US trade and commerce authorities encountermore difficulties in negotiating bilateral agreements concerning areaswithin the FDArsquos jurisdiction
Overall institutional adaptation for the negotiation andimplementation the 1997 MRA has been much easier for the EUwhich already has a mechanism for coordinating the mutualrecognition of product testing and certification among fifteen memberstates speaking eleven different languages This relatively deregulatedsystem consists of EU legislators setting lsquoessential requirementsrsquo in EUlsquonew approachrsquo directives which are supplemented by large numbersof harmonized lsquovoluntaryrsquo technical standards that in turn are widelyadopted Before marketing their products firms either self-certify theircompliance with these requirements or hire accredited testing and
38
certification laboratories Firms and laboratories remain subject topost-marketing member state regulatory controls as well as market-reputational constraints Member state regulators interact on a regularbasis through working groups committees and informalarrangements Overall this EU system can be characterized asgovernance by coordinated cross-border public-private networks
US regulatory officials however oversaw very different regulatorysystems in the areas covered by the 1997 MRA For example the USFederal Communications Commission (FCC) itself certified alltelecommunications equipment until the negotiation of thetransatlantic mutual recognition agreement at which time it adopted adecentralized EU model of certification The FDA continues to certifymost medical devices whereas EU authorities have permitted testingby private notified bodies since the mid-1990s The US OccupationalHealth and Safety Administration (OSHA) requires OSHA-accreditedlaboratories to certify all electrical safety equipment used in theworkplace whereas the EU has permitted manufacturers to self-certifythe equipmentrsquos conformity with European requirements since 1973
EU and US authorities began to seriously address issues of regulatorycoordination at the beginning of the 1990s In May 1989 US Secretaryof Commerce Robert Mosbacher and Commission Vice-PresidentMartin Bangemann agreed to explore the possibility of transatlanticmutual recognition agreements as well as mechanisms to grant USfirms greater access to EU standard-setting procedures After 1995these efforts were championed explicitly and repeatedly byTransatlantic Business Dialogue which became a prominent advocateof transatlantic MRAs4 7
EU and US negotiators initially discussed negotiating mutualrecognition arrangements in eleven sectors but ultimately whittledthis down to six4 8 In consequence the 1997 MRA consists of aframework agreement and six annexes respectively coveringtelecommunications equipment electromagnetic compatibilityelectrical safety recreational craft medical devices andpharmaceutical good manufacturing practices Each of the annexes isin fact a separate agreement for a separate sector covering definedcategories and lists of products
As with all trade negotiations the EU and the United States wereconcerned that the final results be lsquobalancedrsquo The United Stateswished to conclude an agreement on telecommunications equipmentfirst but the EU refused because it felt that US firms would benefitmore if the agreement covered only this sector EU negotiators thusinsisted that an agreement on pharmaceuticals and medical devices becompleted simultaneously The MRA sets up a new transatlanticstructure for overseeing its implementation First the MRA creates aJoint Committee which consists of US and EU trade officials who meet
39
twice annually Second the annexes create Joint Sectoral Committeesto oversee the annexesrsquo implementation
The 1997 Mutual Recognition Agreement does not cover recognition ofthe adequacy or equivalency of US and EU standards as such Ratherthe 1997 MRA only addresses mutual recognition by certificationbodies (known as lsquoConformity Assessment Bodiesrsquo) of each otherrsquosseparate standards4 9 Since neither the United States nor the EUrelinquishes sovereign control over the substance of their standardstrading firms still must meet the separate requirements of the worldrsquostwo largest markets In addition these assessment evaluations aresubject to certain pre-approval and post-approval conditions
Implementation of the 1997 MRA moreover remains uneven Thetelecommunications electromagnetic compatibility and recreationalcraft annexes all have been implemented as required In contrastimplementation of the electrical safety medical device andpharmaceutical GMP annexes remain in dispute in part because theFDA and OSHA have been slow to recognize the equivalency ofcertification by European government regulators or privatelaboratories and in part because of the magnitude and theunfamiliarity of US regulatorsrsquo task in assessing the equivalence ofstandards from 15 different member states submitting documentationin up to 11 different languages5 0 In the words of one FDA official theFDA has lsquorefused to compromise its mission of protecting public healthfor balance of trade purposesrsquo5 1 Thus all three annexes initiallydesired by the US administration are in operation while the threeannexes desired by the Commission are not Since the US executivehas less control over the US agencies responsible for implementationboth partiesrsquo choices are somewhat constrained
On June 12 2001 the United States and the EU initialed anAgreement on Mutual Recognition of Certificates of Conformity forMarine Equipment5 2 Unlike the 1997 Mutual Recognition Agreementand its six annexes this new agreement provides for mutualrecognition of each partiesrsquo standards and procedures as lsquoequivalentrsquofor purposes of certifications issued by conformity assessment bodieslocated in the partiesrsquo respective territories (Articles 3 and 4) Pre-existing harmonization of standards in this sector made possible thepartiesrsquo mutual recognition of lsquoequivalencersquo These standards wereagreed under the auspices of the International Maritime Organization(IMO) located in Geneva This new mutual recognition agreementshould be much easier to implement because less training andinformation exchange are required insofar as testing bodies will not becertifying under separate standards or procedures The parties alsoagreed up-front to recognize each otherrsquos existing conformityassessment bodies so that no application procedures are required forimplementation (Article 6) Thus while this agreement is relativelynarrow in product coverage it is much broader in scope
40
Transatlantic businesses that first touted the benefits of EUUSmutual recognition arrangements now realize their underestimation ofthe difficulties of implementation5 3 These constraints involve not justregulators and regulatory cultures but market forces as well Themarket has not reacted favourably to the recognition of newConformity Assessment Bodies as provided under the 1997 MRA Fromthe perspective of manufacturers they typically develop long-termworking relationships with certifying laboratories which constitute aform of cost-effective firm-laboratory partnership Moreover alaboratoryrsquos mark itself may be important in some markets so thatfirms may continue obtaining formal certification from EU notifiedbodies for the EU market and US laboratories for the United States Asa result most firms may continue using the same laboratories eventhough these laboratories cannot directly certify products asConformity Assessment Bodies but must work through sub-contracting arrangements with accredited laboratories on the otherside of the Atlantic5 4 As for laboratories they will not invest in theaccreditation procedures required to become a Conformity AssessmentBody if they fear that the benefits are limited or too uncertainAccreditation costs can be substantial involving seminars workshopstraining programs audits and joint inspections with authorities acrossthe Atlantic The MRArsquos success in consequence may requireconsiderable market promotion
Perhaps the most important lesson from the implementation of theEUUS MRAs is that agreements that both guarantee public safetyand reduce trade barriers cannot be accomplished on the cheap Theyrequire sustained political will of leaders in each jurisdiction to allocatesignificant resources to finance the coordination of cross-borderregulatory networks EU member states sustained such political willand dedicated such resources over decades in order to create thesingle market Even so they too have encountered significant setbacksand obstacles While it is far too early to pre-judge the 1997 MRA itseems clear that the full benefits of the agreement will be reaped only ifboth sides take concrete steps to ensure that sufficient regulatoryresources are made available to the regulators charged withimplementing the agreement in practice
44 Case Study Data Privacy and the Safe Harbour Agreement5 5
Data privacy protection became a transatlantic issue because of thegrowing interdependence of the US and European economies and therising importance of information technology US affiliates in Europeproduce over a trillion dollars of goods and services annuallyconstituting lsquoover half of all the foreign production of US companiesrsquo5 6
These companies depend on information flows not only with thirdparty suppliers customers consultants marketers and other serviceproviders but also internally within their complex networks of
41
affiliates joint ventures and partnerships The EUUS dispute overdata privacy protection and efforts at cooperation demonstrate theinherent interrelation between social regulation and open trade policieswhere regulation (or the lack thereof) has external effects Alleged USunder-regulation can jeopardize the privacy interests of EU residentsAlleged EU over-regulation can limit the commercial operations of USenterprises In an interdependent transatlantic economy US and EUauthorities attempt to manage the ensuing conflicts of norms andmesh where possible their divergent regulatory systems
On October 24 1998 Directive 9546EC on the Protection ofIndividuals with Regard to the Processing of Personal Data and theFree Movement of Such Data became effective The EU through itsDirective takes primarily a regulatory approach to data privacyprotection as opposed to private ordering through market processesExcept for public security criminal law and related exceptions theDirective covers all processing of all personal data by whatever meansand is not limited to action by government business sector or field ofuse (arts 2-3) The Directive prohibits data controllers from processinginformation unless the individual lsquounambiguouslyrsquo consents to theprocessing and that consent is informed (arts 7 8 10 14) TheDirective provides multiple means for enforcement It requires memberstates to grant individuals a permanent right of access to obtain copiesof the data about them and have it corrected or its use enjoined (arts12 28) It obliges member states to provide a judicial remedy forinfringements of data privacy rights including the right to receivedamages (arts 22-24) To support effective enforcement each memberstate must designate an independent public authority lsquoresponsible formonitoring the application within its territoryrsquo of the Directiversquosprovisions (art 28) These supervisory authorities are to be grantedsignificant powers (arts 18 28)5 7
In contrast the United States has stressed lsquoself-regulationrsquo by theprivate sector backed by regulation which tends to be sector-specificand less stringent Congressrsquos targeting of specific sectors andconcerns is reflected in the following statutory titles The DriverrsquosPrivacy Protection Act of 1994 the Video Privacy Protection Act of1988 The Electronic Communications Privacy Act of 1986 the CableCommunications Policy Act of 1984 and The Fair Credit Reporting Actof 1971 Overall the US approach is fragmented involving standard-setting and enforcement by a wide variety of actors including federaland state legislatures agencies and courts industry associationsindividual companies and market forces US legislation providescitizens with significantly greater protection against the collection anduse of personal information by government in particular the federalgovernment than by the private sector
Article 25 of the EU Directive provides that member states shallprohibit all data transfers to a third country if the Commission finds
42
that the country does not ensure lsquoan adequate level of protectionrsquo ofdata privacy Since it appeared that the United States might notprovide for lsquoadequatersquo data privacy protection under the Directiversquoscriteria US and EU authorities engaged in intensive negotiations toavoid a ban on data flows to the United States culminating in theiragreement on Safe Harbour Principles in March 20005 8 Under theagreement EU member states now must recognize that US firmsrsquoadherence to these Principles is sufficient to protect them frommember state challenge Member state authorities however may stillchallenge transfers to firms that do not adopt and comply with thePrinciples
The guidelines set forth seven core data privacy principles for industryto follow which respectively cover the following issues Notice ChoiceOnward Transfer Security Data Integrity Access and EnforcementThe parties supplemented the Principles with a document entitledlsquoFrequently Asked Questionsrsquo (FAQs) designed to guide firms andauthorities in the Principlesrsquo application Many of the FAQs specify thescope of exceptions thereby providing some leeway to US firms
Companies join the Safe Harbour program by annually certifying to theUS Department of Commerce that they will comply with the PrinciplesThe Department of Commerce then places the companyrsquos name on itsweb site list of certifying firms Self-regulatory organizations (such asBBB Online and TRUSTe) backed by the US Federal TradeCommission offer the primary means for the Principlesrsquo enforcementIn this way the Principlesrsquo application resembles the EUrsquos new andglobal approaches to internal market harmonization5 9 As under thenew approach the Safe Harbour Principles set forth lsquoessentialrequirementsrsquo that firms must meet As under the global approachfirms self-certify their adherence which certification is backed first byaudits from self-regulatory organizations and then (ultimately) by theauthority of the state As of February 23 2002 156 companies hadcertified their adherence to the Principles
The Directive also provides other ways to comply with it in particularthrough obtaining lsquounambiguousrsquo consent from the lsquodata subjectrsquo inEurope (art 7) and the signature of a lsquomodel contractrsquo with data privacyauthorities in member states (Article 26) In January 2002 theCommission approved standard contract clauses covering privacyprotection that can be applied to all data transfers from the EUregardless of a firmrsquos adherence to the Safe Harbour Principles Firmsalso can sign ad hoc contracts with individual member state dataprivacy authorities In addition firms can sign contracts with affiliateswhen transferring personal information such as information containedin personnel files
The Safe Harbour Principles are still at an inchoate stage so that itremains too early to assess their impact Some commentators have
43
questioned the effectiveness of the Principles given that relatively fewUS companies have signed them However some practitioners pointout that companies will not certify their procedures until theiroperations are in compliance6 0 For large companies this allegedly caninvolve considerable re-engineering of their information systemscreation of new internal policies and training of personnel
Nonetheless companies engaged in transatlantic business operate inthe shadow of the Directiversquos potential enforcement Under theDirective US businesses face potential litigation before Europeancourts and administrative bodies unless they adhere to the SafeHarbour Principles Even though privacy advocates have criticized theSafe Harbour Principles the agreement represents a potentially usefultool for such advocates In addition the agreement has increased thedemand for legal consulting and other privacy services within theUnited States For example the Better Business Bureau OnLinecreated a privacy seal program which incorporates the Safe HarbourPrinciples and the Electronic Frontier Foundation a public interestorganization has associated with information technology companies tolaunch a program named TRUSTe to rate the privacy protection ofInternet sites which program also is certified under Safe Harbour
In a world of increased economic interdependence the Safe HarbourPrinciples point to the importance of regulatory cooperation acrossborders involving public and private actors Certification groups suchas BBB OnLine meet with European data protection officials so thatthey become comfortable in the workings of an alternative USapproach Government officials including in Europe realize that theydo not have the resources to enforce the Directiversquos provisions solelyon their own and thus rely on public-private networks in an attemptto ensure better global practices affecting EU constituentsNonetheless to make the Principles work will require sustained cross-border cooperation
45 The Challenge of Transatlantic Regulatory Cooperation
Although brief and selective this review of cooperation across threesectors suggests several tentative conclusions about both the benefitsand the potential obstacles to transatlantic regulatory cooperation
With regard to the potential benefits of transatlantic regulatorycooperation we have identified two First as we have seen regulatorycooperation has the potential to enhance the efficiency of regulationthrough the exchange of information and best practice the provision ofearly warning of potential disputes the avoidance or management ofconflicting regulatory decisions and the gradual building of mutualtrust among regulators Second regulatory cooperation can facilitatetransatlantic trade and investment by removing duplicative regulatory
44
requirements and other non-tariff barriers within the transatlanticmarketplace Such cooperation moreover need not involve thecomplete harmonization or convergence of EU and US regulationsalthough there is some preliminary evidence of convergence in specificissue-areas including the acceptance by the United States of a mutualrecognition scheme similar to that long practiced in the EuropeanUnion and the EUrsquos active discussion of moving from its currentlsquodominance testrsquo to a possible new standard for regulatory mergerscloser to that employed by competition authorities in the UnitedStates
Yet despite the obvious promise of transatlantic regulatorycooperation a broad survey of EUUS cooperation in various areasincluding the three case studies analyzed above points to a number ofpotential obstacles to successful transatlantic regulatory cooperation
bull Regulatory Independence In a number of areas US regulatorsenjoy greater regulatory independence than their Europeancounterparts and may resist what they perceive to be an effort tocompromise domestic regulatory standards and processes in theinterests of international trade The result in some cases is that theUSTR and other central agencies of the federal governmentencounter difficulty guaranteeing compliance with regulatoryagreements by specific regulatory agencies such as the FDA andOSHA if and insofar as these agencies believe that implementationof those agreements would compromise established US regulatorystandards and procedures
bull Transparency and Administrative Law Requirements Across awide range of issue-areas US regulators express concern about thedifferent administrative-law requirements for regulators in the USand the European Union most notably in the area of transparencyIn the United States regulators are required to adhere to thelsquonotice-and-commentrsquo rulemaking procedures of the AdministrativeProcedure Act which requires agencies to provide public notice ofproposed regulations in the Federal Register allow individuals tosubmit comments prior to the final adoption of new rules and keepa public record of the regulatory process The EU rulemakingprocedure although typically characterized by widespreadconsultation of interested parties does not incorporate thesefeatures
bull Confidential Information T h e need to pr o tect con f id e n tia lin f or m a ti on of fir m s an d ot h er pr iva te pa r tie s also pla ce s lim i ts on th ea b i lity of both sid es to co op er a t e in th e ad o p tion an d im p lem en ta tion of reg ula tion s pa r ti cula r l y in th e en f or cem e n t of US an d EU com p etiti on la w s reg a r d in g ca r tel s an d con cen tr a tio n s wh er e fi r m sh a v e been mor e reluct a n t to ag r ee to th e sh a r in g of con f i d en tia lin f or m a ti on th a n in th e ar e a of mer g er con tr o l revi ew ed ab ove
45
bull Multi-Level Governance The United States and the EuropeanUnion are both federal or quasi-federal governance systems withregulatory powers divided in most sectors between the federalEUlevel on the one hand and individual statesmember states or evenlocal governments on the other In terms of regulatory cooperationthis division of regulatory powers means that US executive-branchnegotiators and EU Commission officials are frequently chargedwith negotiating regulatory agreements in areas where the statesretain at least partial regulatory competence and to charges fromboth sides that their counterparts are unable to lsquodeliver the statesrsquoExamples of such state regulatory powers on the US side includethe regulation of insurance and other services as well as publicprocurement where the EU has insisted that the participation ofindividual states is vital to the enforcement of regulatoryagreements6 1 Similar problems afflict the EU side whereCommission efforts to engage in regulatory cooperation may befrustrated by resistance among individual member states as in thecase of GMOs or by the slow adoption of EU-level regulations as inthe case of financial services
bull Regulatory Sovereignty Ultimately the adoption of the broadregulatory frameworks for economic activity consumer andenvironmental protection and other areas is entrusted on bothsides of the Atlantic to democratically accountable bodies such asthe Congress and President in the US and the Council of Ministersand European Parliament in the European Union Within theEuropean Union the harmonization and mutual recognition ofnational regulations has been accomplished in large part through adeliberate transfer of regulatory sovereignty to the European level(as in EU merger control) through the pooling of regulatorysovereignty in the Council of Ministers and the EuropeanParliament (as in data privacy and food safety) and through themutual recognition of standards as enforced by the European Courtof Justice To date however the European Union and the UnitedStates have proven unwilling to compromise their regulatorysovereignty in the various agreements reviewed above indeed eventhe most successful experiment in transatlantic regulatorycooperation that in competition policy is predicated explicitly oneach sidersquos ability to cooperate without any substantial change to itsdomestic regulatory objectives and procedures
The existence of these various obstacles does not of course mean thattransatlantic regulatory cooperation is doomed to failure Some areaslike competition policy are subject to relatively few obstacles tosuccessful cooperation while others such as food safety encountermultiple obstacles Even in difficult areas like food safety moreoverregular exchange of information has proven useful in allowingregulators on each side to understand each otherrsquos regulatoryphilosophies and procedures and gradually to build up the trust
46
among regulators that will be required for the successful operation offuture efforts at mutual recognition or harmonization of regulations
As a first step in this direction the European Union and the UnitedStates agreed in April 2002 to the adoption of a set of non-bindinglsquoEUUS Guidelines on Regulatory Cooperation and TransparencyrsquoAlthough this joint statement of principles does not bind either the USor the EU to any specific regulatory measures and explicitly excludesthe sensitive area of agriculture the agreement does call forregularized exchange of information between EU and US regulatorsand for consideration of harmonization or mutual recognition ofstandards lsquoas may be appropriate in specific casesrsquo to minimizeunnecessary technical barriers to trade In addition the documentsuggests that both EU and US regulators should apply potentially far-reaching principles of transparency in rule-making including publicnotification of and comment on proposed regulations Theimplementation of the guidelines is to be reviewed on an ongoing basisby the TEPTBT Working Group6 2
The significance of the new EUUS Guidelines will depend on theirimplementation in practice across an array of issue-areas in themonths and years to come Regardless of the success of this specificendeavor however regulatory cooperation remains an importantpriority for the European Union and the United States in achievingtheir respective regulatory aims while also preventing and resolvingpotential trade disputes For this reason the conclusion to this reportsuggests a careful and systematic study of current attempts atregulatory cooperation across issue-areas identifying key obstaclesand lsquobest practicersquo at overcoming those obstacles would represent asubstantial contribution to future efforts in this area
47
ndash 5 ndashThe European Union and the Americas
EUUS economic relations do not take place in a vacuum As wehave seen transatlantic efforts at trade liberalization regulatorycooperation and dispute resolution are nested within and frequentlymake explicit use of the rules-based multilateral trading system of theWorld Trade Organization the next round of which both the UnitedStates and the European Union have identified as a priority in thecoming years
Just as importantly the story of the EUrsquos ever-closer economicrelationship with the United States coincides with a second majordevelopment namely the rapid increase of EU trade with the countriesof North and South America Prior to the 1990s the United States wasthe most important trading partner and the largest source of foreigndirect investment in Canada Mexico and throughout most of LatinAmerica and this important role for the US has been further enhancedby the adoption and implementation of the North American Free TradeAgreement (NAFTA) with Mexico and Canada as well the earlynegotiations regarding the possible creation of a multilateral FreeTrade Area of the Americas During the course of the 1990s howeverthe European Union has developed an increasingly close andinstitutionalized relationship with Canada Mexico the Mercosurcustoms union and other countries of Central and South Americawhere it now rivals the economic importance of the United States
In institutional terms the EUUS relationship finds its closestcounterpart in the Unionrsquos bilateral relationship with Canadamdashthisdespite an EUCanada economic relationship that is dwarfed by eachsidersquos economic relationship with the US In economic terms theEUCanada relationship is substantially less important than Canadarsquosbilateral relationship with the United States which is far and awayCanadarsquos largest trading partner taking some 87 of total Canadianexports The integration of Canadarsquos economy with that of other Northand South American states moreover has increased in recent yearswith the implementation of NAFTA and a free trade agreement withChile Nevertheless the European Union ranks as Canadarsquos second-largest trading partner after the United States while Canada accountsfor approximately 17 of EU imports and 22 of total EU exports Asin the EUUS relationship moreover foreign direct investment has
48
outpaced trade as a source of interdependence in the EUCanadarelationship with Canada holding 32 of all FDI in the Union whilethe EU is the second largest investor in Canada after the US holdingsome 8 of all foreign direct investment in Canada6 3
Institutionally the EUCanada relationship is structured by a series ofbilateral agreements including the 1990 Declaration on EuropeanCommunity-Canada Relations and the 1996 Joint Political Declarationon EU-Canada Relations and its accompanying Joint EU-CanadaAction Plan and by a series of regular high-level summits that parallelthose held between the EU and the US The EU and Canada have alsosigned a number of important regulatory cooperation agreements inrecent years including a 1996 customs cooperation agreement a setof Mutual Recognition Agreements agreed in 1998 and agreements onveterinary equivalence and cooperation policy cooperation both signedin 1999 Trade disputes between the EU and Canada are relativelyrare and have generally been dealt with successfully through bilateralconsultation or through the WTO dispute resolution procedure6 4
The Union has come also to play an increasingly important economicrole in Latin America characterized by a sharp increase in both tradeand especially foreign direct investment in the region At the sametime the Union has pursued a wide range of trade and economicagreements with the countries of Latin America including a free tradeagreement with Mexico and other agreements with Mercosur andother Latin American countries In the rest of this section thereforewe examine the EUrsquos economic relationship with the countries of LatinAmerica focusing in turn on the changing patterns of EULatinAmerican trade and investment EU economic agreements with thecountries of the region and the remaining challenges for the EULatinAmerica relationship
51 The EU and Latin America Trade and Investment
The pattern of the trade relationships between the EU and the mainLatin American countries has changed substantially during the lastdecade Although none of them was a major trade partner the largercountries of Latin America already represented an importantproportion of EU exports and imports in 1990 when Mercosur plusMexico and Chile accounted for 43 of extra-EU exports and 32 ofits imports The trade balance was very favourable to the Europeanside with a deficit of over US$8 billion During the 1990s Europeconsolidated its Latin American export markets and increased itsmarket share in Argentina Mexico Chile and especially Brazil In2000 the EU maintained the proportion of its exports towards theanalysed countries while increasing the proportion of imports up to35 The trade balance has improved versus Argentina Mexicoand Brazil whereas the deficit has increased significantly with Chile
49
The total deficit with the countries has now turned into a surplus ofmore than 5 billion
Table 9 EULatin American Trade and Investment(ExportsImports and Foreign Direct Investment as apercentage of total extra-EU flows Trade Balances aremillions of US$)
of EUexports
of EUimports
Trade balance of EUFDI
1990 2000 1990 2000 1990 2000 1999 2000
Argentina 03 08 08 06 -2252 737 54 15
Brazil 25 18 09 17 -5711 -1031 38 53
MERCOSUR 28 25 19 23 -8368 301 92 68
Mexico 11 15 07 07 1231 6973 06 08
Chile 03 04 06 05 -1336 -1653 19 ---
Note figures with an asterisk correspond to year 1999Source European Commission DG-Trade
Moving from Latin America as a whole to individual countries andgroupings we come first to the Mercosur countries (Argentina BrazilParaguay and Uruguay) which created a customs union in 1994 andhave since increased partly thanks to their own process of economicintegration their openness towards the rest of the world6 5 The twosmallest countries are considerably more open (a tradeGDP ratio of70 in Paraguay and 33 in Uruguay in 1999) whereas thisproportion is 19 in Argentina and 15 in Brazil6 6 Although intra-area trade accounts for 20 of their total flows trade with NAFTA andthe EU has also increased during the nineties The financial crises ofthe end of the decade have especially since 1998 temporally put ahalt in the process and affected their external demand By 2000 theEU as a bloc had overtaken the United States as Mercosurrsquos singlelargest trade partner representing 30 of their exports and 35 oftheir imports
The EU and Mercosur can be considered complementary economicblocs in both agricultural and industrial products The EU is the mainexport market for Mercosur agriculture with a 40 share (the USrepresents only 9) More precisely 50 of Mercosur exports towardsthe EU are agricultural products and are concentrated in a smallrange of products such as oilseeds (particularly soy) and animal feedproducts We should also mention coffee (10 of EU imports fromMercosur) livestock and meat and derivatives fruit and derivativestobacco and fish products In contrast EU exports of agricultural
50
products to Mercosur are modest (approximately 6 of total) and areconcentrated in three groups of products alcoholic beverages dairyproducts and other edible animal products and cocoa derivatives Thetrade balance is negative for the EU in agricultural products althoughthe opposite happens in the case of industrial goods The EU is themain supplier of industrial and capital goods to the area includingmost importantly automobiles machinery and mechanical appliancesand a third group of products from the electrical industry (mainlyradiotelephony appliances and parts)
Economic relations between Argentina and the EU developed verypositively since the signature in 1990 of the ECArgentina frameworkagreement on trade and economic co-operation During the 1990sArgentina advanced towards being an open market economy and optedfor an outward-looking external policy where Mercosur and the EUplayed a key role The EU is Argentinarsquos second largest trading partner(after Brazil) overall trade with the EU has more than doubled duringthe last 10 years and represents around 25 of total trade Howeverthe crisis that started at the end of last decade has interrupted thispositive trend The main components of EU imports are agriculturalproducts and raw materials while EU exports to Argentina concentrateon machinery and transport equipment chemicals and manufacturedgoods
Brazil is the largest Latin American economy its GDP accounting for35 of the area or 65 of Mercosur Brazilrsquos domestic market with apopulation over 160 million people constitutes a potentially attractivedestination for both US and EU exports Brazil also signed a co-operation agreement in 1995 with the EU which is now its maintrading partner destination of 268 of its exports and origin of 252of its imports although the US follows very closely (243 and 233respectively) Although during the last years the EU has progressivelyreduced its share of the Brazilian market in favour of the US Brazilremains the EUrsquos main trade partner in Latin America Like Argentinathe process of opening to international competition started between1990 and 1993 As a result Brazilrsquos trade surpluses of the 1990squickly turned into substantial deficits later in the decade only slowlycorrected after the 1999 devaluation The main components of EUimports (1999 data) were vegetable products prepared foodstuffsmineral products transportation equipment wood and wood pulpproducts and machinery and mechanical appliances the latter alsoimportant in EU exports together with transportation equipmentchemical products base metals plastics and rubber
Mexico is the tenth-largest world economy and the most importantLatin-American exporter its total exports amounting to US$166 billionin 2000 In order to qualify its relative size it should be compared withBrazil the second larger exporter in the region (and ninth worldeconomy in terms of GDP) which exported only US$55 billion Mexico
51
is traditionally one of the EUrsquos most important trade partners in LatinAmerica sharing with Brazil its high potential for growth as an exportmarket Mexico has also followed a process of opening to internationalcompetition during the end of the eighties and all the nineties first byunilateral tariff reductions then by subscribing to ten free tradeagreements with the majority of the Latin American countries or areasCanada and the US (creating NAFTA) and in Europe with the EFTAand the EU
During the period 1994-2000 Mexican exports to the US increased240 while their composition has substantially diversified Oil-relatedexports represented only 98 of the total in 2000 compared to 248in 1990 Agricultural products did not account for more than 25 andthe rest of the exports were manufactured goods In contrast 75 ofMexicorsquos imports are intermediate goods 134 capital goods and theproportion of consumption goods is only 117 The EU is Mexicorsquossecond trading partner after the US although the data reveals theoverwhelming dependence of Mexico on the US economy 887 of itsexports are directed to the US and 73 of its imports come from it Inthe EU Germany and Spain represent Mexicorsquos largest export marketswith 09 each Germany is the main European supplier representinga 33 of Mexicorsquos imports As mentioned above Mexicorsquos tradebalance with the EU is highly deficitary
Chile is considered the most open stable and liberalized economy inLatin America Despite its relatively modest size Chile is an importanttrading nation due to its high tradeGDP ratio (over 40) Chile is thefifth Latin American exporter (US$182 billion in 2000) withagriculture and fishery accounting for 10 of the total and the other90 distributed between mining (449 ) and industry (442) Incontrast Chilersquos imports are concentrated in the industrial sector(77) with mining (135) and agriculture (22) lagging far behindIt should be stressed that Chilean trade is globally balanced andexhibits important surpluses with the European Union and Asia Incontrast Chile cumulates its largest deficit with Argentina its main oilsupplier
The EU is Chilersquos main trading partner taking in approximately 25 ofthe countries imports during 20016 7 Among the EU countries theUnited Kingdom and Italy accumulate 34 of Chilersquos trade each andFrance 3 Chile is not only a market for EU exporters of goods andservices but also an important source of imports both in agriculturaland industrial goods The main components of EU imports from Chileare manufactured goods raw materials agricultural products andbeverages and tobacco EU exports of goods are concentrated inmachinery and transport equipment chemical products andmanufactured goods
52
Latin America in general and particularly Mercosur has been involvedin the general trend that directed large capital flows towards emergingand developing economies In 1990 only 16 of overall foreign directinvestment was received by developing countries whereas in 2000 thisproportion had reached 37 Latin America and the Caribbeanreceived around 11 of these flows during the period 1995-99 Brazilreceived one third of the investment in the area whereas Argentinaand Chilersquos proportions were 16 and 8 respectively thanks to theacquisitions of domestic firms by the Spanish companies Repsol andEndesa However due to its instability Argentina has experienced asignificant reduction in foreign investment since 2000 Mexico is thesecond destination of FDI in Latin America (17 during the periodabove mentioned) and in contrast with other countries such asArgentina these flows exhibit a very stable behaviour
Although Mexico followed a process of capital movements liberalizationsimilar to the experiences of Brazil and Argentina a factor behind thestability of these movements is related to its process of regionalintegration with North America Many multinational enterprises haveinvested in Mexico as a platform to produce manufactured goodsdirected towards the US and Canadian markets As an examplebetween 1995 and 2000 more than 60 of cumulated FDI went to themanufacturing sector and 65 had its origin in the US Theseinvestment flows have contributed to the modernization of theindustrial sector and to a significant improvement in Mexicorsquoscompetitive position in the automobile electronic and textileindustries which can help to explain the excellent export performanceof this country in recent years Finally in 2000 the banking sector hascumulated 30 of the total flows of FDI received by Mexico whereasservices telecommunications and the oil industry have had a verylimited interest for foreign investors This fact is in contrast with theother large Latin American economies
The majority of the FDI that the Mercosur countries received in thesecond half of the nineties was directed towards the privatization of thepublic firms especially in the area of services (CEPAL 2001) Due tothis process FDI has abandoned its traditional destinations (forexample in 1995 55 of the FDI stock of Brazil was concentrated inmanufacturing) to be employed in mergers and acquisitions mainly inthe service sector According to Tansini and Vera in 1998 and 199978 of these acquisitions were directed towards Argentina and 18had Chile as destination6 8 In 1999 30 of the capital flows receivedby Brazil were absorbed by the privatizations although since then themajority of the resources were devoted to consolidating andrestructuring these firms
The European Unionrsquos share of foreign direct investment inLatin America increased dramatically during the 1990s with netinflows from the EU increasing from US$1077 billion in 1993 to
53
US$17068 billion in 1997 nearly overtaking total inflows to the regionfrom the United States Within Europe moreover there has been ashift in the primary investors in Latin America with Spain inparticular joining the United Kingdom and Germany as the leadingEuropean investors in the region (see Figure 2) During the 1980s theUK produced more than 50 of the cumulated FDI flows in Mercosurplus Chile6 9 followed by Germany (25) In the 1990s by contrastGermany increased its participation to more than 30 whereas Spainmore than doubled its share to 24 Germanyrsquos FDI concentrated inmanufacturing (such as the automobile industry) during the first halfof the decade especially in Argentina and Brazil with their largedomestic markets Since 1995 Spain is the main European investordirecting its interests in the privatization sectors bankingtelecommunications and energy Other EU countries with importantFDI flows in Mercosur and Chile during the nineties have beenthe Netherlands France and Portugal (the latter with Brazil as itsprimary destination) According to the EC Commission the EUrsquos stockof foreign direct investment in 1999 was euro 1 billion in Uruguayeuro 31 billion in Argentina and euro 34 billion in Brazil EU investment inParaguay is virtually non-existent whereas Chile cumulateseuro 104 billion although in this country the US is still the main foreigninvestor
52 EU Trade Agreements with Latin American Countries7 0
The first symbolic push for the intensification of EU relations withLatin America followed the 1969 lsquoDeclaration of Buenos Airesrsquo issuedby the Latin American members of the Special Committee for LatinAmerican Coordination and calling for an institutionalization of theEULatin America political dialogue and closer economic cooperationbetween both regions
Unlike some previous attempts this time the EU responded positivelyand a regular dialogue between the group of Latin Americanambassadors in Brussels (GRULA) and EC representatives wasinitiated The major substantive measure advanced in this dialoguewas the policy developed toward the Caribbean countries which wereincorporated together with other European former colonies in Africaand the Pacific in the so-called ACP Group and were accorded a specialregime as stated in the Lomeacute Convention of 19757 1 Apart from thatthe Communityrsquos official policy during this period was limited tobilateral economic treaties with the major Latin American countries(so-called first generation agreements) such as the non-preferentialtrade agreements with Argentina in 1970 Uruguay in 1973 Brazil in1973 and Mexico in 19757 2
54
Table 10 EULatin American Trade Agreements
Agreement Objectives Year ofentry into
fEUMexico FreeTrade Agreement(EconomicPartnershipPolitical Co-operation and Co-operationAgreement)
Liberalizes over 96 per cent of EU-Mexicotrade by 2007 at the latest fullyliberalizes industrial products by 2003for the EU and 2007 for Mexico withnegotiations on tariff phase-out ofagricultural items deferred until 2003includes rules on intellectual propertyand dispute settlements and providesEU access to the Mexican procurementand services markets similar to NAFTA
2000
CentralAmericaEUFramework Co-operationAgreement andRegionalProgramme for theReconstruction ofCentral America(PRRAC)
The Framework Agreement seeks tostrength the co-operation in theeconomic financial commercial socio-cultural areas and environment Asecond aim is to reinforce the CentralAmerican Integration System ThePPRAC is a specific program for recoveryfrom the effects caused by hurricaneMitch
Both since1999
AndeanCommunityEUCo-operationagreement andGSP
Political aspects anti-drug dialogueCommercial aspects since 1998 theGeneral System of Preferences is appliedunder a new regime As a result 75 ofproducts imported from the AndeanCommunity to the EU are exempt fromcustom duties Framework Co-operationAgreement to promote regionalintegration
1998(politicaldialogueand co-
operation)and 1999
(GSP)
EUChile AssociationAgreement
Governments concluded negotiations inApril 2002 on a wide-ranging AssociationAgreement including the creation of a free-trade area in goods and services anagreement on wines and spirits andprovisions on public procurementinvestment competition and intellectualproperty
Awaitingratificationby the EUand Chile
MercosurEuropeanUnion
Framework agreement came into force in1999 Negotiations on an interregionalfree-trade agreement began in 1999 andare ongoing
Frameworkagreementsince 1999Free-tradeagreementexpected in
2005
Source Flocircres (2001) DG Trade (European Commission) and Camarero andTamarit (2002)
55
Figure 2 EU Foreign Direct Investment in MERCOSUR + Chile(Cumulated flows Country shares EU = 100)
Source OECD International Direct Investment Statistics YearbookNote For clarity some EU countries with smaller investment shares in MERCOSURhave been excluded
From the mid-1970s to mid-1980s the official policy of the EC towardsLatin America was based mainly on the Inter-Parliamentary Dialoguebetween the European Parliament and Latin Americanparliamentarians and on bilateral economic treaties With regard tothe latter a new round of lsquosecond-generationrsquo agreements was signedbetween 1980 and 1985 with individual countries such as Argentina in1980 Uruguay in 1980 and Brazil in 1982 and with sub-regionssuch as the Andean Pact (created in 1969 between VenezuelaColombia Equator Peru and Bolivia) in 1983 and the CentralAmerican Common Market in 1986 7 3
From the mid-1980s onward Latin America became the focus of moresubstantial political and economic policies from the EU On thepolitical side a variety of multilateral fora have been set up The SanJoseacute Group was launched in Costa Rica in 1984 with the aim ofsupporting progress in the peace process and democracy in CentralAmerica From that date annual meetings have been organizedextending their aims to other fields like the rule of law and humanrights the fight against the trafficking of drugs and educationaltechnical and cultural co-operation The Rio Group was established in1986 again meeting on an annual basis with a membership includingall the South American countries as well as Mexico Finally twosummit meetingsmdashthe first in Rio de Janeiro in June 1999 and a
0
10
20
30
40
50
60
1980-90
1991-98
56
second held under the Spanish EU Presidency in Madrid in May2002mdashbrought together the leaders of 48 countries from the EU andLatin America The first summit in Rio agreed upon an Action Plan toincrease co-operation in the political and cultural spheres and calledfor negotiation of association agreements with Chile and Mercosurwhile the Madrid summit further developed political cooperation andconfirmed the conclusion of a bilateral EUChile AssociationAgreement7 4
The 1990s and early 2000s finally have witnessed the conclusion bythe EU of a round of so-called lsquothird-generationrsquo treaties between theEU and various Latin American countries and trade blocs The primaryagreements in force or under negotiation between the Union and thecountries of Latin America are summarized in Table 10 In all thecases the nature of these agreements is twofold encompassingpolitical agreements on questions such as democracy the environmentand human rights and as well as economic agreements regarding theliberalization of trade and investment
521 The EUMexico Free Trade Agreement
Since 1975 the EU has signed several agreements with MexicoAlthough these agreements were not significantly different from othersalready in force with other countries in the same geographic areaMexico had always received a particular treatment Thus in the 70sMexico benefited from the treatment of most favoured nationneglecting the fact that this country was not a member of the GATT atthat time Later Mexico was eligible under the GSP scheme benefitingfrom this treatment until 1995 when this system was revisited andMexico lost much of its preferential access to the EU marketNegotiations aiming at the establishment of an FTA with the EUstarted during the same year The primary reason was the concern inthe EU about possible trade diversion due to the Mexican entry intoNAFTA in 1994 A general agreement removing trade barriers betweenthe EU and Mexico would minimize any trade diversion effect
Although the most important part of the agreement is the creation of afree trade area between the EU and Mexico the so-called GlobalAgreement includes a rather wide package institutionalising a regularpolitical dialogue and extending the bilateral co-operation Thisagreement places the EU in a better position to compete for access tothe Mexican market In 2007 all industrial goods will be free of tariffsMoreover in trade volume 52 of EC exports will enter the Mexicanmarket duty free by 2003 and for the remaining 48 a maximum dutyof 5 will be applied This extremely quick dismantling calendar willplace economic operators on both sides on an equal footing with otherpreferential partners in real time Concerning agricultural and fisheriesproducts some European special sensitivities are respected allowingat the same time for preferential access to European and Mexican
57
exporters into their respective markets The agreement also includespreferential treatment in services providing service providers from theEU with access to the Mexican market which will be equivalent if notsuperior to that currently enjoyed by operators from Mexicorsquos otherpreferential partners in particular the US and Canada In the servicessector EU banks and insurance companies will be authorized tooperate and establish directly on the Mexican territory Theliberalization of investment and payments related to investments willtake place in 2003 The agreement also provides access to the Mexicanprocurement market similar to NAFTA Finally provisions are madeabout intellectual property competition and dispute settlement
The agreement covers other aspects apart from trade Thus the EUfosters co-operation programmes with Mexico for an annual amount onaverage of euro 13 million during the 1990-99 period There were alsosignificant activities under horizontal programmes such as AL-Invest(Latin American Investment Programmes) and ALFA (Latin AmericanAcademic Formation)
522 Relations with Central America
The most important part of the cooperation between the EU and LatinAmerica and more specifically with Central America has beenimplemented through the so-called cooperation agreements The firstbilateral agreements with individual Central American countries weresigned during the 1970s and early 1980s Later on a second wave ofagreements were adopted covering a wider range of areas topicsbeginning with the First Framework Agreement of Co-operation forCentral America signed in 1985 This agreement belongs to the mostadvanced second-generation type and covers areas such ascommercial promotion and well as agricultural industrial andeconomic co-operation The Second Framework Agreement of Co-operation signed in 1993 is considered as a lsquothird generationrsquo type7 5
This Agreement came into force in 1999 including two novelties apackage of aid for refugees and a programme to support democracyand human rights The previsions of financial technical and economicco-operation aid with these countries from 2000 to 2006 are close toeuro 500 million Furthermore the Commission has decided to participatein the initiative for highly indebted poor countries (HIPC) The eligibleLatin American countries are Honduras and Nicaragua which stand toreceive as much as euro 30 million Additionally the European InvestmentBank has made several loans to the Central American Bank forEconomic Integration (CABEI) in order to support reconstruction in theregion
58
523 Relations with the Andean Community and Chile
The EU has established a complete institutional framework with theAndean Community implementing different instruments in each field(political dialogue trade and co-operation) with a special emphasis onthe question of lsquoanti-drugrsquo measures
Trade relations between the EU and the Andean Community haveincreased 32 over the last nine years currently representing 08 ofthe EUrsquos total trade and 167 of total trade for the AndeanCommunity It is worthwhile to note that 90 of Andean exportsconsist of raw materials or primary production while 85 of the EUrsquosexports are manufactured products From 1999 on the EU hasgranted under the Generalized System of Preferences (GSP)preferential access for all industrial products as well as numerousagricultural products especially for those Andean countries committedto fighting against drug production and trafficking
In the area of political co-operation the Andean region was the first inLatin America to conclude a regional co-operation agreement with theEU The present regional framework agreement was signed in 1993and entered into force in 1998 The amount of the aid to the areareached some euro 6 millionyear for the period 1982-97
Finally the EU has also established several bilateral agreements withChile including the Framework Agreement signed in 1996 andcurrently in force This agreement covers political and economiccooperation and formed the cornerstone for a new EUChileAssociation Agreement the negotiation of which was completed inApril 2002 The agreement which is currently awaiting ratification byboth parties calls for the creation of a free-trade area in goods andservices an agreement on wines and spirits including both market-access questions and the use of protected names a Sanitary andPhytosanitary Agreement new rules on public procurementinvestment competition and intellectual property and a dispute-resolution mechanism7 6
524 The Launching of a Free Trade Area with Mercosur77
The EU is currently the main trade partner of Mercosur The EUgenerally imports agricultural and primary products from Mercosurwhile it exports primarily industrial commodities7 8 The EU has aFramework Agreement of co-operation similar to others with severalcountries or blocs in Latin America In June 2000 negotiations werere-opened aiming at signing a new Inter-regional AssociationAgreement This new agreement would cover not only commercialaspects but also many others like political dialogue or cooperation(social and humanitarian economic and development) between the twoblocs
59
The fifth round of negotiation between the EU and Mercosur took placein July 2001 The main point in this round was the presentation bythe EU of its offer for the reduction of tariff and non-tariff barriers inorder to liberalize trade in goods services and public procurementThese reductions would cover all the industrial products and 90 ofagricultural products over a period of no longer than ten yearsMercosurrsquos answer to that proposal was given during the sixth roundin October 2001 presenting its own offer in terms of tariff and non-tariff reduction and public procurement At the same time there hasbeen an exchange of views on political dialogue as well as someimprovement in the area of technical and scientific co-operationenergy transport telecommunications and information technologyNegotiations continue but conclusion of the agreement is not expecteduntil 2005
53 Challenges for EULatin American Economic Relations
As even this brief survey has made clear the European Union todayplays a substantial economic and political role in Latin America EUtrade with and foreign direct investment in the region have increaseddramatically during the course of the past decade with the EU nowemerging as the most important economic partner for Mercosur inparticular At the same time the EUrsquos political and economicagreements have demonstrated ever-greater ambition and anincreasingly broad economic agenda embracing not only tariff andquota reductions but also provisions on non-tariff barriersinvestment and public procurement as well as political provisionsregarding democracy and human rights
The completion of a more ambitious system of economic agreementswith the Latin American countries remains a goal for both the UnitedStates and the European Union However there are importantqualitative differences between the strategies of the two trade blocswhile the European Union is trying to keep the development of a hub-and-spoke system of bilateral agreements with individual countries or(as in the case of Mercosur) customs unions the United States hasannounced its desire to create a multilateral Free Trade Area of theAmericas The countries of the region for their part havedemonstrated a decades-long commitment to economic liberalizationlocked in place by a series of both multilateral and bilateral tradeagreements amongst themselves as well as with the United States andthe European Union although their commitment to proceeding alongthese lines has been tested by the recent economic crisis in Argentina
The EULatin America summit meeting held in Madrid in May 2002witnessed the conclusion of the EUChile free trade agreement whichis now awaiting ratification by both sides but further negotiations lieahead particularly in the case of the proposed EUMercosur
60
agreement which remains far from a conclusion not expected before2005 In these negotiations the EU should give special attention toexpanding market access for the Mercosur countries especially for so-called lsquosensitive productsrsquo Although the EU has presented itself as achampion of free trade within various multilateral fora it is clear thatthe Union has actively sought to preserve barriers in some industrialsubsectors and especially in the agricultural sector where theCommission has estimated that some 10-12 of all EU imports fromthe Mercosur countries are currently labelled as lsquosensitiversquo7 9 Removalof these barriers would benefit not only Latin American countries butalso European consumers who are currently playing higher prices foran amount equivalent to 5-7 of the Unionrsquos GDP8 0 In addition thenegotiation process should cover not only tariffs (since over 50 of allimports from Mercosur are eligible for an average tariff lower than25) but also other means of market-access protection such as tariffquotas which are applied extensively to agriculture and food productsAdditional areas for negotiation include trade in goods servicesinvestment public procurement intellectual property rights technicalstandards and rules of origin
Finally neither these EULatin American negotiations nor theextensive EUUS cooperation outlined in the previous sections of thisreport should distract the European Union or the United States fromtheir shared priority namely the successful completion of alsquoDevelopment Roundrsquo of multilateral trade talks within the WTODuring his recent trip to Argentina EU Trade Commissioner PascalLamy stressed the importance of ensuring that bilateral and inter-regional trade agreements such as those that the EU has concludedwith the countries of Latin America rest on the multilateral foundationof WTO trade law For this reason he argued bilateral andinterregional negotiations lsquomust not be allowed to detract our attentionfrom the pursuit of the Doha Development Agendarsquo8 1 Such acommitment should remain a central tenet of EU trade policy in theyears to come
61
ConclusionsThe New Transatlantic Economic Agenda
The United States and the European Union have an extraordinarilyclose and important economic relationship the health of which is vitalto the global economy as a whole Both partners stand to gain a greatdeal by making the relationship more productive Both stand to lose ifdisputes cause interruptions and acrimony and if the relationship failsto adapt to new pressures and new challenges
The agenda of transatlantic economic relations has evolved andexpanded to reflect the increasingly integrated nature of thetransatlantic marketplace To be sure traditional trade questionsmdashandtrade tensionsmdashpersist between the European Union and the UnitedStates Despite the generally low level of tariffs between the EU andUS tariff peaks and quotas remain for both sides in a number ofsensitive areas which can and should be subject to further reductionsin the Doha Round of trade liberalization talks within the World TradeOrganization In addition to tariffs and quotas a number of othertraditional trade measuresmdashincluding most notably antidumpingsubsidies and safeguard measuresmdashcontinue to plague thetransatlantic partnership most strikingly in the current dispute overUS safeguard actions in the steel sector Nevertheless while theseriousness of these disputes should not be underestimated themultilateral rules-based trading system of the World TradingOrganization is generally well equipped to address such issues andthe United States and the European Union should continue in theirefforts to use and support the WTO as a forum for both negotiationand dispute resolution
Perhaps the greatest challenge to the transatlantic economicrelationship however is the expansion of the transatlantic economicagenda to encompass domestic regulations that are adopted forlegitimate purposes but act in practice as non-tariff barriers to tradefragmenting the transatlantic market and in some cases leading tobitter and intractable trade disputes As we have seen these types ofdisputes also create enormous legal and political challenges to thedispute settlement procedure of the WTO where judgments in areassuch as the beef hormones and Irish music disputes have createdpolitical controversy without (at this writing) securing full compliancefrom the states concerned
62
For these reasons any attempt to deepen transatlantic economicintegration between the United States and the European Union mustaddress not only tariffs quotas and similar disputes about subsidiesantidumping actions and safeguard measures but also the new-styleregulatory disputes that are likely to become the most importantbarriers in the transatlantic marketplace and place the greateststrains on the EUUS relationship and the multilateral WTO systemin the medium- to long-term future
Addressing these challenges in turn will require a careful andextensive study and more comprehensive understanding not only oftraditional trade issues but also and especially the domestic sourcesof transatlantic regulatory disputes existing efforts to resolve suchdisputes and possible new mechanisms for preventing and settlingfuture regulatory disputes between the European Union and theUnited States
Such a study would necessarily be wide-ranging involving not onlyeconomists who would identify the potential benefits of economicliberalization but also political scientists political economists andlegal scholars who would identify the domestic sources oftransatlantic regulatory disputes the possibility of preventing suchdisputes through early warning andor regulatory cooperation and themost promising means of settling disputes either bilaterally ormultilaterally Any such study would therefore have to undertakethree fundamental tasks
1 A comprehensive listing and analysis based on publiclyavailable sources of EU and US regulations capable of restrictingtrade and investment between the European Union and the UnitedStates
This report has taken a first step towards such an analysis with thecompilation of regulatory barriers identified by the United States andthe EU in their respective trade barriers reports for 2001 (see Appendix1) but further research is required to identify both the sources and theseriousness of problematic regulations
bull In terms of sources a useful first step would be to identify whetherthe regulations in question were adopted by the local state orfederal (EU) levels of government and whether they were adoptedthrough legislation or by regulatory authorities
bull In terms of seriousness a preliminary effort should be made toidentify the economic impact of the regulations in question ontransatlantic trade and investment Such an analysis could draw onthe research done by the US and the EU as well as on the periodicreports of the World Trade Organization and the Transatlantic
63
Business Dialogue but should be conducted by independenteconomists it is to be accepted as authoritative by both parties
In addition an effort should be made by scholars and practitioners onboth sides of the Atlantic to identify new challenges to the relationshipparticularly those arising from the application of new technologiessuch as electronic commerce and biotechnology
2 A comprehensive survey and analysis of transatlanticregulatory cooperation including areas of informal cooperationamong regulators as well as areas of formal agreement
Section 4 of this report identified regulatory cooperation as aparticularly promising means of preventing as well as settlingtransatlantic regulatory disputes yet it also identified a number ofpolitical legal and institutional barriers which can hindermdashand havehinderedmdashcooperation across a range of issue-areas Given therecognized promise of regulatory cooperation among EU and USauthorities as a means of realizing our joint regulatory aims andavoiding future regulatory disputes more detailed studies oftransatlantic regulatory cooperation are vital in order to identifybarriers to regulatory cooperation as well as instances of lsquobest practicersquoin overcoming those barriers
3 A systematic analysis of various means of bilateral andmultilateral dispute resolution with particular emphasis on thespecific challenges of transatlantic regulatory disputes
Finally while emphasis can and should be placed on prevention ratherthan settlement of transatlantic disputes future studies should focuson new and innovative means of dispute settlement in regulatorydisputes given the acknowledged difficulties of litigating regulatorydisputes before the WTO Dispute Settlement Body At the domesticlevel the prospects for the adoption of lsquotrade impact assessmentsrsquo aswell as a more general move toward transparent regulatory procedureson both sides of the Atlantic should be examined At the bilaterallevel special attention should be directed toward the possibleexpansion of early warning as well as the possible use of bilateralarbitration and mediation outside the WTO At the multilateral levelfinally the EU and US should jointly examine the possible revision ofWTO rules to clarify the use of the precautionary principle and toconsider possible amendments to the WTO Dispute SettlementUnderstanding to be undertaken in May 2003
Appendix 1 EU-US Barriers to Trade in Goods Services and Foreign Investment
Type ofmeasure EU concerns about US rules US concerns about EU rules
Tariffs Tariff peaks Food products Textiles Footwear Leathergoods Jewelry Ceramics and glass Trucks Railway carsOptical fibers Tubes for computer monitorsSANCTIONS IN RETALIATION FOR THE EU BAN ON HORMONE-TREATED BEEFTariff quotas dairy products tobacco
BANANAS (tariff quota + discriminatorylicensing) (settled)CUMULATIVE RECOVERY SYSTEM (brown rice)ADMINISTRATION OF CUSTOMS DUTIES FOR RICE(B) (agreement 1101)
Trade defenceinstruments
1916 ANTIDUMPING ACTSAFEGUARD MEASURES ON STEEL WIRE ROD (32000)SAFEGUARD MEASURES ON WELDED STEEL PIPE (32000)BYRD AMENDMENT (ANTI-DUMPING DUTIES GO TO INJUREDINDUSTRY)FAILURE TO LIFT COUNTERVAILING DUTIES AFTER SUNSET REVIEWSQUOTA ON THE IMPORT OF WHEAT GLUTEN (WITHDRAWN 62001)METHODOLOGY OF COUNTERVAILING DUTIES WITH RESPECT TOBRITISH STEEL ANTI-DUMPING DUTIES ON SEAMLESS PIPE
Othercustomsbarriers
Excessive invoicing requirementsEU not recognized as a country of originTEXTILES amp LEATHER CUSTOMS FORMALITIES amp RULES OF ORIGINTuna (certification of origin)
Other leviesand charges
Customs fees (eg Merchandise Processing Fee)HARBOUR MAINTENANCE TAX and Harbour Services Fee50 tax on imported equipment for boats Taxes that falldisproportionately on European automakersbull Luxury tax (70)bull Gas Guzzler tax (85)bull CAFEacute penalties (~100)
65
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade
SHRIMP-TURTLE ndash to import shrimp countries must be certifiedas matching US efforts to protect sea turtles (EU third party)Tuna-dolphin ndash to import tuna countries must be approvedby the National Marine Fisheries ServiceGeneral prohibition on the importation of dairy productsmade from unpasturized milkEffective prohibition on the importation of yogurtMilk protein for yogurt must come from approved diariesDivergence from international standardsReliance on third-party conformity assessment (eg reelectrical equipment and domestic appliances)US and Canadian content labeling of carsApproval slower than for US-produced drugsOver-the-counter drug approval requires US market historyExtensive product description (textiles amp leather)Citrus fruits must be landed at North Atlantic portsRules on all imports of ruminant animals and animalproducts from all EU countries because of BSEBan on some uncooked meat productsStrict condition on imports of egg products (continuousinspection of production process)Low acid canned food (eg fish and dairy products) subject todetailed prior approval systemPre-clearance inspection of apples and pears from somemember states for pestsProhibition on imports of all animals and products from amember state where a disease exists (not just region wherefound)Approval of wine labels
HORMONE-TREATED BEEFLack of national treatment with respect toGEOGRAPHICAL INDICATIONS for agriculturalproducts and foodPoultry treated with chlorinated waterEffective moratorium on approval of GMproducts since 498Mandatory labeling of all foods containingmore than 1 GM ingredientsStringent certification of non-hormone-treated beef (new US program seemsadequate)Food feed and fertilizer containing specifiedrisk materials (narrower product range thanprevious rule)Treatment and traceability of raw materialsfor production of gelatine for humanconsumption (agreement near on healthcertificate that would enable US exports toresume)EU approval of 3rd country establishmentsexporting animal products (esp dairy)Derogation from EU standards required forUS wine (on-going negotiations to try toresolve)Heat or pressure treatment of softwoodpacking material (new EU rule similar todraft international standard)Metric-only labeling (implementation delayedto 2009)
66
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade(continued)
Excessive post-entry quarantine of hardy nursery stocksExporters of meat or meat products to the US may notprocess meat from countries that are not recognized as freefrom diseases of concern to the US
Slow and arbitrary new aircraft certificationHushkits (dispute brought to ICAO work onan ICAO standard)Labeling of TSP (fertilizer) disadvantages USexportsRestrictive limits on low frequency emissionsfrom electrical and electronic equipment
Regulatorybarriers totrade (USstate and EUmember statelevel)
Duplicate approval of wine labelsState-level safety certification and environmental protectionrequirements (especially of agricultural and food products)Ban on fuel additive MTBE (CA)
Bans on some approved GM products(A I amp L)No approvals for planting certain GMproducts (G P)Unresponsive to requests for field trials ofGM crops (Gr)Ban on GM in animal feed adopted (It) - notin forceHCFC bans by Sw amp FnAdditional navigation light requirements(Fn) ndash suspendedTesting of wheat leading to virtual ban onimports (transshipment recently permitted)(Gr)Harsh interpretation of EU SPSrequirements caused or threatened to causeproblems for processed meat productspoultry products game meat seafoodanimal feed wood products (It)Qualitative imports standards and high test-ing and registration fees for bull semen (It)
67
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Servicesbarriers
50 tax on all non-emergency repairs to US-owned shipscarried out outside the USBarriers in mobile communications (investment restrictionslengthy procedures)De-facto reciprocity requirements regarding satellite-basedcommunications servicesExclusive digital terrestrial television standard (ATSC ) differentfrom EU (DVB-T)Impractical for foreign securities firms to establish branches inorder to engage in broker-dealer activitiesForeign mutual funds unable to make public offerings becauseof registration conditionsForeign investment is restricted in coastal and domesticshippingPartnership with US entity required for granting of licenses forlandings sub-marine cablesOnly US citizens or corporations organized under US law canoperate or maintain power facilities on Federal landForeign stake in airlines capped at 49 (25 of voting stock)Foreign-built vessels prohibited from engaging in coastwisetrade either directly between or via a foreign port and cannot beregistered for dredging towing or salvage
State-level measures Prohibitions on EU exporters distributing rebottling or retailingtheir own wineSome states require insurance companies to already beestablished in another stateSome states require insurers to buy reinsurance from state-licensed insurance companies
European content requirements for TVbroadcastsAccess to the single aviation marketrestricted to firms majority-owned andcontrolled by EU nationalsBanking insurance and investmentservices rules require reciprocaltreatment by home country (no US firmsadversely affected)
Member state measures Content requirements for radiobroadcasts (Fr)Requirements that cinemas showEuropean films (It Sp)Nationality requirements affecting tovarying degrees the provision of legalservices (A Dk Fn Fr G It)Strict restrictions on advertising byforeign legal consultants (Dk)Nationality requirements affecting tovarying degrees the provision ofaccounting services (A Dk Fr)
68
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Foreigninvestmentbarriers
National security vetting (Exon-Florio Amendment)US subsidiary required to exploit deep-water ports or to fish inUS Exclusive Economic ZoneFishing-vessel-owning entities must be 75 owned andcontrolled by US citizensForeign individuals or foreign-controlled corporations cannotacquire licenses for using nuclear materialsConditional national treatment governs participation ingovernment research programmes (subsidiaries in US allowed toparticipate but eligibility process more cumbersome)
Mirror-image reciprocity applies toinvestments in the extraction ofhydrocarbons (no US firms adverselyaffected)
NotesIncludes measures in effect + those for which implementation has been suspended as a result of agreementDoes not include non-discriminatory measures systemic barriers (such as the presence of monopolies the pricing ofpharmaceuticals or delays and lack of transparency in standard setting) government procurement intellectual propertyprotection subsidies (including FSC) or issues being prosecuted under EU rules
Barriers in small caps are the subject of WTO proceedings (consultations have been requested)
Sources Commission Report on United States Barriers to Trade and Investment 2001 USTR National Trade Estimate ReportForeign Trade Barriers 2001
69
Appendix 2 WTO Cases by the EU against the US (excludes cases as third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS38Cuban Libertyand DemocraticSolidarity Act
Extraterritorial application of the USembargo of trade with Cuba in so far as itrestricts trade between the EU and Cubaor between the EU and the US Thecreation of a right of action in favour ofUS citizens to sue EU persons andcompanies in US courts in order to obtaincompensation for Cuban properties Thedenial of visas and exclusion from the USof persons involved in confiscating ortrafficking in confiscated property
GATT (V XI XIII)
GATS (II III VIXI XVI XVIIAnnex onMovement ofNaturalPersons)
596 1096 Understandingreached (497)
WTDS39Tariff increaseson productsfrom the EU
The measures were taken in response tothe adoption of EU legislation on the useof hormones in livestock farming andseek unilaterally to settle the issuewithout resorting to the mechanisms ofthe WTO
GATT (I II XXIII)
DSU (3 22 23)
496 996 [No report]
WTDS63Anti-dumpingmeasures onimports of solidurea from theformer GermanDemocraticRepublic
By maintaining the order against the fivestates of the former GDR the US hasignored de jure and de facto their fullintegration into the reunified FederalRepublic of Germany and thus theeconomic integration of their companiesinto the German market economy
Anti-Dumping(92 11)
1296 ndash
70
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS85Measuresaffecting textilesand apparelproducts
Changes to rules of origin of textile andapparel products which entered intoforce on 1 July 1996 adversely affectexports of EU fabrics scarves and otherflat textile products which are no longerrecognized as being of EU origin and losethe free access to the US that theyenjoyed before
Textiles (24 4244)
Rules of origin(2)
GATT (III)
TBT (2)
697 ndash Negotiatedsolution (997)
WTDS88Measureaffectinggovernmentprocurement
Massachusetts law regulating statecontracts with companies doing businesswith or in Burma (Myanmar)
GPA (VIIIb XXIII)
697 998 Law overturnedunder US law
WTDS100Measuresaffecting importsof poultryproducts
Ban on imports of poultry and poultryproducts produced in the EU until theUnited States is able to obtain additionalassurances of product safety No groundsgiven
GATT (I III XXI)
SPS (2 3 4 58 Annex C)
TBT (2 5)
897 ndash
WTDS108Tax treatmentfor Foreign SalesCorporation
The FSC scheme provides for anexemption to the general rulesestablished in the US Internal RevenueCode which results in substantial taxsavings for US companies exportingthrough FSCs
Subsidies (3)
Agriculture (8 910)
1197 798 Panel found infavour of the EUEU not considerFSCReplacement Actadequate Panelfound in favourof the EUAppellate Bodyreport check
71
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS118HarbourMaintenance Tax
Ad valorem tax (0125) on allwaterborne imports entering US ports
GATT (I II IIIVIII X)
298 ndash Reform proposed(HarbourServices Fee)but EU stillviews asproblematic
WTDS136Anti-dumpingAct of 1916
The Act imposes penal sanctions againstthe importation of goods and their sale inthe US when the price is lower than inthe country of production or in otherforeign countries where the goods areexported
GATT (III4 VI1and VI2)
WTO (XVI4)
Anti-Dumping(1234 amp 5)
698 1198 Appellate Bodyfound in favourof the EU
Implementationpending
WTDS138Imposition ofcountervailingduties on certainhot-rolled leadand bismuthcarbon steelproductsoriginating in theUK
Methodology relied on the presumption(based mostly on pre-WTO legislation andpractice) that benefits from priorsubsidies pass through without the needto show that a benefit continues to beconferred
Subsidies (11b10 14 194)
698 199 Appellate Bodyupheld Panelreport favouringEU (500)
WTDS151Measuresaffecting textilesand apparelproducts (II)
Same as WTDS85 Same asWTDS85
1198 ndash Negotiatedsolution (997)
72
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS152Sections 301-310 of the TradeAct of 1974
Imposes specific strict time limits withinwhich unilateral determinations must bemade that other WTO Members havefailed to comply with their WTOobligations and trade sanctions must betaken against such WTO Members
DSU (3 21 2223)
WTO (XVI4)
GATT (I II IIIVIII XI)
1198 199 US through aStatement ofAdministrativeActionundertaken toact consistentwith WTOobligationsPanel ruled thatso long asrespectedcompatible(1199)
WTDS160Section 110(5) ofUS CopyrightAct
Section 110(5) of the US Copyright Actpermits under certain conditions theplaying of radio and television music inpublic places without the payment of aroyalty fee
TRIPS (9(1) 13) 199 499 Panel found infavour of the EU(700) EU andUS havenegotiated anarrangement
Implementationpending
73
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS165Import measureson certainproducts fromthe EU
100 tariffs on certain product inretaliation for the EUs failure to bring itsbanana trade regime into compliance withWTO ruling
GATT (I II VIII)
DSU (3 21 2223)
399 599 Appellate Bodyfound in favourof the EU(1200)
US broughtsanctions intoagreement
Sanctionssuspended asresult of 401agreement
WTDS166Safeguardmeasures onimports of wheatgluten from theEU
Methodology not ensure that all injurydue to imports Imports from Canadawere excluded from the investigation
GATT (I XIX)
Agriculture (42)
Safeguard (214 5 8 12)
399 699 Appellate Body(1200) found infavour of the EU
WTDS176Section 211OmnibusAppropriationsAct
Section 211 provides that the registrationor renewal in the US of a trademarkpreviously abandoned by a trademarkowner whose business and assets havebeen confiscated under Cuban law is nolonger permitted without consent ofprevious owner No US court shallrecognize or enforce such rights
TRIPS (2 15 1641 42 62)
799 600 Appellate Bodyfound in favourof the EU (102)
74
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS186Section 337 ofthe Tariff Act of1930 andamendmentsthereto
Under Section 337 the US caninvestigate whether imported goodsinfringe US intellectual property rightsand can exclude them from entry into theUS Despite amendment the EUconsiders that the procedures andremedies are substantially different fromprocedures concerning domestic goodsand discriminate against Europeanindustries and goods
GATT (III)
TRIPS (2 3 927 41 42 4950 51)
100 ndash
WTDS200Section 306 ofthe Trade Act of1974 andamendmentsthereto(lsquocarouselrsquo)
Section 306 provides for a mandatorymodification (every 6 months) of theproducts subject to sanctions imposedagainst a WTO member which has notcomplied with a WTO panel ruling
DSU (3 21 2223)
GATT (I II XIXXIII)
600 ndash
WTDS212Countervailingmeasuresconcerningcertain productsfrom the EU (14cases)
US application of countervailing dutiesbased on an irrefutable presumption thatnon-recurring subsidies granted to aproducer prior to a change of ownershiplsquopass throughrsquo to the current producerfollowing the change of ownership
SCM (10 19 21) 1100 801 Panelestablished
75
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS213Countervailingduties on certaincorrosion-resistant carbonsteel flatproducts fromGermany
Results of a full sunset review whichmaintains CV duties The original dutywas imposed prior to entry into force ofWTO agreements EU considers that itwould not have been possible to imposethis duty (less than 1) if theinvestigation had been governed by theSCM agreement
SCM (10 11921)
1100 801 Panelestablished
WTDS214Definitivesafeguardmeasures onimports of steelwire rod andcircular weldedcarbon qualityline pipe
EU considers that Sections 201 and 202of the Trade Act of 1974 and Section 311of the NAFTA Implementation Act containprovisions which prevent the US fromrespecting Safeguards Agreement
Safeguards (2 34 5 8 12)
GATT (I XIX)
1100 801 Panelestablished
WTDS217Continueddumping andsubsidy OffsetAct of 2000(ByrdAmendment)
The Act mandates the distribution of theproceeds of duties levied pursuant to aCVD an AD order or a finding under theAntidumping Act of 1921 to the affecteddomestic producers
AD (5 8 18)
SCM (11 1832)
GATT (X)
WTO (XVI)
1200 701 Panelestablished andjoined with panelestablished byCanada andMexico(WTDS234)
76
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS225Anti-dumpingduties onseamless pipefrom Italy
Results of a sunset review which foundthat anti-dumping duties on imports ofseamless line and pressure pipe fromItaly will continue at a rate of 127 EUconsiders this finding is in breach of ADAgreement (duties not lower than 2)
AD (58 111113 17)
GATT (XXII1)
201 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 152027
7
Appendix 3 WTO Cases by the US against the EU and Its Member States(excludes cases as a third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS13Duties onimported grains
Reference price system used to determinethe duties applicable to imports of grainsappear to result in the application ofhigher rates of duties to shipments of USgrains than is permitted under the EUWTO tariff schedule and to discriminateagainst US exports of grains
GATT (I II VIIX)
Agreement onImplementingGATT Article VII(109 11 22Annex I)
795 397 Negotiatedagreement(1195)
Request forpanel withdrawnfollowingimplementation(497)
WTDS26Measuresaffecting meatand meatproducts(Hormones)
EU measures prohibiting the importationof meat and meat products that havebeen treated with growth hormones
GATT (III or XI)
SPS (2 3 5)
TBT (2)
Agriculture (4)
196 496 Appellate Bodyfound in favourof US (298)
Sanctions inplace
78
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS27Import regimefor bananas
EU regime for the importation sale anddistribution of bananas established byCouncil Reg No 40493 and subsequentlegislation regulations and administrativemeasures including those reflecting theprovisions of the Framework Agreementon Bananas which implementsupplement and amend that regime
GATT (I II III XXI XIII)
Licensing (1 3)
Agriculture
TRIMs (2)
GATS (II XVIXVII)
296 496 Appellate Bodyfound in favourof the US andEcuador (997)
Compliancepanel foundrevised EUregime stillincompatible(499)
US Ecuador andEU negotiatedsettlement(401)
WTDS37Portugal ndashPatent protectionunder theIndustrialProperty Act
The term granted existing patents underthe Portuguese Industrial Property Actappears to be inconsistent with Portugalsobligations under the TRIPS Agreement
(GATS (33 6570)
496 Negotiatedsolution (596)
WTDS62Customsclassification ofsome computerequipment
Reclassification of certain LAN adaptercards automatic data processingmachines and units thereof astelecommunications apparatus raised thetariff applied them
GATT (II) 1196 297 Appellate Bodyoverturned Panelreport favouringUS (698)
79
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS67UK ndash Customsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS68Ireland ndashCustomsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS80Belgium ndash-measuresaffectingcommercialtelephonedirectoryservices
Conditions for obtaining a license topublish commercial directories inBelgium
GATS (II VI VIIIXVII)
597 ndash
WTDS82Ireland ndashmeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPS Agreement
TRIPS (9-14 6365)
597 198
80
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS83Denmark ndashmeasuresaffecting theenforcement ofintellectualproperty rights
Denmark does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
597 ndash Negotiatedsolution (301)
WTDS86Sweden ndashMeasuresaffecting theenforcement ofintellectualproperty rights
Sweden does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
697 ndash Negotiatedsolution (697)
WTDS104Export subsidiesndash processedcheese
Export subsidies including under aninward processing arrangement in favourof processed cheese distort markets fordairy products and adversely affect USsales of dairy products
Agriculture (8 910 11)
Subsidies (3)
1097 ndash
WTDS115Ireland ndashMeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPs Agreement
TRIPS (9-14 6365 70)
198 198
81
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS124Enforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
TV stations in Greece regularly broadcastcopyrighted motion pictures and TVprograms without the authorization ofcopyright owners Effective remediesagainst copyright infringement do notappear to be provided or enforced
TRIPS (41 61) 598 ndash Negotiatedsolution (301)
WTDS125Greece ndashEnforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
Same as WTDS124 Same asWTDS124
Same asWTDS124
Sameas
WTDS124
Same asWTDS124
WTDS127Belgium ndashCertain incometax measuresconstitutingsubsidies
Belgian corporate taxpayers receive aspecial tax exemption for recruiting adepartmental head for exports
Subsidies (3) 598 ndash
82
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS128Netherlands ndashCertain incometax measuresconstitutingsubsidies
Dutch income tax law permits exportersto establish a special export reserve forincome derived from export sales
Subsidies (3) 598 ndash
WTDS129Greece ndash Certainincome taxmeasuresconstitutingsubsidies
Greek exporters are entitled to a specialannual tax deduction calculated as apercentage of export income
Subsidies (3) 598 ndash
WTDS130Ireland ndashCertain incometax measuresconstitutingsubsidies
Under Irish income tax law specialtrading houses qualify for a special taxrate in respect of trading income from theexport sale of Irish-manufactured goods
Subsidies (3) 598 ndash
WTDS131France ndash Certainincome taxmeasuresconstitutingsubsidies
French companies may deducttemporarily certain start-up expenses ofits foreign operations through a taxdeductible reserve account
Subsidies (3) 598 ndash
83
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS158Import regimefor bananas II
Failure to implement the DisputeSettlement Bodys recommendations andrulings in WTDS27 within a reasonableperiod
199 See WTDS27
WTDS172Measuresrelating to thedevelopment of aflightmanagementsystem
French government has agreed to grantand the Commission has approved aloan on preferential and non-commercialterms to develop a FMS for Airbusaircraft
Subsidies (5 6)
GATT (XXIII1b)
599 ndash
WTDS173France -Measuresrelating to thedevelopment of aflightmanagementsystem
See WTDS172 See WTDS172 SeeWTDS172
SeeWTDS172
See WTDS172
WTDS174Protection oftrademarks andgeographicalindications foragriculturalproducts andfoodstuffs
EU rule does not provide nationaltreatment with respect to geographicalIndications nor sufficient protection topre-existing trademarks that are similaror identical to a geographical indication
TRIPS (3 16 2463 65)
699 ndash
84
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS210Belgium -Administrationof measuresestablishingcustoms dutiesfor rice
Belgian customs values and duties forrice would lead to a denial of duty rebatesfor US rice and to duties in excess of thebound rate
GATT (I II VIIVIII X XI)
CVA (1)
TBT (2 3 5 67 9)
Agriculture (4)
1000 101 Negotiatedsolution (1101)
WTDS223Tariff-rate quotaon corn glutenfeed from the US
TRQ triggered by DSB ruling against theUS in WTDS166
Safeguards (8182 83)
GATT (I II XIX)
101 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
85
87
References and Recommended Reading
Primary Sources Web sites
European Commission DG TRADE Bilateral Trade Relations USAhttpeuropaeuintcommtradebilateralusausahtm
European Union Europa Web Site httpeuropaeuint
European Union Mission to the United Stateshttpwwweurunionorg
Transatlantic Business Dialogue httpwwwtabdcom
Transatlantic Consumers Dialogue httpwwwtacdorg
Transatlantic Environmental Dialoguehttpwwwtiesweborgtaedindexhtm
Transatlantic Legislators Dialoguehttpwwweuroparleuintintcooptlddefault_enhtm
Transatlantic Information Exchange Service httpwwwtiesweborg
United States Mission to the European Union httpwwwuseube
United States Trade Representative Western EuropeEU pagehttpwwwustrgovregionseu-medwesteurindexshtm
World Trade Organization httpwwwwtoorg
Primary Sources Official Government Documents
CEPAL 2001 Informe de la Inversioacuten Extranjera en Ameacuterica Latina y elCaribe Antildeo 2000 Naciones Unidas Chile
Commission of the European Communities 1998a The NewTransatlantic Marketplace Draft Communication from the Commissionto the Council the European Parliament and the Economic and SocialCommittee available athttpeuropaeuintcommdg01sectionahtm
Commission of the European Communities 1998b Commission staffworking paper concerning the establishment of an inter-regionalassociation between the European Union and Mercosurhttpeuropaeuintcommexternal_relation
88
Commission of the European Communities 2000 The TransatlanticEconomic Partnership Overview and Assessment Coordination DGTRADEE3 October
Commission of the European Communities 2001a Reinforcing theTransatlantic Relationship Focusing on Strategy and Delivering ResultsCOM(2001)154 of 20 March 2001 Available on-line athttpwwweurunionorgpartnerTransatlAgendapdf
Commission of the European Communities 2001b Report on UnitedStates Barriers to Trade and Investment July available on-line athttpeuropaeuintcommtradepdfusrbt2001pdf
Commission of the European Communities 2001c Green Paper on theReview of Council Regulation (EEC) No 406489 COM(2001)7456final of 11122001
UNCTAD 2001 Informe sobre las inversiones en el mundo UnitedNations New York and Geneva
US Department of Agriculture (1998) Agriculture in the WTOSituation and Outlook Series WRS-98-4 Washington EconomicResearch Service
United States Trade Representative 2001 2001 National TradeEstimate Report on Foreign Trade Barriers available on-line athttpwwwustrgovhtml2001_contentshtm
World Trade Organization 2000 Trade Policy Review The EuropeanUnion Report by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
World Trade Organization 2001 Trade Policy Review United StatesReport by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
Secondary Sources
Abbott Kenneth W 20001 lsquoDisputes over Technical Barriers toTrade Are the Rules and Procedures Adequatersquo paper prepared forthe Conference on Dispute Prevention and Dispute Settlement in theTransatlantic Partnership European University Institute Fiesole 5-6July
Atlantic Council of the United States 2001 Changing Terms of TradeManaging the New Transatlantic Economy Policy Paper April(Washington DC The Atlantic Council of the United States)
Barfield Claude E 2001 Free Trade Sovereignty Democracy TheFuture of the World Trade Organization (Washington AmericanEnterprise Institute Press)
Bermann George 1996 lsquoRegulatory Cooperation between theEuropean Commission and US Administrative Agenciesrsquo
89
Administrative Law Journal of the American University Vol 9 pp 933-983
Bermann George Matthias Herdegen and Peter Lindstreth eds2001 Transatlantic Regulatory Co-Operation Legal Problems andPolitical Prospects (New York Oxford University Press)
Bignami Francesca and Steve Charnovitz 2001 lsquoTransatlantic CivilSociety Dialoguesrsquo Chapter 10 in Pollack and Shaffer TransatlanticGovernance in the Global Economy
BP Chair in Transatlantic Relations 2001 Resolving and PresentingUS-EU Trade Disputes Six Prize-Winning Essays (Florence EuropeanUniversity Institute Robert Schuman Centre for Advanced Studies 9May 2001)
Busch Marc L and Eric Reinhardt 2001 lsquoTesting International TradeLaw Empirical Studies of GATTWTO Dispute Settlementrsquo in Daniel LM Kennedy and James D Southwick eds The Political Economy ofInternational Trade Law Essays in Honor of Robert E Hudec (NewYork Cambridge University Press)
Camarero M and CR Tamarit 2002 lsquoLa Unioacuten Europea y lasAmeacutericas consecuencias del establecimiento de un acuerdo deasociacioacuten interregional entre la UE y Mercosurrsquo Papeles de EconomiacuteaEspantildeola n 91 (forthcoming)
Charnovitz Steve 2001 lsquoRethinking WTO Trade Sanctionsrsquo AmericanJournal of International Law Vol 95 (October)
Claes Benedicte A 2000 lsquoComment Aircraft Noise Regulation in theEuropean Union The Hushkit Problemrsquo Southern Methodist UniversitySchool of Law Journal of Air Law and Commerce Vol 65 329-382
Cowles Maria Green 2001a lsquoThe New Transatlantic DialogueTransforming the New Transatlantic Dialoguersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 213-233
Cowles Maria Green 2001b lsquoTransatlantic Cooperation and Discordin the New Economy A Case Study of the Global Business Dialogue one-Commercersquo paper delivered at the Biennial Conference of theEuropean Community Studies Association Madison Wisconsin 31May
Damro Chad 2001 lsquoBuilding an International Identity The EU andExtraterritorial Competition Policyrsquo Journal of European Public PolicyVol 8 No 2 (April) 208-226
Devuyst Youri 2001 lsquoTransatlantic Competition Policy Cooperationrsquoin Mark A Pollack and Gregory Shaffer eds Transatlantic Governancein the Global Economy (Lanham MD Rowman amp Littlefield) pp 127-151
Evans David S 2002 lsquoThe New Trustbusters Brussels andWashington Part Waysrsquo Foreign Affairs JanuaryFebruary
90
Evenett Simon J Alexander Lehmann and Benn Steil 2000 AntitrustGoes Global What Future for Transatlantic Cooperation (WashingtonDC Brookings Institution Press)
Falke Andreas 2001 lsquoThe EU-US Conflict over Sanctions PolicyConfronting the Hegemonrsquo European Foreign Affairs Review Vol 5No 2 139-163
Featherstone Kevin and Roy Ginsberg 1996 The United States andthe European Union in the 1990s Partners in Transition (LondonPalgrave)
Flores R 2001 lsquoRegional Economic Integrationrsquo in Investing in LatinAmerican Growth Unlocking Opportunities in Brazil Mexico Argentinaand Chile EAU Australian Department of Foreign Affairs and TradeChap 12 pp 259-282
Frankel JA E Stein and SJ Wei 1998 lsquoContinental Trading BlocsAre they Natural or Supernaturalrsquo in JA Frankel ed TheRegionalization of the World Economy (Chicago The University ofChicago Press)
Frost Ellen 1997 Transatlantic Trade A Strategic Agenda(Washington DC Institute for International Economics)
Gardner Anthony 1997 A New Era in US-EU Relations The ClintonAdministration and the New Transatlantic Agenda (London Avebury)
Giordano P A Valladio and M-F Durand eds 2001 Vers un accordentre lrsquoEurope et le Mercosur (Presses de Science Po Paris)
Helfer Laurence R 2000 lsquoWorld Music on a US Stage ABerneTRIPS and Economic Analysis of the Fairness in MusicLicensing Actrsquo Boston University Law Review Vol 80 93-204
Helweg Jason 2000 lsquoThe Retreat of the State The MassachusettsBurma Law and Local Empowerment in the Context ofGlobalization(s)rsquo Wisconsin International Law Journal Vol 18 477-510
Hindley Michael 1999 lsquoNew Institutions for Transatlantic TradersquoInternational Affairs Vol 75 45-60
Hudec Robert 1998 lsquoThe New WTO Dispute Settlement Procedure AnOverview of the First Three Yearsrsquo Minnesota Journal of Global TradeVol 8 22-24
Kahler Miles 1995 Regional Futures and Transatlantic Relations (NewYork Council on Foreign Relations Press)
Keohane Robert O Andrew Moravcsik and Anne-Marie Slaughter2001 lsquoLegalized Dispute Resolution Interstate and TransnationalrsquoInternational Organization Vol 54 No 4 457-488
Knauss Jody and David Trubek 2001 lsquoThe Transatlantic LaborDialogue Minimal Action in a Weak Structurersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 235-254
91
Kolasky William J and Leon B Greenfield 2001 lsquoA View to a KillThe Lost GEHoneywell Deal Reveals a Trans-Atlantic Clash ofEssentialsrsquo Legal Times 30 July 2001 p 28
Kuner Christopher 2001 lsquoBeyond Safe Harbour European DataProtection Law and Electronic Commercersquo International Lawyer Vol31
LaFrance Mary 2001 lsquoCongress Trips Over International Law WTOFinds Unfairness in Music Licensing Actrsquo Journal of Art andEntertainment Law Vol 11 397-424
Lorvellec Louis 1997 lsquoBack to the Fields after the Storm Agriculturein the European Union after the Uruguay Round Agreementsrsquo DrakeJournal of Agricultural Law Vol 2 (Winter) p 411
Mazumdar Anandashankar 2002 lsquoEuropean Commission Gives FinalApproval to Model Clauses to Protect Personal Datarsquo InternationalTrade Reporter Vol 19 187 (31 January)
Mehta K 2002 lsquoInternational Competition Policy Cooperationrsquorevised version of a paper presented at the BP Chair Conference onDispute Prevention and Dispute Settlement in the TransatlanticPartnership European University Institute Florence July 2001
Messerlin Patrick A 2001a Measuring the Cost of Protection in Europe(Washington DC Institute for International Economics)
Messerlin Patrick A 2001b lsquoNiveau et coucircts du protectionnismeeuropeacuteenrsquo in Giordano P A Valladao y M-F Durand (eds) Vers unaccord entre lrsquoEurope et le Mercosur Presses de Science Po Paris
Mishkin FS and MA Savastano 2001 lsquoMonetary Policy Strategiesfor Latin Americarsquo Journal of Development Economics 66 415-444
Nagarajan N 1998 lsquoMercosur and Trade Diversion What Do theImport Figures Tell Usrsquo Economic Papers No 129 EuropeanCommission
Petersmann Ernst-Ulrich ed 1997 The GATTWTO DisputeSettlement System International Law International Organizations andDispute Settlement (Kluwer Law International)
Peterson John 1996 Europe and America Prospects for Partnership(New York St Martinrsquos Press 1996)
Peterson John 2001 lsquoGet Away from Me Closer Yoursquore Near Me TooFar Europe and America after the Uruguay Roundrsquo in Mark A Pollackand Gregory Shaffer eds Transatlantic Governance in the GlobalEconomy (Lanham MD Rowman amp Littlefield) pp 45-72
Peterson John and Maria Green Cowles 1998 lsquoUS EconomicDiplomacy What Makes the EU Differentrsquo Governance Vol 11 No 3pp 251-71
Philippart Eric and Pascaline Winand 2001 lsquoDeeds Not WordsEvaluating and Explaining the US-EU Policy Outputrsquo in Philippart and
92
Winand eds Ever Closer Partnership Policymaking in US-EU Relations(Brussels Peter Lang) pp 431-463
Pollack Mark A ed 2001 The New Transatlantic Agenda at Five ACritical Assessment (San Domenico di Fiesole BP Chair inTransatlantic Relations Robert Schuman Centre for AdvancedStudies European University Institute)
Pollack Mark A and Gregory C Shaffer 2001a lsquoTransatlanticGovernance in Historical and Theoretical Perspectiversquo in Mark APollack and Gregory Shaffer eds Transatlantic Governance in theGlobal Economy (Lanham MD Rowman amp Littlefield) pp 3-42
Pollack Mark A and Gregory C Shaffer 2001b lsquoThe Challenge ofReconciling Regulatory Differences Food Safety and GMOs in theTransatlantic Relationshiprsquo in Mark A Pollack and Gregory Shaffereds Transatlantic Governance in the Global Economy (Lanham MDRowman amp Littlefield) pp 153-178
Pollack Mark A and Gregory C Shaffer 2001c lsquoWho Governsrsquo inMark A Pollack and Gregory Shaffer eds Transatlantic Governance inthe Global Economy (Lanham MD Rowman amp Littlefield) pp 287-305
Reidenberg Joel 2001 lsquoE-Commerce and Trans-Atlantic PrivacyrsquoHouston Law Review Vol 8 717-49
Schaefer Matthew 2002 lsquoGovernment Procurement DisputesLessons from the Dispute over the Massachusetts 1996 Act RegulatingState Contracts with Companies Doing Business with Burma(Myanmar)rsquo paper presented at the Conference on Dispute Preventionand Dispute Settlement in the Transatlantic Partnership EuropeanUniversity Institute Florence 5-6 July 2001 final version submitted26 January 2002
Shaffer Gregory 1999 lsquoThe Power of EU Collective Action The Impactof EU Data Privacy Regulation on US Business Practicersquo EuropeanLaw Journal Vol 5
Shaffer Gregory 2000 lsquoGlobalization and Social Protection TheImpact of EU and International Rules in Ratcheting Up of US PrivacyStandardsrsquo Yale Journal of International Law Vol 25 pp 1-88
Shaffer Gregory C 2002 lsquoManaging US-EU Trade Relations throughMutual Recognition and Safe Harbour Agreements lsquoNewrsquo and lsquoGlobalrsquoApproaches to Transatlantic Economic Governancersquo in Ernst-UlrichPetersmann ed Dispute Avoidance and Dispute Settlement in theTransatlantic Partnership (unpublished manuscript) (working paper onfile with the author)
Sindelar Leslie 2001 lsquoNot So Fair After AllmdashInternational Aspects ofthe Fairness in Music Licensing Actrsquo The Transnational Lawyer Vol14 435-71
Steffenson Becky J 2001 The Institutionalization of EU-US RelationsDecision Making Institution Building and the New Transatlantic
93
Agenda unpublished PhD dissertation University of GlasgowDepartment of Politics
Tansini R and T Vera 2001 lsquoLos procesos de integracioacuten enAmeacuterica Latina El caso de Mercosurrsquo Informacioacuten Comercial EspantildeolaFebrero-Marzo nuacutem 790 107-117
Vogel David 1997 Barriers or Benefits Regulation in TransatlanticTrade (Washington DC Brookings Institution)
Vogel David 2001 Ships Passing in the Night The Changing Politics ofRisk Regulation in the United States and the European Union RSCASWorking Paper No 200116
Woolcock Stephen 2000 lsquoEuropean Trade Policy Global Pressuresand Domestic Constraintsrsquo in Helen Wallace and William Wallaceeds Policy-Making in the European Union (New York Oxford UniversityPress) pp 373-99
Yerkey Gary G 2000a lsquoEU Accuses US of Failing to ImplementMRAs on Electrical Safety Pharmaceuticalsrsquo International TradeReporter Vol 17 1662 (2 November)
Yerkey Gary G 2000b lsquoUS European CEOs Call on Governments toResolve Dispute Over MRA by Dec 18rsquo International Trade ReporterVol 17 1662 (30 November)
Young Alasdair 2001 Trading Up or Trading Blows US Politics andTransatlantic Trade in Genetically Modified Food RSCAS WorkingPaper No 200130
Young Alasdair R 2002 lsquoRisk Positive Integration and SystemFriction The Single European Market and World Tradersquo paperpresented at the Council of European Studies Conference 14-16March 2002
94
Notes
1 The EU and the 50 US States website of the European Union Mission tothe United Stateshttpwwweurunionorgpartnerusstatesusstateshtm
2 Ibid
3 As Miles Kahler wrote in 1995 lsquoIncreasingly the points of conflict amongthe industrialized countries are not the familiar ones of barriers toexchange at the border but an entire array of ldquodomesticrdquo policies thatproduce conflict by appearing to restrict market access or alter theterms of competition The agenda of behind-the-border issues that hasbecome more prominent in the 1990s will only grow as economicintegration continues and groups mobilize to seek new benchmarks foran international ldquolevel playing fieldrdquo rsquo (Kahler 1995 5) For gooddiscussions of regulatory barriers in USEU trade relations see alsoVogel 1997 Young 2002
4 This section draws on the analysis presented in Pollack and Shaffer2001a
5 For good discussions see Gardner 1997 Peterson and Cowles 1998
6 Pollack and Shaffer 2001c 291
7 lsquoTransatlantic Declarationrsquo text available on-line athttpwwweurunionorgpartnertransatldechtm
8 See eg Featherstone and Ginsburg 1996 Peterson 1996
9 lsquoThe New Transatlantic Agendarsquo text available on-line athttpwwweurunionorgpartneragendahtm
1 0 lsquoJoint US-EU Action Planrsquo text available on-line athttpwwweurunionorgpartneractplanhtm
1 1 Gardner 1997
1 2 Commission of the European Communities 1998a
1 3 lsquoTransatlantic Economic Partnership Action Planrsquo text available on-lineat httpeuropaeuintcommtradebilateralusa1109tephtm For auseful review of the TEP see Commission of the EuropeanCommunities 2000
95
1 5 For good discussions of the TABD see Cowles 2001a 2001b and thewebsite of the TABD at httpwwwtabdorg
1 6 lsquoCincinnati Recommendations Transatlantic Business DialoguersquoNovember 16-18 2000 p 4 Available on-line athttpwwwtabdorgrecommendationsCincinnati00pdf
1 7 Ibid page 5
1 8 Cowles 2001b
1 9 Steffenson 2001
2 0 Pollack ed 2001 12
2 1 For an excellent discussion of the TACD and its activities see Bignamiand Charnovitz 2001 and the TACD website at httpwwwtacdorg
2 2 For example sixty-five consumer groups issued a statement in 2000stating that the EU and the US had largely ignored consumer tradepolicy recommendations TACD press release lsquoUS amp EU ConsumerGroups Call for Swift Action to Balance Trade Dialoguersquo 30 March 2000
2 3 The USIA funding for the TAED ($100000) was subject to approval fromthe Senate Finance Committee In January 2000 the objection of SenatorJesse Helms to TAED funding blocked the approval of funds andstopped the State Department from issuing the grant The TAED arguedthat this demonstrated the US governmentrsquos lack of dedication to theproject See lsquoTransatlantic Environment Dialogue suspends its activitiesdue to the failure of US government to stick to its commitmentsrsquoaccessed on 12 March 2002 on the TAED websitehttpwwwtiesweborgtaedindexhtml For a good general discussionof the TAED see Bignami and Charnovitz 2001
2 4 To summarise the TAED recommended the removal of subsidies forenvironmentally unfriendly energy sources (such as coal) demanded thatsustainability assessments be applied to a number of WTO agreementsand expressed it opposition to the multilateral TRIPs Technical Barriersto Trade and SPS Agreements It aired concerns about biotechnologyeco-labelling and the Precautionary Principle the MRAs and Chemicaland Electrical Waste Management (WEEEs) It stressed transparency intransatlantic and multilateral decision making urged both governmentsto support the Kyoto Treaty and to stop challenging environmentallegislation at the WTO The message to the EUUS Summit Lisbon May31 2000 was that lsquoUntil such time as parity exists betweenenvironmental governance and multilateral trade rules we demand thatboth the United States and the European Union immediately agree tomutual moratorium on WTO challenges and threatened challengesrsquo Fora good discussion of the TAED and its activities see Bignami andCharnovitz 2001
2 5 For an excellent discussion of the TALD see Knauss and Trubek 2001
96
2 6 Commission of the European Communities 2001a
2 7 Philippart and Winand 2001
2 8 Kahler 1995 See also Vogel 1997 Young 2002
2 9 For excellent overviews of the WTO dispute resolution procedure and itspredecessor within the GATT see Petersmann 1997 Hudec 1998 Buschand Reinhardt 2001 and BP Chair in Transatlantic Relations 2001 Fora provocative challenge to the DSU see Barfield 2001
3 0 This section draws largely on Abbottrsquos (2001) account of transatlanticdisputes over TBTs in general and the hushkits case in particular Forother accounts of the hushkits dispute see also Claes 2000 andPeterson 2001 58-59
3 1 Commission of the European Communities lsquoCommission Proposes NewLegislation to Fight Aircraft Noisersquo Press Release IP 011683
3 2 For a detailed analyses of transatlantic disputes over food safety andgenetically modified organisms see Pollack and Shaffer 2001b Vogel2001 and Young 2001
3 3 The text of the report can be found athttpeuropaeuintcommexternal_relationsusbiotechbiotechhtm
3 4 Schaefer 2002 1-2 See also Hellweg 2000
3 5 For useful background on the case filed before the WTO as DS160 seeHelfer 2000 LaFrance 2001 and Sindelar 2001
3 6 Commission of the European Communities lsquoEU and US Agree onTemporary Compensation in Copyright Disputersquo Press Release IP011860
3 7 For good discussions of potential reforms of the bilateral relationship aswell as WTO dispute settlement including a wide range of proposals seeeg BP Chair in Transatlantic Relations 2001 Charnovitz 2001 Barfield2001 and Petersmann 2001
3 8 Some countries such as the United Kingdom have establishedguidelines for policymakers to take trade implications of proposedregulations into account but neither the US nor the EU currentlyemploys any statutory requirement to undertake such an impactassessment
3 9 Bermann 1996 961 For an excellent set of essays on various aspects oftransatlantic regulatory cooperation see also Bermann Herdegen andLindstreth (eds) 2001
4 0 Ibid p 966
97
4 1 For excellent analyses of USEU competition-policy cooperation fromwhich this analysis is largely drawn see eg Evenett Lehmann and Steil2000 Devuyst 2001 Damro 2001 and Mehta 2002
4 2 Devuyst 2001 142-145
4 3 See eg Kolasky and Greenfield 2001 Evans 2002
4 4 Commission 2001c 38-40
4 5 This section draws extensively from research reported in Shaffer 2002
4 6 Subsidiaries of US firms in the EC account for about one-third of ECimports from the United States while subsidiaries of EC firms in theUnited States account for about 38 of US imports from the EC SeePollack and Shaffer 2001a 14
4 7 Agreement on Mutual Recognition Between the European Communityand the United States of America Available on-line athttpeuropaeuintcommtradepdf0713mra-usenpdf
4 8 The five excluded sectors were information technology pressureequipment road safety equipment lawn mowers and personal protectiveequipment such as helmets
4 9 However as an exception tests of pharmaceutical good manufacturingpractices are to be performed by regulatory bodies and not privatelaboratories in accordance with that annex
5 0 Yerkey 2000a 2000b
5 1 Quoted in Shaffer 2002 23
5 2 Agreement Between the European Community and the United States ofAmerica on Mutual Recognition of Certificates of Conformity for MarineEquipment Available on-line athttpeuropaeuintcommtradepdfmareqpdf
5 3 See Shaffer 2002
5 4 See Shaffer 2002
5 5 This section draws extensively from research reported in Shaffer 2002
5 6 The above figures are from the prepared testimony of Assistant Secretaryof Commerce Franklin Vargo before the House Committee onInternational Relations See lsquoIssues in US-European Union TradeEuropean Privacy Legislation and BiotechnologyFood Safety PolicyrsquoFederal News Service (May 7 1998)
5 7 Mazumdar 2002 See also Shaffer 2000 Reidenberg 2001
5 8 Commission Decision of 26 July 2000 pursuant to Directive 9546ECof the European Parliament and of the Council on the adequacy of the
98
protection provided by the safe harbour privacy principals and relatedfrequently asked questions issued by the US Department of CommerceAvailable on-line athttpeuropaeuintcommtradepdfsafeharbourpdf For generalinformation on safe harbour documents see Safe Harbor Documentshttpwwwexportsgovsafeharborsh_documentshtm
5 9 Guide to the Implementation of Directives Based on the New Approachand the Global Approach Available on-line athttpeuropaeuintcommenterprisenewapproachlegislationguidedocument1999_1282_enpdf
6 0 See Shaffer 2002
6 1 For a good discussion of the obstacles posed by US federalism inregulatory cooperation see Commission of the European Communities2000
6 2 lsquoEU-US Guidelines on Regulatory Cooperation and Transparencyrsquoavailable on-line athttpeuropaeuintcommenterpriseenterprise_policygov_relationsregulcooptransathtm See also lsquoTransatlantic Bid to Cut Red TapersquoEuropean Report 10 April 2002 and Micheal Mann lsquoDrive to Head OffTrade Riftsrsquo Financial Times 13 April 2002
6 3 See the DG Trade website lsquoBilateral Trade Relations Canadarsquo accessedat httpeuropaeuintcommtradebilateralcanadacanadahtml
6 4 For useful and up-to-date reviews of the EUCanada relationship see inaddition to the DG Trade web page cited above the websites of theEuropean Union Delegation to Canadahttpwwweudelcanorgenglishindexcfm and the Canadian Missionto the European Union httpwwwdfait-maecigccaeu-missionconten_ehtml
6 5 For more information about Mercosur visit the following internetaddress httpwwwmercosurorg
6 6 Tansini and Vera 2001
6 7 lsquoEUChile Deal Reached on Free Trade Agreementrsquo European Report 27April 2002
6 8 Ibid
6 9 Camarero and Tamarit (2002) Source OECD International SectoralDatabase
7 0 For more information about the EU and Latin America visit the followinginternet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 1 The Lomeacute Convention replaced the Yaounde Convention of 1963 afterthe accession of the UK to the Community It was renewed in 1979
99
(Lomeacute II) 1985 (Lomeacute III) 1989 (Lomeacute IV) and 1995 (Lomeacute IV) andconsists of a system of preferences for imports in which industrial goodsalmost free of tariffs and agricultural receive different treatments InJune 2000 the Lomeacute Convention was replaced by the CotonouAgreement which stabilized what can be seen as a transitory regimeaiming to incorporate the ACP countries in the WTO general rules
7 2 What characterizes first-generation agreements is their conventionalbilateral and technical structure and their reference to possiblereciprocal cooperation In practical terms however these treaties onlyextended the Most Favoured Nation (MFN) status to its signatories
7 3 The second-generation agreements referred mainly to specificcommercial and cooperation questions
7 4 For the conclusions of the Madrid summit see the Latin America webpage of the Commissionrsquos Directorate-General for Tradehttpeuropaeuintcommtradebilaterallaclachtm
7 5 In October 1998 hurricane Mitch one of the worst natural disastersever to have hit the region caused a material damage equivalent to 10of the regionrsquos GDP The EU not only played a significant role in theinternational communityrsquos emergency aid but also launched in 1998a medium-term rehabilitation plan called the Regional Programme forthe Reconstruction of Central America (PRRAC) Funding was set ateuro 250 million committed for the 1999-2002 period but to beimplemented within six years The target countries were HondurasNicaragua El Salvador and Guatemala
7 6 For details on the provisions of the EU-Chile Association Agreement andthe status of the ratification procedure seehttpeuropaeuintcommexternal_relationschileintroindexhtm
7 7 The information about the results of the different negotiation rounds canbe updated at the following internet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 8 For an assessment of the trade-diverting effects of Mercosur seeNagarajan (1998)
7 9 Commission of the European Communities 1998b
8 0 Messerlin 2001b
8 1 Pascal Lamy lsquoFacing the Challenge of Globalization Regional Integrationor Multilateral Rulesrsquo Buenos Aires 1 March 2002 Reproduced on theDG Trade website athttpeuropaeuintcommtradespeeches_articlesspla99_enhtml
Lead Author
Mark A Pollack
The Political Economy ofthe Transatlantic Partnership
Robert Schuman Centrefor Advanced Studies
EUROPEAN UNIVERSITY INSTITUTE
Report prepared by theTransatlantic Programme
for and with the contribution of
Her Majestyrsquos TreasuryUnited Kingdom
Ministry of FinanceThe Netherlands
iii
Executive Summary
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly in thecourse of the past decade During the 1990s the volume oftransatlantic trade more than doubled making the EU and the USeach otherrsquos most important trading partners Foreign directinvestment between the US and the EU has grown even more rapidlydoubling in value during the last three years of the 1990s aloneindeed it is estimated that some 35 million American jobs rely onforeign investment from the European Union with a similar number ofEuropeans employed by US firms
These developments reviewed briefly in Section 1 of this report havecreated a de facto transatlantic marketplace yet they have also led tonew strains on the transatlantic partnership and to a new andchallenging economic agenda for EUUS cooperation Prior to the1990s much of the transatlantic economic relationship was dominatedby traditional trade questions such as tariffs quotas and other directbarriers to trade typically imposed at US and EU borders With thedecline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade - most notably lsquobehind-the-borderrsquo domestic regulations adopted in response to legitimate publicconcerns about the environment consumer protection food safety anddata privacy - have emerged alongside traditional trade barriers as theprimary challenges to a mutually beneficial EUUS trade andinvestment relationship
In an effort to meet these challenges the United States and theEuropean Union have put into place an increasingly well developedinstitutional machinery for bilateral economic as well as foreign andsecurity policy cooperation These institutions examined in detail inSection 2 have fostered a regular dialogue between EU and USauthorities across a full range of issue-areas and have provided theframework for increasing efforts at regulatory cooperation and tradedispute resolution Nevertheless recent studies have demonstrated theuneven performance of these institutions across issue-areas as well asthe uneven development of the various transatlantic lsquocivil-societydialoguesrsquo and have suggested reforms to allow the EU and US tofocus more effectively on joint long-term objectives
iv
The transatlantic relationship has come under repeated strain duringthe past decade as a result of both traditional and new-style regulatorydisputes Such disputes the European Commission has pointed outconcern only an estimated 1-2 of the total value of transatlantictrade and investment yet these disputes could potentially spread toother areas of the transatlantic relationship it is therefore in theinterests of both sides to ensure that such disputes are prevented fromarising through timely consultations where possible and settledefficiently and amicably in other cases Many of thesedisputesmdashespecially traditional tariff quota antidumping andsubsidies disputesmdashare dealt with effectively through the disputesettlement procedure of the World Trade Organization (WTO) to whichthe EU and the US are both parties New-style regulatory disputeshowever often involve domestic laws adopted for legitimate purposesfollowing democratic deliberation and these disputes can placeconsiderable strain on the WTO system particularly in cases wherethe losing party would have difficulty complying with an adverse WTOruling
In such cases both the United States and the European Union shouldstrive proactively to consider the WTO compatibility of nationalregulations prior to adoption cooperate on common regulatoryproblems and seek to settle regulatory disputes through consultationswithin the WTO dispute settlement procedure wherever possibleSection 3 of the report therefore examines a range of potential reformsin US and EU domestic regulatory procedures in the bilateralrelationship and in the multilateral WTO dispute settlementprocedure
bull At the domestic level the US and the EU could commit themselvesto conducting lsquoTrade Impact Assessmentsrsquo of draft regulations sothat legislators are made aware of the potential trade implications ofproposed regulations before they are adopted
bull At the bilateral level both partners can engage in more extensiveearly warning of new rules as well as greater regulatory cooperationand greater contact among legislators to increase their awareness ofthe external impact of domestic laws Far from weakening themultilateral trading system bilateral economic cooperation can andshould strengthen the WTO by preventing difficult regulatorydisputes before they occur and by acting as a laboratory for theresolution of such disputes at the global level
bull At the multilateral level finally the EU and the US could committhemselves to modest reforms in the WTO and its disputesettlement procedure including a clarification of the lsquoprecautionaryprinciplersquo in WTO law and a possible move from retaliation tocompensation as the primary means of enforcement of WTO law
v
Of the aforementioned proposals the EU and the US have arguablymade the most progress in promoting cooperation among theirrespective domestic regulators with a growing number of formalregulatory agreements adopted since 1997 and an even larger numberof informal contacts among EU and US regulators taking place on aregular basis across a full range of issue-areas Such regulatorycontacts hold significant promise allowing regulators on both sides ofthe Atlantic to learn from each other coordinate their regulatoryefforts and avoid transatlantic regulatory disputes before they beginHowever as Section 4 of this report demonstrates in detail successfulregulatory cooperation is not a lsquomagic bulletrsquo for trade disputes butrather a lsquohothouse flowerrsquo which must be carefully nurtured and canbe easily frustrated by any of a number of potential obstaclesincluding the persistence of distinctive European and Americanregulatory philosophies and procedures the multi-level nature of theEU and US political systems and the insistence by both sides onmaintaining domestic regulatory sovereignty Overcoming theseobstacles will require the identification of lsquobest practicersquo in regulatorycooperation gradual increase in regulatory trust among EU and USregulators and a careful balancing by political leaders of domesticregulatory aims on the one hand and the importance of thetransatlantic economic relationship on the other
The EUrsquos ever-closer economic relationship with the United States hasnot developed in a vacuum but rather coincides with a second majordevelopment namely the rapid increase during the 1990s of EU tradeand foreign direct investment with the countries of North and SouthAmerica analyzed in Section 5 of the report Concurrent with itsgreater economic presence in the Americas the Union has pursued awide range of trade and economic agreements with the countries of theregion including an increasingly close trade and regulatoryrelationship with Canada a free trade agreement with Mexico andother agreements with Chile Mercosur and other Latin Americancountries
In May 2002 leaders of the European Union and Latin Americancountries met in Madrid for their second summit meeting confirmingthe conclusion of negotiations on an EUChile Association Agreementand calling for further development of bilateral ties including theeventual conclusion of a similar association agreement with MercosurIn these and future negotiations the EU should give special attentionto expanding market access for Latin American goods and servicesespecially for so-called lsquosensitive productsrsquo currently subject to high EUtariffs as well as focusing on the reduction of other means ofprotection such as tariff quotas that are applied trade in goodsservices investment public procurement intellectual property rightstechnical standards and rules of origin
vi
The European Unionrsquos economic relationships with the countries of theAmericas like its bilateral relationship with the United States isnested in turn within the multilateral trading system of the WorldTrade Organization the further development of which is a sharedpriority for both the European Union and the United States During hisrecent trip to Argentina EU Trade Commissioner Pascal Lamy stressedthe importance of ensuring that bilateral and inter-regional tradeagreements with the United States Canada and the countries of LatinAmerica rest on the multilateral foundation of WTO trade law For thisreason he argued bilateral and interregional negotiations lsquomust not beallowed to detract our attention from the pursuit of the DohaDevelopment Agendarsquo Such a commitment should remain a centraltenet of EU trade policy in the years to come
Within the multilateral rules-based trading system finally theEuropean Union and the United States should also seek to developfurther their bilateral relationship the health of which is vital to theglobal economy as a whole Addressing the full range of challenges tothe transatlantic economic partnership will in turn require a carefuland extensive study not only of traditional trade issues such as theliberalization of tariffs and quotas but also and especially the domesticsources of transatlantic regulatory disputes and successful means ofpreventing and settling such disputes More specifically such as studywould have to undertake three essential tasks
bull A comprehensive listing and analysis of EU and US regulationscapable of restricting trade and investment in the transatlanticsmarketplace
bull A comprehensive survey and analysis of formal and informalregulatory cooperation focusing on both the obstacles to suchcooperation and instances of lsquobest practicersquo in overcoming thoseobstacles and
bull A systematic analysis of various means of bilateral and multilateraldispute resolution with a particular emphasis on the specificchallenges of transatlantic regulatory disputes
The insights generated by such a study would inform not only thefurther development of the transatlantic economic partnership but alsothe development of the rules-based multilateral trading system of theWorld Trade Organization
vii
About the Authors
This report was prepared by the Transatlantic Programme of theRobert Schuman Centre for Advanced Studies at the EuropeanUniversity Institute Florence
The following persons contributed to the writing of one or moreportions of this reportRebecca Steffenson (European University Institute) contributed toSection 2Alasdair Young (University of Glasgow) contributed to Section 3including the preparation of Tables 5-7 as well as Appendices 1-3Gregory C Shaffer (University of Wisconsin School of Law) contributedtwo case studies in Section 4Mariam Camarero (Universidad Jaume I) Cecilio Tamarit (Universidadde Valencia) and Andrea Ribeiro Hoffmann (University of Tuumlbingen)contributed to Section 5 andMark A Pollack (European University InstituteUniversity ofWisconsin-Madison) served as lead author for the report andcontributed to the writing of various sections
The Transatlantic Programme is also grateful to the following personsfor comments on early drafts of the reportHelen Wallace (Director Robert Schuman Centre for AdvancedStudies)Patrick Messerlin (Institut de Sciences politiques Paris)Claus-Dieter Ehlermann (European University Institute)Ernst-Ulrich Petersmann (European University Institute) andMichael Artis (European University Institute)
The Transatlantic Programme was established in 2000 with a majorgift from BP
1
ndash 1 ndashThe Transatlantic Marketplace and
the Changing EUUS Economic Agenda
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly over thecourse of the past decade Taken together the US and the EU accountfor roughly one half of both world GDP and global trade
Table 1 Transatlantic Trade 1980-2000 in millions of Euros(share of EU total)
1980 1990 2000
EU imports from US 50733(181)
88957(205)
197992(193)
EU exports to US 29543(140)
82004(200)
232037(247)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
The European Union and the United States are also each otherrsquos mostimportant trading partners As Table 1 illustrates the volume ofEUUS trade more than doubled during the 1990s and the twocountries are currently each otherrsquos largest trading partners Indeedrecent data on trade in services summarized in Table 2 demonstrateseven more clearly the importance of the transatlantic traderelationship with the United States accounting for some 40 of theEUrsquos total imports and exports of services which in turn account forbetween one-third and one-half of total transatlantic tradeFurthermore EUUS trade has been largely balanced over the decadeof the 1990s
2
Table 2 Transatlantic Trade in Services in millions of Euros(share of EU total)
1998 1999 2000
EU imports from US 79874(360)
99042(409)
116474(407)
EU exports to US 77039(334)
92199(373)
117403(403)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
Notwithstanding the impressive growth of EUUS trade it is theinvestment relationship that most clearly distinguishes thecontemporary transatlantic marketplace As Table 3 makes clear theEuropean Union in 2000 was far and away the largest investor in theUnited States its euro 794 billion in foreign direct investment (FDI)constituting 65 of total FDI in the US1 The United States is similarlythe largest source of FDI in the European Union with someeuro 561 billion invested in 2000 These high levels of EU investment areestimated to provide roughly 35 million jobs in the United States witha similar number of European jobs relying on US investment in theUnion2 The large and growing investment relationship also explains aconsiderable portion of the recent growth in bilateral USEU tradesince an estimated 20-30 percent of all bilateral trade takes the form ofintrafirm trade within firms operating on both sides of the Atlantic
Table 3 Transatlantic Foreign Direct Investment in millions of Euros(share of EU total)
1998 1999 2000
US FDI flows into EU 60697(571)
83798(754)
121271(688)
EU FDI flows to US 133416(602)
196794(632)
172027(475)
US FDI stocks in EU 366462(60)
439928(609)
561199(625)
EU FDI stocks in US 398190(483)
622496(524)
794523(513)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
3
With the simultaneous growth of transatlantic trade and investmentand the gradual decline in EU and US tariffs and quotas followingsuccessive waves of trade liberalization the transatlantic economicagenda has been transformed Prior to the 1990s much of the EUUSeconomic relationship was dominated by trade questions andspecifically by cooperation and conflict over tariffs quotas and otherdirect barriers to trade typically imposed at US and EU borders Withthe decline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade have increased in importance aspotential sources of international trade tension Such non-tariffbarriers have been addressed in the European Union for decadesthrough the use of regulatory harmonization and more recentlythrough the mutual recognition of national standards Similarly theGATT system began as early as the Tokyo Round (1973-1979) toaddress non-tariff barriers to trade most notably through theTechnical Barriers to Trade (TBT) Agreement and more recentlythrough the 1994 Sanitary and Phytosanitary Standards (SPS)Agreement both of which apply international law disciplines to trade-distorting national regulations
Notwithstanding these new rules however lsquobehind-the-borderrsquo US andEU regulations on a diverse array of topicsmdashranging from theenvironment and food safety to consumer protection and dataprivacymdashhave emerged during the past decade as significant obstaclesto transatlantic and global trade and investment3 In some cases suchdomestic regulations have led to trade disputes between the UnitedStates and the European Union and to increasing demands frombusinesses on both sides of the Atlantic for cooperation among US andEuropean regulatory authorities to prevent and settle such disputesand facilitate access to the European and American markets
In sum the ever-increasing levels of transatlantic trade andinvestment have created a de facto transatlantic marketplace and withit an increasing incentive for the European Union and the UnitedStates to cooperate in an effort to manage that marketplace facilitatemutually beneficial economic exchange and prevent or settle the tradeand economic disputes that inevitably arise in such a closerelationship In that context this report aims to summarize the stateof our scholarly understanding about the political economy of thetransatlantic economic relationship with an emphasis on theinstitutions for joint economic governance the new challenges posedby regulatory disputes and the promise and limits of transatlanticregulatory cooperation Accordingly Section 2 of the report examinesthe development and growth of post-Cold War institutions for themanagement of the EUUS economic partnership while Section 3examines the persistence of trade and economic disputes between theEU and the US including the rise of new and potentially intractableregulatory disputes and Section 4 examines the prospects and limitsof transatlantic regulatory cooperation as a possible solution to such
4
conflicts The fifth section of the report places the EUUS bilateralrelationship in the broader context of the relationship between theEuropean Union and the various countries of the Americas and thesixth concludes with a review of potential areas for furthertransatlantic cooperation and promising areas for further study
5
ndash 2 ndashInstitutions for Transatlantic Economic Governance
Origins and Effectiveness
Transatlantic relations between the United States and the countries ofWestern Europe have long been based on common values and interestsin terms of both security and economic interdependence Throughoutthe Cold War transatlantic cooperation took place largely though theNorth Atlantic Treaty Organization (NATO) in the area of security andthrough common US and European participation in variousmultilateral economic forums including the Organization for EconomicCooperation and Development (OECD) the G-7 (now G-8) group ofhighly industrialized economies and the World Trade Organization
Cooperation between the United States and its European partners istherefore not new but the character of the relationship changedsubstantially during the 1990s with an ever-greater emphasis oneconomic as well as security cooperation and a greater recognition bythe United States of the European Union (in addition to its memberstates) as an important interlocutor Three transatlantic agreementssigned in the 1990s underpin this new transatlantic partnership andthe increasingly liberalized EUUS economic relationship TheTransatlantic Declaration (1990) the New Transatlantic Agenda (NTA1995) and the Transatlantic Economic Partnership (TEP 1998) haveeach played an important role in creating a transatlantic framework foreconomic co-operation and introducing formal transatlanticinstitutions to manage the relationship This upgrading of the EUUSrelationship in turn can be traced to several interrelateddevelopments during that decade including the end of the Cold Warthe maturation of the European Union as an economic and politicalactor and the relentless expansion of transatlantic economic exchangewhich created pressures for joint management of the emergingtransatlantic marketplace4
The end of the Cold War was clearly a precipitating cause for theupgrading of the transatlantic relationship As early as 1990 the USpresidential administration of George HW Bush proposed aTransatlantic Declaration to reaffirm USEuropean solidarity followingthe fall of the Iron Curtain and the collapse of the Soviet Union Whilethat Transatlantic Declaration itself focused largely on security issuesrather than economic cooperation the diminution of the security
6
threat from post-Soviet Russia facilitated an increasing emphasis oneconomic issues by the Clinton Administration reflected in both the1995 New Transatlantic Agenda and the 1998 Transatlantic EconomicPartnership5
This economic focus has in turn been reinforced by the maturation ofthe European Union which emerged during the late 1980s and early1990s as the worldrsquos largest internal market and the most importanttrading partner of the United States Simultaneous with thedevelopment of the EUrsquos internal market came the increasing influenceof EU political institutions including the European Commission(which plays a vital role in the EU legislative process as well as servingas trade negotiator and economic regulator in fields such ascompetition policy) and the Council of Ministers and EuropeanParliament (which collectively adopt an increasingly large portion ofEuropean economic legislation) Although the powers of the respectiveEU institutions still varies considerably across sectors theCommission has clearly emerged as the Unionrsquos primary interlocutorwith the United States on economic issues while the legislativeactivities of the Council and the Parliament have the potential toinfluence economic interests in the United States The institutions ofthe New Transatlantic Agenda have therefore attempted to incorporatethe Commission and the Council presidency through biannualsummits and other high-level meetings as well as members of theEuropean Parliament through the Transatlantic Legislatorsrsquo Dialogue(see below)
Beyond the end of the Cold War and the maturation of the EuropeanUnion finally lies the relentless increase of transatlantic economicexchange Increased transatlantic trade and investment have creatednew demands for market access and economic cooperation fromproducer groups such as the Transatlantic Business Dialogue whileother consumer labour and environmental groups have sought toensure that transatlantic cooperation takes into account their diverseinterests Indeed as we shall see below the increasingly closeeconomic relationship between the EU and the US has created newprospects for both trade conflicts and regulatory cooperation and hasresulted in what might be termed lsquoscuttle diplomacyrsquomdashthe scurrying ofEU and US government authorities to cope with the incessant conflictswhich although they compose only a small fraction of EUUSeconomic exchange threaten to poison a mutually advantageouseconomic relationship6 Largely for this reason the United States andthe European Union have established an increasingly complexinstitutional structure designed to facilitate economic and securitycooperation resolve and prevent disputes and integrate civil-societygroups into the process of transatlantic economic governance
7
21 Transatlantic Economic Agreements in the 1990s
211 The Transatlantic Declaration
The process of institutionalizing the EUUS relationship begansimultaneously with the end of the Cold War in 1989 when USPresident Bush and EU Commission President Jacques Delors agreedto work to ensure regular meetings between high-level EU and USofficials On 27 February 1990 this agreement bore fruit in the shapeof a lsquoTransatlantic Declarationrsquo pursuant to which the US and ECagreed to establish an institutional framework lsquofor regular andintensive consultationrsquo Specifically the Declaration called for biannualEUUS summit meetings between the presidents of the United Statesthe European Commission and the European Council as well asregular meetings between the US Secretary of State the ECCommission and the US Cabinet These meetings it was hoped wouldopen lines of communication create networks facilitate informationsharing and reduce the impact of disputes in transatlantic relations
In substantive terms the Transatlantic Declaration identified threemajor goals
bull economic liberalizationbull educational scientific and cultural co-operation andbull cooperation in fighting international crime terrorism and
environmental degradation7
While these policy areas were identified as priorities the agreementfailed to provide a more detailed agenda for meeting its goals Thecontent of the agreement has been described as cosmetic minimalistand lacking in substantive innovations and would soon besupplemented by other more detailed economic agreements8
212 The New Transatlantic Agenda
The next stage in developing the transatlantic economic relationshipcame with the New Transatlantic Agenda (NTA) which was signed atthe EUUS Summit in Madrid in 1995 and established four priorityareas for closer cooperation
1 promoting peace and stability democracy and development aroundthe world (in particular in Central and Eastern Europe Russia andthe Middle East)
2 responding to global challenges (with a focus on international crimedrug trafficking terrorism migration and health andenvironmental issues)
3 lsquocontributing to the expansion of world trade and promoting closereconomic relationsrsquo (including both bilateral and multilateralliberalization of trade and investment) and
8
4 building bridges across the Atlantic (specifically direct contactsamong lsquobusiness people scientists educators and othersrsquo)9
In addition to the six-page NTA itself the two partners also adopted amuch more detailed Joint Action Plan (JAP) which outlined specificpolicy areas where deeper cooperation could be pursued The economicchapter of the JAP was arguably the most ambitious of the four callingfor both the strengthening of the multilateral trading system and thecreation of liberalized lsquotransatlantic marketplacersquo with a special focuson bilateral regulatory cooperation1 0 The NTA itself also acknowledgedthe role of the Transatlantic Business Dialogue which would laterprove to be influential in setting the agenda for transatlantic economiccooperation
In institutional terms the New Transatlantic Agenda established newtransatlantic governance mechanisms and a more established policyprocess First it created a Senior Level Group of EU and US officialstogether with a lower-level NTA Task Force to help drive coordinatemonitor and implement the agenda of transatlantic relations betweenthe continuing EUUS summits Although this framework has sincebeen criticized as excessively bureaucratic and focused on summit-driven lsquodeliverablesrsquo (see below) the NTA framework has proven usefulin coordinating EU and US responses to both economic and securityissues and remains the overarching framework for transatlanticrelations today
213 The Transatlantic Economic Partnership
The drive for an ever-closer transatlantic economic relationship wasrevived in 1998 amidst revelations that cooperation in many policyareas had fallen short of initial expectations1 1 Despite the NTA and itsinstitutions high-profile trade disputes over bananas beef andextraterritorial sanctions continued highlighting the need for furthertransatlantic commitment to facilitate economic exchange and containconflict In that context the European Commission took the initiativein April 1998 calling for negotiations on a lsquosingle comprehensiveagreementrsquo to implement a lsquoNew Transatlantic Marketplacersquo TheCommissionrsquos proposal had four central objectives
1 the lsquoremoval of technical barriers to trade in goods through anextensive process of mutual recognition andor harmonizationrsquo
2 the elimination lsquoby 2010 of all industrial tariffs on an MFN basisrsquo3 the formation of a lsquofree trade area in servicesrsquo and4 further liberalization in the areas of government procurement
intellectual property rights and investment1 2
The United States had little time to respond however as the initiativefailed to secure the support of the Council of Ministers In its placethe US and the EU agreed in May 1998 to a somewhat less ambitious
9
Transatlantic Economic Partnership (TEP) which aimed to tacklebilateral regulatory barriers to trade and to identify common positionswithin multilateral trade negotiations In substantive terms the TEPand its accompanying Action Plan focused more directly than the NTAon regulatory cooperation and on the possible harmonization ofstandards as a means of removing technical barriers to trade and itcommitted both sides to negotiations in specific issue-areas includingservices intellectual property food safety and biotechnology1 3
In addition the TEP created a new set of institutions to manage theeconomic aspects of the relationship including a lsquoTEP Steering Grouprsquocharged with monitoring implementing and reviewing TEP objectivesas well as expert-level working groups The TEP also emphasized theimportance of early warning of potential trade and regulatory disputesand fostered the creation of an institutionalized lsquoearly warning systemrsquofollowing the Bonn EUUS summit in June 1999 Finally the TEPexplicitly encouraged the participation of not only business but othercivil society groups which would lead in time to the creation of thetransatlantic consumer environment and labour dialogues
Table 4 Transatlantic Cooperation Agreements at a Glance
Transatlantic Agreement Year Impact on the Economic Relationship
The TransatlanticDeclaration 1990 Contains a broad commitment to
economic liberalization
The New TransatlanticAgenda (NTA) and JointAction Plan (JAP)
1995
Includes a chapter on contributing tothe expansion of world trade andpromoting closer economic relationsJAP discusses building a lsquonewtransatlantic marketplacersquo throughincreased regulatory co-operation
Transatlantic EconomicPartnership (TEP) 1998
Outlines three main goals for thetransatlantic economic relationship1) market access gains for goods
services and agricultural products2) multilateral and bilateral trade
liberalization of goods services andcapital
3) deepening dialogue between non-governmental organizationsparliamentarians and government
10
22 An Overview of Existing Transatlantic Institutions
Todayrsquos transatlantic economic relationship is managed largely by a setof institutions that were created in stages by the TransatlanticDeclaration the NTA and the TEP Combined these institutionsconstitute a framework for long-term as well as day-to-day economiccooperation and dispute resolution
221 EUUS Summits
The biannual EUUS summit is the primary forum forintergovernmental exchange in the NTA process consisting of thehighest level of contact between the Presidents of the US the EUCommission and the Council Presidency The transatlantic policy cyclebegins and ends with these biannual summits where decisions arelsquomadersquo about the general scope for co-operation and wherelsquodeliverablesrsquo - in the form of new bilateral agreements about regulatorycooperation or the resolution of specific disputesmdashare announced Thesummits encourage policy co-ordination because they create deadlinesfor progress reports and exert pressure on lower-level officials toproduce results
222 Senior Level Group and the NTA Task Force
The Senior Level Group serves as a contact point between the EUUSSummit and the working level of the transatlantic dialogue It hasroughly six formal members including the US Undersecretary of Statefor Economic Affairs Commission delegates from the Directorates-General for external relations and trade Council Presidencyrepresentatives and representatives of the lsquoArticle 133 committeersquodealing with international trade matters The primary tasks of the SLGare to prepare the agenda of the biannual summits lsquoshopping fordeliverablesrsquo to be announced on those occasions and to monitor theimplementation of the NTA and the TEP
Logistically the SLG typically meets twice during each CouncilPresidency with the first meeting used to assess potential areas ofcooperation and conflict and the second meeting finalizing the agendafor the EUUS summit and confirming the contents of its progressreport which is presented to summit leaders Below the SLG an lsquoNTATask Forcersquo meets somewhat more frequently (often throughvideoconferencing) to follow specific dossiers in both the security andeconomic realms
223 TEP Steering Committee and Working Groups
The TEP institutions including the Steering Group and workinggroups bring together policy experts to deal with economic issues ingreater detail The Steering Group consists of the US Deputy Assistant
11
Secretary of State for Economic Affairs Commission officials at theHead-of-Unit level and a Council Presidency representative Originallydesigned to coordinate negotiating approaches within the WTO and toact as an lsquoearly warning systemrsquo to identify possible trade disputes theTEP Steering Group has evolved into the primary coordinating body fortransatlantic economic relations including negotiations aboutregulatory cooperation in specific areas
The Steering Group is assisted by the TEP working groups which aresector-specific and thus mirror the sectors laid out by the TEPincluding agriculture biotechnology trade services and globalelectronic commerce Their main task is to find areas where the EUand the US can work together under the TEP framework and to reportany progress or problems to the Steering Group
224 The Transatlantic Early Warning System
The 1998 TEP declaration highlighted the need to identify potentialtrade disputes before they emerge At the Bonn EUUS summit inJune 1999 the two sides announced plans to formalize an EarlyWarning System for this purpose1 4 Essentially the transatlantic earlywarning system sparks an inter-agency process to identify potentialeconomic disputes at an early stage most notably with regard todomestic EU or US legislation that might act as a barrier totransatlantic trade and investment The task of spotting such potentialdisputes is delegated to the TEP Steering Group which reports earlywarning items to the Senior Level Group which in turn may take theminto account when preparing the EUUS summit agenda The TEPSteering Group also assigns contact points facilitating consultationsand agreeing on timelines for reporting back on items highlighted aspotential transatlantic policy frictions Unlike similar early warningsystems within the European Union however the transatlantic earlywarning system does not require that either side pause or reconsiderits proposed legislation or regulations The result is a system whichwhile respecting the regulatory sovereignty of both sides does notguarantee prevention or resolution of potential conflicts
12
Figure 1 The Transatlantic Early Warning System
The EUUS SummitTop-level discussions on
potential and exiting disputes
The Senior Level GroupReviews friction points reports to summitorand refers back to TEP Steering Group
or NTA Task Force
TEP Steering GroupIdentifies and monitorseconomic friction points
225 The Transatlantic Legislatorsrsquo Dialogue
An underlying feature of the early warning concept is the desire to getboth EU and US domestic policy makers to consider the externalimplications of internal policies However the Early Warning System isa bureaucratic tool The important task of raising awareness betweenEU and US legislators lies with the Transatlantic Legislatorsrsquo Dialogue(TLD) another product of the NTArsquos lsquobuilding bridgesrsquo chapter The TLDbrings together members of the US Congress and the EuropeanParliament so as to create awareness on each side of the transatlantictrade impact of EU and US legislative acts
Thus far however the TLD has not lived up to initial expectations forthree reasons First TLD participation is largely limited to members ofthe US House of Representatives and the European Parliament with aparticular interest in transatlantic relations and may not includemembers of committees drafting legislation with transatlanticrepercussions the US Senate moreover is thus far excluded from theTLD Second there is insufficient contact between the TLD and otherparts of the transatlantic dialogue for example the SLG Thirdmeetings of the TLD have been held only rarely and typically withweak attendance on the US side and the Dialogue has yet to engage inor settle any serious economic disputes between the United States andthe European Union
226 The Transatlantic Civil Society Dialogues
The fourth and final chapter of the NTA encourages the establishmentof lsquopeople to peoplersquo links as a way of building bridges across the
13
Atlantic and bringing a civil-society component to transatlanticcooperation In addition to supporting ad hoc exchange betweeneducators and scientists the EU and the US have encouraged and insome cases subsidized the establishment of formal dialogues amongEuropean and American business consumer and environmentalgroups and labour unions The 1995 NTA made specific mention ofthe Transatlantic Business Dialogue (TABD) while the 1998 TEPinvited civil society input lsquoon issues relevant to international trade as aconstructive contribution to policy makingrsquo In practice however not alldialogues have been created or function as equals
The Transatlantic Business Dialogue
The TABD is the oldest best organized and most influential dialoguein the transatlantic economic relationship Launched in 1995 at theinitiative of the US Commerce Department and the EU Commissionthe TABD brings together some 200 European and American CEOs forannual meetings which make joint recommendations on thetransatlantic policy issues1 5 From the beginning the TABD focusedthe attention of US and European legislators and regulators on theimportance of non-tariff barriers to trade calling explicitly for EUUSregulatory cooperation and mutual recognition of standardsmdashanapproach it has labelled lsquoapproved once accepted everywherersquo1 6 Inkeeping with this approach the TABD has been active in pressing forthe adoption and implementation of specific agreements including the1997 Mutual Recognition Agreements and the 2000 Safe HarbourAgreement on data privacy (examined below) In addition the TABDparticipates actively in the transatlantic early warning systemidentifying in its annual reports those domestic laws and regulationsthat might create obstacles to transatlantic trade and investment1 7
One result of this process is that the TABD has become a valuablesource of information for EU and US policy makers Sixty percent ofthe TABDrsquos original recommendations resurfaced in the NTA and theJoint Action Plan1 8 Some members estimate that one-third of itsrecommendations have been taken on board by transatlantic policymakers1 9 Nevertheless there is an increasing perception within theTABD that much of the lsquolow-hanging fruitrsquo has been picked in terms oftransatlantic trade liberalization and regulatory cooperation and a fearthat governments lsquocanrsquot deliverrsquo regulatory reforms demanded bybusiness2 0 In addition the TABD faces the challenge of interactingwith the other officially recognized dialogues with which it may notalways agree
The Transatlantic Consumer Dialogue
The decision to include consumers environmentalists and workers inthe transatlantic dialogue was the result of pressure from NGOs theEuropean Commission and eventually the US State Department The
14
success of the TABD sparked criticism from the NGO communitywhich argued that the influence of the TABD was unbalanced by anabsence of civil society input In response to these concerns the StateDepartment and the European Commission both agreed to providefunds to establish a new Transatlantic Consumer Dialogue There wassome objection to government sponsorship of the groups particularlyin the US where it was feared that the consumer dialogue was a wayto lsquogreenwashrsquo the TEP There was also a divide among its membersover the issue of trade liberalization most notably at the first meetingof the TACD which was overshadowed by a dispute between groupssuch as Public Citizen which generally oppose trade liberalization andother groups such as Consumer Union which support tradeliberalization as a means of increasing consumer choice2 1
Despite this rocky start the TACD has become an efficientorganization with a secretariat in London and a Steering Committeethat has organized its roughly 60 members into working groups onfood electronic commerce and trade In its working groups annualmeetings and recommendations the TACD has focused largely ontransatlantic regulatory issuesmdashin areas such as data privacy foodsafety and the application of the lsquoprecautionary principlersquo in riskregulationmdashbecause many consumer groups feared a downward spiralof regulatory standards as a result of increasing trade liberalizationNevertheless despite its high level of activity some members of theTACD feel that they have not had a sufficient impact on the NTAprocess which they regard as being dominated by a free-tradeagenda2 2
The Transatlantic Environmental and Labour Dialogues
Attempts to forge a functioning dialogue between the European andAmerican environmental and labour movements have been the leastsuccessful Despite initial attempts to create an environmentaldialogue the TAED suspended its activities in 2000 citing a lack offunding from the US side2 3 The TAED had until this point held threemeetings and established a Steering Committee as well as WorkingGroups on Climate Protection Bio-diversity and Forest ConservationFood and Agriculture and Industry The TAED also offered a numberof official recommendations on safe energy sources biotechnologywaste management and emissions standards although TAEDmembers like their TACD counterparts argued that the TABDcontinued to enjoy privileged access to EU and US policymakers2 4
Finally while the Transatlantic Labour Dialogue is officially still afunctioning forum it is the least developed of the transatlantic civil-society dialogues The TALD is little more than a modest exchangebetween the European Trade Union Confederation (ETUC) and theAmerican Federation of Labour and the Congress of IndustrialOrganizations (AFL-CIO) with no organizational structure secretariat
15
or formal objectives The TALD did hold several meetings in 1998 and1999 and 2000 but produced only six recommendations from thosemeetings Simplifying only slightly the ETUC and AFL-CIO havechosen to emphasize their shared interests in a global labour dialogueand have demonstrated little commitment to a specificallytransatlantic agenda within the framework of the NTA or the TEP2 5
In sum the transatlantic civil-society dialogues have arguably served auseful purpose in fostering transatlantic discussion among businessesand non-governmental organizations (most notably in the businessand consumer sectors) and in producing concrete recommendationsfor transatlantic economic cooperation However the relative weight ofthese organizations remains highly uneven and the currentarrangement is highly segmented and marked by a lack of anylsquodialogue among the dialoguesrsquo which might lead to the creation of agenuine transatlantic public sphere
23 An Effective Framework for Economic Cooperation
In recent months both official reviews and academic studies havefocused on the institutions of the NTA and the TEP asking whetherthese institutions are an adequate framework for transatlanticeconomic as well as security cooperation In its 2001 review of theNTA for example the European Commission argued that institutionssuch as the TEP Steering Group the NTA Task Force and the SeniorLevel Group serve useful purposes in fostering dialogue andcooperation between EU officials and their US counterparts but alsonoted a number of weaknesses in the current structure including thesummit-driven demand for often artificial lsquodeliverablesrsquo at six-monthintervals and the difficulty in focusing on medium- to long-termpriorities given the inevitable demands of pressing short-term issuesThe Commission therefore proposed a number of reforms to thecurrent institutions including the establishment of explicit medium-term priorities and the possible reduction of the number of EUUSsummits to one per year2 6
By and large the Commissionrsquos recommendations were welcomed bythe United States government which agreed to the establishment of aset of medium-term priorities in the context of the June 2001 Goumlteborgsummit By contrast no progress has been made on the suggestion ofreducing the number of transatlantic summits largely because of thedifficulties posed by the rotating six-month presidency on the EU sideIn addition as we have seen a number of calls have been made inrecent years for a more transparent and accountable process oftransatlantic economic governance with more balanced input fromcivil society and with a greater role for democratically electedlegislators Thus far however these calls have met with no systematicresponse from either the US or the EU
16
Moving from institutions to lsquodeliverablesrsquo a recent study by EricPhilippart and Pascaline Winand has attempted to measure the policyoutputs of the NTA by examining the joint reports of the Senior LevelGroup since 1995 in order to determine to what extent and in whichareas the goals of the Joint Action Plan had been missed met orexceeded Summarizing a complex analysis Philippart and Winandfind that the extent and level of cooperation varies both across andwithin the four chapters of the NTA with genuine joint action in someareas and lower levels of cooperation (such as the exchange ofinformation) or inactivity in others In the area of foreign policycooperation for example the authors find that EUUS cooperation hasbeen most successful and resulted in the most extensive joint actionwithin Europe itself while yielding fewer and less binding outcomes inother regions In the area of economic cooperation the authors findthat the NTA has been most active in the establishment of alsquotransatlantic marketplacersquo with relatively extensive trade andregulatory cooperation but far less active and successful incoordinating economic policies in the World Trade Organization andother multilateral fora2 7 In the following two sections therefore weturn from a discussion of institutions and process to a more explicitanalysis of specific economic issues relating to the management oftrade disputes as well as bilateral efforts at regulatory cooperation
17
ndash 3 ndashTrade and Regulatory Disputes
in the Transatlantic Economic Partnership
Despite the obvious importance of EUUS trade and investmentrelationshipmdashor indeed because of itmdasheconomic disputes have beenand remain an important feature of the transatlantic partnershipIndeed the settlement and where possible prevention of suchdisputes was a large part of the motivation behind the establishment ofthe New Transatlantic Agenda and retains an important place inbilateral economic relations
31 Classifying Disputes Traditional Trade Issues vs NewlsquoBehind-the-Borderrsquo Regulatory Disputes
Transatlantic economic disputes arise from various sources and canbe settledmdashor left unsettledmdashby a similar variety of means In terms oftheir sources we can distinguish between two broad categories oftransatlantic trade disputes (1) lsquotraditionalrsquo trade disputes regardingdiscriminatory national measures such as tariffs and quotas imposedat the border as well as subsidies antidumping actions and safeguardmeasures which discriminate explicitly between domestic and foreignproducers and (2) lsquonew-stylersquo disputes about the trade-distortingeffects of lsquobehind-the-borderrsquo regulations that act as non-tariff barriersto international trade in goods services and intellectual property
With the gradual decline of tariffs and quotas as direct barriers toinvestment and the simultaneous increase in domestic economicregulation on both sides of the Atlantic in response to concerns aboutthe environment consumer protection public health and the like thefrequency of these new-style disputes has increased drastically duringthe course of the 1990s and early 2000s Some of these disputes likethe ongoing conflicts over the regulation and marketing of hormone-treated beef and genetically modified organisms (GMOs) havegenerated considerable controversy on both sides of the Atlantic andplaced strains on the transatlantic economic partnership
The rise of such transatlantic regulatory disputes in turn hasprompted questions about what Miles Kahler and others have termedlsquosystem frictionrsquo between the respective regulatory systems of the
18
European Union and the United States In a survey of transatlanticeconomic relations conducted in 1995 Kahler concluded that thereexisted at best partial evidence of system friction between the UnitedStates and the European Union noting that some issues (egagriculture and audiovisual services) did indeed divide the US and EUsystems fundamentally while on other lsquonewrsquo issues like labourstandards and the environment the EU and the US generally sharedcommon views2 8
Surveying the landscape of transatlantic economic relations sevenyears later it remains true that the European Union and the UnitedStates are united by many common values and common interestsNevertheless in a growing number of issue-areas including food safetydata privacy copyright protection taxation accountancy standardsand others the United States and the European Union have arguablyexperienced lsquosystem frictionrsquo in the form of a large number ofsimmering regulatory disputes summarized in Appendix 1 at the endof this report
Table 5 Classifying US-EU Trade Disputes
Agriculture Industrial goods Services
Border-measures
Bananas (alsoGATS)Belgian ricedutiesTariff-rate quotacorn gluten feed
Harbour taxAnti-dumping(steel uranium)CVD (steel)Safeguard actions(steel)
Tra
dit
ion
al
Subsidies Export subsidies AirbusFSC
Regulatorybarriers
Beef hormonesGMOs
Hush kitsPublicprocurement
Audio-visualProfessionalservicesTelecommuni-cationsData privacy
New
sty
le
IPR Havana Club Irish MusiccopyrightGreek protectionof movies
19
As Table 5 makes clear the contemporary transatlantic relationship ischaracterized by both traditional trade conflicts and new-styleregulatory disputes Indeed traditional disputes about tariffs andquotas (eg bananas) subsidies (eg Foreign Sales Corporations) anti-dumping measures and safeguard actions (eg steel) constitute someof the most high-profile disputes between the United States and theEuropean Union With a few exceptions however these disputesprimarily concern traditional trade measures that are within the lsquocorebusinessrsquo of the multilateral trading system which has wellestablished rules and an effective functioning dispute settlementprocedure within the World Trade Organization Put simply the WTODispute Settlement Understanding provides a body of multilateralrules governing the permissible use of tariffs quotas and other trade-restrictive practices a forum for consultation and if necessarylitigation among the parties to a dispute before WTO panels and theAppellate Body a binding requirement for member states to complywith DSU panel and Appellate body decisions and authorizedretaliation in the event of prolonged noncompliance with thosedecisions2 9
By contrast regulatory disputes implicate national laws andregulations that are often adopted for legitimate reasons of consumerand environmental protection or public health and after extensivedemocratic or administrative processes For this reason transatlanticregulatory disputes can be more bitter and intractable than traditionaltrade disputes insofar as both sides believe that they are lsquodoing theright thingrsquo and insofar as domestic political actors resistsubordinating domestic regulations to the exigencies of internationaltrade Such regulatory disputes also create particularly difficultquestions for the WTO dispute settlement procedure insofar as theycall for a politically sensitive balance between the economic imperativeof liberalized international trade on the one hand and the economicand non-economic motivations behind domestic regulations on theother hand
Largely for this reason both the United States and the EuropeanUnion have generally avoided bringing such regulatory conflicts beforethe World Trade Organization preferring in most instances to managetheir regulatory differences through bilateral consultation andcooperation Table 6 which summarizes EUUS WTO disputes bysubject matter demonstrates clearly the continuing dominance oftraditional trade issues (tariffs subsidies countervailing duties andantidumping) and the effort by both sides to keep politically sensitiveregulatory issues away from the WTO (For more information about thesubjects and status of all EUUS trade disputes before the WTO seeAppendices 2 and 3 at the end of this report)
Simplifying slightly existing regulatory as well as traditional tradedisputes can be addressed in any one of three ways (summarized in
20
Table 7 page 22) First the EU and the US may engage in directconsultations about regulatory barriers to trade and resolve thedispute without resorting to WTO dispute resolution examples includethe dispute over airplane lsquohush kitsrsquo resolved through a negotiatedsettlement between the EU and the US and the public procurementcase involving a Massachusetts state law imposing sanctions againstfirms doing business in Myanmar which was resolved unilaterallythrough the application of US federal law Second one party maychallenge the legality of the otherrsquos regulations before the WTO as inthe case of the US challenge to the EU ban on hormone-treated beefor the EU challenge to a provision of US copyright law in cases wherethe disputed regulation is ruled to be in violation of WTOrequirements however compliance has proven difficult Third andfinally given the difficulties of resolving such disputes through eitherbilateral negotiations or WTO litigation the bulk of regulatory disputesare allowed to simmer indefinitely with periodic consultations andexchange of information among the two sides but no resolution of theresulting trade tensions As Appendix 1 makes clear the overwhelmingmajority of current transatlantic regulatory disputes fall into this thirdcategory
Table 6 Transatlantic Trade Disputes in the WTO Overview and Context
Tariffsquotascustomsdutiesrules oforigin
retaliatorymeasures
Tradedefence
instruments(a-d CVDsubsidies)
TechnicalTBTs
(classi-ficationlabelingtesting)
Substantive TBTs
(process ampproductrequire-ments)
Subsidies GATS TRIPS TRIMS GPA Other
EU - US(EU asthirdparty)
6 9 (11) 1 (1) 1 3 1 2
EU - Restof World(RoW)
14 6 1 1 3 4 3 4
RoW ndash EU 12 3 4 2 1 1
US ndash EU(US asthirdparty)
8 (1) (1) 1 (1) 8 1 8
US - RoW 10 7 3 2 7 2 6 3 1
RoW ndash US 7 21 5 1 1 1
RoW ndash RoW 17 30 1 6 10 3
Sources Adapted from DG Trade WTO - Dispute Settlement (updated 15102) httpeuropaeuintcommtradepdfcasesxls accessed15202 and the WTOs dispute database (httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
21
22
Table 7 Methods of Dispute Resolution with Examples
Negotiated Agreement orUnilateral Action
WTO Dispute Settlement SimmeringDisputes
HushkitsMassachusettsMyanmar(public procurement)
Beef hormones(EU not in compliance)Irish Musiccopyright (EUUScompensation agreement)
GMOs
The sources of such regulatory disputes and the difficulties they posefor traditional dispute settlement procedures are illustrated below infour brief case studies focusing on (1) the US challenge to EUlegislation prohibiting the use of airplane lsquohush kitsrsquo (2) the USchallenge to the EUrsquos ban on hormone-treated beef and the relateddispute over the EUrsquos moratorium on the approval of geneticallymodified foods and crops (3) the EUrsquos challenge to the aforementionedMassachusetts public procurement law and (4) the EUrsquos challenge to aprovision of the US Copyright Act Although not a thorough review ofthe entire universe of EUUS regulatory disputes these four cases doillustrate the types of regulations adopted and challenged by both theEU and the US as well as the various methods of dispute resolutionmentioned above The policy implications of these cases are discussedin Section 36
32 Case Study Airplane lsquoHushkitsrsquo
Many EUUS disputes concern the technical barriers to trade (TBTs)caused by divergent national regulations setting technical standards inareas ranging from the specifications for industrial machinery andemissions standards for motor vehicles to nutritional labelingrequirements for packaged foods As Kenneth W Abbott has pointedout in a recent study many such national regulations are identified bybusiness or governments as TBTs within the transatlantic relationshipand a far smaller percentage of these have emerged as high-profiletrade disputes3 0 To date no disputes have been litigated between theEU and the US under the TBT Agreement although one particularlyprominent case did create significant tensions in the transatlanticrelationship namely the US challenge to the EUrsquos ban on airplanelsquohushkitsrsquo
Hushkits are equipment packages designed to reduce the noiseemissions of aircraft through the use of sound-absorbing materialswith the aim of bringing particularly older planes into compliance withthe so-called lsquoChapter 3rsquo noise pollution standards adopted within theInternational Civil Aviation Organization (ICAO) In 1999 theEuropean Union which had long pressed unsuccessfully for theadoption of stricter standards within the ICAO adopted a Regulation
23
establishing a ban on the registration of older aircraft fitted withhushkits on the grounds that such aircraft only barely complied withChapter 3 standards and were substantially more polluting thannewer planes The ban on new registrations was to enter into force inMay of 2000 from April 2002 moreover hushkitted aircraft registeredin third countries would not be allowed to operate within EU territory
Although nominally intended to decrease noise pollution aroundairports in heavily populated regions of Europe the EUrsquos hushkitsRegulation met with howls of protest in the United States where theuse of hushkits had been encouraged by US authorities as a cost-effective way of meeting Chapter 3 standards A ban on the registrationof hushkitted aircraft the US argued would therefore impose adisproportionate burden on US airlines which estimated that theRegulation cost them some $2 billion by depressing the value of theirexisting fleets while benefiting European carriers that had relied moreextensively on the purchase of new aircraft designed specifically tomeet Chapter 3 specifications In legal terms moreover the UnitedStates argued that the Regulation violated the terms of the ICAOagreement which simply set a performance standard for planes anddid not authorize parties to set more demanding standards or tomandate a specific design standard (eg a ban on the use ofhushkits) The US accordingly lodged a formal ICAO complaint againstthe 15 EU member states in March of 2000
After extensive bilateral discussion as well as multilateral negotiationswithin the ICAO in October 2001 the US and the EU reached asettlement of the case The first step in this settlement was themultilateral resolution adopted on 4 October in the ICAO assemblyurging states to pursue a lsquobalanced approachrsquo to noise reductionadopting local operating restrictions only where supported by anassessment of the costs and benefits and only after fully assessingalternative measures to reduce noise At the same time the ICAOagreed to a new and stricter set of lsquoChapter 4rsquo standards to take effectbeginning in 2006
Consistent with the provisions of the ICAO agreements the EU agreedon 25 October to withdraw the original Hushkits Regulation by April2002 (the date when it would have applied to third-country aircraft) inreturn for which the US agreed to withdraw its complaint before theICAO In place of the original Regulation the Commission issued aproposal in November 2001 for a new Directive replacing the generalban on hushkitted places with a more discriminating provisionallowing noise-sensitive airports in congested urban areas to limit theuse of planes that are lsquomarginallyrsquo compliant with Chapter 3standards3 1 This draft Directive was approved by the EuropeanParliament in its first reading in March 2002 and at this writing ispending adoption by the Council of Ministers and the Parliament
24
Despite the initial acrimony between the US and the EU the hushkitscase represents a successful effort at bilateral dispute resolution in abroader multilateral setting In this case the European Union agreedafter receiving assurance and guidance from the ICAO to adopt a morediscriminating and less trade-distorting regulatory approach whichsatisfies the trade concerns of the United States while allowing the EUto address the problems of noise pollution around the Unionrsquos mostcongested urban airports As we shall see presently however not allsuch regulatory conflicts have proven so amenable to negotiatedagreement
33 Case Study Hormone-Treated Beef andGenetically Modified Organisms
EU and US food-safety regulations constitute some of the mostimportant regulatory barriers to international trade and have been thesource of some of the most politically difficult and intractabletransatlantic regulatory disputes pitting each sidersquos sovereign right toregulate the safety of its food against its international obligationsunder WTO law3 2 Within the United States regulation of food safetywas among the earliest and most politically sensitive tasks of thefederal government which has delegated much of the power fordomestic regulation to agencies like the Food and Drug Administration(FDA) which has jealously guarded its reputation as an independentand impartial regulator making decisions on the basis of scientifictests rather than political pressures In the EU by contrast foodsafety regulation is carried out in part by national regulators and inpart by the EUrsquos political bodies including the Council of Ministersthe European Parliament and the Commission The deficiencies of thispatchwork regulatory process was painfully revealed however by aseries of food safety crises during the latter half of the 1990s includingmost notably the BSE crisis of 1996 and the Union has respondedforcefully with the creation of a European Food Safety Authority andwith an insistence on the application of the so-called lsquoprecautionaryprinciplersquo justifying regulatory action in the absence of clear scientificevidence and on the basis of consumer concerns and social andeconomic criteria
Precisely because food safety regulations can act as non-tariff barriersto trade in agricultural products the EU and the US have agreed tosubject their domestic regulations to the discipline of internationalguidelines such as the United Nations Codex AlimentariusCommission which establishes international standards for food safetyand more recently through the 1994 WTO Agreement on theApplication of Sanitary and Phytosanitary Measures (the SPSAgreement) The SPS Agreement does not establish bindinginternational standards for food safety nor does it automaticallypreempt the adoption of domestic standards that might constitute
25
non-tariff barriers to trade The agreement does however incorporateand promote the adoption of international standards as well asestablish trade rules that limit the ability of states to adopt food safetyregulations that are not scientifically grounded The terms of the SPSAgreement are moreover enforceable under the WTO disputesettlement procedure
The consequences of the divergent EU and US regulatory processesand the difficulties of resolving disputes through the WTO disputesettlement procedure can be illustrated most clearly by the long-standing EUUS dispute over the issue of hormone-treated beef Theconflict began in 1989 when the European Union announced a ban onthe sale and marketing of beef treated with any one of six growth-promoting hormones that had been tested and certified as safe by theFDA In 1995 following the entry into force of the SPS Agreement theUnited States took legal action before the WTO alleging that the EUban was inconsistent with the terms of the SPS Agreement since it wasnot based on scientific evidence risk assessment or internationalstandards After a protracted legal battle involving the issuing of apanel report and a subsequent appeal the WTO Appellate Body heldwith the United States that the EU had failed to base its ban on ascientific risk assessment and ordered the EU to bring its domesticregulations into compliance with WTO law
Despite the clear ruling against it the European Union faced withopposition from public opinion and hopeful of producing additionalscientific findings that would eventually justify the maintenance of theban failed to comply with the Appellate Bodyrsquos decision The UnitedStates therefore retaliated against the EU in May of 1999 imposingtariffs of $1168 million against EU agricultural products such as foiegras Roquefort cheese and Dijon mustard These US tariffs in turnsparked protests among French and European farmers who seized onthe beef-hormones case as a symbol of the threat posed byAmericanization and globalization to European regulations andtraditions Since 1999 the United States and the European Unionhave continued to consult regularly about this case but the Unionremains firm in its refusal to alter its domestic law and the UnitedStates persists in the application of retaliatory sanctions against theEU
The transatlantic dispute over the regulation of genetically modifiedorganisms (GMOs)mdashor more precisely genetically modified foods andcropsmdashis analytically similar to the beef hormones case although thepotential economic stakes in this area of GMOs are potentially fargreater Here again the US Food and Drug Administration decided inthe early 1990s that genetically modified foods were not substantiallydifferent from conventional foods and therefore required no specialprocedures for approval or marketing and on that basis US farmersand seed producers have quickly embraced the use of genetically
26
modified foods and crops By contrast the European Union has takena more cautious approach in a series of Directives and Regulationsrequiring specific approval procedures for genetically modified crops aswell as labeling of foods from genetically modified varieties Since1998 moreover the Council has maintained a de facto moratorium onthe approval of new GM varieties even though the EUrsquos scientificcommittees have continued to formally approve a number of varietiesas posing no health risks to consumers
The GMO issue has been the subject of intense consultation betweenthe US and the EU in recent years including the creation of an EU-USBiotechnology Forum which issued a joint report on the subject inDecember 20003 3 as well as a Biotech Working Group within theTransatlantic Economic Partnership Such fora have provided for auseful exchange of information among regulators as well as tradeofficials yet the positions of the two sides remain far apart with atbest modest signs of convergence in the EU and US approaches Thusfar the United States has refrained from bringing a case against theEU before the WTO partly of fear that the European Union facing apotential backlash against both GMOs and the WTO would be unableto comply The issue therefore remains a simmering irritant in thetransatlantic relationship with the potential to flare into a majordispute should the United States eventually decide to litigate the issuebefore the WTO
34 Public Procurement The MassachusettsMyanmar Case
The previous two cases involved US challenges to EU regulationssetting requirements for the marketing and use of industrial oragricultural products Regulatory disputes can however be directed atUS as well as EU regulations and they can concern regulationsgoverning questions other than product standards An excellentexample is the EUUS dispute over the 1996 Act adopted by the stateof Massachusetts regulating state contracts with companies doingbusiness in Myanmar (formerly Burma) The law in question wasadopted in June of 1996 by the Massachusetts State Legislature withthe avowed aim of securing human rights and democratic elections inMyanmar which was then under military rule and subject to sanctionsfrom the US federal government as well as the EU Specifically theMassachusetts law imposed sanctions on foreign as well as domesticfirms doing business in Myanmar with the aim of motivating suchfirms to withdraw from activities in that country
As Matthew Schaefer points out in an excellent analysis of the casethe MassachusettsMyanmar dispute illustrates two recurrenttensions in EUUS trade relations3 4 First the case illustrates theproblems encountered when individual US states like Massachusettswhich are not directly party to the WTO adopt laws and regulations in
27
possible contravention of WTO law Anticipating such problems duringthe negotiation of the 1994 Government Procurement Agreement(GPA) the European Union had emphasized the importance for the USof binding the states and the US federal government responded byasking each of the states to submit a voluntary lsquoletter of commitmentrsquoagreeing to be bound 37 states including Massachusetts submittedsuch letters resulting in a substantial but incomplete mechanism toensure state-level compliance with the GPA
Second the Massachusetts law in question also represents theextraterritorial application of US (state or federal) laws which employtrade and other economic provisions to secure a foreign policy aim (inthis case the cause of democracy and human rights in Myanmar)Specifically the Massachusetts law attempted to penalize not onlyAmerican firms but also foreign firms for investing in Myanmar even ifsuch investments were legal in those firmsrsquo home countries In thislatter sense the MassachusettsMyanmar case bears a strikingsimilarity to the extraterritorial sanctions applied by the US in thewell-known Helms-Burton and Iran-Libya Sanctions Acts in which theUS federal government adopted extraterritorial sanctions againstcorporations doing business in Cuba Iran and Libya (The latter caseswere resolved at least temporarily when President Clinton agreed in1998 to waive such sanctions in a bilateral agreement with the leadersof the European Union)
In the Massachusetts case the law was challenged before the WTO bythe European Union (joined by Japan) which sought to have the lawruled incompatible with US obligations under the GPA Before the WTOpanel could rule however the law was successfully challenged andoverruled under US federal law when the US Supreme Court held thatfederal action in this area (ie the federal sanctions law againstBurma) had pre-empted such sanctions by the State of Massachusettswhose law was therefore held to be unconstitutional
The successful resolution of the MassachusettsMyanmar disputesuggests several lessons for the prevention and settlement of similarcases in the future according to Schaefer In terms of disputeprevention he argues this case points to the importance of informingstate governors and legislators about the constitutional limitations onthe extraterritorial use of economic sanctions as well as theirobligations under WTO agreements (at least insofar as the statesthemselves agree to be bound by them) In terms of dispute settlementfinally the Massachusetts case suggests that litigation in domesticcourts under US law may be more a more effective and comprehensiveconstraint on state sanctions than WTO law which should thereforebe employed with restraint in such cases
28
35 Intellectual Property Rights The Irish Music Case
In addition to trade in goods and services and public procurementnational laws and regulations regarding intellectual property rightscan also have international trade repercussions even when thoseregulations apply without discrimination to domestic as well as foreignproducers Indeed protection of intellectual property has been thesubject of no fewer than 11 WTO disputes between the United Statesand the European Union since 1995 The challenges posed byintellectual property disputes are illustrated most strikingly by the so-called lsquoIrish music casersquo in which the European Union challengedprovisions of US copyright law before the World Trade Organization 3 5
The US law in question was the 1976 Copyright Act as amended bythe 1998 Fairness in Music Licensing Act Specifically Article 110(5) ofthe amended Act included a lsquobusiness exemptionrsquo according to whichestablishments such as bars shops and restaurants below a certainsize (ie 2000-3750 square feet) were allowed to play radio andtelevision music without paying fees to royalty-collecting bodies Therelevant provisions of the Act had been adopted only after long anddifficult negotiations between the representatives of US performingrights organizations on the one side and the National LicensedBeverage Association on the other and sought (however successfully)to balance the rights of copyright holders with the interests of smallrestaurant and bar owners
Although the US law applied equally to domestic as well as foreigncopyright holders in 1997 the Irish Music Rights Organization (IMRO)a collective music management company representing Irish musicianssuch as the rock group U2 filed a complaint about the law before theEuropean Commission IMRO claimed that the derogation in the lawwas in violation of US commitments under both the InternationalAgreement on Trade Related Aspects of International Property Rights(TRIPS) as well as the Berne Convention for the Protection of Literaryand Artistic Works since it failed to protect authorsrsquo rights resultingin an estimated loss of euro 121 million annually for IMROrsquos membersThe Commission having investigated the case agreed with IMRO thatthe law violated US obligations under the TRIPS agreement andinitiated a formal complaint before the World Trade Organization in1998
In June 2000 a WTO panel issued a decision in favour of theEuropean Union calling on the US to bring subparagraph (B) ofSection 110(5) of the Copyright Act (the aforementioned businessexemption) into conformity with the TRIPS agreement In response tothe panelrsquos report the United States announced that it would notappeal the panel decision but also that it would require time to amendits existing copyright legislation In the interim the United States andthe European Union agreed to establish a WTO arbitration panel
29
which would decide on the level of compensation to be granted by theUS to the EU pending modification of the Act In November 2001 thearbitrators accordingly assessed the annual losses suffered by EUcopyright owners and hence the level of compensation to be paid bythe United States at some $108 million In light of this finding EUTrade Commissioner Pascal Lamy and US Trade Representative (USTR)Robert Zoellick agreed the following month to a temporary solutionwhereby the USTR would seek authorization from Congress toestablish a special fund worth $33 million over three years to financeprojects and activities for the benefit of EU music creators pendingrevision of the US law
The December 2001 agreement between the US and the EU waspresented by EU Trade Commissioner Pascal Lamy as lsquoa good exampleof how we can manage our problems in a cooperative manner whilekeeping in mind our international commitmentsrsquo3 6 However while theUS and the EU have indeed reached an amicable three-year agreementon this issue the Irish Music case also serves as an additionalexample of the difficulties encountered by both sides in amendingdomestic regulations in response to trade concerns and WTO rulingsAlthough the European Union side insisted on the US obligation toamend its law and explicitly retained its right to return to the WTO inthe event of noncompliance at this writing there is no sign of anyimminent US effort to bring its domestic law into compliance and anextended US agreement to compensation remains a probablealternative for the foreseeable future
36 Dealing with Trade and Regulatory Conflicts
Transatlantic trade disputesmdashboth traditional disputes and new-styleregulatory conflictsmdashare inevitable in a relationship as close as EUUSrelationship and are not likely to disappear anytime in the nearfuture Many of these disputesmdashespecially old-style tariff quotasantidumping and subsidies disputesmdashare dealt with effectively by WTOdispute resolution New-style disputes however often involve domesticlaws adopted for legitimate purposes after democratic deliberation andlitigation in such cases can place severe strain on the WTO systemparticularly in cases like beef-hormones copyright and potentiallyGMOs where the losing party would have difficulty complying with anadverse WTO ruling
In light of these challenges scholars and practitioners haverecommended a range of potential reforms in US and EU domesticpolitics in the bilateral relationship and in the multilateral WTOsystem to prevent and settle regulatory disputes Although a complete
30
review of these recommendations is beyond the scope of this report3 7 some of the most promising proposed reforms include the following
bull Changes in Domestic Regulation Perhaps the most promisingsuggestions for reform are those that require no formal internationalagreement but rather domestic reforms that could be undertakeneither unilaterally or through an informal process of mutualcoordination The Transatlantic Business Dialogue for examplehas proposed that the United States and the European Union bothundertake to conduct lsquoTrade Impact Assessmentsrsquo of draftregulations so that legislators are made aware of the potential tradeimplications of proposed regulations before they are adopted Sucha procedural change could be undertaken within the respectivedomestic systems of the US and the EU and without compromisingthe regulatory sovereignty of either side and would have theadvantage of implicating legislators who thus far have been largelyabsent from the NTA process3 8 In a similar vein US observers haveadvocated the adoption by the EU of some form of advise-and-consent procedures for the adoption of regulations which wouldprovide domestic as well as foreign stakeholders with advancewarning of proposed regulations and improve the quality of EUgovernance more generally Finally as we have seen in theMassachusettsMyanmar case it has been proposed that theUnited States should do more in the future to implicate subfederalstates in international trade agreements and to inform them oftheir obligations under US constitutional as well as internationaltrade law
bull Changes in the Bilateral Relationship Notwithstanding theirincreasing complexity the institutions of the NTA and the TEP havenot prevented the rise of new regulatory disputes nor have theybeen able consistently to settle amicably all those that do arisegiven the difficulty for both sides of changing domestic regulationsadopted in response to legitimate public concerns Nevertheless anumber of bilateral reforms have recently been proposed includingmost notably the further development of the bilateral early warningsystem increased regulatory cooperation and the expansion of theTransatlantic Legislators Dialogue With regard to the firstinterviews with policy-makers on both sides of the Atlantic revealthat the early warning system has proven useful in identifyingobscure technical barriers to trade but the same policy-makersemphasize that increased early warning does not provide aguarantee that legislators or regulators will be willing or able toadjust domestic regulations and indeed the survey of regulatorydisputes undertaken above suggests that increased early warningwould not have been capable of resolving disputes over beefhormones or copyright where the primary impediment to resolutionof the disputes was not lack of information but the regulatorysovereignty of legislators and regulators on each side For this
31
reason particular emphasis has been placed on the promise ofenhanced regulatory cooperation (examined in detail in the nextsection) and on the further development of the TLD (where theprimary challenge will be to provide an incentive for domesticallyoriented parliamentarians and congressmen to participate intransatlantic consultations)
bull Reform of WTO Dispute Settlement The WTO Dispute SettlementUnderstanding establishes a binding and efficient system for theresolution of international trade disputes and most WTO memberstates are broadly satisfied with the operation of the systemNevertheless the WTO dispute resolution system is placed underparticular strain in regulatory disputes such as the beef-hormonesand Irish music cases reviewed above where it is called to balancetrade and regulatory objectives and where compliance is politicallydifficult for the losing parties In light of these weaknesses variousscholars and practitioners have suggested reforms to both WTOrules and to the DSU including most notably the clarification of thelsquoprecautionary principlersquo in WTO law and moving from retaliation tocompensation in cases of noncompliance with DSU rulings Both ofthese proposals merit further discussion in the coming review of theDispute Settlement Understanding (scheduled to be completed inMay 2003) and in the ongoing Doha Round of trade talks In themeantime the EU and the US would do well to continue theirgeneral pattern of restraint in addressing regulatory disputesbilaterally and avoiding any potential lsquooverloadingrsquo of the WTOdispute settlement procedure
Future negotiations between the EU and the US as well as futurestudies designed to inform those negotiations would do well to explorethe viability of these proposed reforms
32
ndash 4 ndashTransatlantic Regulatory Cooperation
One of the most striking features of the period since the 1995 NewTransatlantic Agenda has been the dramatic increase in both formaland informal cooperation among the regulatory authorities of theUnited States and the European Union In the past five years alonethe United States and the European Union have signed nine formalregulatory cooperation agreements in areas as diverse as competitionpolicy data privacy customs procedures veterinary standards andthe mutual recognition of testing and certification procedures (Table 8)These formal regulatory agreements moreover represent only afraction of the contacts that occur among US and EU regulators bothbilaterally and in various multilateral fora
41 Why Cooperate
The incentives for US and EU regulators to engage in formal andinformal cooperation vary across different issue-areas but cangenerally be classed into two broad categories3 9 First regulators maycooperate because they view such cooperation as useful in carrying outtheir essential rulemaking responsibilities in an increasingly integratedtransatlantic and global marketplace Such cooperation need not andtypically does not involve joint rulemaking activities but focusesinstead on exchanges of information identification of best practiceand early notification of new regulations being considered within eitherpolity In the area of food safety for example the EuropeanCommission and the US Food and Drug Administration have notidentified or implemented common standards for the reasonsdiscussed above yet the two regulators do engage in an ongoingdialogue both bilaterally and within the Codex Alimentarius (the globalbody for the establishment of food safety standards) and theCommission consulted extensively with its US counterparts in thedesign of the newly created European Food Safety Authority Similarbilateral exchanges occur regularly in other issue-areas as well aswithin multilateral standard-setting bodies such as the InternationalStandards Organization (for industrial standards) and theInternational Conference on Harmonization (for registration ofpharmaceuticals)
33
Table 8 Transatlantic Regulatory Cooperation Agreements
Agreement Targeted Regulations Year
Competition Policy Agreement Competition regulations 1991
ECUS Agreement on DrugPrecursors
Illicit drug regulations 1997
ECUS Customs and CooperationAgreement
Customs certifications 1997
EUUS General Mutual RecognitionAgreements
Conformity assessmenttesting in six sectorstelecommunicationsequipment electromagneticcompatibility electricalsafety recreational craftmedical devices andpharmaceutical goodmanufacturing practices
1997
EUUS Positive Comity Agreement Competition relations 1998
EUUS Agreement Concerning theEstablishment of Global TechnicalRegulations for Wheeled VehiclesEquipment and Parts
Technical regulations 1999
EUUS Veterinary EquivalenceAgreement
Animal export certifications 1999
EUUS Safe Harbour Agreement Data protection regulations 2000
Joint Declaration on USEUCooperation in the Field ofMetrology and MeasurementStandards
Measurement equivalence inproduct certification
2000
EUUS Agreement on MutualRecognition of Certificates ofConformity for Marine Equipment
Mutual recognition of marineequipment regulations
2001
EUUS Guidelines on RegulatoryCooperation and Transparency
Non-binding guidelines forcooperation among EU andUS regulators regardingtechnical barriers to trade
2002
Source European Commission DG TRADEhttpeuropaeuintcommtradebilateralusausahtm
34
A second and partially overlapping motivation for regulatorycooperation already touched on in Section 3 above is to avoid orresolve bilateral disputes about the potential trade-distorting effects ofnational regulations As we have seen domestic economic regulationscan become a source of transatlantic economic tension in two distinctways First domestic regulations in areas such as consumer orenvironmental protection food safety or copyright protection cancreate non-tariff barriers to international trade and investmentexamples include the recent disputes over the EUrsquos Data PrivacyDirective and its ban on hormone-treated beef as well as exemptionsto the US Copyright Act Second US and EU domestic regulators mayapply their domestic regulations in an extrajurisdictional fashion asfor example when EU and US competition authorities insist on theright to review mergers among firms in the other constituency insofaras the proposed merger creates effects in the regulatorrsquos domesticjurisdiction or when the US (or its constituent states) employs tradeand economic sanctions as an instrument of foreign policy In suchcases George Bermann has pointed out lsquothe line between simpleregulatory [cooperation] hellip and the settlement of trade disputes canbecome highly blurredrsquo4 0
The full range of regulatory cooperation agreements and practicesbetween the United States and the European Union is beyond thescope of this preliminary report Indeed interviews with practitionersfrom the United States and the European Union reveal thatconsiderable informal cooperation takes place across virtually everyconceivable area of US and EU regulation with little attention from thepress scholars or political actors Even in the absence of a full-scalecross-sectoral analysis however we can nevertheless undertake threebrief case studies of regulatory cooperation in the fields of competitionpolicy the negotiation of EUUS Mutual Recognition Agreements andthe Safe Harbour Agreement on data privacy regulation Takentogether these three cases illustrate the range of incentives forregulatory cooperation as well as the various means for suchcooperation and the significant obstacles that often stand in its way
42 Case Study Transatlantic Competition Policy Cooperation
One of the earliest regulatory cooperation agreements signed betweenEU and US authorities and one of the most successful concernscooperation in the enforcement of each sidersquos respective competitionpolicy laws including most notably the examination of proposedmergers and acquisitions
The incentives for cooperation in this area are substantial4 1 First asin other areas of regulation EU and US regulators confront similarproblems and are increasingly called upon to rule upon the samecases placing a premium on the sharing of information Second both
35
US and EU courts have ruled that their respective regulatorsmdashnamelythe Department of Justice and the Federal Trade Commission on theUS side and the Directorate-General for Competition on the EUsidemdashmay enforce domestic competition laws extraterritorially againstfirms based outside their domestic jurisdiction if and insofar thebehavior in question (eg a proposed merger) produces effects oncompetition in the domestic market Such extraterritorial applicationof both EU and US competition law raises serious issues about theduplication of effort by the two sets of regulators not to mention theadverse economic and political impact of inconsistent or conflictingdecisions on the same case by EU and US regulators
These concerns increased substantially in the early 1990s moreoverwith the rapid rise in cross-border mergers and acquisitions thataccompanied the completion of the Unionrsquos lsquo1992rsquo internal marketinitiative At approximately the same time moreover the EuropeanUnion adopted the 1990 Merger Control Regulation which gave theCommission regulatory authority to review mergers above certain sizethresholds and made the Commission an important interlocutor forthe EU in this area It was in this context of increasing cross-bordermergers and increasing EU authority over such mergers thatCompetition Commissioner Leon Brittan proposed in 1990 to expandEU competition policy cooperation with third countries beginning witha formal agreement with the United States US regulators respondedpositively to Brittanrsquos proposal and US and EU regulators agreed in1991 to adopt an agreement committing them to cooperation in thearea of competition policy including the sharing of non-confidentialinformation and coordination of enforcement activities This agreementwas later supplemented by two secondary agreements the 1998Positive Comity Agreement (which seeks to restrict the extra-territorialapplication of antitrust laws in non-merger cases but has beenformally invoked only once) and by the 1999 AdministrativeArrangements on Attendance in Hearings (which provide guidelines forthe participation of EU and US regulators in each otherrsquos hearings)
In the decade since the signature of the first Competition PolicyAgreement EUUS competition policy cooperation has generallyoperated smoothly and successfully with regulators from theCommission the Justice Department and the FTC sharing informationand coordinating enforcement activities on a daily basis andcooperating successfully on over 600 cases during the course of the1990s including almost 500 merger decisions The general success ofEUUS competition policy cooperation in the area of merger controlcan be attributed to the broad transatlantic agreement among EU andUS regulators about the basic scope and tools of policy which hasfacilitated the task of coordinating enforcement actions and generatingmutual trust among regulators
36
Nevertheless as Youri Devuyst points out in an excellent review oftransatlantic competition policy cooperation successful cooperationand conflict prevention between US and EU regulators can behampered by persistent differences in the scope and focus of US andEU competition law the procedures employed by both sides and theexigencies of confidentiality which limit the sharing of information byUS and EU agencies These limitations can be illustrated in theatypical but well-known BoeingMcDonnell Douglas merger (bothAmerican firms) which was approved by the FTC in July 1997 only tobe held up by Commission insistence that the companies agree toformal undertakings to satisfy its competition concerns Although thecase caused substantial strains in the transatlantic relationship thecompanies concerned eventually agreed to the Commissionrsquos proposedremedies allowing the merger to proceed4 2
An even more dramatic difference of opinion occurred with regard tothe proposed merger of two other US firms GE and Honeywell in2001 Here again US regulators approved the proposed merger only tosee the European Commission reject it in July 2001 after announcingthat the firmsrsquo proposed remedies had failed to satisfy theCommissionrsquos concerns Perhaps most strikingly and unlike theprevious case of EUUS disagreement in the BoeingMcDonnellDouglas merger a number of analysts claimed that the disagreementbetween US and EU regulators reflected an underlying andfundamental difference in the criteria for assessing proposedmergers4 3 Although the resulting predictions of other imminentUSEU conflicts are almost certainly overstated it is worthwhilenoting that the Commission in its December 2001 Green Paper on thereview of the Merger Control Regulation proposes to launch a debateon whether the Union should abandon its traditional lsquodominance testrsquo(ie assessing whether a proposed merger would create a dominantposition for the merged firm in the relevant market) in favour of alsquosubstantial lessening of competitionrsquo test (similar to that already usedin the US Canada and Australia)4 4 Whether the Union will move inthis direction remains unclear If so however it would represent astriking example of regulatory convergence among regulators alreadynotable for their similar (if not identical) regulatory philosophies andprocedures
43 Case Study EUUS Mutual Recognition Agreements4 5
As transatlantic tariff barriers have decreased firms have becomemore concerned with what they term duplicative regulatory compliancecosts and many have pressed for their removal This pressure hasincreased with rising transatlantic investment since divergent EU andUS standards and certification requirements most directly affecttransatlantic corporate groups and these groups more easilycoordinate lobbying on both sides of the Atlantic4 6 Transatlantic firms
37
under the auspices of the Transatlantic Business Dialogue inparticular have pressed for enhanced regulatory cooperation throughmutual recognition agreements culminating in the 1997 EUUSMutual Recognition Agreement (MRA) providing for mutual recognitionof testing and certification requirements and the more ambitious MRArelating to marine equipment signed in 2000 These agreements havebeen promoted as a major achievement of the New TransatlanticAgenda and as a flexible means of reconciling the regulatoryapproaches of the United States and the European Union andfacilitating access to both domestic markets
Notwithstanding these potential advantages however majorchallenges for transatlantic regulatory cooperation in this and otherareas are posed by the significant institutional asymmetries betweenthe United Statesrsquo and EUrsquos respective regulatory systems in an arrayof fields Where regulators adopt similar regulatory structures andsystems and enact similar substantive standards they more easilyunderstand and accept each otherrsquos regulatory determinationsRegulatory symmetry facilitates regulatory trust and confidenceenabling regulatory cooperation to occur as in the competition policycase examined above
In many issue-areas however US and EU regulators tend to work indifferent regulatory cultures Generally EU and national regulatorsoperate under the dual mission of ensuring free trade within theinternal market on the one hand while ensuring public safety throughhigh product and process standards on the other They thus are quiteaccustomed to interacting with foreign regulators and testing bodies onan ongoing basis As a consequence the Commissionrsquos DG Enterpriseand DG Trade units rarely tousled when negotiating and implementingthe 1997 Mutual Recognition Agreement The US Food and DrugAdministration (FDA) by contrast has traditionally defined its rolesolely as that of protecting US public health and has not operatedunder a dual mission of also facilitating market exchange Because theFDA is an independent regulatory authority anxious to protect itsregulatory autonomy US trade and commerce authorities encountermore difficulties in negotiating bilateral agreements concerning areaswithin the FDArsquos jurisdiction
Overall institutional adaptation for the negotiation andimplementation the 1997 MRA has been much easier for the EUwhich already has a mechanism for coordinating the mutualrecognition of product testing and certification among fifteen memberstates speaking eleven different languages This relatively deregulatedsystem consists of EU legislators setting lsquoessential requirementsrsquo in EUlsquonew approachrsquo directives which are supplemented by large numbersof harmonized lsquovoluntaryrsquo technical standards that in turn are widelyadopted Before marketing their products firms either self-certify theircompliance with these requirements or hire accredited testing and
38
certification laboratories Firms and laboratories remain subject topost-marketing member state regulatory controls as well as market-reputational constraints Member state regulators interact on a regularbasis through working groups committees and informalarrangements Overall this EU system can be characterized asgovernance by coordinated cross-border public-private networks
US regulatory officials however oversaw very different regulatorysystems in the areas covered by the 1997 MRA For example the USFederal Communications Commission (FCC) itself certified alltelecommunications equipment until the negotiation of thetransatlantic mutual recognition agreement at which time it adopted adecentralized EU model of certification The FDA continues to certifymost medical devices whereas EU authorities have permitted testingby private notified bodies since the mid-1990s The US OccupationalHealth and Safety Administration (OSHA) requires OSHA-accreditedlaboratories to certify all electrical safety equipment used in theworkplace whereas the EU has permitted manufacturers to self-certifythe equipmentrsquos conformity with European requirements since 1973
EU and US authorities began to seriously address issues of regulatorycoordination at the beginning of the 1990s In May 1989 US Secretaryof Commerce Robert Mosbacher and Commission Vice-PresidentMartin Bangemann agreed to explore the possibility of transatlanticmutual recognition agreements as well as mechanisms to grant USfirms greater access to EU standard-setting procedures After 1995these efforts were championed explicitly and repeatedly byTransatlantic Business Dialogue which became a prominent advocateof transatlantic MRAs4 7
EU and US negotiators initially discussed negotiating mutualrecognition arrangements in eleven sectors but ultimately whittledthis down to six4 8 In consequence the 1997 MRA consists of aframework agreement and six annexes respectively coveringtelecommunications equipment electromagnetic compatibilityelectrical safety recreational craft medical devices andpharmaceutical good manufacturing practices Each of the annexes isin fact a separate agreement for a separate sector covering definedcategories and lists of products
As with all trade negotiations the EU and the United States wereconcerned that the final results be lsquobalancedrsquo The United Stateswished to conclude an agreement on telecommunications equipmentfirst but the EU refused because it felt that US firms would benefitmore if the agreement covered only this sector EU negotiators thusinsisted that an agreement on pharmaceuticals and medical devices becompleted simultaneously The MRA sets up a new transatlanticstructure for overseeing its implementation First the MRA creates aJoint Committee which consists of US and EU trade officials who meet
39
twice annually Second the annexes create Joint Sectoral Committeesto oversee the annexesrsquo implementation
The 1997 Mutual Recognition Agreement does not cover recognition ofthe adequacy or equivalency of US and EU standards as such Ratherthe 1997 MRA only addresses mutual recognition by certificationbodies (known as lsquoConformity Assessment Bodiesrsquo) of each otherrsquosseparate standards4 9 Since neither the United States nor the EUrelinquishes sovereign control over the substance of their standardstrading firms still must meet the separate requirements of the worldrsquostwo largest markets In addition these assessment evaluations aresubject to certain pre-approval and post-approval conditions
Implementation of the 1997 MRA moreover remains uneven Thetelecommunications electromagnetic compatibility and recreationalcraft annexes all have been implemented as required In contrastimplementation of the electrical safety medical device andpharmaceutical GMP annexes remain in dispute in part because theFDA and OSHA have been slow to recognize the equivalency ofcertification by European government regulators or privatelaboratories and in part because of the magnitude and theunfamiliarity of US regulatorsrsquo task in assessing the equivalence ofstandards from 15 different member states submitting documentationin up to 11 different languages5 0 In the words of one FDA official theFDA has lsquorefused to compromise its mission of protecting public healthfor balance of trade purposesrsquo5 1 Thus all three annexes initiallydesired by the US administration are in operation while the threeannexes desired by the Commission are not Since the US executivehas less control over the US agencies responsible for implementationboth partiesrsquo choices are somewhat constrained
On June 12 2001 the United States and the EU initialed anAgreement on Mutual Recognition of Certificates of Conformity forMarine Equipment5 2 Unlike the 1997 Mutual Recognition Agreementand its six annexes this new agreement provides for mutualrecognition of each partiesrsquo standards and procedures as lsquoequivalentrsquofor purposes of certifications issued by conformity assessment bodieslocated in the partiesrsquo respective territories (Articles 3 and 4) Pre-existing harmonization of standards in this sector made possible thepartiesrsquo mutual recognition of lsquoequivalencersquo These standards wereagreed under the auspices of the International Maritime Organization(IMO) located in Geneva This new mutual recognition agreementshould be much easier to implement because less training andinformation exchange are required insofar as testing bodies will not becertifying under separate standards or procedures The parties alsoagreed up-front to recognize each otherrsquos existing conformityassessment bodies so that no application procedures are required forimplementation (Article 6) Thus while this agreement is relativelynarrow in product coverage it is much broader in scope
40
Transatlantic businesses that first touted the benefits of EUUSmutual recognition arrangements now realize their underestimation ofthe difficulties of implementation5 3 These constraints involve not justregulators and regulatory cultures but market forces as well Themarket has not reacted favourably to the recognition of newConformity Assessment Bodies as provided under the 1997 MRA Fromthe perspective of manufacturers they typically develop long-termworking relationships with certifying laboratories which constitute aform of cost-effective firm-laboratory partnership Moreover alaboratoryrsquos mark itself may be important in some markets so thatfirms may continue obtaining formal certification from EU notifiedbodies for the EU market and US laboratories for the United States Asa result most firms may continue using the same laboratories eventhough these laboratories cannot directly certify products asConformity Assessment Bodies but must work through sub-contracting arrangements with accredited laboratories on the otherside of the Atlantic5 4 As for laboratories they will not invest in theaccreditation procedures required to become a Conformity AssessmentBody if they fear that the benefits are limited or too uncertainAccreditation costs can be substantial involving seminars workshopstraining programs audits and joint inspections with authorities acrossthe Atlantic The MRArsquos success in consequence may requireconsiderable market promotion
Perhaps the most important lesson from the implementation of theEUUS MRAs is that agreements that both guarantee public safetyand reduce trade barriers cannot be accomplished on the cheap Theyrequire sustained political will of leaders in each jurisdiction to allocatesignificant resources to finance the coordination of cross-borderregulatory networks EU member states sustained such political willand dedicated such resources over decades in order to create thesingle market Even so they too have encountered significant setbacksand obstacles While it is far too early to pre-judge the 1997 MRA itseems clear that the full benefits of the agreement will be reaped only ifboth sides take concrete steps to ensure that sufficient regulatoryresources are made available to the regulators charged withimplementing the agreement in practice
44 Case Study Data Privacy and the Safe Harbour Agreement5 5
Data privacy protection became a transatlantic issue because of thegrowing interdependence of the US and European economies and therising importance of information technology US affiliates in Europeproduce over a trillion dollars of goods and services annuallyconstituting lsquoover half of all the foreign production of US companiesrsquo5 6
These companies depend on information flows not only with thirdparty suppliers customers consultants marketers and other serviceproviders but also internally within their complex networks of
41
affiliates joint ventures and partnerships The EUUS dispute overdata privacy protection and efforts at cooperation demonstrate theinherent interrelation between social regulation and open trade policieswhere regulation (or the lack thereof) has external effects Alleged USunder-regulation can jeopardize the privacy interests of EU residentsAlleged EU over-regulation can limit the commercial operations of USenterprises In an interdependent transatlantic economy US and EUauthorities attempt to manage the ensuing conflicts of norms andmesh where possible their divergent regulatory systems
On October 24 1998 Directive 9546EC on the Protection ofIndividuals with Regard to the Processing of Personal Data and theFree Movement of Such Data became effective The EU through itsDirective takes primarily a regulatory approach to data privacyprotection as opposed to private ordering through market processesExcept for public security criminal law and related exceptions theDirective covers all processing of all personal data by whatever meansand is not limited to action by government business sector or field ofuse (arts 2-3) The Directive prohibits data controllers from processinginformation unless the individual lsquounambiguouslyrsquo consents to theprocessing and that consent is informed (arts 7 8 10 14) TheDirective provides multiple means for enforcement It requires memberstates to grant individuals a permanent right of access to obtain copiesof the data about them and have it corrected or its use enjoined (arts12 28) It obliges member states to provide a judicial remedy forinfringements of data privacy rights including the right to receivedamages (arts 22-24) To support effective enforcement each memberstate must designate an independent public authority lsquoresponsible formonitoring the application within its territoryrsquo of the Directiversquosprovisions (art 28) These supervisory authorities are to be grantedsignificant powers (arts 18 28)5 7
In contrast the United States has stressed lsquoself-regulationrsquo by theprivate sector backed by regulation which tends to be sector-specificand less stringent Congressrsquos targeting of specific sectors andconcerns is reflected in the following statutory titles The DriverrsquosPrivacy Protection Act of 1994 the Video Privacy Protection Act of1988 The Electronic Communications Privacy Act of 1986 the CableCommunications Policy Act of 1984 and The Fair Credit Reporting Actof 1971 Overall the US approach is fragmented involving standard-setting and enforcement by a wide variety of actors including federaland state legislatures agencies and courts industry associationsindividual companies and market forces US legislation providescitizens with significantly greater protection against the collection anduse of personal information by government in particular the federalgovernment than by the private sector
Article 25 of the EU Directive provides that member states shallprohibit all data transfers to a third country if the Commission finds
42
that the country does not ensure lsquoan adequate level of protectionrsquo ofdata privacy Since it appeared that the United States might notprovide for lsquoadequatersquo data privacy protection under the Directiversquoscriteria US and EU authorities engaged in intensive negotiations toavoid a ban on data flows to the United States culminating in theiragreement on Safe Harbour Principles in March 20005 8 Under theagreement EU member states now must recognize that US firmsrsquoadherence to these Principles is sufficient to protect them frommember state challenge Member state authorities however may stillchallenge transfers to firms that do not adopt and comply with thePrinciples
The guidelines set forth seven core data privacy principles for industryto follow which respectively cover the following issues Notice ChoiceOnward Transfer Security Data Integrity Access and EnforcementThe parties supplemented the Principles with a document entitledlsquoFrequently Asked Questionsrsquo (FAQs) designed to guide firms andauthorities in the Principlesrsquo application Many of the FAQs specify thescope of exceptions thereby providing some leeway to US firms
Companies join the Safe Harbour program by annually certifying to theUS Department of Commerce that they will comply with the PrinciplesThe Department of Commerce then places the companyrsquos name on itsweb site list of certifying firms Self-regulatory organizations (such asBBB Online and TRUSTe) backed by the US Federal TradeCommission offer the primary means for the Principlesrsquo enforcementIn this way the Principlesrsquo application resembles the EUrsquos new andglobal approaches to internal market harmonization5 9 As under thenew approach the Safe Harbour Principles set forth lsquoessentialrequirementsrsquo that firms must meet As under the global approachfirms self-certify their adherence which certification is backed first byaudits from self-regulatory organizations and then (ultimately) by theauthority of the state As of February 23 2002 156 companies hadcertified their adherence to the Principles
The Directive also provides other ways to comply with it in particularthrough obtaining lsquounambiguousrsquo consent from the lsquodata subjectrsquo inEurope (art 7) and the signature of a lsquomodel contractrsquo with data privacyauthorities in member states (Article 26) In January 2002 theCommission approved standard contract clauses covering privacyprotection that can be applied to all data transfers from the EUregardless of a firmrsquos adherence to the Safe Harbour Principles Firmsalso can sign ad hoc contracts with individual member state dataprivacy authorities In addition firms can sign contracts with affiliateswhen transferring personal information such as information containedin personnel files
The Safe Harbour Principles are still at an inchoate stage so that itremains too early to assess their impact Some commentators have
43
questioned the effectiveness of the Principles given that relatively fewUS companies have signed them However some practitioners pointout that companies will not certify their procedures until theiroperations are in compliance6 0 For large companies this allegedly caninvolve considerable re-engineering of their information systemscreation of new internal policies and training of personnel
Nonetheless companies engaged in transatlantic business operate inthe shadow of the Directiversquos potential enforcement Under theDirective US businesses face potential litigation before Europeancourts and administrative bodies unless they adhere to the SafeHarbour Principles Even though privacy advocates have criticized theSafe Harbour Principles the agreement represents a potentially usefultool for such advocates In addition the agreement has increased thedemand for legal consulting and other privacy services within theUnited States For example the Better Business Bureau OnLinecreated a privacy seal program which incorporates the Safe HarbourPrinciples and the Electronic Frontier Foundation a public interestorganization has associated with information technology companies tolaunch a program named TRUSTe to rate the privacy protection ofInternet sites which program also is certified under Safe Harbour
In a world of increased economic interdependence the Safe HarbourPrinciples point to the importance of regulatory cooperation acrossborders involving public and private actors Certification groups suchas BBB OnLine meet with European data protection officials so thatthey become comfortable in the workings of an alternative USapproach Government officials including in Europe realize that theydo not have the resources to enforce the Directiversquos provisions solelyon their own and thus rely on public-private networks in an attemptto ensure better global practices affecting EU constituentsNonetheless to make the Principles work will require sustained cross-border cooperation
45 The Challenge of Transatlantic Regulatory Cooperation
Although brief and selective this review of cooperation across threesectors suggests several tentative conclusions about both the benefitsand the potential obstacles to transatlantic regulatory cooperation
With regard to the potential benefits of transatlantic regulatorycooperation we have identified two First as we have seen regulatorycooperation has the potential to enhance the efficiency of regulationthrough the exchange of information and best practice the provision ofearly warning of potential disputes the avoidance or management ofconflicting regulatory decisions and the gradual building of mutualtrust among regulators Second regulatory cooperation can facilitatetransatlantic trade and investment by removing duplicative regulatory
44
requirements and other non-tariff barriers within the transatlanticmarketplace Such cooperation moreover need not involve thecomplete harmonization or convergence of EU and US regulationsalthough there is some preliminary evidence of convergence in specificissue-areas including the acceptance by the United States of a mutualrecognition scheme similar to that long practiced in the EuropeanUnion and the EUrsquos active discussion of moving from its currentlsquodominance testrsquo to a possible new standard for regulatory mergerscloser to that employed by competition authorities in the UnitedStates
Yet despite the obvious promise of transatlantic regulatorycooperation a broad survey of EUUS cooperation in various areasincluding the three case studies analyzed above points to a number ofpotential obstacles to successful transatlantic regulatory cooperation
bull Regulatory Independence In a number of areas US regulatorsenjoy greater regulatory independence than their Europeancounterparts and may resist what they perceive to be an effort tocompromise domestic regulatory standards and processes in theinterests of international trade The result in some cases is that theUSTR and other central agencies of the federal governmentencounter difficulty guaranteeing compliance with regulatoryagreements by specific regulatory agencies such as the FDA andOSHA if and insofar as these agencies believe that implementationof those agreements would compromise established US regulatorystandards and procedures
bull Transparency and Administrative Law Requirements Across awide range of issue-areas US regulators express concern about thedifferent administrative-law requirements for regulators in the USand the European Union most notably in the area of transparencyIn the United States regulators are required to adhere to thelsquonotice-and-commentrsquo rulemaking procedures of the AdministrativeProcedure Act which requires agencies to provide public notice ofproposed regulations in the Federal Register allow individuals tosubmit comments prior to the final adoption of new rules and keepa public record of the regulatory process The EU rulemakingprocedure although typically characterized by widespreadconsultation of interested parties does not incorporate thesefeatures
bull Confidential Information T h e need to pr o tect con f id e n tia lin f or m a ti on of fir m s an d ot h er pr iva te pa r tie s also pla ce s lim i ts on th ea b i lity of both sid es to co op er a t e in th e ad o p tion an d im p lem en ta tion of reg ula tion s pa r ti cula r l y in th e en f or cem e n t of US an d EU com p etiti on la w s reg a r d in g ca r tel s an d con cen tr a tio n s wh er e fi r m sh a v e been mor e reluct a n t to ag r ee to th e sh a r in g of con f i d en tia lin f or m a ti on th a n in th e ar e a of mer g er con tr o l revi ew ed ab ove
45
bull Multi-Level Governance The United States and the EuropeanUnion are both federal or quasi-federal governance systems withregulatory powers divided in most sectors between the federalEUlevel on the one hand and individual statesmember states or evenlocal governments on the other In terms of regulatory cooperationthis division of regulatory powers means that US executive-branchnegotiators and EU Commission officials are frequently chargedwith negotiating regulatory agreements in areas where the statesretain at least partial regulatory competence and to charges fromboth sides that their counterparts are unable to lsquodeliver the statesrsquoExamples of such state regulatory powers on the US side includethe regulation of insurance and other services as well as publicprocurement where the EU has insisted that the participation ofindividual states is vital to the enforcement of regulatoryagreements6 1 Similar problems afflict the EU side whereCommission efforts to engage in regulatory cooperation may befrustrated by resistance among individual member states as in thecase of GMOs or by the slow adoption of EU-level regulations as inthe case of financial services
bull Regulatory Sovereignty Ultimately the adoption of the broadregulatory frameworks for economic activity consumer andenvironmental protection and other areas is entrusted on bothsides of the Atlantic to democratically accountable bodies such asthe Congress and President in the US and the Council of Ministersand European Parliament in the European Union Within theEuropean Union the harmonization and mutual recognition ofnational regulations has been accomplished in large part through adeliberate transfer of regulatory sovereignty to the European level(as in EU merger control) through the pooling of regulatorysovereignty in the Council of Ministers and the EuropeanParliament (as in data privacy and food safety) and through themutual recognition of standards as enforced by the European Courtof Justice To date however the European Union and the UnitedStates have proven unwilling to compromise their regulatorysovereignty in the various agreements reviewed above indeed eventhe most successful experiment in transatlantic regulatorycooperation that in competition policy is predicated explicitly oneach sidersquos ability to cooperate without any substantial change to itsdomestic regulatory objectives and procedures
The existence of these various obstacles does not of course mean thattransatlantic regulatory cooperation is doomed to failure Some areaslike competition policy are subject to relatively few obstacles tosuccessful cooperation while others such as food safety encountermultiple obstacles Even in difficult areas like food safety moreoverregular exchange of information has proven useful in allowingregulators on each side to understand each otherrsquos regulatoryphilosophies and procedures and gradually to build up the trust
46
among regulators that will be required for the successful operation offuture efforts at mutual recognition or harmonization of regulations
As a first step in this direction the European Union and the UnitedStates agreed in April 2002 to the adoption of a set of non-bindinglsquoEUUS Guidelines on Regulatory Cooperation and TransparencyrsquoAlthough this joint statement of principles does not bind either the USor the EU to any specific regulatory measures and explicitly excludesthe sensitive area of agriculture the agreement does call forregularized exchange of information between EU and US regulatorsand for consideration of harmonization or mutual recognition ofstandards lsquoas may be appropriate in specific casesrsquo to minimizeunnecessary technical barriers to trade In addition the documentsuggests that both EU and US regulators should apply potentially far-reaching principles of transparency in rule-making including publicnotification of and comment on proposed regulations Theimplementation of the guidelines is to be reviewed on an ongoing basisby the TEPTBT Working Group6 2
The significance of the new EUUS Guidelines will depend on theirimplementation in practice across an array of issue-areas in themonths and years to come Regardless of the success of this specificendeavor however regulatory cooperation remains an importantpriority for the European Union and the United States in achievingtheir respective regulatory aims while also preventing and resolvingpotential trade disputes For this reason the conclusion to this reportsuggests a careful and systematic study of current attempts atregulatory cooperation across issue-areas identifying key obstaclesand lsquobest practicersquo at overcoming those obstacles would represent asubstantial contribution to future efforts in this area
47
ndash 5 ndashThe European Union and the Americas
EUUS economic relations do not take place in a vacuum As wehave seen transatlantic efforts at trade liberalization regulatorycooperation and dispute resolution are nested within and frequentlymake explicit use of the rules-based multilateral trading system of theWorld Trade Organization the next round of which both the UnitedStates and the European Union have identified as a priority in thecoming years
Just as importantly the story of the EUrsquos ever-closer economicrelationship with the United States coincides with a second majordevelopment namely the rapid increase of EU trade with the countriesof North and South America Prior to the 1990s the United States wasthe most important trading partner and the largest source of foreigndirect investment in Canada Mexico and throughout most of LatinAmerica and this important role for the US has been further enhancedby the adoption and implementation of the North American Free TradeAgreement (NAFTA) with Mexico and Canada as well the earlynegotiations regarding the possible creation of a multilateral FreeTrade Area of the Americas During the course of the 1990s howeverthe European Union has developed an increasingly close andinstitutionalized relationship with Canada Mexico the Mercosurcustoms union and other countries of Central and South Americawhere it now rivals the economic importance of the United States
In institutional terms the EUUS relationship finds its closestcounterpart in the Unionrsquos bilateral relationship with Canadamdashthisdespite an EUCanada economic relationship that is dwarfed by eachsidersquos economic relationship with the US In economic terms theEUCanada relationship is substantially less important than Canadarsquosbilateral relationship with the United States which is far and awayCanadarsquos largest trading partner taking some 87 of total Canadianexports The integration of Canadarsquos economy with that of other Northand South American states moreover has increased in recent yearswith the implementation of NAFTA and a free trade agreement withChile Nevertheless the European Union ranks as Canadarsquos second-largest trading partner after the United States while Canada accountsfor approximately 17 of EU imports and 22 of total EU exports Asin the EUUS relationship moreover foreign direct investment has
48
outpaced trade as a source of interdependence in the EUCanadarelationship with Canada holding 32 of all FDI in the Union whilethe EU is the second largest investor in Canada after the US holdingsome 8 of all foreign direct investment in Canada6 3
Institutionally the EUCanada relationship is structured by a series ofbilateral agreements including the 1990 Declaration on EuropeanCommunity-Canada Relations and the 1996 Joint Political Declarationon EU-Canada Relations and its accompanying Joint EU-CanadaAction Plan and by a series of regular high-level summits that parallelthose held between the EU and the US The EU and Canada have alsosigned a number of important regulatory cooperation agreements inrecent years including a 1996 customs cooperation agreement a setof Mutual Recognition Agreements agreed in 1998 and agreements onveterinary equivalence and cooperation policy cooperation both signedin 1999 Trade disputes between the EU and Canada are relativelyrare and have generally been dealt with successfully through bilateralconsultation or through the WTO dispute resolution procedure6 4
The Union has come also to play an increasingly important economicrole in Latin America characterized by a sharp increase in both tradeand especially foreign direct investment in the region At the sametime the Union has pursued a wide range of trade and economicagreements with the countries of Latin America including a free tradeagreement with Mexico and other agreements with Mercosur andother Latin American countries In the rest of this section thereforewe examine the EUrsquos economic relationship with the countries of LatinAmerica focusing in turn on the changing patterns of EULatinAmerican trade and investment EU economic agreements with thecountries of the region and the remaining challenges for the EULatinAmerica relationship
51 The EU and Latin America Trade and Investment
The pattern of the trade relationships between the EU and the mainLatin American countries has changed substantially during the lastdecade Although none of them was a major trade partner the largercountries of Latin America already represented an importantproportion of EU exports and imports in 1990 when Mercosur plusMexico and Chile accounted for 43 of extra-EU exports and 32 ofits imports The trade balance was very favourable to the Europeanside with a deficit of over US$8 billion During the 1990s Europeconsolidated its Latin American export markets and increased itsmarket share in Argentina Mexico Chile and especially Brazil In2000 the EU maintained the proportion of its exports towards theanalysed countries while increasing the proportion of imports up to35 The trade balance has improved versus Argentina Mexicoand Brazil whereas the deficit has increased significantly with Chile
49
The total deficit with the countries has now turned into a surplus ofmore than 5 billion
Table 9 EULatin American Trade and Investment(ExportsImports and Foreign Direct Investment as apercentage of total extra-EU flows Trade Balances aremillions of US$)
of EUexports
of EUimports
Trade balance of EUFDI
1990 2000 1990 2000 1990 2000 1999 2000
Argentina 03 08 08 06 -2252 737 54 15
Brazil 25 18 09 17 -5711 -1031 38 53
MERCOSUR 28 25 19 23 -8368 301 92 68
Mexico 11 15 07 07 1231 6973 06 08
Chile 03 04 06 05 -1336 -1653 19 ---
Note figures with an asterisk correspond to year 1999Source European Commission DG-Trade
Moving from Latin America as a whole to individual countries andgroupings we come first to the Mercosur countries (Argentina BrazilParaguay and Uruguay) which created a customs union in 1994 andhave since increased partly thanks to their own process of economicintegration their openness towards the rest of the world6 5 The twosmallest countries are considerably more open (a tradeGDP ratio of70 in Paraguay and 33 in Uruguay in 1999) whereas thisproportion is 19 in Argentina and 15 in Brazil6 6 Although intra-area trade accounts for 20 of their total flows trade with NAFTA andthe EU has also increased during the nineties The financial crises ofthe end of the decade have especially since 1998 temporally put ahalt in the process and affected their external demand By 2000 theEU as a bloc had overtaken the United States as Mercosurrsquos singlelargest trade partner representing 30 of their exports and 35 oftheir imports
The EU and Mercosur can be considered complementary economicblocs in both agricultural and industrial products The EU is the mainexport market for Mercosur agriculture with a 40 share (the USrepresents only 9) More precisely 50 of Mercosur exports towardsthe EU are agricultural products and are concentrated in a smallrange of products such as oilseeds (particularly soy) and animal feedproducts We should also mention coffee (10 of EU imports fromMercosur) livestock and meat and derivatives fruit and derivativestobacco and fish products In contrast EU exports of agricultural
50
products to Mercosur are modest (approximately 6 of total) and areconcentrated in three groups of products alcoholic beverages dairyproducts and other edible animal products and cocoa derivatives Thetrade balance is negative for the EU in agricultural products althoughthe opposite happens in the case of industrial goods The EU is themain supplier of industrial and capital goods to the area includingmost importantly automobiles machinery and mechanical appliancesand a third group of products from the electrical industry (mainlyradiotelephony appliances and parts)
Economic relations between Argentina and the EU developed verypositively since the signature in 1990 of the ECArgentina frameworkagreement on trade and economic co-operation During the 1990sArgentina advanced towards being an open market economy and optedfor an outward-looking external policy where Mercosur and the EUplayed a key role The EU is Argentinarsquos second largest trading partner(after Brazil) overall trade with the EU has more than doubled duringthe last 10 years and represents around 25 of total trade Howeverthe crisis that started at the end of last decade has interrupted thispositive trend The main components of EU imports are agriculturalproducts and raw materials while EU exports to Argentina concentrateon machinery and transport equipment chemicals and manufacturedgoods
Brazil is the largest Latin American economy its GDP accounting for35 of the area or 65 of Mercosur Brazilrsquos domestic market with apopulation over 160 million people constitutes a potentially attractivedestination for both US and EU exports Brazil also signed a co-operation agreement in 1995 with the EU which is now its maintrading partner destination of 268 of its exports and origin of 252of its imports although the US follows very closely (243 and 233respectively) Although during the last years the EU has progressivelyreduced its share of the Brazilian market in favour of the US Brazilremains the EUrsquos main trade partner in Latin America Like Argentinathe process of opening to international competition started between1990 and 1993 As a result Brazilrsquos trade surpluses of the 1990squickly turned into substantial deficits later in the decade only slowlycorrected after the 1999 devaluation The main components of EUimports (1999 data) were vegetable products prepared foodstuffsmineral products transportation equipment wood and wood pulpproducts and machinery and mechanical appliances the latter alsoimportant in EU exports together with transportation equipmentchemical products base metals plastics and rubber
Mexico is the tenth-largest world economy and the most importantLatin-American exporter its total exports amounting to US$166 billionin 2000 In order to qualify its relative size it should be compared withBrazil the second larger exporter in the region (and ninth worldeconomy in terms of GDP) which exported only US$55 billion Mexico
51
is traditionally one of the EUrsquos most important trade partners in LatinAmerica sharing with Brazil its high potential for growth as an exportmarket Mexico has also followed a process of opening to internationalcompetition during the end of the eighties and all the nineties first byunilateral tariff reductions then by subscribing to ten free tradeagreements with the majority of the Latin American countries or areasCanada and the US (creating NAFTA) and in Europe with the EFTAand the EU
During the period 1994-2000 Mexican exports to the US increased240 while their composition has substantially diversified Oil-relatedexports represented only 98 of the total in 2000 compared to 248in 1990 Agricultural products did not account for more than 25 andthe rest of the exports were manufactured goods In contrast 75 ofMexicorsquos imports are intermediate goods 134 capital goods and theproportion of consumption goods is only 117 The EU is Mexicorsquossecond trading partner after the US although the data reveals theoverwhelming dependence of Mexico on the US economy 887 of itsexports are directed to the US and 73 of its imports come from it Inthe EU Germany and Spain represent Mexicorsquos largest export marketswith 09 each Germany is the main European supplier representinga 33 of Mexicorsquos imports As mentioned above Mexicorsquos tradebalance with the EU is highly deficitary
Chile is considered the most open stable and liberalized economy inLatin America Despite its relatively modest size Chile is an importanttrading nation due to its high tradeGDP ratio (over 40) Chile is thefifth Latin American exporter (US$182 billion in 2000) withagriculture and fishery accounting for 10 of the total and the other90 distributed between mining (449 ) and industry (442) Incontrast Chilersquos imports are concentrated in the industrial sector(77) with mining (135) and agriculture (22) lagging far behindIt should be stressed that Chilean trade is globally balanced andexhibits important surpluses with the European Union and Asia Incontrast Chile cumulates its largest deficit with Argentina its main oilsupplier
The EU is Chilersquos main trading partner taking in approximately 25 ofthe countries imports during 20016 7 Among the EU countries theUnited Kingdom and Italy accumulate 34 of Chilersquos trade each andFrance 3 Chile is not only a market for EU exporters of goods andservices but also an important source of imports both in agriculturaland industrial goods The main components of EU imports from Chileare manufactured goods raw materials agricultural products andbeverages and tobacco EU exports of goods are concentrated inmachinery and transport equipment chemical products andmanufactured goods
52
Latin America in general and particularly Mercosur has been involvedin the general trend that directed large capital flows towards emergingand developing economies In 1990 only 16 of overall foreign directinvestment was received by developing countries whereas in 2000 thisproportion had reached 37 Latin America and the Caribbeanreceived around 11 of these flows during the period 1995-99 Brazilreceived one third of the investment in the area whereas Argentinaand Chilersquos proportions were 16 and 8 respectively thanks to theacquisitions of domestic firms by the Spanish companies Repsol andEndesa However due to its instability Argentina has experienced asignificant reduction in foreign investment since 2000 Mexico is thesecond destination of FDI in Latin America (17 during the periodabove mentioned) and in contrast with other countries such asArgentina these flows exhibit a very stable behaviour
Although Mexico followed a process of capital movements liberalizationsimilar to the experiences of Brazil and Argentina a factor behind thestability of these movements is related to its process of regionalintegration with North America Many multinational enterprises haveinvested in Mexico as a platform to produce manufactured goodsdirected towards the US and Canadian markets As an examplebetween 1995 and 2000 more than 60 of cumulated FDI went to themanufacturing sector and 65 had its origin in the US Theseinvestment flows have contributed to the modernization of theindustrial sector and to a significant improvement in Mexicorsquoscompetitive position in the automobile electronic and textileindustries which can help to explain the excellent export performanceof this country in recent years Finally in 2000 the banking sector hascumulated 30 of the total flows of FDI received by Mexico whereasservices telecommunications and the oil industry have had a verylimited interest for foreign investors This fact is in contrast with theother large Latin American economies
The majority of the FDI that the Mercosur countries received in thesecond half of the nineties was directed towards the privatization of thepublic firms especially in the area of services (CEPAL 2001) Due tothis process FDI has abandoned its traditional destinations (forexample in 1995 55 of the FDI stock of Brazil was concentrated inmanufacturing) to be employed in mergers and acquisitions mainly inthe service sector According to Tansini and Vera in 1998 and 199978 of these acquisitions were directed towards Argentina and 18had Chile as destination6 8 In 1999 30 of the capital flows receivedby Brazil were absorbed by the privatizations although since then themajority of the resources were devoted to consolidating andrestructuring these firms
The European Unionrsquos share of foreign direct investment inLatin America increased dramatically during the 1990s with netinflows from the EU increasing from US$1077 billion in 1993 to
53
US$17068 billion in 1997 nearly overtaking total inflows to the regionfrom the United States Within Europe moreover there has been ashift in the primary investors in Latin America with Spain inparticular joining the United Kingdom and Germany as the leadingEuropean investors in the region (see Figure 2) During the 1980s theUK produced more than 50 of the cumulated FDI flows in Mercosurplus Chile6 9 followed by Germany (25) In the 1990s by contrastGermany increased its participation to more than 30 whereas Spainmore than doubled its share to 24 Germanyrsquos FDI concentrated inmanufacturing (such as the automobile industry) during the first halfof the decade especially in Argentina and Brazil with their largedomestic markets Since 1995 Spain is the main European investordirecting its interests in the privatization sectors bankingtelecommunications and energy Other EU countries with importantFDI flows in Mercosur and Chile during the nineties have beenthe Netherlands France and Portugal (the latter with Brazil as itsprimary destination) According to the EC Commission the EUrsquos stockof foreign direct investment in 1999 was euro 1 billion in Uruguayeuro 31 billion in Argentina and euro 34 billion in Brazil EU investment inParaguay is virtually non-existent whereas Chile cumulateseuro 104 billion although in this country the US is still the main foreigninvestor
52 EU Trade Agreements with Latin American Countries7 0
The first symbolic push for the intensification of EU relations withLatin America followed the 1969 lsquoDeclaration of Buenos Airesrsquo issuedby the Latin American members of the Special Committee for LatinAmerican Coordination and calling for an institutionalization of theEULatin America political dialogue and closer economic cooperationbetween both regions
Unlike some previous attempts this time the EU responded positivelyand a regular dialogue between the group of Latin Americanambassadors in Brussels (GRULA) and EC representatives wasinitiated The major substantive measure advanced in this dialoguewas the policy developed toward the Caribbean countries which wereincorporated together with other European former colonies in Africaand the Pacific in the so-called ACP Group and were accorded a specialregime as stated in the Lomeacute Convention of 19757 1 Apart from thatthe Communityrsquos official policy during this period was limited tobilateral economic treaties with the major Latin American countries(so-called first generation agreements) such as the non-preferentialtrade agreements with Argentina in 1970 Uruguay in 1973 Brazil in1973 and Mexico in 19757 2
54
Table 10 EULatin American Trade Agreements
Agreement Objectives Year ofentry into
fEUMexico FreeTrade Agreement(EconomicPartnershipPolitical Co-operation and Co-operationAgreement)
Liberalizes over 96 per cent of EU-Mexicotrade by 2007 at the latest fullyliberalizes industrial products by 2003for the EU and 2007 for Mexico withnegotiations on tariff phase-out ofagricultural items deferred until 2003includes rules on intellectual propertyand dispute settlements and providesEU access to the Mexican procurementand services markets similar to NAFTA
2000
CentralAmericaEUFramework Co-operationAgreement andRegionalProgramme for theReconstruction ofCentral America(PRRAC)
The Framework Agreement seeks tostrength the co-operation in theeconomic financial commercial socio-cultural areas and environment Asecond aim is to reinforce the CentralAmerican Integration System ThePPRAC is a specific program for recoveryfrom the effects caused by hurricaneMitch
Both since1999
AndeanCommunityEUCo-operationagreement andGSP
Political aspects anti-drug dialogueCommercial aspects since 1998 theGeneral System of Preferences is appliedunder a new regime As a result 75 ofproducts imported from the AndeanCommunity to the EU are exempt fromcustom duties Framework Co-operationAgreement to promote regionalintegration
1998(politicaldialogueand co-
operation)and 1999
(GSP)
EUChile AssociationAgreement
Governments concluded negotiations inApril 2002 on a wide-ranging AssociationAgreement including the creation of a free-trade area in goods and services anagreement on wines and spirits andprovisions on public procurementinvestment competition and intellectualproperty
Awaitingratificationby the EUand Chile
MercosurEuropeanUnion
Framework agreement came into force in1999 Negotiations on an interregionalfree-trade agreement began in 1999 andare ongoing
Frameworkagreementsince 1999Free-tradeagreementexpected in
2005
Source Flocircres (2001) DG Trade (European Commission) and Camarero andTamarit (2002)
55
Figure 2 EU Foreign Direct Investment in MERCOSUR + Chile(Cumulated flows Country shares EU = 100)
Source OECD International Direct Investment Statistics YearbookNote For clarity some EU countries with smaller investment shares in MERCOSURhave been excluded
From the mid-1970s to mid-1980s the official policy of the EC towardsLatin America was based mainly on the Inter-Parliamentary Dialoguebetween the European Parliament and Latin Americanparliamentarians and on bilateral economic treaties With regard tothe latter a new round of lsquosecond-generationrsquo agreements was signedbetween 1980 and 1985 with individual countries such as Argentina in1980 Uruguay in 1980 and Brazil in 1982 and with sub-regionssuch as the Andean Pact (created in 1969 between VenezuelaColombia Equator Peru and Bolivia) in 1983 and the CentralAmerican Common Market in 1986 7 3
From the mid-1980s onward Latin America became the focus of moresubstantial political and economic policies from the EU On thepolitical side a variety of multilateral fora have been set up The SanJoseacute Group was launched in Costa Rica in 1984 with the aim ofsupporting progress in the peace process and democracy in CentralAmerica From that date annual meetings have been organizedextending their aims to other fields like the rule of law and humanrights the fight against the trafficking of drugs and educationaltechnical and cultural co-operation The Rio Group was established in1986 again meeting on an annual basis with a membership includingall the South American countries as well as Mexico Finally twosummit meetingsmdashthe first in Rio de Janeiro in June 1999 and a
0
10
20
30
40
50
60
1980-90
1991-98
56
second held under the Spanish EU Presidency in Madrid in May2002mdashbrought together the leaders of 48 countries from the EU andLatin America The first summit in Rio agreed upon an Action Plan toincrease co-operation in the political and cultural spheres and calledfor negotiation of association agreements with Chile and Mercosurwhile the Madrid summit further developed political cooperation andconfirmed the conclusion of a bilateral EUChile AssociationAgreement7 4
The 1990s and early 2000s finally have witnessed the conclusion bythe EU of a round of so-called lsquothird-generationrsquo treaties between theEU and various Latin American countries and trade blocs The primaryagreements in force or under negotiation between the Union and thecountries of Latin America are summarized in Table 10 In all thecases the nature of these agreements is twofold encompassingpolitical agreements on questions such as democracy the environmentand human rights and as well as economic agreements regarding theliberalization of trade and investment
521 The EUMexico Free Trade Agreement
Since 1975 the EU has signed several agreements with MexicoAlthough these agreements were not significantly different from othersalready in force with other countries in the same geographic areaMexico had always received a particular treatment Thus in the 70sMexico benefited from the treatment of most favoured nationneglecting the fact that this country was not a member of the GATT atthat time Later Mexico was eligible under the GSP scheme benefitingfrom this treatment until 1995 when this system was revisited andMexico lost much of its preferential access to the EU marketNegotiations aiming at the establishment of an FTA with the EUstarted during the same year The primary reason was the concern inthe EU about possible trade diversion due to the Mexican entry intoNAFTA in 1994 A general agreement removing trade barriers betweenthe EU and Mexico would minimize any trade diversion effect
Although the most important part of the agreement is the creation of afree trade area between the EU and Mexico the so-called GlobalAgreement includes a rather wide package institutionalising a regularpolitical dialogue and extending the bilateral co-operation Thisagreement places the EU in a better position to compete for access tothe Mexican market In 2007 all industrial goods will be free of tariffsMoreover in trade volume 52 of EC exports will enter the Mexicanmarket duty free by 2003 and for the remaining 48 a maximum dutyof 5 will be applied This extremely quick dismantling calendar willplace economic operators on both sides on an equal footing with otherpreferential partners in real time Concerning agricultural and fisheriesproducts some European special sensitivities are respected allowingat the same time for preferential access to European and Mexican
57
exporters into their respective markets The agreement also includespreferential treatment in services providing service providers from theEU with access to the Mexican market which will be equivalent if notsuperior to that currently enjoyed by operators from Mexicorsquos otherpreferential partners in particular the US and Canada In the servicessector EU banks and insurance companies will be authorized tooperate and establish directly on the Mexican territory Theliberalization of investment and payments related to investments willtake place in 2003 The agreement also provides access to the Mexicanprocurement market similar to NAFTA Finally provisions are madeabout intellectual property competition and dispute settlement
The agreement covers other aspects apart from trade Thus the EUfosters co-operation programmes with Mexico for an annual amount onaverage of euro 13 million during the 1990-99 period There were alsosignificant activities under horizontal programmes such as AL-Invest(Latin American Investment Programmes) and ALFA (Latin AmericanAcademic Formation)
522 Relations with Central America
The most important part of the cooperation between the EU and LatinAmerica and more specifically with Central America has beenimplemented through the so-called cooperation agreements The firstbilateral agreements with individual Central American countries weresigned during the 1970s and early 1980s Later on a second wave ofagreements were adopted covering a wider range of areas topicsbeginning with the First Framework Agreement of Co-operation forCentral America signed in 1985 This agreement belongs to the mostadvanced second-generation type and covers areas such ascommercial promotion and well as agricultural industrial andeconomic co-operation The Second Framework Agreement of Co-operation signed in 1993 is considered as a lsquothird generationrsquo type7 5
This Agreement came into force in 1999 including two novelties apackage of aid for refugees and a programme to support democracyand human rights The previsions of financial technical and economicco-operation aid with these countries from 2000 to 2006 are close toeuro 500 million Furthermore the Commission has decided to participatein the initiative for highly indebted poor countries (HIPC) The eligibleLatin American countries are Honduras and Nicaragua which stand toreceive as much as euro 30 million Additionally the European InvestmentBank has made several loans to the Central American Bank forEconomic Integration (CABEI) in order to support reconstruction in theregion
58
523 Relations with the Andean Community and Chile
The EU has established a complete institutional framework with theAndean Community implementing different instruments in each field(political dialogue trade and co-operation) with a special emphasis onthe question of lsquoanti-drugrsquo measures
Trade relations between the EU and the Andean Community haveincreased 32 over the last nine years currently representing 08 ofthe EUrsquos total trade and 167 of total trade for the AndeanCommunity It is worthwhile to note that 90 of Andean exportsconsist of raw materials or primary production while 85 of the EUrsquosexports are manufactured products From 1999 on the EU hasgranted under the Generalized System of Preferences (GSP)preferential access for all industrial products as well as numerousagricultural products especially for those Andean countries committedto fighting against drug production and trafficking
In the area of political co-operation the Andean region was the first inLatin America to conclude a regional co-operation agreement with theEU The present regional framework agreement was signed in 1993and entered into force in 1998 The amount of the aid to the areareached some euro 6 millionyear for the period 1982-97
Finally the EU has also established several bilateral agreements withChile including the Framework Agreement signed in 1996 andcurrently in force This agreement covers political and economiccooperation and formed the cornerstone for a new EUChileAssociation Agreement the negotiation of which was completed inApril 2002 The agreement which is currently awaiting ratification byboth parties calls for the creation of a free-trade area in goods andservices an agreement on wines and spirits including both market-access questions and the use of protected names a Sanitary andPhytosanitary Agreement new rules on public procurementinvestment competition and intellectual property and a dispute-resolution mechanism7 6
524 The Launching of a Free Trade Area with Mercosur77
The EU is currently the main trade partner of Mercosur The EUgenerally imports agricultural and primary products from Mercosurwhile it exports primarily industrial commodities7 8 The EU has aFramework Agreement of co-operation similar to others with severalcountries or blocs in Latin America In June 2000 negotiations werere-opened aiming at signing a new Inter-regional AssociationAgreement This new agreement would cover not only commercialaspects but also many others like political dialogue or cooperation(social and humanitarian economic and development) between the twoblocs
59
The fifth round of negotiation between the EU and Mercosur took placein July 2001 The main point in this round was the presentation bythe EU of its offer for the reduction of tariff and non-tariff barriers inorder to liberalize trade in goods services and public procurementThese reductions would cover all the industrial products and 90 ofagricultural products over a period of no longer than ten yearsMercosurrsquos answer to that proposal was given during the sixth roundin October 2001 presenting its own offer in terms of tariff and non-tariff reduction and public procurement At the same time there hasbeen an exchange of views on political dialogue as well as someimprovement in the area of technical and scientific co-operationenergy transport telecommunications and information technologyNegotiations continue but conclusion of the agreement is not expecteduntil 2005
53 Challenges for EULatin American Economic Relations
As even this brief survey has made clear the European Union todayplays a substantial economic and political role in Latin America EUtrade with and foreign direct investment in the region have increaseddramatically during the course of the past decade with the EU nowemerging as the most important economic partner for Mercosur inparticular At the same time the EUrsquos political and economicagreements have demonstrated ever-greater ambition and anincreasingly broad economic agenda embracing not only tariff andquota reductions but also provisions on non-tariff barriersinvestment and public procurement as well as political provisionsregarding democracy and human rights
The completion of a more ambitious system of economic agreementswith the Latin American countries remains a goal for both the UnitedStates and the European Union However there are importantqualitative differences between the strategies of the two trade blocswhile the European Union is trying to keep the development of a hub-and-spoke system of bilateral agreements with individual countries or(as in the case of Mercosur) customs unions the United States hasannounced its desire to create a multilateral Free Trade Area of theAmericas The countries of the region for their part havedemonstrated a decades-long commitment to economic liberalizationlocked in place by a series of both multilateral and bilateral tradeagreements amongst themselves as well as with the United States andthe European Union although their commitment to proceeding alongthese lines has been tested by the recent economic crisis in Argentina
The EULatin America summit meeting held in Madrid in May 2002witnessed the conclusion of the EUChile free trade agreement whichis now awaiting ratification by both sides but further negotiations lieahead particularly in the case of the proposed EUMercosur
60
agreement which remains far from a conclusion not expected before2005 In these negotiations the EU should give special attention toexpanding market access for the Mercosur countries especially for so-called lsquosensitive productsrsquo Although the EU has presented itself as achampion of free trade within various multilateral fora it is clear thatthe Union has actively sought to preserve barriers in some industrialsubsectors and especially in the agricultural sector where theCommission has estimated that some 10-12 of all EU imports fromthe Mercosur countries are currently labelled as lsquosensitiversquo7 9 Removalof these barriers would benefit not only Latin American countries butalso European consumers who are currently playing higher prices foran amount equivalent to 5-7 of the Unionrsquos GDP8 0 In addition thenegotiation process should cover not only tariffs (since over 50 of allimports from Mercosur are eligible for an average tariff lower than25) but also other means of market-access protection such as tariffquotas which are applied extensively to agriculture and food productsAdditional areas for negotiation include trade in goods servicesinvestment public procurement intellectual property rights technicalstandards and rules of origin
Finally neither these EULatin American negotiations nor theextensive EUUS cooperation outlined in the previous sections of thisreport should distract the European Union or the United States fromtheir shared priority namely the successful completion of alsquoDevelopment Roundrsquo of multilateral trade talks within the WTODuring his recent trip to Argentina EU Trade Commissioner PascalLamy stressed the importance of ensuring that bilateral and inter-regional trade agreements such as those that the EU has concludedwith the countries of Latin America rest on the multilateral foundationof WTO trade law For this reason he argued bilateral andinterregional negotiations lsquomust not be allowed to detract our attentionfrom the pursuit of the Doha Development Agendarsquo8 1 Such acommitment should remain a central tenet of EU trade policy in theyears to come
61
ConclusionsThe New Transatlantic Economic Agenda
The United States and the European Union have an extraordinarilyclose and important economic relationship the health of which is vitalto the global economy as a whole Both partners stand to gain a greatdeal by making the relationship more productive Both stand to lose ifdisputes cause interruptions and acrimony and if the relationship failsto adapt to new pressures and new challenges
The agenda of transatlantic economic relations has evolved andexpanded to reflect the increasingly integrated nature of thetransatlantic marketplace To be sure traditional trade questionsmdashandtrade tensionsmdashpersist between the European Union and the UnitedStates Despite the generally low level of tariffs between the EU andUS tariff peaks and quotas remain for both sides in a number ofsensitive areas which can and should be subject to further reductionsin the Doha Round of trade liberalization talks within the World TradeOrganization In addition to tariffs and quotas a number of othertraditional trade measuresmdashincluding most notably antidumpingsubsidies and safeguard measuresmdashcontinue to plague thetransatlantic partnership most strikingly in the current dispute overUS safeguard actions in the steel sector Nevertheless while theseriousness of these disputes should not be underestimated themultilateral rules-based trading system of the World TradingOrganization is generally well equipped to address such issues andthe United States and the European Union should continue in theirefforts to use and support the WTO as a forum for both negotiationand dispute resolution
Perhaps the greatest challenge to the transatlantic economicrelationship however is the expansion of the transatlantic economicagenda to encompass domestic regulations that are adopted forlegitimate purposes but act in practice as non-tariff barriers to tradefragmenting the transatlantic market and in some cases leading tobitter and intractable trade disputes As we have seen these types ofdisputes also create enormous legal and political challenges to thedispute settlement procedure of the WTO where judgments in areassuch as the beef hormones and Irish music disputes have createdpolitical controversy without (at this writing) securing full compliancefrom the states concerned
62
For these reasons any attempt to deepen transatlantic economicintegration between the United States and the European Union mustaddress not only tariffs quotas and similar disputes about subsidiesantidumping actions and safeguard measures but also the new-styleregulatory disputes that are likely to become the most importantbarriers in the transatlantic marketplace and place the greateststrains on the EUUS relationship and the multilateral WTO systemin the medium- to long-term future
Addressing these challenges in turn will require a careful andextensive study and more comprehensive understanding not only oftraditional trade issues but also and especially the domestic sourcesof transatlantic regulatory disputes existing efforts to resolve suchdisputes and possible new mechanisms for preventing and settlingfuture regulatory disputes between the European Union and theUnited States
Such a study would necessarily be wide-ranging involving not onlyeconomists who would identify the potential benefits of economicliberalization but also political scientists political economists andlegal scholars who would identify the domestic sources oftransatlantic regulatory disputes the possibility of preventing suchdisputes through early warning andor regulatory cooperation and themost promising means of settling disputes either bilaterally ormultilaterally Any such study would therefore have to undertakethree fundamental tasks
1 A comprehensive listing and analysis based on publiclyavailable sources of EU and US regulations capable of restrictingtrade and investment between the European Union and the UnitedStates
This report has taken a first step towards such an analysis with thecompilation of regulatory barriers identified by the United States andthe EU in their respective trade barriers reports for 2001 (see Appendix1) but further research is required to identify both the sources and theseriousness of problematic regulations
bull In terms of sources a useful first step would be to identify whetherthe regulations in question were adopted by the local state orfederal (EU) levels of government and whether they were adoptedthrough legislation or by regulatory authorities
bull In terms of seriousness a preliminary effort should be made toidentify the economic impact of the regulations in question ontransatlantic trade and investment Such an analysis could draw onthe research done by the US and the EU as well as on the periodicreports of the World Trade Organization and the Transatlantic
63
Business Dialogue but should be conducted by independenteconomists it is to be accepted as authoritative by both parties
In addition an effort should be made by scholars and practitioners onboth sides of the Atlantic to identify new challenges to the relationshipparticularly those arising from the application of new technologiessuch as electronic commerce and biotechnology
2 A comprehensive survey and analysis of transatlanticregulatory cooperation including areas of informal cooperationamong regulators as well as areas of formal agreement
Section 4 of this report identified regulatory cooperation as aparticularly promising means of preventing as well as settlingtransatlantic regulatory disputes yet it also identified a number ofpolitical legal and institutional barriers which can hindermdashand havehinderedmdashcooperation across a range of issue-areas Given therecognized promise of regulatory cooperation among EU and USauthorities as a means of realizing our joint regulatory aims andavoiding future regulatory disputes more detailed studies oftransatlantic regulatory cooperation are vital in order to identifybarriers to regulatory cooperation as well as instances of lsquobest practicersquoin overcoming those barriers
3 A systematic analysis of various means of bilateral andmultilateral dispute resolution with particular emphasis on thespecific challenges of transatlantic regulatory disputes
Finally while emphasis can and should be placed on prevention ratherthan settlement of transatlantic disputes future studies should focuson new and innovative means of dispute settlement in regulatorydisputes given the acknowledged difficulties of litigating regulatorydisputes before the WTO Dispute Settlement Body At the domesticlevel the prospects for the adoption of lsquotrade impact assessmentsrsquo aswell as a more general move toward transparent regulatory procedureson both sides of the Atlantic should be examined At the bilaterallevel special attention should be directed toward the possibleexpansion of early warning as well as the possible use of bilateralarbitration and mediation outside the WTO At the multilateral levelfinally the EU and US should jointly examine the possible revision ofWTO rules to clarify the use of the precautionary principle and toconsider possible amendments to the WTO Dispute SettlementUnderstanding to be undertaken in May 2003
Appendix 1 EU-US Barriers to Trade in Goods Services and Foreign Investment
Type ofmeasure EU concerns about US rules US concerns about EU rules
Tariffs Tariff peaks Food products Textiles Footwear Leathergoods Jewelry Ceramics and glass Trucks Railway carsOptical fibers Tubes for computer monitorsSANCTIONS IN RETALIATION FOR THE EU BAN ON HORMONE-TREATED BEEFTariff quotas dairy products tobacco
BANANAS (tariff quota + discriminatorylicensing) (settled)CUMULATIVE RECOVERY SYSTEM (brown rice)ADMINISTRATION OF CUSTOMS DUTIES FOR RICE(B) (agreement 1101)
Trade defenceinstruments
1916 ANTIDUMPING ACTSAFEGUARD MEASURES ON STEEL WIRE ROD (32000)SAFEGUARD MEASURES ON WELDED STEEL PIPE (32000)BYRD AMENDMENT (ANTI-DUMPING DUTIES GO TO INJUREDINDUSTRY)FAILURE TO LIFT COUNTERVAILING DUTIES AFTER SUNSET REVIEWSQUOTA ON THE IMPORT OF WHEAT GLUTEN (WITHDRAWN 62001)METHODOLOGY OF COUNTERVAILING DUTIES WITH RESPECT TOBRITISH STEEL ANTI-DUMPING DUTIES ON SEAMLESS PIPE
Othercustomsbarriers
Excessive invoicing requirementsEU not recognized as a country of originTEXTILES amp LEATHER CUSTOMS FORMALITIES amp RULES OF ORIGINTuna (certification of origin)
Other leviesand charges
Customs fees (eg Merchandise Processing Fee)HARBOUR MAINTENANCE TAX and Harbour Services Fee50 tax on imported equipment for boats Taxes that falldisproportionately on European automakersbull Luxury tax (70)bull Gas Guzzler tax (85)bull CAFEacute penalties (~100)
65
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade
SHRIMP-TURTLE ndash to import shrimp countries must be certifiedas matching US efforts to protect sea turtles (EU third party)Tuna-dolphin ndash to import tuna countries must be approvedby the National Marine Fisheries ServiceGeneral prohibition on the importation of dairy productsmade from unpasturized milkEffective prohibition on the importation of yogurtMilk protein for yogurt must come from approved diariesDivergence from international standardsReliance on third-party conformity assessment (eg reelectrical equipment and domestic appliances)US and Canadian content labeling of carsApproval slower than for US-produced drugsOver-the-counter drug approval requires US market historyExtensive product description (textiles amp leather)Citrus fruits must be landed at North Atlantic portsRules on all imports of ruminant animals and animalproducts from all EU countries because of BSEBan on some uncooked meat productsStrict condition on imports of egg products (continuousinspection of production process)Low acid canned food (eg fish and dairy products) subject todetailed prior approval systemPre-clearance inspection of apples and pears from somemember states for pestsProhibition on imports of all animals and products from amember state where a disease exists (not just region wherefound)Approval of wine labels
HORMONE-TREATED BEEFLack of national treatment with respect toGEOGRAPHICAL INDICATIONS for agriculturalproducts and foodPoultry treated with chlorinated waterEffective moratorium on approval of GMproducts since 498Mandatory labeling of all foods containingmore than 1 GM ingredientsStringent certification of non-hormone-treated beef (new US program seemsadequate)Food feed and fertilizer containing specifiedrisk materials (narrower product range thanprevious rule)Treatment and traceability of raw materialsfor production of gelatine for humanconsumption (agreement near on healthcertificate that would enable US exports toresume)EU approval of 3rd country establishmentsexporting animal products (esp dairy)Derogation from EU standards required forUS wine (on-going negotiations to try toresolve)Heat or pressure treatment of softwoodpacking material (new EU rule similar todraft international standard)Metric-only labeling (implementation delayedto 2009)
66
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade(continued)
Excessive post-entry quarantine of hardy nursery stocksExporters of meat or meat products to the US may notprocess meat from countries that are not recognized as freefrom diseases of concern to the US
Slow and arbitrary new aircraft certificationHushkits (dispute brought to ICAO work onan ICAO standard)Labeling of TSP (fertilizer) disadvantages USexportsRestrictive limits on low frequency emissionsfrom electrical and electronic equipment
Regulatorybarriers totrade (USstate and EUmember statelevel)
Duplicate approval of wine labelsState-level safety certification and environmental protectionrequirements (especially of agricultural and food products)Ban on fuel additive MTBE (CA)
Bans on some approved GM products(A I amp L)No approvals for planting certain GMproducts (G P)Unresponsive to requests for field trials ofGM crops (Gr)Ban on GM in animal feed adopted (It) - notin forceHCFC bans by Sw amp FnAdditional navigation light requirements(Fn) ndash suspendedTesting of wheat leading to virtual ban onimports (transshipment recently permitted)(Gr)Harsh interpretation of EU SPSrequirements caused or threatened to causeproblems for processed meat productspoultry products game meat seafoodanimal feed wood products (It)Qualitative imports standards and high test-ing and registration fees for bull semen (It)
67
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Servicesbarriers
50 tax on all non-emergency repairs to US-owned shipscarried out outside the USBarriers in mobile communications (investment restrictionslengthy procedures)De-facto reciprocity requirements regarding satellite-basedcommunications servicesExclusive digital terrestrial television standard (ATSC ) differentfrom EU (DVB-T)Impractical for foreign securities firms to establish branches inorder to engage in broker-dealer activitiesForeign mutual funds unable to make public offerings becauseof registration conditionsForeign investment is restricted in coastal and domesticshippingPartnership with US entity required for granting of licenses forlandings sub-marine cablesOnly US citizens or corporations organized under US law canoperate or maintain power facilities on Federal landForeign stake in airlines capped at 49 (25 of voting stock)Foreign-built vessels prohibited from engaging in coastwisetrade either directly between or via a foreign port and cannot beregistered for dredging towing or salvage
State-level measures Prohibitions on EU exporters distributing rebottling or retailingtheir own wineSome states require insurance companies to already beestablished in another stateSome states require insurers to buy reinsurance from state-licensed insurance companies
European content requirements for TVbroadcastsAccess to the single aviation marketrestricted to firms majority-owned andcontrolled by EU nationalsBanking insurance and investmentservices rules require reciprocaltreatment by home country (no US firmsadversely affected)
Member state measures Content requirements for radiobroadcasts (Fr)Requirements that cinemas showEuropean films (It Sp)Nationality requirements affecting tovarying degrees the provision of legalservices (A Dk Fn Fr G It)Strict restrictions on advertising byforeign legal consultants (Dk)Nationality requirements affecting tovarying degrees the provision ofaccounting services (A Dk Fr)
68
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Foreigninvestmentbarriers
National security vetting (Exon-Florio Amendment)US subsidiary required to exploit deep-water ports or to fish inUS Exclusive Economic ZoneFishing-vessel-owning entities must be 75 owned andcontrolled by US citizensForeign individuals or foreign-controlled corporations cannotacquire licenses for using nuclear materialsConditional national treatment governs participation ingovernment research programmes (subsidiaries in US allowed toparticipate but eligibility process more cumbersome)
Mirror-image reciprocity applies toinvestments in the extraction ofhydrocarbons (no US firms adverselyaffected)
NotesIncludes measures in effect + those for which implementation has been suspended as a result of agreementDoes not include non-discriminatory measures systemic barriers (such as the presence of monopolies the pricing ofpharmaceuticals or delays and lack of transparency in standard setting) government procurement intellectual propertyprotection subsidies (including FSC) or issues being prosecuted under EU rules
Barriers in small caps are the subject of WTO proceedings (consultations have been requested)
Sources Commission Report on United States Barriers to Trade and Investment 2001 USTR National Trade Estimate ReportForeign Trade Barriers 2001
69
Appendix 2 WTO Cases by the EU against the US (excludes cases as third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS38Cuban Libertyand DemocraticSolidarity Act
Extraterritorial application of the USembargo of trade with Cuba in so far as itrestricts trade between the EU and Cubaor between the EU and the US Thecreation of a right of action in favour ofUS citizens to sue EU persons andcompanies in US courts in order to obtaincompensation for Cuban properties Thedenial of visas and exclusion from the USof persons involved in confiscating ortrafficking in confiscated property
GATT (V XI XIII)
GATS (II III VIXI XVI XVIIAnnex onMovement ofNaturalPersons)
596 1096 Understandingreached (497)
WTDS39Tariff increaseson productsfrom the EU
The measures were taken in response tothe adoption of EU legislation on the useof hormones in livestock farming andseek unilaterally to settle the issuewithout resorting to the mechanisms ofthe WTO
GATT (I II XXIII)
DSU (3 22 23)
496 996 [No report]
WTDS63Anti-dumpingmeasures onimports of solidurea from theformer GermanDemocraticRepublic
By maintaining the order against the fivestates of the former GDR the US hasignored de jure and de facto their fullintegration into the reunified FederalRepublic of Germany and thus theeconomic integration of their companiesinto the German market economy
Anti-Dumping(92 11)
1296 ndash
70
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS85Measuresaffecting textilesand apparelproducts
Changes to rules of origin of textile andapparel products which entered intoforce on 1 July 1996 adversely affectexports of EU fabrics scarves and otherflat textile products which are no longerrecognized as being of EU origin and losethe free access to the US that theyenjoyed before
Textiles (24 4244)
Rules of origin(2)
GATT (III)
TBT (2)
697 ndash Negotiatedsolution (997)
WTDS88Measureaffectinggovernmentprocurement
Massachusetts law regulating statecontracts with companies doing businesswith or in Burma (Myanmar)
GPA (VIIIb XXIII)
697 998 Law overturnedunder US law
WTDS100Measuresaffecting importsof poultryproducts
Ban on imports of poultry and poultryproducts produced in the EU until theUnited States is able to obtain additionalassurances of product safety No groundsgiven
GATT (I III XXI)
SPS (2 3 4 58 Annex C)
TBT (2 5)
897 ndash
WTDS108Tax treatmentfor Foreign SalesCorporation
The FSC scheme provides for anexemption to the general rulesestablished in the US Internal RevenueCode which results in substantial taxsavings for US companies exportingthrough FSCs
Subsidies (3)
Agriculture (8 910)
1197 798 Panel found infavour of the EUEU not considerFSCReplacement Actadequate Panelfound in favourof the EUAppellate Bodyreport check
71
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS118HarbourMaintenance Tax
Ad valorem tax (0125) on allwaterborne imports entering US ports
GATT (I II IIIVIII X)
298 ndash Reform proposed(HarbourServices Fee)but EU stillviews asproblematic
WTDS136Anti-dumpingAct of 1916
The Act imposes penal sanctions againstthe importation of goods and their sale inthe US when the price is lower than inthe country of production or in otherforeign countries where the goods areexported
GATT (III4 VI1and VI2)
WTO (XVI4)
Anti-Dumping(1234 amp 5)
698 1198 Appellate Bodyfound in favourof the EU
Implementationpending
WTDS138Imposition ofcountervailingduties on certainhot-rolled leadand bismuthcarbon steelproductsoriginating in theUK
Methodology relied on the presumption(based mostly on pre-WTO legislation andpractice) that benefits from priorsubsidies pass through without the needto show that a benefit continues to beconferred
Subsidies (11b10 14 194)
698 199 Appellate Bodyupheld Panelreport favouringEU (500)
WTDS151Measuresaffecting textilesand apparelproducts (II)
Same as WTDS85 Same asWTDS85
1198 ndash Negotiatedsolution (997)
72
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS152Sections 301-310 of the TradeAct of 1974
Imposes specific strict time limits withinwhich unilateral determinations must bemade that other WTO Members havefailed to comply with their WTOobligations and trade sanctions must betaken against such WTO Members
DSU (3 21 2223)
WTO (XVI4)
GATT (I II IIIVIII XI)
1198 199 US through aStatement ofAdministrativeActionundertaken toact consistentwith WTOobligationsPanel ruled thatso long asrespectedcompatible(1199)
WTDS160Section 110(5) ofUS CopyrightAct
Section 110(5) of the US Copyright Actpermits under certain conditions theplaying of radio and television music inpublic places without the payment of aroyalty fee
TRIPS (9(1) 13) 199 499 Panel found infavour of the EU(700) EU andUS havenegotiated anarrangement
Implementationpending
73
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS165Import measureson certainproducts fromthe EU
100 tariffs on certain product inretaliation for the EUs failure to bring itsbanana trade regime into compliance withWTO ruling
GATT (I II VIII)
DSU (3 21 2223)
399 599 Appellate Bodyfound in favourof the EU(1200)
US broughtsanctions intoagreement
Sanctionssuspended asresult of 401agreement
WTDS166Safeguardmeasures onimports of wheatgluten from theEU
Methodology not ensure that all injurydue to imports Imports from Canadawere excluded from the investigation
GATT (I XIX)
Agriculture (42)
Safeguard (214 5 8 12)
399 699 Appellate Body(1200) found infavour of the EU
WTDS176Section 211OmnibusAppropriationsAct
Section 211 provides that the registrationor renewal in the US of a trademarkpreviously abandoned by a trademarkowner whose business and assets havebeen confiscated under Cuban law is nolonger permitted without consent ofprevious owner No US court shallrecognize or enforce such rights
TRIPS (2 15 1641 42 62)
799 600 Appellate Bodyfound in favourof the EU (102)
74
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS186Section 337 ofthe Tariff Act of1930 andamendmentsthereto
Under Section 337 the US caninvestigate whether imported goodsinfringe US intellectual property rightsand can exclude them from entry into theUS Despite amendment the EUconsiders that the procedures andremedies are substantially different fromprocedures concerning domestic goodsand discriminate against Europeanindustries and goods
GATT (III)
TRIPS (2 3 927 41 42 4950 51)
100 ndash
WTDS200Section 306 ofthe Trade Act of1974 andamendmentsthereto(lsquocarouselrsquo)
Section 306 provides for a mandatorymodification (every 6 months) of theproducts subject to sanctions imposedagainst a WTO member which has notcomplied with a WTO panel ruling
DSU (3 21 2223)
GATT (I II XIXXIII)
600 ndash
WTDS212Countervailingmeasuresconcerningcertain productsfrom the EU (14cases)
US application of countervailing dutiesbased on an irrefutable presumption thatnon-recurring subsidies granted to aproducer prior to a change of ownershiplsquopass throughrsquo to the current producerfollowing the change of ownership
SCM (10 19 21) 1100 801 Panelestablished
75
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS213Countervailingduties on certaincorrosion-resistant carbonsteel flatproducts fromGermany
Results of a full sunset review whichmaintains CV duties The original dutywas imposed prior to entry into force ofWTO agreements EU considers that itwould not have been possible to imposethis duty (less than 1) if theinvestigation had been governed by theSCM agreement
SCM (10 11921)
1100 801 Panelestablished
WTDS214Definitivesafeguardmeasures onimports of steelwire rod andcircular weldedcarbon qualityline pipe
EU considers that Sections 201 and 202of the Trade Act of 1974 and Section 311of the NAFTA Implementation Act containprovisions which prevent the US fromrespecting Safeguards Agreement
Safeguards (2 34 5 8 12)
GATT (I XIX)
1100 801 Panelestablished
WTDS217Continueddumping andsubsidy OffsetAct of 2000(ByrdAmendment)
The Act mandates the distribution of theproceeds of duties levied pursuant to aCVD an AD order or a finding under theAntidumping Act of 1921 to the affecteddomestic producers
AD (5 8 18)
SCM (11 1832)
GATT (X)
WTO (XVI)
1200 701 Panelestablished andjoined with panelestablished byCanada andMexico(WTDS234)
76
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS225Anti-dumpingduties onseamless pipefrom Italy
Results of a sunset review which foundthat anti-dumping duties on imports ofseamless line and pressure pipe fromItaly will continue at a rate of 127 EUconsiders this finding is in breach of ADAgreement (duties not lower than 2)
AD (58 111113 17)
GATT (XXII1)
201 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 152027
7
Appendix 3 WTO Cases by the US against the EU and Its Member States(excludes cases as a third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS13Duties onimported grains
Reference price system used to determinethe duties applicable to imports of grainsappear to result in the application ofhigher rates of duties to shipments of USgrains than is permitted under the EUWTO tariff schedule and to discriminateagainst US exports of grains
GATT (I II VIIX)
Agreement onImplementingGATT Article VII(109 11 22Annex I)
795 397 Negotiatedagreement(1195)
Request forpanel withdrawnfollowingimplementation(497)
WTDS26Measuresaffecting meatand meatproducts(Hormones)
EU measures prohibiting the importationof meat and meat products that havebeen treated with growth hormones
GATT (III or XI)
SPS (2 3 5)
TBT (2)
Agriculture (4)
196 496 Appellate Bodyfound in favourof US (298)
Sanctions inplace
78
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS27Import regimefor bananas
EU regime for the importation sale anddistribution of bananas established byCouncil Reg No 40493 and subsequentlegislation regulations and administrativemeasures including those reflecting theprovisions of the Framework Agreementon Bananas which implementsupplement and amend that regime
GATT (I II III XXI XIII)
Licensing (1 3)
Agriculture
TRIMs (2)
GATS (II XVIXVII)
296 496 Appellate Bodyfound in favourof the US andEcuador (997)
Compliancepanel foundrevised EUregime stillincompatible(499)
US Ecuador andEU negotiatedsettlement(401)
WTDS37Portugal ndashPatent protectionunder theIndustrialProperty Act
The term granted existing patents underthe Portuguese Industrial Property Actappears to be inconsistent with Portugalsobligations under the TRIPS Agreement
(GATS (33 6570)
496 Negotiatedsolution (596)
WTDS62Customsclassification ofsome computerequipment
Reclassification of certain LAN adaptercards automatic data processingmachines and units thereof astelecommunications apparatus raised thetariff applied them
GATT (II) 1196 297 Appellate Bodyoverturned Panelreport favouringUS (698)
79
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS67UK ndash Customsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS68Ireland ndashCustomsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS80Belgium ndash-measuresaffectingcommercialtelephonedirectoryservices
Conditions for obtaining a license topublish commercial directories inBelgium
GATS (II VI VIIIXVII)
597 ndash
WTDS82Ireland ndashmeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPS Agreement
TRIPS (9-14 6365)
597 198
80
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS83Denmark ndashmeasuresaffecting theenforcement ofintellectualproperty rights
Denmark does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
597 ndash Negotiatedsolution (301)
WTDS86Sweden ndashMeasuresaffecting theenforcement ofintellectualproperty rights
Sweden does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
697 ndash Negotiatedsolution (697)
WTDS104Export subsidiesndash processedcheese
Export subsidies including under aninward processing arrangement in favourof processed cheese distort markets fordairy products and adversely affect USsales of dairy products
Agriculture (8 910 11)
Subsidies (3)
1097 ndash
WTDS115Ireland ndashMeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPs Agreement
TRIPS (9-14 6365 70)
198 198
81
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS124Enforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
TV stations in Greece regularly broadcastcopyrighted motion pictures and TVprograms without the authorization ofcopyright owners Effective remediesagainst copyright infringement do notappear to be provided or enforced
TRIPS (41 61) 598 ndash Negotiatedsolution (301)
WTDS125Greece ndashEnforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
Same as WTDS124 Same asWTDS124
Same asWTDS124
Sameas
WTDS124
Same asWTDS124
WTDS127Belgium ndashCertain incometax measuresconstitutingsubsidies
Belgian corporate taxpayers receive aspecial tax exemption for recruiting adepartmental head for exports
Subsidies (3) 598 ndash
82
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS128Netherlands ndashCertain incometax measuresconstitutingsubsidies
Dutch income tax law permits exportersto establish a special export reserve forincome derived from export sales
Subsidies (3) 598 ndash
WTDS129Greece ndash Certainincome taxmeasuresconstitutingsubsidies
Greek exporters are entitled to a specialannual tax deduction calculated as apercentage of export income
Subsidies (3) 598 ndash
WTDS130Ireland ndashCertain incometax measuresconstitutingsubsidies
Under Irish income tax law specialtrading houses qualify for a special taxrate in respect of trading income from theexport sale of Irish-manufactured goods
Subsidies (3) 598 ndash
WTDS131France ndash Certainincome taxmeasuresconstitutingsubsidies
French companies may deducttemporarily certain start-up expenses ofits foreign operations through a taxdeductible reserve account
Subsidies (3) 598 ndash
83
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS158Import regimefor bananas II
Failure to implement the DisputeSettlement Bodys recommendations andrulings in WTDS27 within a reasonableperiod
199 See WTDS27
WTDS172Measuresrelating to thedevelopment of aflightmanagementsystem
French government has agreed to grantand the Commission has approved aloan on preferential and non-commercialterms to develop a FMS for Airbusaircraft
Subsidies (5 6)
GATT (XXIII1b)
599 ndash
WTDS173France -Measuresrelating to thedevelopment of aflightmanagementsystem
See WTDS172 See WTDS172 SeeWTDS172
SeeWTDS172
See WTDS172
WTDS174Protection oftrademarks andgeographicalindications foragriculturalproducts andfoodstuffs
EU rule does not provide nationaltreatment with respect to geographicalIndications nor sufficient protection topre-existing trademarks that are similaror identical to a geographical indication
TRIPS (3 16 2463 65)
699 ndash
84
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS210Belgium -Administrationof measuresestablishingcustoms dutiesfor rice
Belgian customs values and duties forrice would lead to a denial of duty rebatesfor US rice and to duties in excess of thebound rate
GATT (I II VIIVIII X XI)
CVA (1)
TBT (2 3 5 67 9)
Agriculture (4)
1000 101 Negotiatedsolution (1101)
WTDS223Tariff-rate quotaon corn glutenfeed from the US
TRQ triggered by DSB ruling against theUS in WTDS166
Safeguards (8182 83)
GATT (I II XIX)
101 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
85
87
References and Recommended Reading
Primary Sources Web sites
European Commission DG TRADE Bilateral Trade Relations USAhttpeuropaeuintcommtradebilateralusausahtm
European Union Europa Web Site httpeuropaeuint
European Union Mission to the United Stateshttpwwweurunionorg
Transatlantic Business Dialogue httpwwwtabdcom
Transatlantic Consumers Dialogue httpwwwtacdorg
Transatlantic Environmental Dialoguehttpwwwtiesweborgtaedindexhtm
Transatlantic Legislators Dialoguehttpwwweuroparleuintintcooptlddefault_enhtm
Transatlantic Information Exchange Service httpwwwtiesweborg
United States Mission to the European Union httpwwwuseube
United States Trade Representative Western EuropeEU pagehttpwwwustrgovregionseu-medwesteurindexshtm
World Trade Organization httpwwwwtoorg
Primary Sources Official Government Documents
CEPAL 2001 Informe de la Inversioacuten Extranjera en Ameacuterica Latina y elCaribe Antildeo 2000 Naciones Unidas Chile
Commission of the European Communities 1998a The NewTransatlantic Marketplace Draft Communication from the Commissionto the Council the European Parliament and the Economic and SocialCommittee available athttpeuropaeuintcommdg01sectionahtm
Commission of the European Communities 1998b Commission staffworking paper concerning the establishment of an inter-regionalassociation between the European Union and Mercosurhttpeuropaeuintcommexternal_relation
88
Commission of the European Communities 2000 The TransatlanticEconomic Partnership Overview and Assessment Coordination DGTRADEE3 October
Commission of the European Communities 2001a Reinforcing theTransatlantic Relationship Focusing on Strategy and Delivering ResultsCOM(2001)154 of 20 March 2001 Available on-line athttpwwweurunionorgpartnerTransatlAgendapdf
Commission of the European Communities 2001b Report on UnitedStates Barriers to Trade and Investment July available on-line athttpeuropaeuintcommtradepdfusrbt2001pdf
Commission of the European Communities 2001c Green Paper on theReview of Council Regulation (EEC) No 406489 COM(2001)7456final of 11122001
UNCTAD 2001 Informe sobre las inversiones en el mundo UnitedNations New York and Geneva
US Department of Agriculture (1998) Agriculture in the WTOSituation and Outlook Series WRS-98-4 Washington EconomicResearch Service
United States Trade Representative 2001 2001 National TradeEstimate Report on Foreign Trade Barriers available on-line athttpwwwustrgovhtml2001_contentshtm
World Trade Organization 2000 Trade Policy Review The EuropeanUnion Report by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
World Trade Organization 2001 Trade Policy Review United StatesReport by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
Secondary Sources
Abbott Kenneth W 20001 lsquoDisputes over Technical Barriers toTrade Are the Rules and Procedures Adequatersquo paper prepared forthe Conference on Dispute Prevention and Dispute Settlement in theTransatlantic Partnership European University Institute Fiesole 5-6July
Atlantic Council of the United States 2001 Changing Terms of TradeManaging the New Transatlantic Economy Policy Paper April(Washington DC The Atlantic Council of the United States)
Barfield Claude E 2001 Free Trade Sovereignty Democracy TheFuture of the World Trade Organization (Washington AmericanEnterprise Institute Press)
Bermann George 1996 lsquoRegulatory Cooperation between theEuropean Commission and US Administrative Agenciesrsquo
89
Administrative Law Journal of the American University Vol 9 pp 933-983
Bermann George Matthias Herdegen and Peter Lindstreth eds2001 Transatlantic Regulatory Co-Operation Legal Problems andPolitical Prospects (New York Oxford University Press)
Bignami Francesca and Steve Charnovitz 2001 lsquoTransatlantic CivilSociety Dialoguesrsquo Chapter 10 in Pollack and Shaffer TransatlanticGovernance in the Global Economy
BP Chair in Transatlantic Relations 2001 Resolving and PresentingUS-EU Trade Disputes Six Prize-Winning Essays (Florence EuropeanUniversity Institute Robert Schuman Centre for Advanced Studies 9May 2001)
Busch Marc L and Eric Reinhardt 2001 lsquoTesting International TradeLaw Empirical Studies of GATTWTO Dispute Settlementrsquo in Daniel LM Kennedy and James D Southwick eds The Political Economy ofInternational Trade Law Essays in Honor of Robert E Hudec (NewYork Cambridge University Press)
Camarero M and CR Tamarit 2002 lsquoLa Unioacuten Europea y lasAmeacutericas consecuencias del establecimiento de un acuerdo deasociacioacuten interregional entre la UE y Mercosurrsquo Papeles de EconomiacuteaEspantildeola n 91 (forthcoming)
Charnovitz Steve 2001 lsquoRethinking WTO Trade Sanctionsrsquo AmericanJournal of International Law Vol 95 (October)
Claes Benedicte A 2000 lsquoComment Aircraft Noise Regulation in theEuropean Union The Hushkit Problemrsquo Southern Methodist UniversitySchool of Law Journal of Air Law and Commerce Vol 65 329-382
Cowles Maria Green 2001a lsquoThe New Transatlantic DialogueTransforming the New Transatlantic Dialoguersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 213-233
Cowles Maria Green 2001b lsquoTransatlantic Cooperation and Discordin the New Economy A Case Study of the Global Business Dialogue one-Commercersquo paper delivered at the Biennial Conference of theEuropean Community Studies Association Madison Wisconsin 31May
Damro Chad 2001 lsquoBuilding an International Identity The EU andExtraterritorial Competition Policyrsquo Journal of European Public PolicyVol 8 No 2 (April) 208-226
Devuyst Youri 2001 lsquoTransatlantic Competition Policy Cooperationrsquoin Mark A Pollack and Gregory Shaffer eds Transatlantic Governancein the Global Economy (Lanham MD Rowman amp Littlefield) pp 127-151
Evans David S 2002 lsquoThe New Trustbusters Brussels andWashington Part Waysrsquo Foreign Affairs JanuaryFebruary
90
Evenett Simon J Alexander Lehmann and Benn Steil 2000 AntitrustGoes Global What Future for Transatlantic Cooperation (WashingtonDC Brookings Institution Press)
Falke Andreas 2001 lsquoThe EU-US Conflict over Sanctions PolicyConfronting the Hegemonrsquo European Foreign Affairs Review Vol 5No 2 139-163
Featherstone Kevin and Roy Ginsberg 1996 The United States andthe European Union in the 1990s Partners in Transition (LondonPalgrave)
Flores R 2001 lsquoRegional Economic Integrationrsquo in Investing in LatinAmerican Growth Unlocking Opportunities in Brazil Mexico Argentinaand Chile EAU Australian Department of Foreign Affairs and TradeChap 12 pp 259-282
Frankel JA E Stein and SJ Wei 1998 lsquoContinental Trading BlocsAre they Natural or Supernaturalrsquo in JA Frankel ed TheRegionalization of the World Economy (Chicago The University ofChicago Press)
Frost Ellen 1997 Transatlantic Trade A Strategic Agenda(Washington DC Institute for International Economics)
Gardner Anthony 1997 A New Era in US-EU Relations The ClintonAdministration and the New Transatlantic Agenda (London Avebury)
Giordano P A Valladio and M-F Durand eds 2001 Vers un accordentre lrsquoEurope et le Mercosur (Presses de Science Po Paris)
Helfer Laurence R 2000 lsquoWorld Music on a US Stage ABerneTRIPS and Economic Analysis of the Fairness in MusicLicensing Actrsquo Boston University Law Review Vol 80 93-204
Helweg Jason 2000 lsquoThe Retreat of the State The MassachusettsBurma Law and Local Empowerment in the Context ofGlobalization(s)rsquo Wisconsin International Law Journal Vol 18 477-510
Hindley Michael 1999 lsquoNew Institutions for Transatlantic TradersquoInternational Affairs Vol 75 45-60
Hudec Robert 1998 lsquoThe New WTO Dispute Settlement Procedure AnOverview of the First Three Yearsrsquo Minnesota Journal of Global TradeVol 8 22-24
Kahler Miles 1995 Regional Futures and Transatlantic Relations (NewYork Council on Foreign Relations Press)
Keohane Robert O Andrew Moravcsik and Anne-Marie Slaughter2001 lsquoLegalized Dispute Resolution Interstate and TransnationalrsquoInternational Organization Vol 54 No 4 457-488
Knauss Jody and David Trubek 2001 lsquoThe Transatlantic LaborDialogue Minimal Action in a Weak Structurersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 235-254
91
Kolasky William J and Leon B Greenfield 2001 lsquoA View to a KillThe Lost GEHoneywell Deal Reveals a Trans-Atlantic Clash ofEssentialsrsquo Legal Times 30 July 2001 p 28
Kuner Christopher 2001 lsquoBeyond Safe Harbour European DataProtection Law and Electronic Commercersquo International Lawyer Vol31
LaFrance Mary 2001 lsquoCongress Trips Over International Law WTOFinds Unfairness in Music Licensing Actrsquo Journal of Art andEntertainment Law Vol 11 397-424
Lorvellec Louis 1997 lsquoBack to the Fields after the Storm Agriculturein the European Union after the Uruguay Round Agreementsrsquo DrakeJournal of Agricultural Law Vol 2 (Winter) p 411
Mazumdar Anandashankar 2002 lsquoEuropean Commission Gives FinalApproval to Model Clauses to Protect Personal Datarsquo InternationalTrade Reporter Vol 19 187 (31 January)
Mehta K 2002 lsquoInternational Competition Policy Cooperationrsquorevised version of a paper presented at the BP Chair Conference onDispute Prevention and Dispute Settlement in the TransatlanticPartnership European University Institute Florence July 2001
Messerlin Patrick A 2001a Measuring the Cost of Protection in Europe(Washington DC Institute for International Economics)
Messerlin Patrick A 2001b lsquoNiveau et coucircts du protectionnismeeuropeacuteenrsquo in Giordano P A Valladao y M-F Durand (eds) Vers unaccord entre lrsquoEurope et le Mercosur Presses de Science Po Paris
Mishkin FS and MA Savastano 2001 lsquoMonetary Policy Strategiesfor Latin Americarsquo Journal of Development Economics 66 415-444
Nagarajan N 1998 lsquoMercosur and Trade Diversion What Do theImport Figures Tell Usrsquo Economic Papers No 129 EuropeanCommission
Petersmann Ernst-Ulrich ed 1997 The GATTWTO DisputeSettlement System International Law International Organizations andDispute Settlement (Kluwer Law International)
Peterson John 1996 Europe and America Prospects for Partnership(New York St Martinrsquos Press 1996)
Peterson John 2001 lsquoGet Away from Me Closer Yoursquore Near Me TooFar Europe and America after the Uruguay Roundrsquo in Mark A Pollackand Gregory Shaffer eds Transatlantic Governance in the GlobalEconomy (Lanham MD Rowman amp Littlefield) pp 45-72
Peterson John and Maria Green Cowles 1998 lsquoUS EconomicDiplomacy What Makes the EU Differentrsquo Governance Vol 11 No 3pp 251-71
Philippart Eric and Pascaline Winand 2001 lsquoDeeds Not WordsEvaluating and Explaining the US-EU Policy Outputrsquo in Philippart and
92
Winand eds Ever Closer Partnership Policymaking in US-EU Relations(Brussels Peter Lang) pp 431-463
Pollack Mark A ed 2001 The New Transatlantic Agenda at Five ACritical Assessment (San Domenico di Fiesole BP Chair inTransatlantic Relations Robert Schuman Centre for AdvancedStudies European University Institute)
Pollack Mark A and Gregory C Shaffer 2001a lsquoTransatlanticGovernance in Historical and Theoretical Perspectiversquo in Mark APollack and Gregory Shaffer eds Transatlantic Governance in theGlobal Economy (Lanham MD Rowman amp Littlefield) pp 3-42
Pollack Mark A and Gregory C Shaffer 2001b lsquoThe Challenge ofReconciling Regulatory Differences Food Safety and GMOs in theTransatlantic Relationshiprsquo in Mark A Pollack and Gregory Shaffereds Transatlantic Governance in the Global Economy (Lanham MDRowman amp Littlefield) pp 153-178
Pollack Mark A and Gregory C Shaffer 2001c lsquoWho Governsrsquo inMark A Pollack and Gregory Shaffer eds Transatlantic Governance inthe Global Economy (Lanham MD Rowman amp Littlefield) pp 287-305
Reidenberg Joel 2001 lsquoE-Commerce and Trans-Atlantic PrivacyrsquoHouston Law Review Vol 8 717-49
Schaefer Matthew 2002 lsquoGovernment Procurement DisputesLessons from the Dispute over the Massachusetts 1996 Act RegulatingState Contracts with Companies Doing Business with Burma(Myanmar)rsquo paper presented at the Conference on Dispute Preventionand Dispute Settlement in the Transatlantic Partnership EuropeanUniversity Institute Florence 5-6 July 2001 final version submitted26 January 2002
Shaffer Gregory 1999 lsquoThe Power of EU Collective Action The Impactof EU Data Privacy Regulation on US Business Practicersquo EuropeanLaw Journal Vol 5
Shaffer Gregory 2000 lsquoGlobalization and Social Protection TheImpact of EU and International Rules in Ratcheting Up of US PrivacyStandardsrsquo Yale Journal of International Law Vol 25 pp 1-88
Shaffer Gregory C 2002 lsquoManaging US-EU Trade Relations throughMutual Recognition and Safe Harbour Agreements lsquoNewrsquo and lsquoGlobalrsquoApproaches to Transatlantic Economic Governancersquo in Ernst-UlrichPetersmann ed Dispute Avoidance and Dispute Settlement in theTransatlantic Partnership (unpublished manuscript) (working paper onfile with the author)
Sindelar Leslie 2001 lsquoNot So Fair After AllmdashInternational Aspects ofthe Fairness in Music Licensing Actrsquo The Transnational Lawyer Vol14 435-71
Steffenson Becky J 2001 The Institutionalization of EU-US RelationsDecision Making Institution Building and the New Transatlantic
93
Agenda unpublished PhD dissertation University of GlasgowDepartment of Politics
Tansini R and T Vera 2001 lsquoLos procesos de integracioacuten enAmeacuterica Latina El caso de Mercosurrsquo Informacioacuten Comercial EspantildeolaFebrero-Marzo nuacutem 790 107-117
Vogel David 1997 Barriers or Benefits Regulation in TransatlanticTrade (Washington DC Brookings Institution)
Vogel David 2001 Ships Passing in the Night The Changing Politics ofRisk Regulation in the United States and the European Union RSCASWorking Paper No 200116
Woolcock Stephen 2000 lsquoEuropean Trade Policy Global Pressuresand Domestic Constraintsrsquo in Helen Wallace and William Wallaceeds Policy-Making in the European Union (New York Oxford UniversityPress) pp 373-99
Yerkey Gary G 2000a lsquoEU Accuses US of Failing to ImplementMRAs on Electrical Safety Pharmaceuticalsrsquo International TradeReporter Vol 17 1662 (2 November)
Yerkey Gary G 2000b lsquoUS European CEOs Call on Governments toResolve Dispute Over MRA by Dec 18rsquo International Trade ReporterVol 17 1662 (30 November)
Young Alasdair 2001 Trading Up or Trading Blows US Politics andTransatlantic Trade in Genetically Modified Food RSCAS WorkingPaper No 200130
Young Alasdair R 2002 lsquoRisk Positive Integration and SystemFriction The Single European Market and World Tradersquo paperpresented at the Council of European Studies Conference 14-16March 2002
94
Notes
1 The EU and the 50 US States website of the European Union Mission tothe United Stateshttpwwweurunionorgpartnerusstatesusstateshtm
2 Ibid
3 As Miles Kahler wrote in 1995 lsquoIncreasingly the points of conflict amongthe industrialized countries are not the familiar ones of barriers toexchange at the border but an entire array of ldquodomesticrdquo policies thatproduce conflict by appearing to restrict market access or alter theterms of competition The agenda of behind-the-border issues that hasbecome more prominent in the 1990s will only grow as economicintegration continues and groups mobilize to seek new benchmarks foran international ldquolevel playing fieldrdquo rsquo (Kahler 1995 5) For gooddiscussions of regulatory barriers in USEU trade relations see alsoVogel 1997 Young 2002
4 This section draws on the analysis presented in Pollack and Shaffer2001a
5 For good discussions see Gardner 1997 Peterson and Cowles 1998
6 Pollack and Shaffer 2001c 291
7 lsquoTransatlantic Declarationrsquo text available on-line athttpwwweurunionorgpartnertransatldechtm
8 See eg Featherstone and Ginsburg 1996 Peterson 1996
9 lsquoThe New Transatlantic Agendarsquo text available on-line athttpwwweurunionorgpartneragendahtm
1 0 lsquoJoint US-EU Action Planrsquo text available on-line athttpwwweurunionorgpartneractplanhtm
1 1 Gardner 1997
1 2 Commission of the European Communities 1998a
1 3 lsquoTransatlantic Economic Partnership Action Planrsquo text available on-lineat httpeuropaeuintcommtradebilateralusa1109tephtm For auseful review of the TEP see Commission of the EuropeanCommunities 2000
95
1 5 For good discussions of the TABD see Cowles 2001a 2001b and thewebsite of the TABD at httpwwwtabdorg
1 6 lsquoCincinnati Recommendations Transatlantic Business DialoguersquoNovember 16-18 2000 p 4 Available on-line athttpwwwtabdorgrecommendationsCincinnati00pdf
1 7 Ibid page 5
1 8 Cowles 2001b
1 9 Steffenson 2001
2 0 Pollack ed 2001 12
2 1 For an excellent discussion of the TACD and its activities see Bignamiand Charnovitz 2001 and the TACD website at httpwwwtacdorg
2 2 For example sixty-five consumer groups issued a statement in 2000stating that the EU and the US had largely ignored consumer tradepolicy recommendations TACD press release lsquoUS amp EU ConsumerGroups Call for Swift Action to Balance Trade Dialoguersquo 30 March 2000
2 3 The USIA funding for the TAED ($100000) was subject to approval fromthe Senate Finance Committee In January 2000 the objection of SenatorJesse Helms to TAED funding blocked the approval of funds andstopped the State Department from issuing the grant The TAED arguedthat this demonstrated the US governmentrsquos lack of dedication to theproject See lsquoTransatlantic Environment Dialogue suspends its activitiesdue to the failure of US government to stick to its commitmentsrsquoaccessed on 12 March 2002 on the TAED websitehttpwwwtiesweborgtaedindexhtml For a good general discussionof the TAED see Bignami and Charnovitz 2001
2 4 To summarise the TAED recommended the removal of subsidies forenvironmentally unfriendly energy sources (such as coal) demanded thatsustainability assessments be applied to a number of WTO agreementsand expressed it opposition to the multilateral TRIPs Technical Barriersto Trade and SPS Agreements It aired concerns about biotechnologyeco-labelling and the Precautionary Principle the MRAs and Chemicaland Electrical Waste Management (WEEEs) It stressed transparency intransatlantic and multilateral decision making urged both governmentsto support the Kyoto Treaty and to stop challenging environmentallegislation at the WTO The message to the EUUS Summit Lisbon May31 2000 was that lsquoUntil such time as parity exists betweenenvironmental governance and multilateral trade rules we demand thatboth the United States and the European Union immediately agree tomutual moratorium on WTO challenges and threatened challengesrsquo Fora good discussion of the TAED and its activities see Bignami andCharnovitz 2001
2 5 For an excellent discussion of the TALD see Knauss and Trubek 2001
96
2 6 Commission of the European Communities 2001a
2 7 Philippart and Winand 2001
2 8 Kahler 1995 See also Vogel 1997 Young 2002
2 9 For excellent overviews of the WTO dispute resolution procedure and itspredecessor within the GATT see Petersmann 1997 Hudec 1998 Buschand Reinhardt 2001 and BP Chair in Transatlantic Relations 2001 Fora provocative challenge to the DSU see Barfield 2001
3 0 This section draws largely on Abbottrsquos (2001) account of transatlanticdisputes over TBTs in general and the hushkits case in particular Forother accounts of the hushkits dispute see also Claes 2000 andPeterson 2001 58-59
3 1 Commission of the European Communities lsquoCommission Proposes NewLegislation to Fight Aircraft Noisersquo Press Release IP 011683
3 2 For a detailed analyses of transatlantic disputes over food safety andgenetically modified organisms see Pollack and Shaffer 2001b Vogel2001 and Young 2001
3 3 The text of the report can be found athttpeuropaeuintcommexternal_relationsusbiotechbiotechhtm
3 4 Schaefer 2002 1-2 See also Hellweg 2000
3 5 For useful background on the case filed before the WTO as DS160 seeHelfer 2000 LaFrance 2001 and Sindelar 2001
3 6 Commission of the European Communities lsquoEU and US Agree onTemporary Compensation in Copyright Disputersquo Press Release IP011860
3 7 For good discussions of potential reforms of the bilateral relationship aswell as WTO dispute settlement including a wide range of proposals seeeg BP Chair in Transatlantic Relations 2001 Charnovitz 2001 Barfield2001 and Petersmann 2001
3 8 Some countries such as the United Kingdom have establishedguidelines for policymakers to take trade implications of proposedregulations into account but neither the US nor the EU currentlyemploys any statutory requirement to undertake such an impactassessment
3 9 Bermann 1996 961 For an excellent set of essays on various aspects oftransatlantic regulatory cooperation see also Bermann Herdegen andLindstreth (eds) 2001
4 0 Ibid p 966
97
4 1 For excellent analyses of USEU competition-policy cooperation fromwhich this analysis is largely drawn see eg Evenett Lehmann and Steil2000 Devuyst 2001 Damro 2001 and Mehta 2002
4 2 Devuyst 2001 142-145
4 3 See eg Kolasky and Greenfield 2001 Evans 2002
4 4 Commission 2001c 38-40
4 5 This section draws extensively from research reported in Shaffer 2002
4 6 Subsidiaries of US firms in the EC account for about one-third of ECimports from the United States while subsidiaries of EC firms in theUnited States account for about 38 of US imports from the EC SeePollack and Shaffer 2001a 14
4 7 Agreement on Mutual Recognition Between the European Communityand the United States of America Available on-line athttpeuropaeuintcommtradepdf0713mra-usenpdf
4 8 The five excluded sectors were information technology pressureequipment road safety equipment lawn mowers and personal protectiveequipment such as helmets
4 9 However as an exception tests of pharmaceutical good manufacturingpractices are to be performed by regulatory bodies and not privatelaboratories in accordance with that annex
5 0 Yerkey 2000a 2000b
5 1 Quoted in Shaffer 2002 23
5 2 Agreement Between the European Community and the United States ofAmerica on Mutual Recognition of Certificates of Conformity for MarineEquipment Available on-line athttpeuropaeuintcommtradepdfmareqpdf
5 3 See Shaffer 2002
5 4 See Shaffer 2002
5 5 This section draws extensively from research reported in Shaffer 2002
5 6 The above figures are from the prepared testimony of Assistant Secretaryof Commerce Franklin Vargo before the House Committee onInternational Relations See lsquoIssues in US-European Union TradeEuropean Privacy Legislation and BiotechnologyFood Safety PolicyrsquoFederal News Service (May 7 1998)
5 7 Mazumdar 2002 See also Shaffer 2000 Reidenberg 2001
5 8 Commission Decision of 26 July 2000 pursuant to Directive 9546ECof the European Parliament and of the Council on the adequacy of the
98
protection provided by the safe harbour privacy principals and relatedfrequently asked questions issued by the US Department of CommerceAvailable on-line athttpeuropaeuintcommtradepdfsafeharbourpdf For generalinformation on safe harbour documents see Safe Harbor Documentshttpwwwexportsgovsafeharborsh_documentshtm
5 9 Guide to the Implementation of Directives Based on the New Approachand the Global Approach Available on-line athttpeuropaeuintcommenterprisenewapproachlegislationguidedocument1999_1282_enpdf
6 0 See Shaffer 2002
6 1 For a good discussion of the obstacles posed by US federalism inregulatory cooperation see Commission of the European Communities2000
6 2 lsquoEU-US Guidelines on Regulatory Cooperation and Transparencyrsquoavailable on-line athttpeuropaeuintcommenterpriseenterprise_policygov_relationsregulcooptransathtm See also lsquoTransatlantic Bid to Cut Red TapersquoEuropean Report 10 April 2002 and Micheal Mann lsquoDrive to Head OffTrade Riftsrsquo Financial Times 13 April 2002
6 3 See the DG Trade website lsquoBilateral Trade Relations Canadarsquo accessedat httpeuropaeuintcommtradebilateralcanadacanadahtml
6 4 For useful and up-to-date reviews of the EUCanada relationship see inaddition to the DG Trade web page cited above the websites of theEuropean Union Delegation to Canadahttpwwweudelcanorgenglishindexcfm and the Canadian Missionto the European Union httpwwwdfait-maecigccaeu-missionconten_ehtml
6 5 For more information about Mercosur visit the following internetaddress httpwwwmercosurorg
6 6 Tansini and Vera 2001
6 7 lsquoEUChile Deal Reached on Free Trade Agreementrsquo European Report 27April 2002
6 8 Ibid
6 9 Camarero and Tamarit (2002) Source OECD International SectoralDatabase
7 0 For more information about the EU and Latin America visit the followinginternet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 1 The Lomeacute Convention replaced the Yaounde Convention of 1963 afterthe accession of the UK to the Community It was renewed in 1979
99
(Lomeacute II) 1985 (Lomeacute III) 1989 (Lomeacute IV) and 1995 (Lomeacute IV) andconsists of a system of preferences for imports in which industrial goodsalmost free of tariffs and agricultural receive different treatments InJune 2000 the Lomeacute Convention was replaced by the CotonouAgreement which stabilized what can be seen as a transitory regimeaiming to incorporate the ACP countries in the WTO general rules
7 2 What characterizes first-generation agreements is their conventionalbilateral and technical structure and their reference to possiblereciprocal cooperation In practical terms however these treaties onlyextended the Most Favoured Nation (MFN) status to its signatories
7 3 The second-generation agreements referred mainly to specificcommercial and cooperation questions
7 4 For the conclusions of the Madrid summit see the Latin America webpage of the Commissionrsquos Directorate-General for Tradehttpeuropaeuintcommtradebilaterallaclachtm
7 5 In October 1998 hurricane Mitch one of the worst natural disastersever to have hit the region caused a material damage equivalent to 10of the regionrsquos GDP The EU not only played a significant role in theinternational communityrsquos emergency aid but also launched in 1998a medium-term rehabilitation plan called the Regional Programme forthe Reconstruction of Central America (PRRAC) Funding was set ateuro 250 million committed for the 1999-2002 period but to beimplemented within six years The target countries were HondurasNicaragua El Salvador and Guatemala
7 6 For details on the provisions of the EU-Chile Association Agreement andthe status of the ratification procedure seehttpeuropaeuintcommexternal_relationschileintroindexhtm
7 7 The information about the results of the different negotiation rounds canbe updated at the following internet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 8 For an assessment of the trade-diverting effects of Mercosur seeNagarajan (1998)
7 9 Commission of the European Communities 1998b
8 0 Messerlin 2001b
8 1 Pascal Lamy lsquoFacing the Challenge of Globalization Regional Integrationor Multilateral Rulesrsquo Buenos Aires 1 March 2002 Reproduced on theDG Trade website athttpeuropaeuintcommtradespeeches_articlesspla99_enhtml
Lead Author
Mark A Pollack
The Political Economy ofthe Transatlantic Partnership
Robert Schuman Centrefor Advanced Studies
EUROPEAN UNIVERSITY INSTITUTE
Report prepared by theTransatlantic Programme
for and with the contribution of
Her Majestyrsquos TreasuryUnited Kingdom
Ministry of FinanceThe Netherlands
iv
The transatlantic relationship has come under repeated strain duringthe past decade as a result of both traditional and new-style regulatorydisputes Such disputes the European Commission has pointed outconcern only an estimated 1-2 of the total value of transatlantictrade and investment yet these disputes could potentially spread toother areas of the transatlantic relationship it is therefore in theinterests of both sides to ensure that such disputes are prevented fromarising through timely consultations where possible and settledefficiently and amicably in other cases Many of thesedisputesmdashespecially traditional tariff quota antidumping andsubsidies disputesmdashare dealt with effectively through the disputesettlement procedure of the World Trade Organization (WTO) to whichthe EU and the US are both parties New-style regulatory disputeshowever often involve domestic laws adopted for legitimate purposesfollowing democratic deliberation and these disputes can placeconsiderable strain on the WTO system particularly in cases wherethe losing party would have difficulty complying with an adverse WTOruling
In such cases both the United States and the European Union shouldstrive proactively to consider the WTO compatibility of nationalregulations prior to adoption cooperate on common regulatoryproblems and seek to settle regulatory disputes through consultationswithin the WTO dispute settlement procedure wherever possibleSection 3 of the report therefore examines a range of potential reformsin US and EU domestic regulatory procedures in the bilateralrelationship and in the multilateral WTO dispute settlementprocedure
bull At the domestic level the US and the EU could commit themselvesto conducting lsquoTrade Impact Assessmentsrsquo of draft regulations sothat legislators are made aware of the potential trade implications ofproposed regulations before they are adopted
bull At the bilateral level both partners can engage in more extensiveearly warning of new rules as well as greater regulatory cooperationand greater contact among legislators to increase their awareness ofthe external impact of domestic laws Far from weakening themultilateral trading system bilateral economic cooperation can andshould strengthen the WTO by preventing difficult regulatorydisputes before they occur and by acting as a laboratory for theresolution of such disputes at the global level
bull At the multilateral level finally the EU and the US could committhemselves to modest reforms in the WTO and its disputesettlement procedure including a clarification of the lsquoprecautionaryprinciplersquo in WTO law and a possible move from retaliation tocompensation as the primary means of enforcement of WTO law
v
Of the aforementioned proposals the EU and the US have arguablymade the most progress in promoting cooperation among theirrespective domestic regulators with a growing number of formalregulatory agreements adopted since 1997 and an even larger numberof informal contacts among EU and US regulators taking place on aregular basis across a full range of issue-areas Such regulatorycontacts hold significant promise allowing regulators on both sides ofthe Atlantic to learn from each other coordinate their regulatoryefforts and avoid transatlantic regulatory disputes before they beginHowever as Section 4 of this report demonstrates in detail successfulregulatory cooperation is not a lsquomagic bulletrsquo for trade disputes butrather a lsquohothouse flowerrsquo which must be carefully nurtured and canbe easily frustrated by any of a number of potential obstaclesincluding the persistence of distinctive European and Americanregulatory philosophies and procedures the multi-level nature of theEU and US political systems and the insistence by both sides onmaintaining domestic regulatory sovereignty Overcoming theseobstacles will require the identification of lsquobest practicersquo in regulatorycooperation gradual increase in regulatory trust among EU and USregulators and a careful balancing by political leaders of domesticregulatory aims on the one hand and the importance of thetransatlantic economic relationship on the other
The EUrsquos ever-closer economic relationship with the United States hasnot developed in a vacuum but rather coincides with a second majordevelopment namely the rapid increase during the 1990s of EU tradeand foreign direct investment with the countries of North and SouthAmerica analyzed in Section 5 of the report Concurrent with itsgreater economic presence in the Americas the Union has pursued awide range of trade and economic agreements with the countries of theregion including an increasingly close trade and regulatoryrelationship with Canada a free trade agreement with Mexico andother agreements with Chile Mercosur and other Latin Americancountries
In May 2002 leaders of the European Union and Latin Americancountries met in Madrid for their second summit meeting confirmingthe conclusion of negotiations on an EUChile Association Agreementand calling for further development of bilateral ties including theeventual conclusion of a similar association agreement with MercosurIn these and future negotiations the EU should give special attentionto expanding market access for Latin American goods and servicesespecially for so-called lsquosensitive productsrsquo currently subject to high EUtariffs as well as focusing on the reduction of other means ofprotection such as tariff quotas that are applied trade in goodsservices investment public procurement intellectual property rightstechnical standards and rules of origin
vi
The European Unionrsquos economic relationships with the countries of theAmericas like its bilateral relationship with the United States isnested in turn within the multilateral trading system of the WorldTrade Organization the further development of which is a sharedpriority for both the European Union and the United States During hisrecent trip to Argentina EU Trade Commissioner Pascal Lamy stressedthe importance of ensuring that bilateral and inter-regional tradeagreements with the United States Canada and the countries of LatinAmerica rest on the multilateral foundation of WTO trade law For thisreason he argued bilateral and interregional negotiations lsquomust not beallowed to detract our attention from the pursuit of the DohaDevelopment Agendarsquo Such a commitment should remain a centraltenet of EU trade policy in the years to come
Within the multilateral rules-based trading system finally theEuropean Union and the United States should also seek to developfurther their bilateral relationship the health of which is vital to theglobal economy as a whole Addressing the full range of challenges tothe transatlantic economic partnership will in turn require a carefuland extensive study not only of traditional trade issues such as theliberalization of tariffs and quotas but also and especially the domesticsources of transatlantic regulatory disputes and successful means ofpreventing and settling such disputes More specifically such as studywould have to undertake three essential tasks
bull A comprehensive listing and analysis of EU and US regulationscapable of restricting trade and investment in the transatlanticsmarketplace
bull A comprehensive survey and analysis of formal and informalregulatory cooperation focusing on both the obstacles to suchcooperation and instances of lsquobest practicersquo in overcoming thoseobstacles and
bull A systematic analysis of various means of bilateral and multilateraldispute resolution with a particular emphasis on the specificchallenges of transatlantic regulatory disputes
The insights generated by such a study would inform not only thefurther development of the transatlantic economic partnership but alsothe development of the rules-based multilateral trading system of theWorld Trade Organization
vii
About the Authors
This report was prepared by the Transatlantic Programme of theRobert Schuman Centre for Advanced Studies at the EuropeanUniversity Institute Florence
The following persons contributed to the writing of one or moreportions of this reportRebecca Steffenson (European University Institute) contributed toSection 2Alasdair Young (University of Glasgow) contributed to Section 3including the preparation of Tables 5-7 as well as Appendices 1-3Gregory C Shaffer (University of Wisconsin School of Law) contributedtwo case studies in Section 4Mariam Camarero (Universidad Jaume I) Cecilio Tamarit (Universidadde Valencia) and Andrea Ribeiro Hoffmann (University of Tuumlbingen)contributed to Section 5 andMark A Pollack (European University InstituteUniversity ofWisconsin-Madison) served as lead author for the report andcontributed to the writing of various sections
The Transatlantic Programme is also grateful to the following personsfor comments on early drafts of the reportHelen Wallace (Director Robert Schuman Centre for AdvancedStudies)Patrick Messerlin (Institut de Sciences politiques Paris)Claus-Dieter Ehlermann (European University Institute)Ernst-Ulrich Petersmann (European University Institute) andMichael Artis (European University Institute)
The Transatlantic Programme was established in 2000 with a majorgift from BP
1
ndash 1 ndashThe Transatlantic Marketplace and
the Changing EUUS Economic Agenda
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly over thecourse of the past decade Taken together the US and the EU accountfor roughly one half of both world GDP and global trade
Table 1 Transatlantic Trade 1980-2000 in millions of Euros(share of EU total)
1980 1990 2000
EU imports from US 50733(181)
88957(205)
197992(193)
EU exports to US 29543(140)
82004(200)
232037(247)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
The European Union and the United States are also each otherrsquos mostimportant trading partners As Table 1 illustrates the volume ofEUUS trade more than doubled during the 1990s and the twocountries are currently each otherrsquos largest trading partners Indeedrecent data on trade in services summarized in Table 2 demonstrateseven more clearly the importance of the transatlantic traderelationship with the United States accounting for some 40 of theEUrsquos total imports and exports of services which in turn account forbetween one-third and one-half of total transatlantic tradeFurthermore EUUS trade has been largely balanced over the decadeof the 1990s
2
Table 2 Transatlantic Trade in Services in millions of Euros(share of EU total)
1998 1999 2000
EU imports from US 79874(360)
99042(409)
116474(407)
EU exports to US 77039(334)
92199(373)
117403(403)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
Notwithstanding the impressive growth of EUUS trade it is theinvestment relationship that most clearly distinguishes thecontemporary transatlantic marketplace As Table 3 makes clear theEuropean Union in 2000 was far and away the largest investor in theUnited States its euro 794 billion in foreign direct investment (FDI)constituting 65 of total FDI in the US1 The United States is similarlythe largest source of FDI in the European Union with someeuro 561 billion invested in 2000 These high levels of EU investment areestimated to provide roughly 35 million jobs in the United States witha similar number of European jobs relying on US investment in theUnion2 The large and growing investment relationship also explains aconsiderable portion of the recent growth in bilateral USEU tradesince an estimated 20-30 percent of all bilateral trade takes the form ofintrafirm trade within firms operating on both sides of the Atlantic
Table 3 Transatlantic Foreign Direct Investment in millions of Euros(share of EU total)
1998 1999 2000
US FDI flows into EU 60697(571)
83798(754)
121271(688)
EU FDI flows to US 133416(602)
196794(632)
172027(475)
US FDI stocks in EU 366462(60)
439928(609)
561199(625)
EU FDI stocks in US 398190(483)
622496(524)
794523(513)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
3
With the simultaneous growth of transatlantic trade and investmentand the gradual decline in EU and US tariffs and quotas followingsuccessive waves of trade liberalization the transatlantic economicagenda has been transformed Prior to the 1990s much of the EUUSeconomic relationship was dominated by trade questions andspecifically by cooperation and conflict over tariffs quotas and otherdirect barriers to trade typically imposed at US and EU borders Withthe decline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade have increased in importance aspotential sources of international trade tension Such non-tariffbarriers have been addressed in the European Union for decadesthrough the use of regulatory harmonization and more recentlythrough the mutual recognition of national standards Similarly theGATT system began as early as the Tokyo Round (1973-1979) toaddress non-tariff barriers to trade most notably through theTechnical Barriers to Trade (TBT) Agreement and more recentlythrough the 1994 Sanitary and Phytosanitary Standards (SPS)Agreement both of which apply international law disciplines to trade-distorting national regulations
Notwithstanding these new rules however lsquobehind-the-borderrsquo US andEU regulations on a diverse array of topicsmdashranging from theenvironment and food safety to consumer protection and dataprivacymdashhave emerged during the past decade as significant obstaclesto transatlantic and global trade and investment3 In some cases suchdomestic regulations have led to trade disputes between the UnitedStates and the European Union and to increasing demands frombusinesses on both sides of the Atlantic for cooperation among US andEuropean regulatory authorities to prevent and settle such disputesand facilitate access to the European and American markets
In sum the ever-increasing levels of transatlantic trade andinvestment have created a de facto transatlantic marketplace and withit an increasing incentive for the European Union and the UnitedStates to cooperate in an effort to manage that marketplace facilitatemutually beneficial economic exchange and prevent or settle the tradeand economic disputes that inevitably arise in such a closerelationship In that context this report aims to summarize the stateof our scholarly understanding about the political economy of thetransatlantic economic relationship with an emphasis on theinstitutions for joint economic governance the new challenges posedby regulatory disputes and the promise and limits of transatlanticregulatory cooperation Accordingly Section 2 of the report examinesthe development and growth of post-Cold War institutions for themanagement of the EUUS economic partnership while Section 3examines the persistence of trade and economic disputes between theEU and the US including the rise of new and potentially intractableregulatory disputes and Section 4 examines the prospects and limitsof transatlantic regulatory cooperation as a possible solution to such
4
conflicts The fifth section of the report places the EUUS bilateralrelationship in the broader context of the relationship between theEuropean Union and the various countries of the Americas and thesixth concludes with a review of potential areas for furthertransatlantic cooperation and promising areas for further study
5
ndash 2 ndashInstitutions for Transatlantic Economic Governance
Origins and Effectiveness
Transatlantic relations between the United States and the countries ofWestern Europe have long been based on common values and interestsin terms of both security and economic interdependence Throughoutthe Cold War transatlantic cooperation took place largely though theNorth Atlantic Treaty Organization (NATO) in the area of security andthrough common US and European participation in variousmultilateral economic forums including the Organization for EconomicCooperation and Development (OECD) the G-7 (now G-8) group ofhighly industrialized economies and the World Trade Organization
Cooperation between the United States and its European partners istherefore not new but the character of the relationship changedsubstantially during the 1990s with an ever-greater emphasis oneconomic as well as security cooperation and a greater recognition bythe United States of the European Union (in addition to its memberstates) as an important interlocutor Three transatlantic agreementssigned in the 1990s underpin this new transatlantic partnership andthe increasingly liberalized EUUS economic relationship TheTransatlantic Declaration (1990) the New Transatlantic Agenda (NTA1995) and the Transatlantic Economic Partnership (TEP 1998) haveeach played an important role in creating a transatlantic framework foreconomic co-operation and introducing formal transatlanticinstitutions to manage the relationship This upgrading of the EUUSrelationship in turn can be traced to several interrelateddevelopments during that decade including the end of the Cold Warthe maturation of the European Union as an economic and politicalactor and the relentless expansion of transatlantic economic exchangewhich created pressures for joint management of the emergingtransatlantic marketplace4
The end of the Cold War was clearly a precipitating cause for theupgrading of the transatlantic relationship As early as 1990 the USpresidential administration of George HW Bush proposed aTransatlantic Declaration to reaffirm USEuropean solidarity followingthe fall of the Iron Curtain and the collapse of the Soviet Union Whilethat Transatlantic Declaration itself focused largely on security issuesrather than economic cooperation the diminution of the security
6
threat from post-Soviet Russia facilitated an increasing emphasis oneconomic issues by the Clinton Administration reflected in both the1995 New Transatlantic Agenda and the 1998 Transatlantic EconomicPartnership5
This economic focus has in turn been reinforced by the maturation ofthe European Union which emerged during the late 1980s and early1990s as the worldrsquos largest internal market and the most importanttrading partner of the United States Simultaneous with thedevelopment of the EUrsquos internal market came the increasing influenceof EU political institutions including the European Commission(which plays a vital role in the EU legislative process as well as servingas trade negotiator and economic regulator in fields such ascompetition policy) and the Council of Ministers and EuropeanParliament (which collectively adopt an increasingly large portion ofEuropean economic legislation) Although the powers of the respectiveEU institutions still varies considerably across sectors theCommission has clearly emerged as the Unionrsquos primary interlocutorwith the United States on economic issues while the legislativeactivities of the Council and the Parliament have the potential toinfluence economic interests in the United States The institutions ofthe New Transatlantic Agenda have therefore attempted to incorporatethe Commission and the Council presidency through biannualsummits and other high-level meetings as well as members of theEuropean Parliament through the Transatlantic Legislatorsrsquo Dialogue(see below)
Beyond the end of the Cold War and the maturation of the EuropeanUnion finally lies the relentless increase of transatlantic economicexchange Increased transatlantic trade and investment have creatednew demands for market access and economic cooperation fromproducer groups such as the Transatlantic Business Dialogue whileother consumer labour and environmental groups have sought toensure that transatlantic cooperation takes into account their diverseinterests Indeed as we shall see below the increasingly closeeconomic relationship between the EU and the US has created newprospects for both trade conflicts and regulatory cooperation and hasresulted in what might be termed lsquoscuttle diplomacyrsquomdashthe scurrying ofEU and US government authorities to cope with the incessant conflictswhich although they compose only a small fraction of EUUSeconomic exchange threaten to poison a mutually advantageouseconomic relationship6 Largely for this reason the United States andthe European Union have established an increasingly complexinstitutional structure designed to facilitate economic and securitycooperation resolve and prevent disputes and integrate civil-societygroups into the process of transatlantic economic governance
7
21 Transatlantic Economic Agreements in the 1990s
211 The Transatlantic Declaration
The process of institutionalizing the EUUS relationship begansimultaneously with the end of the Cold War in 1989 when USPresident Bush and EU Commission President Jacques Delors agreedto work to ensure regular meetings between high-level EU and USofficials On 27 February 1990 this agreement bore fruit in the shapeof a lsquoTransatlantic Declarationrsquo pursuant to which the US and ECagreed to establish an institutional framework lsquofor regular andintensive consultationrsquo Specifically the Declaration called for biannualEUUS summit meetings between the presidents of the United Statesthe European Commission and the European Council as well asregular meetings between the US Secretary of State the ECCommission and the US Cabinet These meetings it was hoped wouldopen lines of communication create networks facilitate informationsharing and reduce the impact of disputes in transatlantic relations
In substantive terms the Transatlantic Declaration identified threemajor goals
bull economic liberalizationbull educational scientific and cultural co-operation andbull cooperation in fighting international crime terrorism and
environmental degradation7
While these policy areas were identified as priorities the agreementfailed to provide a more detailed agenda for meeting its goals Thecontent of the agreement has been described as cosmetic minimalistand lacking in substantive innovations and would soon besupplemented by other more detailed economic agreements8
212 The New Transatlantic Agenda
The next stage in developing the transatlantic economic relationshipcame with the New Transatlantic Agenda (NTA) which was signed atthe EUUS Summit in Madrid in 1995 and established four priorityareas for closer cooperation
1 promoting peace and stability democracy and development aroundthe world (in particular in Central and Eastern Europe Russia andthe Middle East)
2 responding to global challenges (with a focus on international crimedrug trafficking terrorism migration and health andenvironmental issues)
3 lsquocontributing to the expansion of world trade and promoting closereconomic relationsrsquo (including both bilateral and multilateralliberalization of trade and investment) and
8
4 building bridges across the Atlantic (specifically direct contactsamong lsquobusiness people scientists educators and othersrsquo)9
In addition to the six-page NTA itself the two partners also adopted amuch more detailed Joint Action Plan (JAP) which outlined specificpolicy areas where deeper cooperation could be pursued The economicchapter of the JAP was arguably the most ambitious of the four callingfor both the strengthening of the multilateral trading system and thecreation of liberalized lsquotransatlantic marketplacersquo with a special focuson bilateral regulatory cooperation1 0 The NTA itself also acknowledgedthe role of the Transatlantic Business Dialogue which would laterprove to be influential in setting the agenda for transatlantic economiccooperation
In institutional terms the New Transatlantic Agenda established newtransatlantic governance mechanisms and a more established policyprocess First it created a Senior Level Group of EU and US officialstogether with a lower-level NTA Task Force to help drive coordinatemonitor and implement the agenda of transatlantic relations betweenthe continuing EUUS summits Although this framework has sincebeen criticized as excessively bureaucratic and focused on summit-driven lsquodeliverablesrsquo (see below) the NTA framework has proven usefulin coordinating EU and US responses to both economic and securityissues and remains the overarching framework for transatlanticrelations today
213 The Transatlantic Economic Partnership
The drive for an ever-closer transatlantic economic relationship wasrevived in 1998 amidst revelations that cooperation in many policyareas had fallen short of initial expectations1 1 Despite the NTA and itsinstitutions high-profile trade disputes over bananas beef andextraterritorial sanctions continued highlighting the need for furthertransatlantic commitment to facilitate economic exchange and containconflict In that context the European Commission took the initiativein April 1998 calling for negotiations on a lsquosingle comprehensiveagreementrsquo to implement a lsquoNew Transatlantic Marketplacersquo TheCommissionrsquos proposal had four central objectives
1 the lsquoremoval of technical barriers to trade in goods through anextensive process of mutual recognition andor harmonizationrsquo
2 the elimination lsquoby 2010 of all industrial tariffs on an MFN basisrsquo3 the formation of a lsquofree trade area in servicesrsquo and4 further liberalization in the areas of government procurement
intellectual property rights and investment1 2
The United States had little time to respond however as the initiativefailed to secure the support of the Council of Ministers In its placethe US and the EU agreed in May 1998 to a somewhat less ambitious
9
Transatlantic Economic Partnership (TEP) which aimed to tacklebilateral regulatory barriers to trade and to identify common positionswithin multilateral trade negotiations In substantive terms the TEPand its accompanying Action Plan focused more directly than the NTAon regulatory cooperation and on the possible harmonization ofstandards as a means of removing technical barriers to trade and itcommitted both sides to negotiations in specific issue-areas includingservices intellectual property food safety and biotechnology1 3
In addition the TEP created a new set of institutions to manage theeconomic aspects of the relationship including a lsquoTEP Steering Grouprsquocharged with monitoring implementing and reviewing TEP objectivesas well as expert-level working groups The TEP also emphasized theimportance of early warning of potential trade and regulatory disputesand fostered the creation of an institutionalized lsquoearly warning systemrsquofollowing the Bonn EUUS summit in June 1999 Finally the TEPexplicitly encouraged the participation of not only business but othercivil society groups which would lead in time to the creation of thetransatlantic consumer environment and labour dialogues
Table 4 Transatlantic Cooperation Agreements at a Glance
Transatlantic Agreement Year Impact on the Economic Relationship
The TransatlanticDeclaration 1990 Contains a broad commitment to
economic liberalization
The New TransatlanticAgenda (NTA) and JointAction Plan (JAP)
1995
Includes a chapter on contributing tothe expansion of world trade andpromoting closer economic relationsJAP discusses building a lsquonewtransatlantic marketplacersquo throughincreased regulatory co-operation
Transatlantic EconomicPartnership (TEP) 1998
Outlines three main goals for thetransatlantic economic relationship1) market access gains for goods
services and agricultural products2) multilateral and bilateral trade
liberalization of goods services andcapital
3) deepening dialogue between non-governmental organizationsparliamentarians and government
10
22 An Overview of Existing Transatlantic Institutions
Todayrsquos transatlantic economic relationship is managed largely by a setof institutions that were created in stages by the TransatlanticDeclaration the NTA and the TEP Combined these institutionsconstitute a framework for long-term as well as day-to-day economiccooperation and dispute resolution
221 EUUS Summits
The biannual EUUS summit is the primary forum forintergovernmental exchange in the NTA process consisting of thehighest level of contact between the Presidents of the US the EUCommission and the Council Presidency The transatlantic policy cyclebegins and ends with these biannual summits where decisions arelsquomadersquo about the general scope for co-operation and wherelsquodeliverablesrsquo - in the form of new bilateral agreements about regulatorycooperation or the resolution of specific disputesmdashare announced Thesummits encourage policy co-ordination because they create deadlinesfor progress reports and exert pressure on lower-level officials toproduce results
222 Senior Level Group and the NTA Task Force
The Senior Level Group serves as a contact point between the EUUSSummit and the working level of the transatlantic dialogue It hasroughly six formal members including the US Undersecretary of Statefor Economic Affairs Commission delegates from the Directorates-General for external relations and trade Council Presidencyrepresentatives and representatives of the lsquoArticle 133 committeersquodealing with international trade matters The primary tasks of the SLGare to prepare the agenda of the biannual summits lsquoshopping fordeliverablesrsquo to be announced on those occasions and to monitor theimplementation of the NTA and the TEP
Logistically the SLG typically meets twice during each CouncilPresidency with the first meeting used to assess potential areas ofcooperation and conflict and the second meeting finalizing the agendafor the EUUS summit and confirming the contents of its progressreport which is presented to summit leaders Below the SLG an lsquoNTATask Forcersquo meets somewhat more frequently (often throughvideoconferencing) to follow specific dossiers in both the security andeconomic realms
223 TEP Steering Committee and Working Groups
The TEP institutions including the Steering Group and workinggroups bring together policy experts to deal with economic issues ingreater detail The Steering Group consists of the US Deputy Assistant
11
Secretary of State for Economic Affairs Commission officials at theHead-of-Unit level and a Council Presidency representative Originallydesigned to coordinate negotiating approaches within the WTO and toact as an lsquoearly warning systemrsquo to identify possible trade disputes theTEP Steering Group has evolved into the primary coordinating body fortransatlantic economic relations including negotiations aboutregulatory cooperation in specific areas
The Steering Group is assisted by the TEP working groups which aresector-specific and thus mirror the sectors laid out by the TEPincluding agriculture biotechnology trade services and globalelectronic commerce Their main task is to find areas where the EUand the US can work together under the TEP framework and to reportany progress or problems to the Steering Group
224 The Transatlantic Early Warning System
The 1998 TEP declaration highlighted the need to identify potentialtrade disputes before they emerge At the Bonn EUUS summit inJune 1999 the two sides announced plans to formalize an EarlyWarning System for this purpose1 4 Essentially the transatlantic earlywarning system sparks an inter-agency process to identify potentialeconomic disputes at an early stage most notably with regard todomestic EU or US legislation that might act as a barrier totransatlantic trade and investment The task of spotting such potentialdisputes is delegated to the TEP Steering Group which reports earlywarning items to the Senior Level Group which in turn may take theminto account when preparing the EUUS summit agenda The TEPSteering Group also assigns contact points facilitating consultationsand agreeing on timelines for reporting back on items highlighted aspotential transatlantic policy frictions Unlike similar early warningsystems within the European Union however the transatlantic earlywarning system does not require that either side pause or reconsiderits proposed legislation or regulations The result is a system whichwhile respecting the regulatory sovereignty of both sides does notguarantee prevention or resolution of potential conflicts
12
Figure 1 The Transatlantic Early Warning System
The EUUS SummitTop-level discussions on
potential and exiting disputes
The Senior Level GroupReviews friction points reports to summitorand refers back to TEP Steering Group
or NTA Task Force
TEP Steering GroupIdentifies and monitorseconomic friction points
225 The Transatlantic Legislatorsrsquo Dialogue
An underlying feature of the early warning concept is the desire to getboth EU and US domestic policy makers to consider the externalimplications of internal policies However the Early Warning System isa bureaucratic tool The important task of raising awareness betweenEU and US legislators lies with the Transatlantic Legislatorsrsquo Dialogue(TLD) another product of the NTArsquos lsquobuilding bridgesrsquo chapter The TLDbrings together members of the US Congress and the EuropeanParliament so as to create awareness on each side of the transatlantictrade impact of EU and US legislative acts
Thus far however the TLD has not lived up to initial expectations forthree reasons First TLD participation is largely limited to members ofthe US House of Representatives and the European Parliament with aparticular interest in transatlantic relations and may not includemembers of committees drafting legislation with transatlanticrepercussions the US Senate moreover is thus far excluded from theTLD Second there is insufficient contact between the TLD and otherparts of the transatlantic dialogue for example the SLG Thirdmeetings of the TLD have been held only rarely and typically withweak attendance on the US side and the Dialogue has yet to engage inor settle any serious economic disputes between the United States andthe European Union
226 The Transatlantic Civil Society Dialogues
The fourth and final chapter of the NTA encourages the establishmentof lsquopeople to peoplersquo links as a way of building bridges across the
13
Atlantic and bringing a civil-society component to transatlanticcooperation In addition to supporting ad hoc exchange betweeneducators and scientists the EU and the US have encouraged and insome cases subsidized the establishment of formal dialogues amongEuropean and American business consumer and environmentalgroups and labour unions The 1995 NTA made specific mention ofthe Transatlantic Business Dialogue (TABD) while the 1998 TEPinvited civil society input lsquoon issues relevant to international trade as aconstructive contribution to policy makingrsquo In practice however not alldialogues have been created or function as equals
The Transatlantic Business Dialogue
The TABD is the oldest best organized and most influential dialoguein the transatlantic economic relationship Launched in 1995 at theinitiative of the US Commerce Department and the EU Commissionthe TABD brings together some 200 European and American CEOs forannual meetings which make joint recommendations on thetransatlantic policy issues1 5 From the beginning the TABD focusedthe attention of US and European legislators and regulators on theimportance of non-tariff barriers to trade calling explicitly for EUUSregulatory cooperation and mutual recognition of standardsmdashanapproach it has labelled lsquoapproved once accepted everywherersquo1 6 Inkeeping with this approach the TABD has been active in pressing forthe adoption and implementation of specific agreements including the1997 Mutual Recognition Agreements and the 2000 Safe HarbourAgreement on data privacy (examined below) In addition the TABDparticipates actively in the transatlantic early warning systemidentifying in its annual reports those domestic laws and regulationsthat might create obstacles to transatlantic trade and investment1 7
One result of this process is that the TABD has become a valuablesource of information for EU and US policy makers Sixty percent ofthe TABDrsquos original recommendations resurfaced in the NTA and theJoint Action Plan1 8 Some members estimate that one-third of itsrecommendations have been taken on board by transatlantic policymakers1 9 Nevertheless there is an increasing perception within theTABD that much of the lsquolow-hanging fruitrsquo has been picked in terms oftransatlantic trade liberalization and regulatory cooperation and a fearthat governments lsquocanrsquot deliverrsquo regulatory reforms demanded bybusiness2 0 In addition the TABD faces the challenge of interactingwith the other officially recognized dialogues with which it may notalways agree
The Transatlantic Consumer Dialogue
The decision to include consumers environmentalists and workers inthe transatlantic dialogue was the result of pressure from NGOs theEuropean Commission and eventually the US State Department The
14
success of the TABD sparked criticism from the NGO communitywhich argued that the influence of the TABD was unbalanced by anabsence of civil society input In response to these concerns the StateDepartment and the European Commission both agreed to providefunds to establish a new Transatlantic Consumer Dialogue There wassome objection to government sponsorship of the groups particularlyin the US where it was feared that the consumer dialogue was a wayto lsquogreenwashrsquo the TEP There was also a divide among its membersover the issue of trade liberalization most notably at the first meetingof the TACD which was overshadowed by a dispute between groupssuch as Public Citizen which generally oppose trade liberalization andother groups such as Consumer Union which support tradeliberalization as a means of increasing consumer choice2 1
Despite this rocky start the TACD has become an efficientorganization with a secretariat in London and a Steering Committeethat has organized its roughly 60 members into working groups onfood electronic commerce and trade In its working groups annualmeetings and recommendations the TACD has focused largely ontransatlantic regulatory issuesmdashin areas such as data privacy foodsafety and the application of the lsquoprecautionary principlersquo in riskregulationmdashbecause many consumer groups feared a downward spiralof regulatory standards as a result of increasing trade liberalizationNevertheless despite its high level of activity some members of theTACD feel that they have not had a sufficient impact on the NTAprocess which they regard as being dominated by a free-tradeagenda2 2
The Transatlantic Environmental and Labour Dialogues
Attempts to forge a functioning dialogue between the European andAmerican environmental and labour movements have been the leastsuccessful Despite initial attempts to create an environmentaldialogue the TAED suspended its activities in 2000 citing a lack offunding from the US side2 3 The TAED had until this point held threemeetings and established a Steering Committee as well as WorkingGroups on Climate Protection Bio-diversity and Forest ConservationFood and Agriculture and Industry The TAED also offered a numberof official recommendations on safe energy sources biotechnologywaste management and emissions standards although TAEDmembers like their TACD counterparts argued that the TABDcontinued to enjoy privileged access to EU and US policymakers2 4
Finally while the Transatlantic Labour Dialogue is officially still afunctioning forum it is the least developed of the transatlantic civil-society dialogues The TALD is little more than a modest exchangebetween the European Trade Union Confederation (ETUC) and theAmerican Federation of Labour and the Congress of IndustrialOrganizations (AFL-CIO) with no organizational structure secretariat
15
or formal objectives The TALD did hold several meetings in 1998 and1999 and 2000 but produced only six recommendations from thosemeetings Simplifying only slightly the ETUC and AFL-CIO havechosen to emphasize their shared interests in a global labour dialogueand have demonstrated little commitment to a specificallytransatlantic agenda within the framework of the NTA or the TEP2 5
In sum the transatlantic civil-society dialogues have arguably served auseful purpose in fostering transatlantic discussion among businessesand non-governmental organizations (most notably in the businessand consumer sectors) and in producing concrete recommendationsfor transatlantic economic cooperation However the relative weight ofthese organizations remains highly uneven and the currentarrangement is highly segmented and marked by a lack of anylsquodialogue among the dialoguesrsquo which might lead to the creation of agenuine transatlantic public sphere
23 An Effective Framework for Economic Cooperation
In recent months both official reviews and academic studies havefocused on the institutions of the NTA and the TEP asking whetherthese institutions are an adequate framework for transatlanticeconomic as well as security cooperation In its 2001 review of theNTA for example the European Commission argued that institutionssuch as the TEP Steering Group the NTA Task Force and the SeniorLevel Group serve useful purposes in fostering dialogue andcooperation between EU officials and their US counterparts but alsonoted a number of weaknesses in the current structure including thesummit-driven demand for often artificial lsquodeliverablesrsquo at six-monthintervals and the difficulty in focusing on medium- to long-termpriorities given the inevitable demands of pressing short-term issuesThe Commission therefore proposed a number of reforms to thecurrent institutions including the establishment of explicit medium-term priorities and the possible reduction of the number of EUUSsummits to one per year2 6
By and large the Commissionrsquos recommendations were welcomed bythe United States government which agreed to the establishment of aset of medium-term priorities in the context of the June 2001 Goumlteborgsummit By contrast no progress has been made on the suggestion ofreducing the number of transatlantic summits largely because of thedifficulties posed by the rotating six-month presidency on the EU sideIn addition as we have seen a number of calls have been made inrecent years for a more transparent and accountable process oftransatlantic economic governance with more balanced input fromcivil society and with a greater role for democratically electedlegislators Thus far however these calls have met with no systematicresponse from either the US or the EU
16
Moving from institutions to lsquodeliverablesrsquo a recent study by EricPhilippart and Pascaline Winand has attempted to measure the policyoutputs of the NTA by examining the joint reports of the Senior LevelGroup since 1995 in order to determine to what extent and in whichareas the goals of the Joint Action Plan had been missed met orexceeded Summarizing a complex analysis Philippart and Winandfind that the extent and level of cooperation varies both across andwithin the four chapters of the NTA with genuine joint action in someareas and lower levels of cooperation (such as the exchange ofinformation) or inactivity in others In the area of foreign policycooperation for example the authors find that EUUS cooperation hasbeen most successful and resulted in the most extensive joint actionwithin Europe itself while yielding fewer and less binding outcomes inother regions In the area of economic cooperation the authors findthat the NTA has been most active in the establishment of alsquotransatlantic marketplacersquo with relatively extensive trade andregulatory cooperation but far less active and successful incoordinating economic policies in the World Trade Organization andother multilateral fora2 7 In the following two sections therefore weturn from a discussion of institutions and process to a more explicitanalysis of specific economic issues relating to the management oftrade disputes as well as bilateral efforts at regulatory cooperation
17
ndash 3 ndashTrade and Regulatory Disputes
in the Transatlantic Economic Partnership
Despite the obvious importance of EUUS trade and investmentrelationshipmdashor indeed because of itmdasheconomic disputes have beenand remain an important feature of the transatlantic partnershipIndeed the settlement and where possible prevention of suchdisputes was a large part of the motivation behind the establishment ofthe New Transatlantic Agenda and retains an important place inbilateral economic relations
31 Classifying Disputes Traditional Trade Issues vs NewlsquoBehind-the-Borderrsquo Regulatory Disputes
Transatlantic economic disputes arise from various sources and canbe settledmdashor left unsettledmdashby a similar variety of means In terms oftheir sources we can distinguish between two broad categories oftransatlantic trade disputes (1) lsquotraditionalrsquo trade disputes regardingdiscriminatory national measures such as tariffs and quotas imposedat the border as well as subsidies antidumping actions and safeguardmeasures which discriminate explicitly between domestic and foreignproducers and (2) lsquonew-stylersquo disputes about the trade-distortingeffects of lsquobehind-the-borderrsquo regulations that act as non-tariff barriersto international trade in goods services and intellectual property
With the gradual decline of tariffs and quotas as direct barriers toinvestment and the simultaneous increase in domestic economicregulation on both sides of the Atlantic in response to concerns aboutthe environment consumer protection public health and the like thefrequency of these new-style disputes has increased drastically duringthe course of the 1990s and early 2000s Some of these disputes likethe ongoing conflicts over the regulation and marketing of hormone-treated beef and genetically modified organisms (GMOs) havegenerated considerable controversy on both sides of the Atlantic andplaced strains on the transatlantic economic partnership
The rise of such transatlantic regulatory disputes in turn hasprompted questions about what Miles Kahler and others have termedlsquosystem frictionrsquo between the respective regulatory systems of the
18
European Union and the United States In a survey of transatlanticeconomic relations conducted in 1995 Kahler concluded that thereexisted at best partial evidence of system friction between the UnitedStates and the European Union noting that some issues (egagriculture and audiovisual services) did indeed divide the US and EUsystems fundamentally while on other lsquonewrsquo issues like labourstandards and the environment the EU and the US generally sharedcommon views2 8
Surveying the landscape of transatlantic economic relations sevenyears later it remains true that the European Union and the UnitedStates are united by many common values and common interestsNevertheless in a growing number of issue-areas including food safetydata privacy copyright protection taxation accountancy standardsand others the United States and the European Union have arguablyexperienced lsquosystem frictionrsquo in the form of a large number ofsimmering regulatory disputes summarized in Appendix 1 at the endof this report
Table 5 Classifying US-EU Trade Disputes
Agriculture Industrial goods Services
Border-measures
Bananas (alsoGATS)Belgian ricedutiesTariff-rate quotacorn gluten feed
Harbour taxAnti-dumping(steel uranium)CVD (steel)Safeguard actions(steel)
Tra
dit
ion
al
Subsidies Export subsidies AirbusFSC
Regulatorybarriers
Beef hormonesGMOs
Hush kitsPublicprocurement
Audio-visualProfessionalservicesTelecommuni-cationsData privacy
New
sty
le
IPR Havana Club Irish MusiccopyrightGreek protectionof movies
19
As Table 5 makes clear the contemporary transatlantic relationship ischaracterized by both traditional trade conflicts and new-styleregulatory disputes Indeed traditional disputes about tariffs andquotas (eg bananas) subsidies (eg Foreign Sales Corporations) anti-dumping measures and safeguard actions (eg steel) constitute someof the most high-profile disputes between the United States and theEuropean Union With a few exceptions however these disputesprimarily concern traditional trade measures that are within the lsquocorebusinessrsquo of the multilateral trading system which has wellestablished rules and an effective functioning dispute settlementprocedure within the World Trade Organization Put simply the WTODispute Settlement Understanding provides a body of multilateralrules governing the permissible use of tariffs quotas and other trade-restrictive practices a forum for consultation and if necessarylitigation among the parties to a dispute before WTO panels and theAppellate Body a binding requirement for member states to complywith DSU panel and Appellate body decisions and authorizedretaliation in the event of prolonged noncompliance with thosedecisions2 9
By contrast regulatory disputes implicate national laws andregulations that are often adopted for legitimate reasons of consumerand environmental protection or public health and after extensivedemocratic or administrative processes For this reason transatlanticregulatory disputes can be more bitter and intractable than traditionaltrade disputes insofar as both sides believe that they are lsquodoing theright thingrsquo and insofar as domestic political actors resistsubordinating domestic regulations to the exigencies of internationaltrade Such regulatory disputes also create particularly difficultquestions for the WTO dispute settlement procedure insofar as theycall for a politically sensitive balance between the economic imperativeof liberalized international trade on the one hand and the economicand non-economic motivations behind domestic regulations on theother hand
Largely for this reason both the United States and the EuropeanUnion have generally avoided bringing such regulatory conflicts beforethe World Trade Organization preferring in most instances to managetheir regulatory differences through bilateral consultation andcooperation Table 6 which summarizes EUUS WTO disputes bysubject matter demonstrates clearly the continuing dominance oftraditional trade issues (tariffs subsidies countervailing duties andantidumping) and the effort by both sides to keep politically sensitiveregulatory issues away from the WTO (For more information about thesubjects and status of all EUUS trade disputes before the WTO seeAppendices 2 and 3 at the end of this report)
Simplifying slightly existing regulatory as well as traditional tradedisputes can be addressed in any one of three ways (summarized in
20
Table 7 page 22) First the EU and the US may engage in directconsultations about regulatory barriers to trade and resolve thedispute without resorting to WTO dispute resolution examples includethe dispute over airplane lsquohush kitsrsquo resolved through a negotiatedsettlement between the EU and the US and the public procurementcase involving a Massachusetts state law imposing sanctions againstfirms doing business in Myanmar which was resolved unilaterallythrough the application of US federal law Second one party maychallenge the legality of the otherrsquos regulations before the WTO as inthe case of the US challenge to the EU ban on hormone-treated beefor the EU challenge to a provision of US copyright law in cases wherethe disputed regulation is ruled to be in violation of WTOrequirements however compliance has proven difficult Third andfinally given the difficulties of resolving such disputes through eitherbilateral negotiations or WTO litigation the bulk of regulatory disputesare allowed to simmer indefinitely with periodic consultations andexchange of information among the two sides but no resolution of theresulting trade tensions As Appendix 1 makes clear the overwhelmingmajority of current transatlantic regulatory disputes fall into this thirdcategory
Table 6 Transatlantic Trade Disputes in the WTO Overview and Context
Tariffsquotascustomsdutiesrules oforigin
retaliatorymeasures
Tradedefence
instruments(a-d CVDsubsidies)
TechnicalTBTs
(classi-ficationlabelingtesting)
Substantive TBTs
(process ampproductrequire-ments)
Subsidies GATS TRIPS TRIMS GPA Other
EU - US(EU asthirdparty)
6 9 (11) 1 (1) 1 3 1 2
EU - Restof World(RoW)
14 6 1 1 3 4 3 4
RoW ndash EU 12 3 4 2 1 1
US ndash EU(US asthirdparty)
8 (1) (1) 1 (1) 8 1 8
US - RoW 10 7 3 2 7 2 6 3 1
RoW ndash US 7 21 5 1 1 1
RoW ndash RoW 17 30 1 6 10 3
Sources Adapted from DG Trade WTO - Dispute Settlement (updated 15102) httpeuropaeuintcommtradepdfcasesxls accessed15202 and the WTOs dispute database (httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
21
22
Table 7 Methods of Dispute Resolution with Examples
Negotiated Agreement orUnilateral Action
WTO Dispute Settlement SimmeringDisputes
HushkitsMassachusettsMyanmar(public procurement)
Beef hormones(EU not in compliance)Irish Musiccopyright (EUUScompensation agreement)
GMOs
The sources of such regulatory disputes and the difficulties they posefor traditional dispute settlement procedures are illustrated below infour brief case studies focusing on (1) the US challenge to EUlegislation prohibiting the use of airplane lsquohush kitsrsquo (2) the USchallenge to the EUrsquos ban on hormone-treated beef and the relateddispute over the EUrsquos moratorium on the approval of geneticallymodified foods and crops (3) the EUrsquos challenge to the aforementionedMassachusetts public procurement law and (4) the EUrsquos challenge to aprovision of the US Copyright Act Although not a thorough review ofthe entire universe of EUUS regulatory disputes these four cases doillustrate the types of regulations adopted and challenged by both theEU and the US as well as the various methods of dispute resolutionmentioned above The policy implications of these cases are discussedin Section 36
32 Case Study Airplane lsquoHushkitsrsquo
Many EUUS disputes concern the technical barriers to trade (TBTs)caused by divergent national regulations setting technical standards inareas ranging from the specifications for industrial machinery andemissions standards for motor vehicles to nutritional labelingrequirements for packaged foods As Kenneth W Abbott has pointedout in a recent study many such national regulations are identified bybusiness or governments as TBTs within the transatlantic relationshipand a far smaller percentage of these have emerged as high-profiletrade disputes3 0 To date no disputes have been litigated between theEU and the US under the TBT Agreement although one particularlyprominent case did create significant tensions in the transatlanticrelationship namely the US challenge to the EUrsquos ban on airplanelsquohushkitsrsquo
Hushkits are equipment packages designed to reduce the noiseemissions of aircraft through the use of sound-absorbing materialswith the aim of bringing particularly older planes into compliance withthe so-called lsquoChapter 3rsquo noise pollution standards adopted within theInternational Civil Aviation Organization (ICAO) In 1999 theEuropean Union which had long pressed unsuccessfully for theadoption of stricter standards within the ICAO adopted a Regulation
23
establishing a ban on the registration of older aircraft fitted withhushkits on the grounds that such aircraft only barely complied withChapter 3 standards and were substantially more polluting thannewer planes The ban on new registrations was to enter into force inMay of 2000 from April 2002 moreover hushkitted aircraft registeredin third countries would not be allowed to operate within EU territory
Although nominally intended to decrease noise pollution aroundairports in heavily populated regions of Europe the EUrsquos hushkitsRegulation met with howls of protest in the United States where theuse of hushkits had been encouraged by US authorities as a cost-effective way of meeting Chapter 3 standards A ban on the registrationof hushkitted aircraft the US argued would therefore impose adisproportionate burden on US airlines which estimated that theRegulation cost them some $2 billion by depressing the value of theirexisting fleets while benefiting European carriers that had relied moreextensively on the purchase of new aircraft designed specifically tomeet Chapter 3 specifications In legal terms moreover the UnitedStates argued that the Regulation violated the terms of the ICAOagreement which simply set a performance standard for planes anddid not authorize parties to set more demanding standards or tomandate a specific design standard (eg a ban on the use ofhushkits) The US accordingly lodged a formal ICAO complaint againstthe 15 EU member states in March of 2000
After extensive bilateral discussion as well as multilateral negotiationswithin the ICAO in October 2001 the US and the EU reached asettlement of the case The first step in this settlement was themultilateral resolution adopted on 4 October in the ICAO assemblyurging states to pursue a lsquobalanced approachrsquo to noise reductionadopting local operating restrictions only where supported by anassessment of the costs and benefits and only after fully assessingalternative measures to reduce noise At the same time the ICAOagreed to a new and stricter set of lsquoChapter 4rsquo standards to take effectbeginning in 2006
Consistent with the provisions of the ICAO agreements the EU agreedon 25 October to withdraw the original Hushkits Regulation by April2002 (the date when it would have applied to third-country aircraft) inreturn for which the US agreed to withdraw its complaint before theICAO In place of the original Regulation the Commission issued aproposal in November 2001 for a new Directive replacing the generalban on hushkitted places with a more discriminating provisionallowing noise-sensitive airports in congested urban areas to limit theuse of planes that are lsquomarginallyrsquo compliant with Chapter 3standards3 1 This draft Directive was approved by the EuropeanParliament in its first reading in March 2002 and at this writing ispending adoption by the Council of Ministers and the Parliament
24
Despite the initial acrimony between the US and the EU the hushkitscase represents a successful effort at bilateral dispute resolution in abroader multilateral setting In this case the European Union agreedafter receiving assurance and guidance from the ICAO to adopt a morediscriminating and less trade-distorting regulatory approach whichsatisfies the trade concerns of the United States while allowing the EUto address the problems of noise pollution around the Unionrsquos mostcongested urban airports As we shall see presently however not allsuch regulatory conflicts have proven so amenable to negotiatedagreement
33 Case Study Hormone-Treated Beef andGenetically Modified Organisms
EU and US food-safety regulations constitute some of the mostimportant regulatory barriers to international trade and have been thesource of some of the most politically difficult and intractabletransatlantic regulatory disputes pitting each sidersquos sovereign right toregulate the safety of its food against its international obligationsunder WTO law3 2 Within the United States regulation of food safetywas among the earliest and most politically sensitive tasks of thefederal government which has delegated much of the power fordomestic regulation to agencies like the Food and Drug Administration(FDA) which has jealously guarded its reputation as an independentand impartial regulator making decisions on the basis of scientifictests rather than political pressures In the EU by contrast foodsafety regulation is carried out in part by national regulators and inpart by the EUrsquos political bodies including the Council of Ministersthe European Parliament and the Commission The deficiencies of thispatchwork regulatory process was painfully revealed however by aseries of food safety crises during the latter half of the 1990s includingmost notably the BSE crisis of 1996 and the Union has respondedforcefully with the creation of a European Food Safety Authority andwith an insistence on the application of the so-called lsquoprecautionaryprinciplersquo justifying regulatory action in the absence of clear scientificevidence and on the basis of consumer concerns and social andeconomic criteria
Precisely because food safety regulations can act as non-tariff barriersto trade in agricultural products the EU and the US have agreed tosubject their domestic regulations to the discipline of internationalguidelines such as the United Nations Codex AlimentariusCommission which establishes international standards for food safetyand more recently through the 1994 WTO Agreement on theApplication of Sanitary and Phytosanitary Measures (the SPSAgreement) The SPS Agreement does not establish bindinginternational standards for food safety nor does it automaticallypreempt the adoption of domestic standards that might constitute
25
non-tariff barriers to trade The agreement does however incorporateand promote the adoption of international standards as well asestablish trade rules that limit the ability of states to adopt food safetyregulations that are not scientifically grounded The terms of the SPSAgreement are moreover enforceable under the WTO disputesettlement procedure
The consequences of the divergent EU and US regulatory processesand the difficulties of resolving disputes through the WTO disputesettlement procedure can be illustrated most clearly by the long-standing EUUS dispute over the issue of hormone-treated beef Theconflict began in 1989 when the European Union announced a ban onthe sale and marketing of beef treated with any one of six growth-promoting hormones that had been tested and certified as safe by theFDA In 1995 following the entry into force of the SPS Agreement theUnited States took legal action before the WTO alleging that the EUban was inconsistent with the terms of the SPS Agreement since it wasnot based on scientific evidence risk assessment or internationalstandards After a protracted legal battle involving the issuing of apanel report and a subsequent appeal the WTO Appellate Body heldwith the United States that the EU had failed to base its ban on ascientific risk assessment and ordered the EU to bring its domesticregulations into compliance with WTO law
Despite the clear ruling against it the European Union faced withopposition from public opinion and hopeful of producing additionalscientific findings that would eventually justify the maintenance of theban failed to comply with the Appellate Bodyrsquos decision The UnitedStates therefore retaliated against the EU in May of 1999 imposingtariffs of $1168 million against EU agricultural products such as foiegras Roquefort cheese and Dijon mustard These US tariffs in turnsparked protests among French and European farmers who seized onthe beef-hormones case as a symbol of the threat posed byAmericanization and globalization to European regulations andtraditions Since 1999 the United States and the European Unionhave continued to consult regularly about this case but the Unionremains firm in its refusal to alter its domestic law and the UnitedStates persists in the application of retaliatory sanctions against theEU
The transatlantic dispute over the regulation of genetically modifiedorganisms (GMOs)mdashor more precisely genetically modified foods andcropsmdashis analytically similar to the beef hormones case although thepotential economic stakes in this area of GMOs are potentially fargreater Here again the US Food and Drug Administration decided inthe early 1990s that genetically modified foods were not substantiallydifferent from conventional foods and therefore required no specialprocedures for approval or marketing and on that basis US farmersand seed producers have quickly embraced the use of genetically
26
modified foods and crops By contrast the European Union has takena more cautious approach in a series of Directives and Regulationsrequiring specific approval procedures for genetically modified crops aswell as labeling of foods from genetically modified varieties Since1998 moreover the Council has maintained a de facto moratorium onthe approval of new GM varieties even though the EUrsquos scientificcommittees have continued to formally approve a number of varietiesas posing no health risks to consumers
The GMO issue has been the subject of intense consultation betweenthe US and the EU in recent years including the creation of an EU-USBiotechnology Forum which issued a joint report on the subject inDecember 20003 3 as well as a Biotech Working Group within theTransatlantic Economic Partnership Such fora have provided for auseful exchange of information among regulators as well as tradeofficials yet the positions of the two sides remain far apart with atbest modest signs of convergence in the EU and US approaches Thusfar the United States has refrained from bringing a case against theEU before the WTO partly of fear that the European Union facing apotential backlash against both GMOs and the WTO would be unableto comply The issue therefore remains a simmering irritant in thetransatlantic relationship with the potential to flare into a majordispute should the United States eventually decide to litigate the issuebefore the WTO
34 Public Procurement The MassachusettsMyanmar Case
The previous two cases involved US challenges to EU regulationssetting requirements for the marketing and use of industrial oragricultural products Regulatory disputes can however be directed atUS as well as EU regulations and they can concern regulationsgoverning questions other than product standards An excellentexample is the EUUS dispute over the 1996 Act adopted by the stateof Massachusetts regulating state contracts with companies doingbusiness in Myanmar (formerly Burma) The law in question wasadopted in June of 1996 by the Massachusetts State Legislature withthe avowed aim of securing human rights and democratic elections inMyanmar which was then under military rule and subject to sanctionsfrom the US federal government as well as the EU Specifically theMassachusetts law imposed sanctions on foreign as well as domesticfirms doing business in Myanmar with the aim of motivating suchfirms to withdraw from activities in that country
As Matthew Schaefer points out in an excellent analysis of the casethe MassachusettsMyanmar dispute illustrates two recurrenttensions in EUUS trade relations3 4 First the case illustrates theproblems encountered when individual US states like Massachusettswhich are not directly party to the WTO adopt laws and regulations in
27
possible contravention of WTO law Anticipating such problems duringthe negotiation of the 1994 Government Procurement Agreement(GPA) the European Union had emphasized the importance for the USof binding the states and the US federal government responded byasking each of the states to submit a voluntary lsquoletter of commitmentrsquoagreeing to be bound 37 states including Massachusetts submittedsuch letters resulting in a substantial but incomplete mechanism toensure state-level compliance with the GPA
Second the Massachusetts law in question also represents theextraterritorial application of US (state or federal) laws which employtrade and other economic provisions to secure a foreign policy aim (inthis case the cause of democracy and human rights in Myanmar)Specifically the Massachusetts law attempted to penalize not onlyAmerican firms but also foreign firms for investing in Myanmar even ifsuch investments were legal in those firmsrsquo home countries In thislatter sense the MassachusettsMyanmar case bears a strikingsimilarity to the extraterritorial sanctions applied by the US in thewell-known Helms-Burton and Iran-Libya Sanctions Acts in which theUS federal government adopted extraterritorial sanctions againstcorporations doing business in Cuba Iran and Libya (The latter caseswere resolved at least temporarily when President Clinton agreed in1998 to waive such sanctions in a bilateral agreement with the leadersof the European Union)
In the Massachusetts case the law was challenged before the WTO bythe European Union (joined by Japan) which sought to have the lawruled incompatible with US obligations under the GPA Before the WTOpanel could rule however the law was successfully challenged andoverruled under US federal law when the US Supreme Court held thatfederal action in this area (ie the federal sanctions law againstBurma) had pre-empted such sanctions by the State of Massachusettswhose law was therefore held to be unconstitutional
The successful resolution of the MassachusettsMyanmar disputesuggests several lessons for the prevention and settlement of similarcases in the future according to Schaefer In terms of disputeprevention he argues this case points to the importance of informingstate governors and legislators about the constitutional limitations onthe extraterritorial use of economic sanctions as well as theirobligations under WTO agreements (at least insofar as the statesthemselves agree to be bound by them) In terms of dispute settlementfinally the Massachusetts case suggests that litigation in domesticcourts under US law may be more a more effective and comprehensiveconstraint on state sanctions than WTO law which should thereforebe employed with restraint in such cases
28
35 Intellectual Property Rights The Irish Music Case
In addition to trade in goods and services and public procurementnational laws and regulations regarding intellectual property rightscan also have international trade repercussions even when thoseregulations apply without discrimination to domestic as well as foreignproducers Indeed protection of intellectual property has been thesubject of no fewer than 11 WTO disputes between the United Statesand the European Union since 1995 The challenges posed byintellectual property disputes are illustrated most strikingly by the so-called lsquoIrish music casersquo in which the European Union challengedprovisions of US copyright law before the World Trade Organization 3 5
The US law in question was the 1976 Copyright Act as amended bythe 1998 Fairness in Music Licensing Act Specifically Article 110(5) ofthe amended Act included a lsquobusiness exemptionrsquo according to whichestablishments such as bars shops and restaurants below a certainsize (ie 2000-3750 square feet) were allowed to play radio andtelevision music without paying fees to royalty-collecting bodies Therelevant provisions of the Act had been adopted only after long anddifficult negotiations between the representatives of US performingrights organizations on the one side and the National LicensedBeverage Association on the other and sought (however successfully)to balance the rights of copyright holders with the interests of smallrestaurant and bar owners
Although the US law applied equally to domestic as well as foreigncopyright holders in 1997 the Irish Music Rights Organization (IMRO)a collective music management company representing Irish musicianssuch as the rock group U2 filed a complaint about the law before theEuropean Commission IMRO claimed that the derogation in the lawwas in violation of US commitments under both the InternationalAgreement on Trade Related Aspects of International Property Rights(TRIPS) as well as the Berne Convention for the Protection of Literaryand Artistic Works since it failed to protect authorsrsquo rights resultingin an estimated loss of euro 121 million annually for IMROrsquos membersThe Commission having investigated the case agreed with IMRO thatthe law violated US obligations under the TRIPS agreement andinitiated a formal complaint before the World Trade Organization in1998
In June 2000 a WTO panel issued a decision in favour of theEuropean Union calling on the US to bring subparagraph (B) ofSection 110(5) of the Copyright Act (the aforementioned businessexemption) into conformity with the TRIPS agreement In response tothe panelrsquos report the United States announced that it would notappeal the panel decision but also that it would require time to amendits existing copyright legislation In the interim the United States andthe European Union agreed to establish a WTO arbitration panel
29
which would decide on the level of compensation to be granted by theUS to the EU pending modification of the Act In November 2001 thearbitrators accordingly assessed the annual losses suffered by EUcopyright owners and hence the level of compensation to be paid bythe United States at some $108 million In light of this finding EUTrade Commissioner Pascal Lamy and US Trade Representative (USTR)Robert Zoellick agreed the following month to a temporary solutionwhereby the USTR would seek authorization from Congress toestablish a special fund worth $33 million over three years to financeprojects and activities for the benefit of EU music creators pendingrevision of the US law
The December 2001 agreement between the US and the EU waspresented by EU Trade Commissioner Pascal Lamy as lsquoa good exampleof how we can manage our problems in a cooperative manner whilekeeping in mind our international commitmentsrsquo3 6 However while theUS and the EU have indeed reached an amicable three-year agreementon this issue the Irish Music case also serves as an additionalexample of the difficulties encountered by both sides in amendingdomestic regulations in response to trade concerns and WTO rulingsAlthough the European Union side insisted on the US obligation toamend its law and explicitly retained its right to return to the WTO inthe event of noncompliance at this writing there is no sign of anyimminent US effort to bring its domestic law into compliance and anextended US agreement to compensation remains a probablealternative for the foreseeable future
36 Dealing with Trade and Regulatory Conflicts
Transatlantic trade disputesmdashboth traditional disputes and new-styleregulatory conflictsmdashare inevitable in a relationship as close as EUUSrelationship and are not likely to disappear anytime in the nearfuture Many of these disputesmdashespecially old-style tariff quotasantidumping and subsidies disputesmdashare dealt with effectively by WTOdispute resolution New-style disputes however often involve domesticlaws adopted for legitimate purposes after democratic deliberation andlitigation in such cases can place severe strain on the WTO systemparticularly in cases like beef-hormones copyright and potentiallyGMOs where the losing party would have difficulty complying with anadverse WTO ruling
In light of these challenges scholars and practitioners haverecommended a range of potential reforms in US and EU domesticpolitics in the bilateral relationship and in the multilateral WTOsystem to prevent and settle regulatory disputes Although a complete
30
review of these recommendations is beyond the scope of this report3 7 some of the most promising proposed reforms include the following
bull Changes in Domestic Regulation Perhaps the most promisingsuggestions for reform are those that require no formal internationalagreement but rather domestic reforms that could be undertakeneither unilaterally or through an informal process of mutualcoordination The Transatlantic Business Dialogue for examplehas proposed that the United States and the European Union bothundertake to conduct lsquoTrade Impact Assessmentsrsquo of draftregulations so that legislators are made aware of the potential tradeimplications of proposed regulations before they are adopted Sucha procedural change could be undertaken within the respectivedomestic systems of the US and the EU and without compromisingthe regulatory sovereignty of either side and would have theadvantage of implicating legislators who thus far have been largelyabsent from the NTA process3 8 In a similar vein US observers haveadvocated the adoption by the EU of some form of advise-and-consent procedures for the adoption of regulations which wouldprovide domestic as well as foreign stakeholders with advancewarning of proposed regulations and improve the quality of EUgovernance more generally Finally as we have seen in theMassachusettsMyanmar case it has been proposed that theUnited States should do more in the future to implicate subfederalstates in international trade agreements and to inform them oftheir obligations under US constitutional as well as internationaltrade law
bull Changes in the Bilateral Relationship Notwithstanding theirincreasing complexity the institutions of the NTA and the TEP havenot prevented the rise of new regulatory disputes nor have theybeen able consistently to settle amicably all those that do arisegiven the difficulty for both sides of changing domestic regulationsadopted in response to legitimate public concerns Nevertheless anumber of bilateral reforms have recently been proposed includingmost notably the further development of the bilateral early warningsystem increased regulatory cooperation and the expansion of theTransatlantic Legislators Dialogue With regard to the firstinterviews with policy-makers on both sides of the Atlantic revealthat the early warning system has proven useful in identifyingobscure technical barriers to trade but the same policy-makersemphasize that increased early warning does not provide aguarantee that legislators or regulators will be willing or able toadjust domestic regulations and indeed the survey of regulatorydisputes undertaken above suggests that increased early warningwould not have been capable of resolving disputes over beefhormones or copyright where the primary impediment to resolutionof the disputes was not lack of information but the regulatorysovereignty of legislators and regulators on each side For this
31
reason particular emphasis has been placed on the promise ofenhanced regulatory cooperation (examined in detail in the nextsection) and on the further development of the TLD (where theprimary challenge will be to provide an incentive for domesticallyoriented parliamentarians and congressmen to participate intransatlantic consultations)
bull Reform of WTO Dispute Settlement The WTO Dispute SettlementUnderstanding establishes a binding and efficient system for theresolution of international trade disputes and most WTO memberstates are broadly satisfied with the operation of the systemNevertheless the WTO dispute resolution system is placed underparticular strain in regulatory disputes such as the beef-hormonesand Irish music cases reviewed above where it is called to balancetrade and regulatory objectives and where compliance is politicallydifficult for the losing parties In light of these weaknesses variousscholars and practitioners have suggested reforms to both WTOrules and to the DSU including most notably the clarification of thelsquoprecautionary principlersquo in WTO law and moving from retaliation tocompensation in cases of noncompliance with DSU rulings Both ofthese proposals merit further discussion in the coming review of theDispute Settlement Understanding (scheduled to be completed inMay 2003) and in the ongoing Doha Round of trade talks In themeantime the EU and the US would do well to continue theirgeneral pattern of restraint in addressing regulatory disputesbilaterally and avoiding any potential lsquooverloadingrsquo of the WTOdispute settlement procedure
Future negotiations between the EU and the US as well as futurestudies designed to inform those negotiations would do well to explorethe viability of these proposed reforms
32
ndash 4 ndashTransatlantic Regulatory Cooperation
One of the most striking features of the period since the 1995 NewTransatlantic Agenda has been the dramatic increase in both formaland informal cooperation among the regulatory authorities of theUnited States and the European Union In the past five years alonethe United States and the European Union have signed nine formalregulatory cooperation agreements in areas as diverse as competitionpolicy data privacy customs procedures veterinary standards andthe mutual recognition of testing and certification procedures (Table 8)These formal regulatory agreements moreover represent only afraction of the contacts that occur among US and EU regulators bothbilaterally and in various multilateral fora
41 Why Cooperate
The incentives for US and EU regulators to engage in formal andinformal cooperation vary across different issue-areas but cangenerally be classed into two broad categories3 9 First regulators maycooperate because they view such cooperation as useful in carrying outtheir essential rulemaking responsibilities in an increasingly integratedtransatlantic and global marketplace Such cooperation need not andtypically does not involve joint rulemaking activities but focusesinstead on exchanges of information identification of best practiceand early notification of new regulations being considered within eitherpolity In the area of food safety for example the EuropeanCommission and the US Food and Drug Administration have notidentified or implemented common standards for the reasonsdiscussed above yet the two regulators do engage in an ongoingdialogue both bilaterally and within the Codex Alimentarius (the globalbody for the establishment of food safety standards) and theCommission consulted extensively with its US counterparts in thedesign of the newly created European Food Safety Authority Similarbilateral exchanges occur regularly in other issue-areas as well aswithin multilateral standard-setting bodies such as the InternationalStandards Organization (for industrial standards) and theInternational Conference on Harmonization (for registration ofpharmaceuticals)
33
Table 8 Transatlantic Regulatory Cooperation Agreements
Agreement Targeted Regulations Year
Competition Policy Agreement Competition regulations 1991
ECUS Agreement on DrugPrecursors
Illicit drug regulations 1997
ECUS Customs and CooperationAgreement
Customs certifications 1997
EUUS General Mutual RecognitionAgreements
Conformity assessmenttesting in six sectorstelecommunicationsequipment electromagneticcompatibility electricalsafety recreational craftmedical devices andpharmaceutical goodmanufacturing practices
1997
EUUS Positive Comity Agreement Competition relations 1998
EUUS Agreement Concerning theEstablishment of Global TechnicalRegulations for Wheeled VehiclesEquipment and Parts
Technical regulations 1999
EUUS Veterinary EquivalenceAgreement
Animal export certifications 1999
EUUS Safe Harbour Agreement Data protection regulations 2000
Joint Declaration on USEUCooperation in the Field ofMetrology and MeasurementStandards
Measurement equivalence inproduct certification
2000
EUUS Agreement on MutualRecognition of Certificates ofConformity for Marine Equipment
Mutual recognition of marineequipment regulations
2001
EUUS Guidelines on RegulatoryCooperation and Transparency
Non-binding guidelines forcooperation among EU andUS regulators regardingtechnical barriers to trade
2002
Source European Commission DG TRADEhttpeuropaeuintcommtradebilateralusausahtm
34
A second and partially overlapping motivation for regulatorycooperation already touched on in Section 3 above is to avoid orresolve bilateral disputes about the potential trade-distorting effects ofnational regulations As we have seen domestic economic regulationscan become a source of transatlantic economic tension in two distinctways First domestic regulations in areas such as consumer orenvironmental protection food safety or copyright protection cancreate non-tariff barriers to international trade and investmentexamples include the recent disputes over the EUrsquos Data PrivacyDirective and its ban on hormone-treated beef as well as exemptionsto the US Copyright Act Second US and EU domestic regulators mayapply their domestic regulations in an extrajurisdictional fashion asfor example when EU and US competition authorities insist on theright to review mergers among firms in the other constituency insofaras the proposed merger creates effects in the regulatorrsquos domesticjurisdiction or when the US (or its constituent states) employs tradeand economic sanctions as an instrument of foreign policy In suchcases George Bermann has pointed out lsquothe line between simpleregulatory [cooperation] hellip and the settlement of trade disputes canbecome highly blurredrsquo4 0
The full range of regulatory cooperation agreements and practicesbetween the United States and the European Union is beyond thescope of this preliminary report Indeed interviews with practitionersfrom the United States and the European Union reveal thatconsiderable informal cooperation takes place across virtually everyconceivable area of US and EU regulation with little attention from thepress scholars or political actors Even in the absence of a full-scalecross-sectoral analysis however we can nevertheless undertake threebrief case studies of regulatory cooperation in the fields of competitionpolicy the negotiation of EUUS Mutual Recognition Agreements andthe Safe Harbour Agreement on data privacy regulation Takentogether these three cases illustrate the range of incentives forregulatory cooperation as well as the various means for suchcooperation and the significant obstacles that often stand in its way
42 Case Study Transatlantic Competition Policy Cooperation
One of the earliest regulatory cooperation agreements signed betweenEU and US authorities and one of the most successful concernscooperation in the enforcement of each sidersquos respective competitionpolicy laws including most notably the examination of proposedmergers and acquisitions
The incentives for cooperation in this area are substantial4 1 First asin other areas of regulation EU and US regulators confront similarproblems and are increasingly called upon to rule upon the samecases placing a premium on the sharing of information Second both
35
US and EU courts have ruled that their respective regulatorsmdashnamelythe Department of Justice and the Federal Trade Commission on theUS side and the Directorate-General for Competition on the EUsidemdashmay enforce domestic competition laws extraterritorially againstfirms based outside their domestic jurisdiction if and insofar thebehavior in question (eg a proposed merger) produces effects oncompetition in the domestic market Such extraterritorial applicationof both EU and US competition law raises serious issues about theduplication of effort by the two sets of regulators not to mention theadverse economic and political impact of inconsistent or conflictingdecisions on the same case by EU and US regulators
These concerns increased substantially in the early 1990s moreoverwith the rapid rise in cross-border mergers and acquisitions thataccompanied the completion of the Unionrsquos lsquo1992rsquo internal marketinitiative At approximately the same time moreover the EuropeanUnion adopted the 1990 Merger Control Regulation which gave theCommission regulatory authority to review mergers above certain sizethresholds and made the Commission an important interlocutor forthe EU in this area It was in this context of increasing cross-bordermergers and increasing EU authority over such mergers thatCompetition Commissioner Leon Brittan proposed in 1990 to expandEU competition policy cooperation with third countries beginning witha formal agreement with the United States US regulators respondedpositively to Brittanrsquos proposal and US and EU regulators agreed in1991 to adopt an agreement committing them to cooperation in thearea of competition policy including the sharing of non-confidentialinformation and coordination of enforcement activities This agreementwas later supplemented by two secondary agreements the 1998Positive Comity Agreement (which seeks to restrict the extra-territorialapplication of antitrust laws in non-merger cases but has beenformally invoked only once) and by the 1999 AdministrativeArrangements on Attendance in Hearings (which provide guidelines forthe participation of EU and US regulators in each otherrsquos hearings)
In the decade since the signature of the first Competition PolicyAgreement EUUS competition policy cooperation has generallyoperated smoothly and successfully with regulators from theCommission the Justice Department and the FTC sharing informationand coordinating enforcement activities on a daily basis andcooperating successfully on over 600 cases during the course of the1990s including almost 500 merger decisions The general success ofEUUS competition policy cooperation in the area of merger controlcan be attributed to the broad transatlantic agreement among EU andUS regulators about the basic scope and tools of policy which hasfacilitated the task of coordinating enforcement actions and generatingmutual trust among regulators
36
Nevertheless as Youri Devuyst points out in an excellent review oftransatlantic competition policy cooperation successful cooperationand conflict prevention between US and EU regulators can behampered by persistent differences in the scope and focus of US andEU competition law the procedures employed by both sides and theexigencies of confidentiality which limit the sharing of information byUS and EU agencies These limitations can be illustrated in theatypical but well-known BoeingMcDonnell Douglas merger (bothAmerican firms) which was approved by the FTC in July 1997 only tobe held up by Commission insistence that the companies agree toformal undertakings to satisfy its competition concerns Although thecase caused substantial strains in the transatlantic relationship thecompanies concerned eventually agreed to the Commissionrsquos proposedremedies allowing the merger to proceed4 2
An even more dramatic difference of opinion occurred with regard tothe proposed merger of two other US firms GE and Honeywell in2001 Here again US regulators approved the proposed merger only tosee the European Commission reject it in July 2001 after announcingthat the firmsrsquo proposed remedies had failed to satisfy theCommissionrsquos concerns Perhaps most strikingly and unlike theprevious case of EUUS disagreement in the BoeingMcDonnellDouglas merger a number of analysts claimed that the disagreementbetween US and EU regulators reflected an underlying andfundamental difference in the criteria for assessing proposedmergers4 3 Although the resulting predictions of other imminentUSEU conflicts are almost certainly overstated it is worthwhilenoting that the Commission in its December 2001 Green Paper on thereview of the Merger Control Regulation proposes to launch a debateon whether the Union should abandon its traditional lsquodominance testrsquo(ie assessing whether a proposed merger would create a dominantposition for the merged firm in the relevant market) in favour of alsquosubstantial lessening of competitionrsquo test (similar to that already usedin the US Canada and Australia)4 4 Whether the Union will move inthis direction remains unclear If so however it would represent astriking example of regulatory convergence among regulators alreadynotable for their similar (if not identical) regulatory philosophies andprocedures
43 Case Study EUUS Mutual Recognition Agreements4 5
As transatlantic tariff barriers have decreased firms have becomemore concerned with what they term duplicative regulatory compliancecosts and many have pressed for their removal This pressure hasincreased with rising transatlantic investment since divergent EU andUS standards and certification requirements most directly affecttransatlantic corporate groups and these groups more easilycoordinate lobbying on both sides of the Atlantic4 6 Transatlantic firms
37
under the auspices of the Transatlantic Business Dialogue inparticular have pressed for enhanced regulatory cooperation throughmutual recognition agreements culminating in the 1997 EUUSMutual Recognition Agreement (MRA) providing for mutual recognitionof testing and certification requirements and the more ambitious MRArelating to marine equipment signed in 2000 These agreements havebeen promoted as a major achievement of the New TransatlanticAgenda and as a flexible means of reconciling the regulatoryapproaches of the United States and the European Union andfacilitating access to both domestic markets
Notwithstanding these potential advantages however majorchallenges for transatlantic regulatory cooperation in this and otherareas are posed by the significant institutional asymmetries betweenthe United Statesrsquo and EUrsquos respective regulatory systems in an arrayof fields Where regulators adopt similar regulatory structures andsystems and enact similar substantive standards they more easilyunderstand and accept each otherrsquos regulatory determinationsRegulatory symmetry facilitates regulatory trust and confidenceenabling regulatory cooperation to occur as in the competition policycase examined above
In many issue-areas however US and EU regulators tend to work indifferent regulatory cultures Generally EU and national regulatorsoperate under the dual mission of ensuring free trade within theinternal market on the one hand while ensuring public safety throughhigh product and process standards on the other They thus are quiteaccustomed to interacting with foreign regulators and testing bodies onan ongoing basis As a consequence the Commissionrsquos DG Enterpriseand DG Trade units rarely tousled when negotiating and implementingthe 1997 Mutual Recognition Agreement The US Food and DrugAdministration (FDA) by contrast has traditionally defined its rolesolely as that of protecting US public health and has not operatedunder a dual mission of also facilitating market exchange Because theFDA is an independent regulatory authority anxious to protect itsregulatory autonomy US trade and commerce authorities encountermore difficulties in negotiating bilateral agreements concerning areaswithin the FDArsquos jurisdiction
Overall institutional adaptation for the negotiation andimplementation the 1997 MRA has been much easier for the EUwhich already has a mechanism for coordinating the mutualrecognition of product testing and certification among fifteen memberstates speaking eleven different languages This relatively deregulatedsystem consists of EU legislators setting lsquoessential requirementsrsquo in EUlsquonew approachrsquo directives which are supplemented by large numbersof harmonized lsquovoluntaryrsquo technical standards that in turn are widelyadopted Before marketing their products firms either self-certify theircompliance with these requirements or hire accredited testing and
38
certification laboratories Firms and laboratories remain subject topost-marketing member state regulatory controls as well as market-reputational constraints Member state regulators interact on a regularbasis through working groups committees and informalarrangements Overall this EU system can be characterized asgovernance by coordinated cross-border public-private networks
US regulatory officials however oversaw very different regulatorysystems in the areas covered by the 1997 MRA For example the USFederal Communications Commission (FCC) itself certified alltelecommunications equipment until the negotiation of thetransatlantic mutual recognition agreement at which time it adopted adecentralized EU model of certification The FDA continues to certifymost medical devices whereas EU authorities have permitted testingby private notified bodies since the mid-1990s The US OccupationalHealth and Safety Administration (OSHA) requires OSHA-accreditedlaboratories to certify all electrical safety equipment used in theworkplace whereas the EU has permitted manufacturers to self-certifythe equipmentrsquos conformity with European requirements since 1973
EU and US authorities began to seriously address issues of regulatorycoordination at the beginning of the 1990s In May 1989 US Secretaryof Commerce Robert Mosbacher and Commission Vice-PresidentMartin Bangemann agreed to explore the possibility of transatlanticmutual recognition agreements as well as mechanisms to grant USfirms greater access to EU standard-setting procedures After 1995these efforts were championed explicitly and repeatedly byTransatlantic Business Dialogue which became a prominent advocateof transatlantic MRAs4 7
EU and US negotiators initially discussed negotiating mutualrecognition arrangements in eleven sectors but ultimately whittledthis down to six4 8 In consequence the 1997 MRA consists of aframework agreement and six annexes respectively coveringtelecommunications equipment electromagnetic compatibilityelectrical safety recreational craft medical devices andpharmaceutical good manufacturing practices Each of the annexes isin fact a separate agreement for a separate sector covering definedcategories and lists of products
As with all trade negotiations the EU and the United States wereconcerned that the final results be lsquobalancedrsquo The United Stateswished to conclude an agreement on telecommunications equipmentfirst but the EU refused because it felt that US firms would benefitmore if the agreement covered only this sector EU negotiators thusinsisted that an agreement on pharmaceuticals and medical devices becompleted simultaneously The MRA sets up a new transatlanticstructure for overseeing its implementation First the MRA creates aJoint Committee which consists of US and EU trade officials who meet
39
twice annually Second the annexes create Joint Sectoral Committeesto oversee the annexesrsquo implementation
The 1997 Mutual Recognition Agreement does not cover recognition ofthe adequacy or equivalency of US and EU standards as such Ratherthe 1997 MRA only addresses mutual recognition by certificationbodies (known as lsquoConformity Assessment Bodiesrsquo) of each otherrsquosseparate standards4 9 Since neither the United States nor the EUrelinquishes sovereign control over the substance of their standardstrading firms still must meet the separate requirements of the worldrsquostwo largest markets In addition these assessment evaluations aresubject to certain pre-approval and post-approval conditions
Implementation of the 1997 MRA moreover remains uneven Thetelecommunications electromagnetic compatibility and recreationalcraft annexes all have been implemented as required In contrastimplementation of the electrical safety medical device andpharmaceutical GMP annexes remain in dispute in part because theFDA and OSHA have been slow to recognize the equivalency ofcertification by European government regulators or privatelaboratories and in part because of the magnitude and theunfamiliarity of US regulatorsrsquo task in assessing the equivalence ofstandards from 15 different member states submitting documentationin up to 11 different languages5 0 In the words of one FDA official theFDA has lsquorefused to compromise its mission of protecting public healthfor balance of trade purposesrsquo5 1 Thus all three annexes initiallydesired by the US administration are in operation while the threeannexes desired by the Commission are not Since the US executivehas less control over the US agencies responsible for implementationboth partiesrsquo choices are somewhat constrained
On June 12 2001 the United States and the EU initialed anAgreement on Mutual Recognition of Certificates of Conformity forMarine Equipment5 2 Unlike the 1997 Mutual Recognition Agreementand its six annexes this new agreement provides for mutualrecognition of each partiesrsquo standards and procedures as lsquoequivalentrsquofor purposes of certifications issued by conformity assessment bodieslocated in the partiesrsquo respective territories (Articles 3 and 4) Pre-existing harmonization of standards in this sector made possible thepartiesrsquo mutual recognition of lsquoequivalencersquo These standards wereagreed under the auspices of the International Maritime Organization(IMO) located in Geneva This new mutual recognition agreementshould be much easier to implement because less training andinformation exchange are required insofar as testing bodies will not becertifying under separate standards or procedures The parties alsoagreed up-front to recognize each otherrsquos existing conformityassessment bodies so that no application procedures are required forimplementation (Article 6) Thus while this agreement is relativelynarrow in product coverage it is much broader in scope
40
Transatlantic businesses that first touted the benefits of EUUSmutual recognition arrangements now realize their underestimation ofthe difficulties of implementation5 3 These constraints involve not justregulators and regulatory cultures but market forces as well Themarket has not reacted favourably to the recognition of newConformity Assessment Bodies as provided under the 1997 MRA Fromthe perspective of manufacturers they typically develop long-termworking relationships with certifying laboratories which constitute aform of cost-effective firm-laboratory partnership Moreover alaboratoryrsquos mark itself may be important in some markets so thatfirms may continue obtaining formal certification from EU notifiedbodies for the EU market and US laboratories for the United States Asa result most firms may continue using the same laboratories eventhough these laboratories cannot directly certify products asConformity Assessment Bodies but must work through sub-contracting arrangements with accredited laboratories on the otherside of the Atlantic5 4 As for laboratories they will not invest in theaccreditation procedures required to become a Conformity AssessmentBody if they fear that the benefits are limited or too uncertainAccreditation costs can be substantial involving seminars workshopstraining programs audits and joint inspections with authorities acrossthe Atlantic The MRArsquos success in consequence may requireconsiderable market promotion
Perhaps the most important lesson from the implementation of theEUUS MRAs is that agreements that both guarantee public safetyand reduce trade barriers cannot be accomplished on the cheap Theyrequire sustained political will of leaders in each jurisdiction to allocatesignificant resources to finance the coordination of cross-borderregulatory networks EU member states sustained such political willand dedicated such resources over decades in order to create thesingle market Even so they too have encountered significant setbacksand obstacles While it is far too early to pre-judge the 1997 MRA itseems clear that the full benefits of the agreement will be reaped only ifboth sides take concrete steps to ensure that sufficient regulatoryresources are made available to the regulators charged withimplementing the agreement in practice
44 Case Study Data Privacy and the Safe Harbour Agreement5 5
Data privacy protection became a transatlantic issue because of thegrowing interdependence of the US and European economies and therising importance of information technology US affiliates in Europeproduce over a trillion dollars of goods and services annuallyconstituting lsquoover half of all the foreign production of US companiesrsquo5 6
These companies depend on information flows not only with thirdparty suppliers customers consultants marketers and other serviceproviders but also internally within their complex networks of
41
affiliates joint ventures and partnerships The EUUS dispute overdata privacy protection and efforts at cooperation demonstrate theinherent interrelation between social regulation and open trade policieswhere regulation (or the lack thereof) has external effects Alleged USunder-regulation can jeopardize the privacy interests of EU residentsAlleged EU over-regulation can limit the commercial operations of USenterprises In an interdependent transatlantic economy US and EUauthorities attempt to manage the ensuing conflicts of norms andmesh where possible their divergent regulatory systems
On October 24 1998 Directive 9546EC on the Protection ofIndividuals with Regard to the Processing of Personal Data and theFree Movement of Such Data became effective The EU through itsDirective takes primarily a regulatory approach to data privacyprotection as opposed to private ordering through market processesExcept for public security criminal law and related exceptions theDirective covers all processing of all personal data by whatever meansand is not limited to action by government business sector or field ofuse (arts 2-3) The Directive prohibits data controllers from processinginformation unless the individual lsquounambiguouslyrsquo consents to theprocessing and that consent is informed (arts 7 8 10 14) TheDirective provides multiple means for enforcement It requires memberstates to grant individuals a permanent right of access to obtain copiesof the data about them and have it corrected or its use enjoined (arts12 28) It obliges member states to provide a judicial remedy forinfringements of data privacy rights including the right to receivedamages (arts 22-24) To support effective enforcement each memberstate must designate an independent public authority lsquoresponsible formonitoring the application within its territoryrsquo of the Directiversquosprovisions (art 28) These supervisory authorities are to be grantedsignificant powers (arts 18 28)5 7
In contrast the United States has stressed lsquoself-regulationrsquo by theprivate sector backed by regulation which tends to be sector-specificand less stringent Congressrsquos targeting of specific sectors andconcerns is reflected in the following statutory titles The DriverrsquosPrivacy Protection Act of 1994 the Video Privacy Protection Act of1988 The Electronic Communications Privacy Act of 1986 the CableCommunications Policy Act of 1984 and The Fair Credit Reporting Actof 1971 Overall the US approach is fragmented involving standard-setting and enforcement by a wide variety of actors including federaland state legislatures agencies and courts industry associationsindividual companies and market forces US legislation providescitizens with significantly greater protection against the collection anduse of personal information by government in particular the federalgovernment than by the private sector
Article 25 of the EU Directive provides that member states shallprohibit all data transfers to a third country if the Commission finds
42
that the country does not ensure lsquoan adequate level of protectionrsquo ofdata privacy Since it appeared that the United States might notprovide for lsquoadequatersquo data privacy protection under the Directiversquoscriteria US and EU authorities engaged in intensive negotiations toavoid a ban on data flows to the United States culminating in theiragreement on Safe Harbour Principles in March 20005 8 Under theagreement EU member states now must recognize that US firmsrsquoadherence to these Principles is sufficient to protect them frommember state challenge Member state authorities however may stillchallenge transfers to firms that do not adopt and comply with thePrinciples
The guidelines set forth seven core data privacy principles for industryto follow which respectively cover the following issues Notice ChoiceOnward Transfer Security Data Integrity Access and EnforcementThe parties supplemented the Principles with a document entitledlsquoFrequently Asked Questionsrsquo (FAQs) designed to guide firms andauthorities in the Principlesrsquo application Many of the FAQs specify thescope of exceptions thereby providing some leeway to US firms
Companies join the Safe Harbour program by annually certifying to theUS Department of Commerce that they will comply with the PrinciplesThe Department of Commerce then places the companyrsquos name on itsweb site list of certifying firms Self-regulatory organizations (such asBBB Online and TRUSTe) backed by the US Federal TradeCommission offer the primary means for the Principlesrsquo enforcementIn this way the Principlesrsquo application resembles the EUrsquos new andglobal approaches to internal market harmonization5 9 As under thenew approach the Safe Harbour Principles set forth lsquoessentialrequirementsrsquo that firms must meet As under the global approachfirms self-certify their adherence which certification is backed first byaudits from self-regulatory organizations and then (ultimately) by theauthority of the state As of February 23 2002 156 companies hadcertified their adherence to the Principles
The Directive also provides other ways to comply with it in particularthrough obtaining lsquounambiguousrsquo consent from the lsquodata subjectrsquo inEurope (art 7) and the signature of a lsquomodel contractrsquo with data privacyauthorities in member states (Article 26) In January 2002 theCommission approved standard contract clauses covering privacyprotection that can be applied to all data transfers from the EUregardless of a firmrsquos adherence to the Safe Harbour Principles Firmsalso can sign ad hoc contracts with individual member state dataprivacy authorities In addition firms can sign contracts with affiliateswhen transferring personal information such as information containedin personnel files
The Safe Harbour Principles are still at an inchoate stage so that itremains too early to assess their impact Some commentators have
43
questioned the effectiveness of the Principles given that relatively fewUS companies have signed them However some practitioners pointout that companies will not certify their procedures until theiroperations are in compliance6 0 For large companies this allegedly caninvolve considerable re-engineering of their information systemscreation of new internal policies and training of personnel
Nonetheless companies engaged in transatlantic business operate inthe shadow of the Directiversquos potential enforcement Under theDirective US businesses face potential litigation before Europeancourts and administrative bodies unless they adhere to the SafeHarbour Principles Even though privacy advocates have criticized theSafe Harbour Principles the agreement represents a potentially usefultool for such advocates In addition the agreement has increased thedemand for legal consulting and other privacy services within theUnited States For example the Better Business Bureau OnLinecreated a privacy seal program which incorporates the Safe HarbourPrinciples and the Electronic Frontier Foundation a public interestorganization has associated with information technology companies tolaunch a program named TRUSTe to rate the privacy protection ofInternet sites which program also is certified under Safe Harbour
In a world of increased economic interdependence the Safe HarbourPrinciples point to the importance of regulatory cooperation acrossborders involving public and private actors Certification groups suchas BBB OnLine meet with European data protection officials so thatthey become comfortable in the workings of an alternative USapproach Government officials including in Europe realize that theydo not have the resources to enforce the Directiversquos provisions solelyon their own and thus rely on public-private networks in an attemptto ensure better global practices affecting EU constituentsNonetheless to make the Principles work will require sustained cross-border cooperation
45 The Challenge of Transatlantic Regulatory Cooperation
Although brief and selective this review of cooperation across threesectors suggests several tentative conclusions about both the benefitsand the potential obstacles to transatlantic regulatory cooperation
With regard to the potential benefits of transatlantic regulatorycooperation we have identified two First as we have seen regulatorycooperation has the potential to enhance the efficiency of regulationthrough the exchange of information and best practice the provision ofearly warning of potential disputes the avoidance or management ofconflicting regulatory decisions and the gradual building of mutualtrust among regulators Second regulatory cooperation can facilitatetransatlantic trade and investment by removing duplicative regulatory
44
requirements and other non-tariff barriers within the transatlanticmarketplace Such cooperation moreover need not involve thecomplete harmonization or convergence of EU and US regulationsalthough there is some preliminary evidence of convergence in specificissue-areas including the acceptance by the United States of a mutualrecognition scheme similar to that long practiced in the EuropeanUnion and the EUrsquos active discussion of moving from its currentlsquodominance testrsquo to a possible new standard for regulatory mergerscloser to that employed by competition authorities in the UnitedStates
Yet despite the obvious promise of transatlantic regulatorycooperation a broad survey of EUUS cooperation in various areasincluding the three case studies analyzed above points to a number ofpotential obstacles to successful transatlantic regulatory cooperation
bull Regulatory Independence In a number of areas US regulatorsenjoy greater regulatory independence than their Europeancounterparts and may resist what they perceive to be an effort tocompromise domestic regulatory standards and processes in theinterests of international trade The result in some cases is that theUSTR and other central agencies of the federal governmentencounter difficulty guaranteeing compliance with regulatoryagreements by specific regulatory agencies such as the FDA andOSHA if and insofar as these agencies believe that implementationof those agreements would compromise established US regulatorystandards and procedures
bull Transparency and Administrative Law Requirements Across awide range of issue-areas US regulators express concern about thedifferent administrative-law requirements for regulators in the USand the European Union most notably in the area of transparencyIn the United States regulators are required to adhere to thelsquonotice-and-commentrsquo rulemaking procedures of the AdministrativeProcedure Act which requires agencies to provide public notice ofproposed regulations in the Federal Register allow individuals tosubmit comments prior to the final adoption of new rules and keepa public record of the regulatory process The EU rulemakingprocedure although typically characterized by widespreadconsultation of interested parties does not incorporate thesefeatures
bull Confidential Information T h e need to pr o tect con f id e n tia lin f or m a ti on of fir m s an d ot h er pr iva te pa r tie s also pla ce s lim i ts on th ea b i lity of both sid es to co op er a t e in th e ad o p tion an d im p lem en ta tion of reg ula tion s pa r ti cula r l y in th e en f or cem e n t of US an d EU com p etiti on la w s reg a r d in g ca r tel s an d con cen tr a tio n s wh er e fi r m sh a v e been mor e reluct a n t to ag r ee to th e sh a r in g of con f i d en tia lin f or m a ti on th a n in th e ar e a of mer g er con tr o l revi ew ed ab ove
45
bull Multi-Level Governance The United States and the EuropeanUnion are both federal or quasi-federal governance systems withregulatory powers divided in most sectors between the federalEUlevel on the one hand and individual statesmember states or evenlocal governments on the other In terms of regulatory cooperationthis division of regulatory powers means that US executive-branchnegotiators and EU Commission officials are frequently chargedwith negotiating regulatory agreements in areas where the statesretain at least partial regulatory competence and to charges fromboth sides that their counterparts are unable to lsquodeliver the statesrsquoExamples of such state regulatory powers on the US side includethe regulation of insurance and other services as well as publicprocurement where the EU has insisted that the participation ofindividual states is vital to the enforcement of regulatoryagreements6 1 Similar problems afflict the EU side whereCommission efforts to engage in regulatory cooperation may befrustrated by resistance among individual member states as in thecase of GMOs or by the slow adoption of EU-level regulations as inthe case of financial services
bull Regulatory Sovereignty Ultimately the adoption of the broadregulatory frameworks for economic activity consumer andenvironmental protection and other areas is entrusted on bothsides of the Atlantic to democratically accountable bodies such asthe Congress and President in the US and the Council of Ministersand European Parliament in the European Union Within theEuropean Union the harmonization and mutual recognition ofnational regulations has been accomplished in large part through adeliberate transfer of regulatory sovereignty to the European level(as in EU merger control) through the pooling of regulatorysovereignty in the Council of Ministers and the EuropeanParliament (as in data privacy and food safety) and through themutual recognition of standards as enforced by the European Courtof Justice To date however the European Union and the UnitedStates have proven unwilling to compromise their regulatorysovereignty in the various agreements reviewed above indeed eventhe most successful experiment in transatlantic regulatorycooperation that in competition policy is predicated explicitly oneach sidersquos ability to cooperate without any substantial change to itsdomestic regulatory objectives and procedures
The existence of these various obstacles does not of course mean thattransatlantic regulatory cooperation is doomed to failure Some areaslike competition policy are subject to relatively few obstacles tosuccessful cooperation while others such as food safety encountermultiple obstacles Even in difficult areas like food safety moreoverregular exchange of information has proven useful in allowingregulators on each side to understand each otherrsquos regulatoryphilosophies and procedures and gradually to build up the trust
46
among regulators that will be required for the successful operation offuture efforts at mutual recognition or harmonization of regulations
As a first step in this direction the European Union and the UnitedStates agreed in April 2002 to the adoption of a set of non-bindinglsquoEUUS Guidelines on Regulatory Cooperation and TransparencyrsquoAlthough this joint statement of principles does not bind either the USor the EU to any specific regulatory measures and explicitly excludesthe sensitive area of agriculture the agreement does call forregularized exchange of information between EU and US regulatorsand for consideration of harmonization or mutual recognition ofstandards lsquoas may be appropriate in specific casesrsquo to minimizeunnecessary technical barriers to trade In addition the documentsuggests that both EU and US regulators should apply potentially far-reaching principles of transparency in rule-making including publicnotification of and comment on proposed regulations Theimplementation of the guidelines is to be reviewed on an ongoing basisby the TEPTBT Working Group6 2
The significance of the new EUUS Guidelines will depend on theirimplementation in practice across an array of issue-areas in themonths and years to come Regardless of the success of this specificendeavor however regulatory cooperation remains an importantpriority for the European Union and the United States in achievingtheir respective regulatory aims while also preventing and resolvingpotential trade disputes For this reason the conclusion to this reportsuggests a careful and systematic study of current attempts atregulatory cooperation across issue-areas identifying key obstaclesand lsquobest practicersquo at overcoming those obstacles would represent asubstantial contribution to future efforts in this area
47
ndash 5 ndashThe European Union and the Americas
EUUS economic relations do not take place in a vacuum As wehave seen transatlantic efforts at trade liberalization regulatorycooperation and dispute resolution are nested within and frequentlymake explicit use of the rules-based multilateral trading system of theWorld Trade Organization the next round of which both the UnitedStates and the European Union have identified as a priority in thecoming years
Just as importantly the story of the EUrsquos ever-closer economicrelationship with the United States coincides with a second majordevelopment namely the rapid increase of EU trade with the countriesof North and South America Prior to the 1990s the United States wasthe most important trading partner and the largest source of foreigndirect investment in Canada Mexico and throughout most of LatinAmerica and this important role for the US has been further enhancedby the adoption and implementation of the North American Free TradeAgreement (NAFTA) with Mexico and Canada as well the earlynegotiations regarding the possible creation of a multilateral FreeTrade Area of the Americas During the course of the 1990s howeverthe European Union has developed an increasingly close andinstitutionalized relationship with Canada Mexico the Mercosurcustoms union and other countries of Central and South Americawhere it now rivals the economic importance of the United States
In institutional terms the EUUS relationship finds its closestcounterpart in the Unionrsquos bilateral relationship with Canadamdashthisdespite an EUCanada economic relationship that is dwarfed by eachsidersquos economic relationship with the US In economic terms theEUCanada relationship is substantially less important than Canadarsquosbilateral relationship with the United States which is far and awayCanadarsquos largest trading partner taking some 87 of total Canadianexports The integration of Canadarsquos economy with that of other Northand South American states moreover has increased in recent yearswith the implementation of NAFTA and a free trade agreement withChile Nevertheless the European Union ranks as Canadarsquos second-largest trading partner after the United States while Canada accountsfor approximately 17 of EU imports and 22 of total EU exports Asin the EUUS relationship moreover foreign direct investment has
48
outpaced trade as a source of interdependence in the EUCanadarelationship with Canada holding 32 of all FDI in the Union whilethe EU is the second largest investor in Canada after the US holdingsome 8 of all foreign direct investment in Canada6 3
Institutionally the EUCanada relationship is structured by a series ofbilateral agreements including the 1990 Declaration on EuropeanCommunity-Canada Relations and the 1996 Joint Political Declarationon EU-Canada Relations and its accompanying Joint EU-CanadaAction Plan and by a series of regular high-level summits that parallelthose held between the EU and the US The EU and Canada have alsosigned a number of important regulatory cooperation agreements inrecent years including a 1996 customs cooperation agreement a setof Mutual Recognition Agreements agreed in 1998 and agreements onveterinary equivalence and cooperation policy cooperation both signedin 1999 Trade disputes between the EU and Canada are relativelyrare and have generally been dealt with successfully through bilateralconsultation or through the WTO dispute resolution procedure6 4
The Union has come also to play an increasingly important economicrole in Latin America characterized by a sharp increase in both tradeand especially foreign direct investment in the region At the sametime the Union has pursued a wide range of trade and economicagreements with the countries of Latin America including a free tradeagreement with Mexico and other agreements with Mercosur andother Latin American countries In the rest of this section thereforewe examine the EUrsquos economic relationship with the countries of LatinAmerica focusing in turn on the changing patterns of EULatinAmerican trade and investment EU economic agreements with thecountries of the region and the remaining challenges for the EULatinAmerica relationship
51 The EU and Latin America Trade and Investment
The pattern of the trade relationships between the EU and the mainLatin American countries has changed substantially during the lastdecade Although none of them was a major trade partner the largercountries of Latin America already represented an importantproportion of EU exports and imports in 1990 when Mercosur plusMexico and Chile accounted for 43 of extra-EU exports and 32 ofits imports The trade balance was very favourable to the Europeanside with a deficit of over US$8 billion During the 1990s Europeconsolidated its Latin American export markets and increased itsmarket share in Argentina Mexico Chile and especially Brazil In2000 the EU maintained the proportion of its exports towards theanalysed countries while increasing the proportion of imports up to35 The trade balance has improved versus Argentina Mexicoand Brazil whereas the deficit has increased significantly with Chile
49
The total deficit with the countries has now turned into a surplus ofmore than 5 billion
Table 9 EULatin American Trade and Investment(ExportsImports and Foreign Direct Investment as apercentage of total extra-EU flows Trade Balances aremillions of US$)
of EUexports
of EUimports
Trade balance of EUFDI
1990 2000 1990 2000 1990 2000 1999 2000
Argentina 03 08 08 06 -2252 737 54 15
Brazil 25 18 09 17 -5711 -1031 38 53
MERCOSUR 28 25 19 23 -8368 301 92 68
Mexico 11 15 07 07 1231 6973 06 08
Chile 03 04 06 05 -1336 -1653 19 ---
Note figures with an asterisk correspond to year 1999Source European Commission DG-Trade
Moving from Latin America as a whole to individual countries andgroupings we come first to the Mercosur countries (Argentina BrazilParaguay and Uruguay) which created a customs union in 1994 andhave since increased partly thanks to their own process of economicintegration their openness towards the rest of the world6 5 The twosmallest countries are considerably more open (a tradeGDP ratio of70 in Paraguay and 33 in Uruguay in 1999) whereas thisproportion is 19 in Argentina and 15 in Brazil6 6 Although intra-area trade accounts for 20 of their total flows trade with NAFTA andthe EU has also increased during the nineties The financial crises ofthe end of the decade have especially since 1998 temporally put ahalt in the process and affected their external demand By 2000 theEU as a bloc had overtaken the United States as Mercosurrsquos singlelargest trade partner representing 30 of their exports and 35 oftheir imports
The EU and Mercosur can be considered complementary economicblocs in both agricultural and industrial products The EU is the mainexport market for Mercosur agriculture with a 40 share (the USrepresents only 9) More precisely 50 of Mercosur exports towardsthe EU are agricultural products and are concentrated in a smallrange of products such as oilseeds (particularly soy) and animal feedproducts We should also mention coffee (10 of EU imports fromMercosur) livestock and meat and derivatives fruit and derivativestobacco and fish products In contrast EU exports of agricultural
50
products to Mercosur are modest (approximately 6 of total) and areconcentrated in three groups of products alcoholic beverages dairyproducts and other edible animal products and cocoa derivatives Thetrade balance is negative for the EU in agricultural products althoughthe opposite happens in the case of industrial goods The EU is themain supplier of industrial and capital goods to the area includingmost importantly automobiles machinery and mechanical appliancesand a third group of products from the electrical industry (mainlyradiotelephony appliances and parts)
Economic relations between Argentina and the EU developed verypositively since the signature in 1990 of the ECArgentina frameworkagreement on trade and economic co-operation During the 1990sArgentina advanced towards being an open market economy and optedfor an outward-looking external policy where Mercosur and the EUplayed a key role The EU is Argentinarsquos second largest trading partner(after Brazil) overall trade with the EU has more than doubled duringthe last 10 years and represents around 25 of total trade Howeverthe crisis that started at the end of last decade has interrupted thispositive trend The main components of EU imports are agriculturalproducts and raw materials while EU exports to Argentina concentrateon machinery and transport equipment chemicals and manufacturedgoods
Brazil is the largest Latin American economy its GDP accounting for35 of the area or 65 of Mercosur Brazilrsquos domestic market with apopulation over 160 million people constitutes a potentially attractivedestination for both US and EU exports Brazil also signed a co-operation agreement in 1995 with the EU which is now its maintrading partner destination of 268 of its exports and origin of 252of its imports although the US follows very closely (243 and 233respectively) Although during the last years the EU has progressivelyreduced its share of the Brazilian market in favour of the US Brazilremains the EUrsquos main trade partner in Latin America Like Argentinathe process of opening to international competition started between1990 and 1993 As a result Brazilrsquos trade surpluses of the 1990squickly turned into substantial deficits later in the decade only slowlycorrected after the 1999 devaluation The main components of EUimports (1999 data) were vegetable products prepared foodstuffsmineral products transportation equipment wood and wood pulpproducts and machinery and mechanical appliances the latter alsoimportant in EU exports together with transportation equipmentchemical products base metals plastics and rubber
Mexico is the tenth-largest world economy and the most importantLatin-American exporter its total exports amounting to US$166 billionin 2000 In order to qualify its relative size it should be compared withBrazil the second larger exporter in the region (and ninth worldeconomy in terms of GDP) which exported only US$55 billion Mexico
51
is traditionally one of the EUrsquos most important trade partners in LatinAmerica sharing with Brazil its high potential for growth as an exportmarket Mexico has also followed a process of opening to internationalcompetition during the end of the eighties and all the nineties first byunilateral tariff reductions then by subscribing to ten free tradeagreements with the majority of the Latin American countries or areasCanada and the US (creating NAFTA) and in Europe with the EFTAand the EU
During the period 1994-2000 Mexican exports to the US increased240 while their composition has substantially diversified Oil-relatedexports represented only 98 of the total in 2000 compared to 248in 1990 Agricultural products did not account for more than 25 andthe rest of the exports were manufactured goods In contrast 75 ofMexicorsquos imports are intermediate goods 134 capital goods and theproportion of consumption goods is only 117 The EU is Mexicorsquossecond trading partner after the US although the data reveals theoverwhelming dependence of Mexico on the US economy 887 of itsexports are directed to the US and 73 of its imports come from it Inthe EU Germany and Spain represent Mexicorsquos largest export marketswith 09 each Germany is the main European supplier representinga 33 of Mexicorsquos imports As mentioned above Mexicorsquos tradebalance with the EU is highly deficitary
Chile is considered the most open stable and liberalized economy inLatin America Despite its relatively modest size Chile is an importanttrading nation due to its high tradeGDP ratio (over 40) Chile is thefifth Latin American exporter (US$182 billion in 2000) withagriculture and fishery accounting for 10 of the total and the other90 distributed between mining (449 ) and industry (442) Incontrast Chilersquos imports are concentrated in the industrial sector(77) with mining (135) and agriculture (22) lagging far behindIt should be stressed that Chilean trade is globally balanced andexhibits important surpluses with the European Union and Asia Incontrast Chile cumulates its largest deficit with Argentina its main oilsupplier
The EU is Chilersquos main trading partner taking in approximately 25 ofthe countries imports during 20016 7 Among the EU countries theUnited Kingdom and Italy accumulate 34 of Chilersquos trade each andFrance 3 Chile is not only a market for EU exporters of goods andservices but also an important source of imports both in agriculturaland industrial goods The main components of EU imports from Chileare manufactured goods raw materials agricultural products andbeverages and tobacco EU exports of goods are concentrated inmachinery and transport equipment chemical products andmanufactured goods
52
Latin America in general and particularly Mercosur has been involvedin the general trend that directed large capital flows towards emergingand developing economies In 1990 only 16 of overall foreign directinvestment was received by developing countries whereas in 2000 thisproportion had reached 37 Latin America and the Caribbeanreceived around 11 of these flows during the period 1995-99 Brazilreceived one third of the investment in the area whereas Argentinaand Chilersquos proportions were 16 and 8 respectively thanks to theacquisitions of domestic firms by the Spanish companies Repsol andEndesa However due to its instability Argentina has experienced asignificant reduction in foreign investment since 2000 Mexico is thesecond destination of FDI in Latin America (17 during the periodabove mentioned) and in contrast with other countries such asArgentina these flows exhibit a very stable behaviour
Although Mexico followed a process of capital movements liberalizationsimilar to the experiences of Brazil and Argentina a factor behind thestability of these movements is related to its process of regionalintegration with North America Many multinational enterprises haveinvested in Mexico as a platform to produce manufactured goodsdirected towards the US and Canadian markets As an examplebetween 1995 and 2000 more than 60 of cumulated FDI went to themanufacturing sector and 65 had its origin in the US Theseinvestment flows have contributed to the modernization of theindustrial sector and to a significant improvement in Mexicorsquoscompetitive position in the automobile electronic and textileindustries which can help to explain the excellent export performanceof this country in recent years Finally in 2000 the banking sector hascumulated 30 of the total flows of FDI received by Mexico whereasservices telecommunications and the oil industry have had a verylimited interest for foreign investors This fact is in contrast with theother large Latin American economies
The majority of the FDI that the Mercosur countries received in thesecond half of the nineties was directed towards the privatization of thepublic firms especially in the area of services (CEPAL 2001) Due tothis process FDI has abandoned its traditional destinations (forexample in 1995 55 of the FDI stock of Brazil was concentrated inmanufacturing) to be employed in mergers and acquisitions mainly inthe service sector According to Tansini and Vera in 1998 and 199978 of these acquisitions were directed towards Argentina and 18had Chile as destination6 8 In 1999 30 of the capital flows receivedby Brazil were absorbed by the privatizations although since then themajority of the resources were devoted to consolidating andrestructuring these firms
The European Unionrsquos share of foreign direct investment inLatin America increased dramatically during the 1990s with netinflows from the EU increasing from US$1077 billion in 1993 to
53
US$17068 billion in 1997 nearly overtaking total inflows to the regionfrom the United States Within Europe moreover there has been ashift in the primary investors in Latin America with Spain inparticular joining the United Kingdom and Germany as the leadingEuropean investors in the region (see Figure 2) During the 1980s theUK produced more than 50 of the cumulated FDI flows in Mercosurplus Chile6 9 followed by Germany (25) In the 1990s by contrastGermany increased its participation to more than 30 whereas Spainmore than doubled its share to 24 Germanyrsquos FDI concentrated inmanufacturing (such as the automobile industry) during the first halfof the decade especially in Argentina and Brazil with their largedomestic markets Since 1995 Spain is the main European investordirecting its interests in the privatization sectors bankingtelecommunications and energy Other EU countries with importantFDI flows in Mercosur and Chile during the nineties have beenthe Netherlands France and Portugal (the latter with Brazil as itsprimary destination) According to the EC Commission the EUrsquos stockof foreign direct investment in 1999 was euro 1 billion in Uruguayeuro 31 billion in Argentina and euro 34 billion in Brazil EU investment inParaguay is virtually non-existent whereas Chile cumulateseuro 104 billion although in this country the US is still the main foreigninvestor
52 EU Trade Agreements with Latin American Countries7 0
The first symbolic push for the intensification of EU relations withLatin America followed the 1969 lsquoDeclaration of Buenos Airesrsquo issuedby the Latin American members of the Special Committee for LatinAmerican Coordination and calling for an institutionalization of theEULatin America political dialogue and closer economic cooperationbetween both regions
Unlike some previous attempts this time the EU responded positivelyand a regular dialogue between the group of Latin Americanambassadors in Brussels (GRULA) and EC representatives wasinitiated The major substantive measure advanced in this dialoguewas the policy developed toward the Caribbean countries which wereincorporated together with other European former colonies in Africaand the Pacific in the so-called ACP Group and were accorded a specialregime as stated in the Lomeacute Convention of 19757 1 Apart from thatthe Communityrsquos official policy during this period was limited tobilateral economic treaties with the major Latin American countries(so-called first generation agreements) such as the non-preferentialtrade agreements with Argentina in 1970 Uruguay in 1973 Brazil in1973 and Mexico in 19757 2
54
Table 10 EULatin American Trade Agreements
Agreement Objectives Year ofentry into
fEUMexico FreeTrade Agreement(EconomicPartnershipPolitical Co-operation and Co-operationAgreement)
Liberalizes over 96 per cent of EU-Mexicotrade by 2007 at the latest fullyliberalizes industrial products by 2003for the EU and 2007 for Mexico withnegotiations on tariff phase-out ofagricultural items deferred until 2003includes rules on intellectual propertyand dispute settlements and providesEU access to the Mexican procurementand services markets similar to NAFTA
2000
CentralAmericaEUFramework Co-operationAgreement andRegionalProgramme for theReconstruction ofCentral America(PRRAC)
The Framework Agreement seeks tostrength the co-operation in theeconomic financial commercial socio-cultural areas and environment Asecond aim is to reinforce the CentralAmerican Integration System ThePPRAC is a specific program for recoveryfrom the effects caused by hurricaneMitch
Both since1999
AndeanCommunityEUCo-operationagreement andGSP
Political aspects anti-drug dialogueCommercial aspects since 1998 theGeneral System of Preferences is appliedunder a new regime As a result 75 ofproducts imported from the AndeanCommunity to the EU are exempt fromcustom duties Framework Co-operationAgreement to promote regionalintegration
1998(politicaldialogueand co-
operation)and 1999
(GSP)
EUChile AssociationAgreement
Governments concluded negotiations inApril 2002 on a wide-ranging AssociationAgreement including the creation of a free-trade area in goods and services anagreement on wines and spirits andprovisions on public procurementinvestment competition and intellectualproperty
Awaitingratificationby the EUand Chile
MercosurEuropeanUnion
Framework agreement came into force in1999 Negotiations on an interregionalfree-trade agreement began in 1999 andare ongoing
Frameworkagreementsince 1999Free-tradeagreementexpected in
2005
Source Flocircres (2001) DG Trade (European Commission) and Camarero andTamarit (2002)
55
Figure 2 EU Foreign Direct Investment in MERCOSUR + Chile(Cumulated flows Country shares EU = 100)
Source OECD International Direct Investment Statistics YearbookNote For clarity some EU countries with smaller investment shares in MERCOSURhave been excluded
From the mid-1970s to mid-1980s the official policy of the EC towardsLatin America was based mainly on the Inter-Parliamentary Dialoguebetween the European Parliament and Latin Americanparliamentarians and on bilateral economic treaties With regard tothe latter a new round of lsquosecond-generationrsquo agreements was signedbetween 1980 and 1985 with individual countries such as Argentina in1980 Uruguay in 1980 and Brazil in 1982 and with sub-regionssuch as the Andean Pact (created in 1969 between VenezuelaColombia Equator Peru and Bolivia) in 1983 and the CentralAmerican Common Market in 1986 7 3
From the mid-1980s onward Latin America became the focus of moresubstantial political and economic policies from the EU On thepolitical side a variety of multilateral fora have been set up The SanJoseacute Group was launched in Costa Rica in 1984 with the aim ofsupporting progress in the peace process and democracy in CentralAmerica From that date annual meetings have been organizedextending their aims to other fields like the rule of law and humanrights the fight against the trafficking of drugs and educationaltechnical and cultural co-operation The Rio Group was established in1986 again meeting on an annual basis with a membership includingall the South American countries as well as Mexico Finally twosummit meetingsmdashthe first in Rio de Janeiro in June 1999 and a
0
10
20
30
40
50
60
1980-90
1991-98
56
second held under the Spanish EU Presidency in Madrid in May2002mdashbrought together the leaders of 48 countries from the EU andLatin America The first summit in Rio agreed upon an Action Plan toincrease co-operation in the political and cultural spheres and calledfor negotiation of association agreements with Chile and Mercosurwhile the Madrid summit further developed political cooperation andconfirmed the conclusion of a bilateral EUChile AssociationAgreement7 4
The 1990s and early 2000s finally have witnessed the conclusion bythe EU of a round of so-called lsquothird-generationrsquo treaties between theEU and various Latin American countries and trade blocs The primaryagreements in force or under negotiation between the Union and thecountries of Latin America are summarized in Table 10 In all thecases the nature of these agreements is twofold encompassingpolitical agreements on questions such as democracy the environmentand human rights and as well as economic agreements regarding theliberalization of trade and investment
521 The EUMexico Free Trade Agreement
Since 1975 the EU has signed several agreements with MexicoAlthough these agreements were not significantly different from othersalready in force with other countries in the same geographic areaMexico had always received a particular treatment Thus in the 70sMexico benefited from the treatment of most favoured nationneglecting the fact that this country was not a member of the GATT atthat time Later Mexico was eligible under the GSP scheme benefitingfrom this treatment until 1995 when this system was revisited andMexico lost much of its preferential access to the EU marketNegotiations aiming at the establishment of an FTA with the EUstarted during the same year The primary reason was the concern inthe EU about possible trade diversion due to the Mexican entry intoNAFTA in 1994 A general agreement removing trade barriers betweenthe EU and Mexico would minimize any trade diversion effect
Although the most important part of the agreement is the creation of afree trade area between the EU and Mexico the so-called GlobalAgreement includes a rather wide package institutionalising a regularpolitical dialogue and extending the bilateral co-operation Thisagreement places the EU in a better position to compete for access tothe Mexican market In 2007 all industrial goods will be free of tariffsMoreover in trade volume 52 of EC exports will enter the Mexicanmarket duty free by 2003 and for the remaining 48 a maximum dutyof 5 will be applied This extremely quick dismantling calendar willplace economic operators on both sides on an equal footing with otherpreferential partners in real time Concerning agricultural and fisheriesproducts some European special sensitivities are respected allowingat the same time for preferential access to European and Mexican
57
exporters into their respective markets The agreement also includespreferential treatment in services providing service providers from theEU with access to the Mexican market which will be equivalent if notsuperior to that currently enjoyed by operators from Mexicorsquos otherpreferential partners in particular the US and Canada In the servicessector EU banks and insurance companies will be authorized tooperate and establish directly on the Mexican territory Theliberalization of investment and payments related to investments willtake place in 2003 The agreement also provides access to the Mexicanprocurement market similar to NAFTA Finally provisions are madeabout intellectual property competition and dispute settlement
The agreement covers other aspects apart from trade Thus the EUfosters co-operation programmes with Mexico for an annual amount onaverage of euro 13 million during the 1990-99 period There were alsosignificant activities under horizontal programmes such as AL-Invest(Latin American Investment Programmes) and ALFA (Latin AmericanAcademic Formation)
522 Relations with Central America
The most important part of the cooperation between the EU and LatinAmerica and more specifically with Central America has beenimplemented through the so-called cooperation agreements The firstbilateral agreements with individual Central American countries weresigned during the 1970s and early 1980s Later on a second wave ofagreements were adopted covering a wider range of areas topicsbeginning with the First Framework Agreement of Co-operation forCentral America signed in 1985 This agreement belongs to the mostadvanced second-generation type and covers areas such ascommercial promotion and well as agricultural industrial andeconomic co-operation The Second Framework Agreement of Co-operation signed in 1993 is considered as a lsquothird generationrsquo type7 5
This Agreement came into force in 1999 including two novelties apackage of aid for refugees and a programme to support democracyand human rights The previsions of financial technical and economicco-operation aid with these countries from 2000 to 2006 are close toeuro 500 million Furthermore the Commission has decided to participatein the initiative for highly indebted poor countries (HIPC) The eligibleLatin American countries are Honduras and Nicaragua which stand toreceive as much as euro 30 million Additionally the European InvestmentBank has made several loans to the Central American Bank forEconomic Integration (CABEI) in order to support reconstruction in theregion
58
523 Relations with the Andean Community and Chile
The EU has established a complete institutional framework with theAndean Community implementing different instruments in each field(political dialogue trade and co-operation) with a special emphasis onthe question of lsquoanti-drugrsquo measures
Trade relations between the EU and the Andean Community haveincreased 32 over the last nine years currently representing 08 ofthe EUrsquos total trade and 167 of total trade for the AndeanCommunity It is worthwhile to note that 90 of Andean exportsconsist of raw materials or primary production while 85 of the EUrsquosexports are manufactured products From 1999 on the EU hasgranted under the Generalized System of Preferences (GSP)preferential access for all industrial products as well as numerousagricultural products especially for those Andean countries committedto fighting against drug production and trafficking
In the area of political co-operation the Andean region was the first inLatin America to conclude a regional co-operation agreement with theEU The present regional framework agreement was signed in 1993and entered into force in 1998 The amount of the aid to the areareached some euro 6 millionyear for the period 1982-97
Finally the EU has also established several bilateral agreements withChile including the Framework Agreement signed in 1996 andcurrently in force This agreement covers political and economiccooperation and formed the cornerstone for a new EUChileAssociation Agreement the negotiation of which was completed inApril 2002 The agreement which is currently awaiting ratification byboth parties calls for the creation of a free-trade area in goods andservices an agreement on wines and spirits including both market-access questions and the use of protected names a Sanitary andPhytosanitary Agreement new rules on public procurementinvestment competition and intellectual property and a dispute-resolution mechanism7 6
524 The Launching of a Free Trade Area with Mercosur77
The EU is currently the main trade partner of Mercosur The EUgenerally imports agricultural and primary products from Mercosurwhile it exports primarily industrial commodities7 8 The EU has aFramework Agreement of co-operation similar to others with severalcountries or blocs in Latin America In June 2000 negotiations werere-opened aiming at signing a new Inter-regional AssociationAgreement This new agreement would cover not only commercialaspects but also many others like political dialogue or cooperation(social and humanitarian economic and development) between the twoblocs
59
The fifth round of negotiation between the EU and Mercosur took placein July 2001 The main point in this round was the presentation bythe EU of its offer for the reduction of tariff and non-tariff barriers inorder to liberalize trade in goods services and public procurementThese reductions would cover all the industrial products and 90 ofagricultural products over a period of no longer than ten yearsMercosurrsquos answer to that proposal was given during the sixth roundin October 2001 presenting its own offer in terms of tariff and non-tariff reduction and public procurement At the same time there hasbeen an exchange of views on political dialogue as well as someimprovement in the area of technical and scientific co-operationenergy transport telecommunications and information technologyNegotiations continue but conclusion of the agreement is not expecteduntil 2005
53 Challenges for EULatin American Economic Relations
As even this brief survey has made clear the European Union todayplays a substantial economic and political role in Latin America EUtrade with and foreign direct investment in the region have increaseddramatically during the course of the past decade with the EU nowemerging as the most important economic partner for Mercosur inparticular At the same time the EUrsquos political and economicagreements have demonstrated ever-greater ambition and anincreasingly broad economic agenda embracing not only tariff andquota reductions but also provisions on non-tariff barriersinvestment and public procurement as well as political provisionsregarding democracy and human rights
The completion of a more ambitious system of economic agreementswith the Latin American countries remains a goal for both the UnitedStates and the European Union However there are importantqualitative differences between the strategies of the two trade blocswhile the European Union is trying to keep the development of a hub-and-spoke system of bilateral agreements with individual countries or(as in the case of Mercosur) customs unions the United States hasannounced its desire to create a multilateral Free Trade Area of theAmericas The countries of the region for their part havedemonstrated a decades-long commitment to economic liberalizationlocked in place by a series of both multilateral and bilateral tradeagreements amongst themselves as well as with the United States andthe European Union although their commitment to proceeding alongthese lines has been tested by the recent economic crisis in Argentina
The EULatin America summit meeting held in Madrid in May 2002witnessed the conclusion of the EUChile free trade agreement whichis now awaiting ratification by both sides but further negotiations lieahead particularly in the case of the proposed EUMercosur
60
agreement which remains far from a conclusion not expected before2005 In these negotiations the EU should give special attention toexpanding market access for the Mercosur countries especially for so-called lsquosensitive productsrsquo Although the EU has presented itself as achampion of free trade within various multilateral fora it is clear thatthe Union has actively sought to preserve barriers in some industrialsubsectors and especially in the agricultural sector where theCommission has estimated that some 10-12 of all EU imports fromthe Mercosur countries are currently labelled as lsquosensitiversquo7 9 Removalof these barriers would benefit not only Latin American countries butalso European consumers who are currently playing higher prices foran amount equivalent to 5-7 of the Unionrsquos GDP8 0 In addition thenegotiation process should cover not only tariffs (since over 50 of allimports from Mercosur are eligible for an average tariff lower than25) but also other means of market-access protection such as tariffquotas which are applied extensively to agriculture and food productsAdditional areas for negotiation include trade in goods servicesinvestment public procurement intellectual property rights technicalstandards and rules of origin
Finally neither these EULatin American negotiations nor theextensive EUUS cooperation outlined in the previous sections of thisreport should distract the European Union or the United States fromtheir shared priority namely the successful completion of alsquoDevelopment Roundrsquo of multilateral trade talks within the WTODuring his recent trip to Argentina EU Trade Commissioner PascalLamy stressed the importance of ensuring that bilateral and inter-regional trade agreements such as those that the EU has concludedwith the countries of Latin America rest on the multilateral foundationof WTO trade law For this reason he argued bilateral andinterregional negotiations lsquomust not be allowed to detract our attentionfrom the pursuit of the Doha Development Agendarsquo8 1 Such acommitment should remain a central tenet of EU trade policy in theyears to come
61
ConclusionsThe New Transatlantic Economic Agenda
The United States and the European Union have an extraordinarilyclose and important economic relationship the health of which is vitalto the global economy as a whole Both partners stand to gain a greatdeal by making the relationship more productive Both stand to lose ifdisputes cause interruptions and acrimony and if the relationship failsto adapt to new pressures and new challenges
The agenda of transatlantic economic relations has evolved andexpanded to reflect the increasingly integrated nature of thetransatlantic marketplace To be sure traditional trade questionsmdashandtrade tensionsmdashpersist between the European Union and the UnitedStates Despite the generally low level of tariffs between the EU andUS tariff peaks and quotas remain for both sides in a number ofsensitive areas which can and should be subject to further reductionsin the Doha Round of trade liberalization talks within the World TradeOrganization In addition to tariffs and quotas a number of othertraditional trade measuresmdashincluding most notably antidumpingsubsidies and safeguard measuresmdashcontinue to plague thetransatlantic partnership most strikingly in the current dispute overUS safeguard actions in the steel sector Nevertheless while theseriousness of these disputes should not be underestimated themultilateral rules-based trading system of the World TradingOrganization is generally well equipped to address such issues andthe United States and the European Union should continue in theirefforts to use and support the WTO as a forum for both negotiationand dispute resolution
Perhaps the greatest challenge to the transatlantic economicrelationship however is the expansion of the transatlantic economicagenda to encompass domestic regulations that are adopted forlegitimate purposes but act in practice as non-tariff barriers to tradefragmenting the transatlantic market and in some cases leading tobitter and intractable trade disputes As we have seen these types ofdisputes also create enormous legal and political challenges to thedispute settlement procedure of the WTO where judgments in areassuch as the beef hormones and Irish music disputes have createdpolitical controversy without (at this writing) securing full compliancefrom the states concerned
62
For these reasons any attempt to deepen transatlantic economicintegration between the United States and the European Union mustaddress not only tariffs quotas and similar disputes about subsidiesantidumping actions and safeguard measures but also the new-styleregulatory disputes that are likely to become the most importantbarriers in the transatlantic marketplace and place the greateststrains on the EUUS relationship and the multilateral WTO systemin the medium- to long-term future
Addressing these challenges in turn will require a careful andextensive study and more comprehensive understanding not only oftraditional trade issues but also and especially the domestic sourcesof transatlantic regulatory disputes existing efforts to resolve suchdisputes and possible new mechanisms for preventing and settlingfuture regulatory disputes between the European Union and theUnited States
Such a study would necessarily be wide-ranging involving not onlyeconomists who would identify the potential benefits of economicliberalization but also political scientists political economists andlegal scholars who would identify the domestic sources oftransatlantic regulatory disputes the possibility of preventing suchdisputes through early warning andor regulatory cooperation and themost promising means of settling disputes either bilaterally ormultilaterally Any such study would therefore have to undertakethree fundamental tasks
1 A comprehensive listing and analysis based on publiclyavailable sources of EU and US regulations capable of restrictingtrade and investment between the European Union and the UnitedStates
This report has taken a first step towards such an analysis with thecompilation of regulatory barriers identified by the United States andthe EU in their respective trade barriers reports for 2001 (see Appendix1) but further research is required to identify both the sources and theseriousness of problematic regulations
bull In terms of sources a useful first step would be to identify whetherthe regulations in question were adopted by the local state orfederal (EU) levels of government and whether they were adoptedthrough legislation or by regulatory authorities
bull In terms of seriousness a preliminary effort should be made toidentify the economic impact of the regulations in question ontransatlantic trade and investment Such an analysis could draw onthe research done by the US and the EU as well as on the periodicreports of the World Trade Organization and the Transatlantic
63
Business Dialogue but should be conducted by independenteconomists it is to be accepted as authoritative by both parties
In addition an effort should be made by scholars and practitioners onboth sides of the Atlantic to identify new challenges to the relationshipparticularly those arising from the application of new technologiessuch as electronic commerce and biotechnology
2 A comprehensive survey and analysis of transatlanticregulatory cooperation including areas of informal cooperationamong regulators as well as areas of formal agreement
Section 4 of this report identified regulatory cooperation as aparticularly promising means of preventing as well as settlingtransatlantic regulatory disputes yet it also identified a number ofpolitical legal and institutional barriers which can hindermdashand havehinderedmdashcooperation across a range of issue-areas Given therecognized promise of regulatory cooperation among EU and USauthorities as a means of realizing our joint regulatory aims andavoiding future regulatory disputes more detailed studies oftransatlantic regulatory cooperation are vital in order to identifybarriers to regulatory cooperation as well as instances of lsquobest practicersquoin overcoming those barriers
3 A systematic analysis of various means of bilateral andmultilateral dispute resolution with particular emphasis on thespecific challenges of transatlantic regulatory disputes
Finally while emphasis can and should be placed on prevention ratherthan settlement of transatlantic disputes future studies should focuson new and innovative means of dispute settlement in regulatorydisputes given the acknowledged difficulties of litigating regulatorydisputes before the WTO Dispute Settlement Body At the domesticlevel the prospects for the adoption of lsquotrade impact assessmentsrsquo aswell as a more general move toward transparent regulatory procedureson both sides of the Atlantic should be examined At the bilaterallevel special attention should be directed toward the possibleexpansion of early warning as well as the possible use of bilateralarbitration and mediation outside the WTO At the multilateral levelfinally the EU and US should jointly examine the possible revision ofWTO rules to clarify the use of the precautionary principle and toconsider possible amendments to the WTO Dispute SettlementUnderstanding to be undertaken in May 2003
Appendix 1 EU-US Barriers to Trade in Goods Services and Foreign Investment
Type ofmeasure EU concerns about US rules US concerns about EU rules
Tariffs Tariff peaks Food products Textiles Footwear Leathergoods Jewelry Ceramics and glass Trucks Railway carsOptical fibers Tubes for computer monitorsSANCTIONS IN RETALIATION FOR THE EU BAN ON HORMONE-TREATED BEEFTariff quotas dairy products tobacco
BANANAS (tariff quota + discriminatorylicensing) (settled)CUMULATIVE RECOVERY SYSTEM (brown rice)ADMINISTRATION OF CUSTOMS DUTIES FOR RICE(B) (agreement 1101)
Trade defenceinstruments
1916 ANTIDUMPING ACTSAFEGUARD MEASURES ON STEEL WIRE ROD (32000)SAFEGUARD MEASURES ON WELDED STEEL PIPE (32000)BYRD AMENDMENT (ANTI-DUMPING DUTIES GO TO INJUREDINDUSTRY)FAILURE TO LIFT COUNTERVAILING DUTIES AFTER SUNSET REVIEWSQUOTA ON THE IMPORT OF WHEAT GLUTEN (WITHDRAWN 62001)METHODOLOGY OF COUNTERVAILING DUTIES WITH RESPECT TOBRITISH STEEL ANTI-DUMPING DUTIES ON SEAMLESS PIPE
Othercustomsbarriers
Excessive invoicing requirementsEU not recognized as a country of originTEXTILES amp LEATHER CUSTOMS FORMALITIES amp RULES OF ORIGINTuna (certification of origin)
Other leviesand charges
Customs fees (eg Merchandise Processing Fee)HARBOUR MAINTENANCE TAX and Harbour Services Fee50 tax on imported equipment for boats Taxes that falldisproportionately on European automakersbull Luxury tax (70)bull Gas Guzzler tax (85)bull CAFEacute penalties (~100)
65
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade
SHRIMP-TURTLE ndash to import shrimp countries must be certifiedas matching US efforts to protect sea turtles (EU third party)Tuna-dolphin ndash to import tuna countries must be approvedby the National Marine Fisheries ServiceGeneral prohibition on the importation of dairy productsmade from unpasturized milkEffective prohibition on the importation of yogurtMilk protein for yogurt must come from approved diariesDivergence from international standardsReliance on third-party conformity assessment (eg reelectrical equipment and domestic appliances)US and Canadian content labeling of carsApproval slower than for US-produced drugsOver-the-counter drug approval requires US market historyExtensive product description (textiles amp leather)Citrus fruits must be landed at North Atlantic portsRules on all imports of ruminant animals and animalproducts from all EU countries because of BSEBan on some uncooked meat productsStrict condition on imports of egg products (continuousinspection of production process)Low acid canned food (eg fish and dairy products) subject todetailed prior approval systemPre-clearance inspection of apples and pears from somemember states for pestsProhibition on imports of all animals and products from amember state where a disease exists (not just region wherefound)Approval of wine labels
HORMONE-TREATED BEEFLack of national treatment with respect toGEOGRAPHICAL INDICATIONS for agriculturalproducts and foodPoultry treated with chlorinated waterEffective moratorium on approval of GMproducts since 498Mandatory labeling of all foods containingmore than 1 GM ingredientsStringent certification of non-hormone-treated beef (new US program seemsadequate)Food feed and fertilizer containing specifiedrisk materials (narrower product range thanprevious rule)Treatment and traceability of raw materialsfor production of gelatine for humanconsumption (agreement near on healthcertificate that would enable US exports toresume)EU approval of 3rd country establishmentsexporting animal products (esp dairy)Derogation from EU standards required forUS wine (on-going negotiations to try toresolve)Heat or pressure treatment of softwoodpacking material (new EU rule similar todraft international standard)Metric-only labeling (implementation delayedto 2009)
66
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade(continued)
Excessive post-entry quarantine of hardy nursery stocksExporters of meat or meat products to the US may notprocess meat from countries that are not recognized as freefrom diseases of concern to the US
Slow and arbitrary new aircraft certificationHushkits (dispute brought to ICAO work onan ICAO standard)Labeling of TSP (fertilizer) disadvantages USexportsRestrictive limits on low frequency emissionsfrom electrical and electronic equipment
Regulatorybarriers totrade (USstate and EUmember statelevel)
Duplicate approval of wine labelsState-level safety certification and environmental protectionrequirements (especially of agricultural and food products)Ban on fuel additive MTBE (CA)
Bans on some approved GM products(A I amp L)No approvals for planting certain GMproducts (G P)Unresponsive to requests for field trials ofGM crops (Gr)Ban on GM in animal feed adopted (It) - notin forceHCFC bans by Sw amp FnAdditional navigation light requirements(Fn) ndash suspendedTesting of wheat leading to virtual ban onimports (transshipment recently permitted)(Gr)Harsh interpretation of EU SPSrequirements caused or threatened to causeproblems for processed meat productspoultry products game meat seafoodanimal feed wood products (It)Qualitative imports standards and high test-ing and registration fees for bull semen (It)
67
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Servicesbarriers
50 tax on all non-emergency repairs to US-owned shipscarried out outside the USBarriers in mobile communications (investment restrictionslengthy procedures)De-facto reciprocity requirements regarding satellite-basedcommunications servicesExclusive digital terrestrial television standard (ATSC ) differentfrom EU (DVB-T)Impractical for foreign securities firms to establish branches inorder to engage in broker-dealer activitiesForeign mutual funds unable to make public offerings becauseof registration conditionsForeign investment is restricted in coastal and domesticshippingPartnership with US entity required for granting of licenses forlandings sub-marine cablesOnly US citizens or corporations organized under US law canoperate or maintain power facilities on Federal landForeign stake in airlines capped at 49 (25 of voting stock)Foreign-built vessels prohibited from engaging in coastwisetrade either directly between or via a foreign port and cannot beregistered for dredging towing or salvage
State-level measures Prohibitions on EU exporters distributing rebottling or retailingtheir own wineSome states require insurance companies to already beestablished in another stateSome states require insurers to buy reinsurance from state-licensed insurance companies
European content requirements for TVbroadcastsAccess to the single aviation marketrestricted to firms majority-owned andcontrolled by EU nationalsBanking insurance and investmentservices rules require reciprocaltreatment by home country (no US firmsadversely affected)
Member state measures Content requirements for radiobroadcasts (Fr)Requirements that cinemas showEuropean films (It Sp)Nationality requirements affecting tovarying degrees the provision of legalservices (A Dk Fn Fr G It)Strict restrictions on advertising byforeign legal consultants (Dk)Nationality requirements affecting tovarying degrees the provision ofaccounting services (A Dk Fr)
68
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Foreigninvestmentbarriers
National security vetting (Exon-Florio Amendment)US subsidiary required to exploit deep-water ports or to fish inUS Exclusive Economic ZoneFishing-vessel-owning entities must be 75 owned andcontrolled by US citizensForeign individuals or foreign-controlled corporations cannotacquire licenses for using nuclear materialsConditional national treatment governs participation ingovernment research programmes (subsidiaries in US allowed toparticipate but eligibility process more cumbersome)
Mirror-image reciprocity applies toinvestments in the extraction ofhydrocarbons (no US firms adverselyaffected)
NotesIncludes measures in effect + those for which implementation has been suspended as a result of agreementDoes not include non-discriminatory measures systemic barriers (such as the presence of monopolies the pricing ofpharmaceuticals or delays and lack of transparency in standard setting) government procurement intellectual propertyprotection subsidies (including FSC) or issues being prosecuted under EU rules
Barriers in small caps are the subject of WTO proceedings (consultations have been requested)
Sources Commission Report on United States Barriers to Trade and Investment 2001 USTR National Trade Estimate ReportForeign Trade Barriers 2001
69
Appendix 2 WTO Cases by the EU against the US (excludes cases as third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS38Cuban Libertyand DemocraticSolidarity Act
Extraterritorial application of the USembargo of trade with Cuba in so far as itrestricts trade between the EU and Cubaor between the EU and the US Thecreation of a right of action in favour ofUS citizens to sue EU persons andcompanies in US courts in order to obtaincompensation for Cuban properties Thedenial of visas and exclusion from the USof persons involved in confiscating ortrafficking in confiscated property
GATT (V XI XIII)
GATS (II III VIXI XVI XVIIAnnex onMovement ofNaturalPersons)
596 1096 Understandingreached (497)
WTDS39Tariff increaseson productsfrom the EU
The measures were taken in response tothe adoption of EU legislation on the useof hormones in livestock farming andseek unilaterally to settle the issuewithout resorting to the mechanisms ofthe WTO
GATT (I II XXIII)
DSU (3 22 23)
496 996 [No report]
WTDS63Anti-dumpingmeasures onimports of solidurea from theformer GermanDemocraticRepublic
By maintaining the order against the fivestates of the former GDR the US hasignored de jure and de facto their fullintegration into the reunified FederalRepublic of Germany and thus theeconomic integration of their companiesinto the German market economy
Anti-Dumping(92 11)
1296 ndash
70
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS85Measuresaffecting textilesand apparelproducts
Changes to rules of origin of textile andapparel products which entered intoforce on 1 July 1996 adversely affectexports of EU fabrics scarves and otherflat textile products which are no longerrecognized as being of EU origin and losethe free access to the US that theyenjoyed before
Textiles (24 4244)
Rules of origin(2)
GATT (III)
TBT (2)
697 ndash Negotiatedsolution (997)
WTDS88Measureaffectinggovernmentprocurement
Massachusetts law regulating statecontracts with companies doing businesswith or in Burma (Myanmar)
GPA (VIIIb XXIII)
697 998 Law overturnedunder US law
WTDS100Measuresaffecting importsof poultryproducts
Ban on imports of poultry and poultryproducts produced in the EU until theUnited States is able to obtain additionalassurances of product safety No groundsgiven
GATT (I III XXI)
SPS (2 3 4 58 Annex C)
TBT (2 5)
897 ndash
WTDS108Tax treatmentfor Foreign SalesCorporation
The FSC scheme provides for anexemption to the general rulesestablished in the US Internal RevenueCode which results in substantial taxsavings for US companies exportingthrough FSCs
Subsidies (3)
Agriculture (8 910)
1197 798 Panel found infavour of the EUEU not considerFSCReplacement Actadequate Panelfound in favourof the EUAppellate Bodyreport check
71
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS118HarbourMaintenance Tax
Ad valorem tax (0125) on allwaterborne imports entering US ports
GATT (I II IIIVIII X)
298 ndash Reform proposed(HarbourServices Fee)but EU stillviews asproblematic
WTDS136Anti-dumpingAct of 1916
The Act imposes penal sanctions againstthe importation of goods and their sale inthe US when the price is lower than inthe country of production or in otherforeign countries where the goods areexported
GATT (III4 VI1and VI2)
WTO (XVI4)
Anti-Dumping(1234 amp 5)
698 1198 Appellate Bodyfound in favourof the EU
Implementationpending
WTDS138Imposition ofcountervailingduties on certainhot-rolled leadand bismuthcarbon steelproductsoriginating in theUK
Methodology relied on the presumption(based mostly on pre-WTO legislation andpractice) that benefits from priorsubsidies pass through without the needto show that a benefit continues to beconferred
Subsidies (11b10 14 194)
698 199 Appellate Bodyupheld Panelreport favouringEU (500)
WTDS151Measuresaffecting textilesand apparelproducts (II)
Same as WTDS85 Same asWTDS85
1198 ndash Negotiatedsolution (997)
72
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS152Sections 301-310 of the TradeAct of 1974
Imposes specific strict time limits withinwhich unilateral determinations must bemade that other WTO Members havefailed to comply with their WTOobligations and trade sanctions must betaken against such WTO Members
DSU (3 21 2223)
WTO (XVI4)
GATT (I II IIIVIII XI)
1198 199 US through aStatement ofAdministrativeActionundertaken toact consistentwith WTOobligationsPanel ruled thatso long asrespectedcompatible(1199)
WTDS160Section 110(5) ofUS CopyrightAct
Section 110(5) of the US Copyright Actpermits under certain conditions theplaying of radio and television music inpublic places without the payment of aroyalty fee
TRIPS (9(1) 13) 199 499 Panel found infavour of the EU(700) EU andUS havenegotiated anarrangement
Implementationpending
73
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS165Import measureson certainproducts fromthe EU
100 tariffs on certain product inretaliation for the EUs failure to bring itsbanana trade regime into compliance withWTO ruling
GATT (I II VIII)
DSU (3 21 2223)
399 599 Appellate Bodyfound in favourof the EU(1200)
US broughtsanctions intoagreement
Sanctionssuspended asresult of 401agreement
WTDS166Safeguardmeasures onimports of wheatgluten from theEU
Methodology not ensure that all injurydue to imports Imports from Canadawere excluded from the investigation
GATT (I XIX)
Agriculture (42)
Safeguard (214 5 8 12)
399 699 Appellate Body(1200) found infavour of the EU
WTDS176Section 211OmnibusAppropriationsAct
Section 211 provides that the registrationor renewal in the US of a trademarkpreviously abandoned by a trademarkowner whose business and assets havebeen confiscated under Cuban law is nolonger permitted without consent ofprevious owner No US court shallrecognize or enforce such rights
TRIPS (2 15 1641 42 62)
799 600 Appellate Bodyfound in favourof the EU (102)
74
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS186Section 337 ofthe Tariff Act of1930 andamendmentsthereto
Under Section 337 the US caninvestigate whether imported goodsinfringe US intellectual property rightsand can exclude them from entry into theUS Despite amendment the EUconsiders that the procedures andremedies are substantially different fromprocedures concerning domestic goodsand discriminate against Europeanindustries and goods
GATT (III)
TRIPS (2 3 927 41 42 4950 51)
100 ndash
WTDS200Section 306 ofthe Trade Act of1974 andamendmentsthereto(lsquocarouselrsquo)
Section 306 provides for a mandatorymodification (every 6 months) of theproducts subject to sanctions imposedagainst a WTO member which has notcomplied with a WTO panel ruling
DSU (3 21 2223)
GATT (I II XIXXIII)
600 ndash
WTDS212Countervailingmeasuresconcerningcertain productsfrom the EU (14cases)
US application of countervailing dutiesbased on an irrefutable presumption thatnon-recurring subsidies granted to aproducer prior to a change of ownershiplsquopass throughrsquo to the current producerfollowing the change of ownership
SCM (10 19 21) 1100 801 Panelestablished
75
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS213Countervailingduties on certaincorrosion-resistant carbonsteel flatproducts fromGermany
Results of a full sunset review whichmaintains CV duties The original dutywas imposed prior to entry into force ofWTO agreements EU considers that itwould not have been possible to imposethis duty (less than 1) if theinvestigation had been governed by theSCM agreement
SCM (10 11921)
1100 801 Panelestablished
WTDS214Definitivesafeguardmeasures onimports of steelwire rod andcircular weldedcarbon qualityline pipe
EU considers that Sections 201 and 202of the Trade Act of 1974 and Section 311of the NAFTA Implementation Act containprovisions which prevent the US fromrespecting Safeguards Agreement
Safeguards (2 34 5 8 12)
GATT (I XIX)
1100 801 Panelestablished
WTDS217Continueddumping andsubsidy OffsetAct of 2000(ByrdAmendment)
The Act mandates the distribution of theproceeds of duties levied pursuant to aCVD an AD order or a finding under theAntidumping Act of 1921 to the affecteddomestic producers
AD (5 8 18)
SCM (11 1832)
GATT (X)
WTO (XVI)
1200 701 Panelestablished andjoined with panelestablished byCanada andMexico(WTDS234)
76
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS225Anti-dumpingduties onseamless pipefrom Italy
Results of a sunset review which foundthat anti-dumping duties on imports ofseamless line and pressure pipe fromItaly will continue at a rate of 127 EUconsiders this finding is in breach of ADAgreement (duties not lower than 2)
AD (58 111113 17)
GATT (XXII1)
201 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 152027
7
Appendix 3 WTO Cases by the US against the EU and Its Member States(excludes cases as a third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS13Duties onimported grains
Reference price system used to determinethe duties applicable to imports of grainsappear to result in the application ofhigher rates of duties to shipments of USgrains than is permitted under the EUWTO tariff schedule and to discriminateagainst US exports of grains
GATT (I II VIIX)
Agreement onImplementingGATT Article VII(109 11 22Annex I)
795 397 Negotiatedagreement(1195)
Request forpanel withdrawnfollowingimplementation(497)
WTDS26Measuresaffecting meatand meatproducts(Hormones)
EU measures prohibiting the importationof meat and meat products that havebeen treated with growth hormones
GATT (III or XI)
SPS (2 3 5)
TBT (2)
Agriculture (4)
196 496 Appellate Bodyfound in favourof US (298)
Sanctions inplace
78
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS27Import regimefor bananas
EU regime for the importation sale anddistribution of bananas established byCouncil Reg No 40493 and subsequentlegislation regulations and administrativemeasures including those reflecting theprovisions of the Framework Agreementon Bananas which implementsupplement and amend that regime
GATT (I II III XXI XIII)
Licensing (1 3)
Agriculture
TRIMs (2)
GATS (II XVIXVII)
296 496 Appellate Bodyfound in favourof the US andEcuador (997)
Compliancepanel foundrevised EUregime stillincompatible(499)
US Ecuador andEU negotiatedsettlement(401)
WTDS37Portugal ndashPatent protectionunder theIndustrialProperty Act
The term granted existing patents underthe Portuguese Industrial Property Actappears to be inconsistent with Portugalsobligations under the TRIPS Agreement
(GATS (33 6570)
496 Negotiatedsolution (596)
WTDS62Customsclassification ofsome computerequipment
Reclassification of certain LAN adaptercards automatic data processingmachines and units thereof astelecommunications apparatus raised thetariff applied them
GATT (II) 1196 297 Appellate Bodyoverturned Panelreport favouringUS (698)
79
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS67UK ndash Customsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS68Ireland ndashCustomsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS80Belgium ndash-measuresaffectingcommercialtelephonedirectoryservices
Conditions for obtaining a license topublish commercial directories inBelgium
GATS (II VI VIIIXVII)
597 ndash
WTDS82Ireland ndashmeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPS Agreement
TRIPS (9-14 6365)
597 198
80
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS83Denmark ndashmeasuresaffecting theenforcement ofintellectualproperty rights
Denmark does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
597 ndash Negotiatedsolution (301)
WTDS86Sweden ndashMeasuresaffecting theenforcement ofintellectualproperty rights
Sweden does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
697 ndash Negotiatedsolution (697)
WTDS104Export subsidiesndash processedcheese
Export subsidies including under aninward processing arrangement in favourof processed cheese distort markets fordairy products and adversely affect USsales of dairy products
Agriculture (8 910 11)
Subsidies (3)
1097 ndash
WTDS115Ireland ndashMeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPs Agreement
TRIPS (9-14 6365 70)
198 198
81
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS124Enforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
TV stations in Greece regularly broadcastcopyrighted motion pictures and TVprograms without the authorization ofcopyright owners Effective remediesagainst copyright infringement do notappear to be provided or enforced
TRIPS (41 61) 598 ndash Negotiatedsolution (301)
WTDS125Greece ndashEnforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
Same as WTDS124 Same asWTDS124
Same asWTDS124
Sameas
WTDS124
Same asWTDS124
WTDS127Belgium ndashCertain incometax measuresconstitutingsubsidies
Belgian corporate taxpayers receive aspecial tax exemption for recruiting adepartmental head for exports
Subsidies (3) 598 ndash
82
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS128Netherlands ndashCertain incometax measuresconstitutingsubsidies
Dutch income tax law permits exportersto establish a special export reserve forincome derived from export sales
Subsidies (3) 598 ndash
WTDS129Greece ndash Certainincome taxmeasuresconstitutingsubsidies
Greek exporters are entitled to a specialannual tax deduction calculated as apercentage of export income
Subsidies (3) 598 ndash
WTDS130Ireland ndashCertain incometax measuresconstitutingsubsidies
Under Irish income tax law specialtrading houses qualify for a special taxrate in respect of trading income from theexport sale of Irish-manufactured goods
Subsidies (3) 598 ndash
WTDS131France ndash Certainincome taxmeasuresconstitutingsubsidies
French companies may deducttemporarily certain start-up expenses ofits foreign operations through a taxdeductible reserve account
Subsidies (3) 598 ndash
83
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS158Import regimefor bananas II
Failure to implement the DisputeSettlement Bodys recommendations andrulings in WTDS27 within a reasonableperiod
199 See WTDS27
WTDS172Measuresrelating to thedevelopment of aflightmanagementsystem
French government has agreed to grantand the Commission has approved aloan on preferential and non-commercialterms to develop a FMS for Airbusaircraft
Subsidies (5 6)
GATT (XXIII1b)
599 ndash
WTDS173France -Measuresrelating to thedevelopment of aflightmanagementsystem
See WTDS172 See WTDS172 SeeWTDS172
SeeWTDS172
See WTDS172
WTDS174Protection oftrademarks andgeographicalindications foragriculturalproducts andfoodstuffs
EU rule does not provide nationaltreatment with respect to geographicalIndications nor sufficient protection topre-existing trademarks that are similaror identical to a geographical indication
TRIPS (3 16 2463 65)
699 ndash
84
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS210Belgium -Administrationof measuresestablishingcustoms dutiesfor rice
Belgian customs values and duties forrice would lead to a denial of duty rebatesfor US rice and to duties in excess of thebound rate
GATT (I II VIIVIII X XI)
CVA (1)
TBT (2 3 5 67 9)
Agriculture (4)
1000 101 Negotiatedsolution (1101)
WTDS223Tariff-rate quotaon corn glutenfeed from the US
TRQ triggered by DSB ruling against theUS in WTDS166
Safeguards (8182 83)
GATT (I II XIX)
101 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
85
87
References and Recommended Reading
Primary Sources Web sites
European Commission DG TRADE Bilateral Trade Relations USAhttpeuropaeuintcommtradebilateralusausahtm
European Union Europa Web Site httpeuropaeuint
European Union Mission to the United Stateshttpwwweurunionorg
Transatlantic Business Dialogue httpwwwtabdcom
Transatlantic Consumers Dialogue httpwwwtacdorg
Transatlantic Environmental Dialoguehttpwwwtiesweborgtaedindexhtm
Transatlantic Legislators Dialoguehttpwwweuroparleuintintcooptlddefault_enhtm
Transatlantic Information Exchange Service httpwwwtiesweborg
United States Mission to the European Union httpwwwuseube
United States Trade Representative Western EuropeEU pagehttpwwwustrgovregionseu-medwesteurindexshtm
World Trade Organization httpwwwwtoorg
Primary Sources Official Government Documents
CEPAL 2001 Informe de la Inversioacuten Extranjera en Ameacuterica Latina y elCaribe Antildeo 2000 Naciones Unidas Chile
Commission of the European Communities 1998a The NewTransatlantic Marketplace Draft Communication from the Commissionto the Council the European Parliament and the Economic and SocialCommittee available athttpeuropaeuintcommdg01sectionahtm
Commission of the European Communities 1998b Commission staffworking paper concerning the establishment of an inter-regionalassociation between the European Union and Mercosurhttpeuropaeuintcommexternal_relation
88
Commission of the European Communities 2000 The TransatlanticEconomic Partnership Overview and Assessment Coordination DGTRADEE3 October
Commission of the European Communities 2001a Reinforcing theTransatlantic Relationship Focusing on Strategy and Delivering ResultsCOM(2001)154 of 20 March 2001 Available on-line athttpwwweurunionorgpartnerTransatlAgendapdf
Commission of the European Communities 2001b Report on UnitedStates Barriers to Trade and Investment July available on-line athttpeuropaeuintcommtradepdfusrbt2001pdf
Commission of the European Communities 2001c Green Paper on theReview of Council Regulation (EEC) No 406489 COM(2001)7456final of 11122001
UNCTAD 2001 Informe sobre las inversiones en el mundo UnitedNations New York and Geneva
US Department of Agriculture (1998) Agriculture in the WTOSituation and Outlook Series WRS-98-4 Washington EconomicResearch Service
United States Trade Representative 2001 2001 National TradeEstimate Report on Foreign Trade Barriers available on-line athttpwwwustrgovhtml2001_contentshtm
World Trade Organization 2000 Trade Policy Review The EuropeanUnion Report by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
World Trade Organization 2001 Trade Policy Review United StatesReport by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
Secondary Sources
Abbott Kenneth W 20001 lsquoDisputes over Technical Barriers toTrade Are the Rules and Procedures Adequatersquo paper prepared forthe Conference on Dispute Prevention and Dispute Settlement in theTransatlantic Partnership European University Institute Fiesole 5-6July
Atlantic Council of the United States 2001 Changing Terms of TradeManaging the New Transatlantic Economy Policy Paper April(Washington DC The Atlantic Council of the United States)
Barfield Claude E 2001 Free Trade Sovereignty Democracy TheFuture of the World Trade Organization (Washington AmericanEnterprise Institute Press)
Bermann George 1996 lsquoRegulatory Cooperation between theEuropean Commission and US Administrative Agenciesrsquo
89
Administrative Law Journal of the American University Vol 9 pp 933-983
Bermann George Matthias Herdegen and Peter Lindstreth eds2001 Transatlantic Regulatory Co-Operation Legal Problems andPolitical Prospects (New York Oxford University Press)
Bignami Francesca and Steve Charnovitz 2001 lsquoTransatlantic CivilSociety Dialoguesrsquo Chapter 10 in Pollack and Shaffer TransatlanticGovernance in the Global Economy
BP Chair in Transatlantic Relations 2001 Resolving and PresentingUS-EU Trade Disputes Six Prize-Winning Essays (Florence EuropeanUniversity Institute Robert Schuman Centre for Advanced Studies 9May 2001)
Busch Marc L and Eric Reinhardt 2001 lsquoTesting International TradeLaw Empirical Studies of GATTWTO Dispute Settlementrsquo in Daniel LM Kennedy and James D Southwick eds The Political Economy ofInternational Trade Law Essays in Honor of Robert E Hudec (NewYork Cambridge University Press)
Camarero M and CR Tamarit 2002 lsquoLa Unioacuten Europea y lasAmeacutericas consecuencias del establecimiento de un acuerdo deasociacioacuten interregional entre la UE y Mercosurrsquo Papeles de EconomiacuteaEspantildeola n 91 (forthcoming)
Charnovitz Steve 2001 lsquoRethinking WTO Trade Sanctionsrsquo AmericanJournal of International Law Vol 95 (October)
Claes Benedicte A 2000 lsquoComment Aircraft Noise Regulation in theEuropean Union The Hushkit Problemrsquo Southern Methodist UniversitySchool of Law Journal of Air Law and Commerce Vol 65 329-382
Cowles Maria Green 2001a lsquoThe New Transatlantic DialogueTransforming the New Transatlantic Dialoguersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 213-233
Cowles Maria Green 2001b lsquoTransatlantic Cooperation and Discordin the New Economy A Case Study of the Global Business Dialogue one-Commercersquo paper delivered at the Biennial Conference of theEuropean Community Studies Association Madison Wisconsin 31May
Damro Chad 2001 lsquoBuilding an International Identity The EU andExtraterritorial Competition Policyrsquo Journal of European Public PolicyVol 8 No 2 (April) 208-226
Devuyst Youri 2001 lsquoTransatlantic Competition Policy Cooperationrsquoin Mark A Pollack and Gregory Shaffer eds Transatlantic Governancein the Global Economy (Lanham MD Rowman amp Littlefield) pp 127-151
Evans David S 2002 lsquoThe New Trustbusters Brussels andWashington Part Waysrsquo Foreign Affairs JanuaryFebruary
90
Evenett Simon J Alexander Lehmann and Benn Steil 2000 AntitrustGoes Global What Future for Transatlantic Cooperation (WashingtonDC Brookings Institution Press)
Falke Andreas 2001 lsquoThe EU-US Conflict over Sanctions PolicyConfronting the Hegemonrsquo European Foreign Affairs Review Vol 5No 2 139-163
Featherstone Kevin and Roy Ginsberg 1996 The United States andthe European Union in the 1990s Partners in Transition (LondonPalgrave)
Flores R 2001 lsquoRegional Economic Integrationrsquo in Investing in LatinAmerican Growth Unlocking Opportunities in Brazil Mexico Argentinaand Chile EAU Australian Department of Foreign Affairs and TradeChap 12 pp 259-282
Frankel JA E Stein and SJ Wei 1998 lsquoContinental Trading BlocsAre they Natural or Supernaturalrsquo in JA Frankel ed TheRegionalization of the World Economy (Chicago The University ofChicago Press)
Frost Ellen 1997 Transatlantic Trade A Strategic Agenda(Washington DC Institute for International Economics)
Gardner Anthony 1997 A New Era in US-EU Relations The ClintonAdministration and the New Transatlantic Agenda (London Avebury)
Giordano P A Valladio and M-F Durand eds 2001 Vers un accordentre lrsquoEurope et le Mercosur (Presses de Science Po Paris)
Helfer Laurence R 2000 lsquoWorld Music on a US Stage ABerneTRIPS and Economic Analysis of the Fairness in MusicLicensing Actrsquo Boston University Law Review Vol 80 93-204
Helweg Jason 2000 lsquoThe Retreat of the State The MassachusettsBurma Law and Local Empowerment in the Context ofGlobalization(s)rsquo Wisconsin International Law Journal Vol 18 477-510
Hindley Michael 1999 lsquoNew Institutions for Transatlantic TradersquoInternational Affairs Vol 75 45-60
Hudec Robert 1998 lsquoThe New WTO Dispute Settlement Procedure AnOverview of the First Three Yearsrsquo Minnesota Journal of Global TradeVol 8 22-24
Kahler Miles 1995 Regional Futures and Transatlantic Relations (NewYork Council on Foreign Relations Press)
Keohane Robert O Andrew Moravcsik and Anne-Marie Slaughter2001 lsquoLegalized Dispute Resolution Interstate and TransnationalrsquoInternational Organization Vol 54 No 4 457-488
Knauss Jody and David Trubek 2001 lsquoThe Transatlantic LaborDialogue Minimal Action in a Weak Structurersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 235-254
91
Kolasky William J and Leon B Greenfield 2001 lsquoA View to a KillThe Lost GEHoneywell Deal Reveals a Trans-Atlantic Clash ofEssentialsrsquo Legal Times 30 July 2001 p 28
Kuner Christopher 2001 lsquoBeyond Safe Harbour European DataProtection Law and Electronic Commercersquo International Lawyer Vol31
LaFrance Mary 2001 lsquoCongress Trips Over International Law WTOFinds Unfairness in Music Licensing Actrsquo Journal of Art andEntertainment Law Vol 11 397-424
Lorvellec Louis 1997 lsquoBack to the Fields after the Storm Agriculturein the European Union after the Uruguay Round Agreementsrsquo DrakeJournal of Agricultural Law Vol 2 (Winter) p 411
Mazumdar Anandashankar 2002 lsquoEuropean Commission Gives FinalApproval to Model Clauses to Protect Personal Datarsquo InternationalTrade Reporter Vol 19 187 (31 January)
Mehta K 2002 lsquoInternational Competition Policy Cooperationrsquorevised version of a paper presented at the BP Chair Conference onDispute Prevention and Dispute Settlement in the TransatlanticPartnership European University Institute Florence July 2001
Messerlin Patrick A 2001a Measuring the Cost of Protection in Europe(Washington DC Institute for International Economics)
Messerlin Patrick A 2001b lsquoNiveau et coucircts du protectionnismeeuropeacuteenrsquo in Giordano P A Valladao y M-F Durand (eds) Vers unaccord entre lrsquoEurope et le Mercosur Presses de Science Po Paris
Mishkin FS and MA Savastano 2001 lsquoMonetary Policy Strategiesfor Latin Americarsquo Journal of Development Economics 66 415-444
Nagarajan N 1998 lsquoMercosur and Trade Diversion What Do theImport Figures Tell Usrsquo Economic Papers No 129 EuropeanCommission
Petersmann Ernst-Ulrich ed 1997 The GATTWTO DisputeSettlement System International Law International Organizations andDispute Settlement (Kluwer Law International)
Peterson John 1996 Europe and America Prospects for Partnership(New York St Martinrsquos Press 1996)
Peterson John 2001 lsquoGet Away from Me Closer Yoursquore Near Me TooFar Europe and America after the Uruguay Roundrsquo in Mark A Pollackand Gregory Shaffer eds Transatlantic Governance in the GlobalEconomy (Lanham MD Rowman amp Littlefield) pp 45-72
Peterson John and Maria Green Cowles 1998 lsquoUS EconomicDiplomacy What Makes the EU Differentrsquo Governance Vol 11 No 3pp 251-71
Philippart Eric and Pascaline Winand 2001 lsquoDeeds Not WordsEvaluating and Explaining the US-EU Policy Outputrsquo in Philippart and
92
Winand eds Ever Closer Partnership Policymaking in US-EU Relations(Brussels Peter Lang) pp 431-463
Pollack Mark A ed 2001 The New Transatlantic Agenda at Five ACritical Assessment (San Domenico di Fiesole BP Chair inTransatlantic Relations Robert Schuman Centre for AdvancedStudies European University Institute)
Pollack Mark A and Gregory C Shaffer 2001a lsquoTransatlanticGovernance in Historical and Theoretical Perspectiversquo in Mark APollack and Gregory Shaffer eds Transatlantic Governance in theGlobal Economy (Lanham MD Rowman amp Littlefield) pp 3-42
Pollack Mark A and Gregory C Shaffer 2001b lsquoThe Challenge ofReconciling Regulatory Differences Food Safety and GMOs in theTransatlantic Relationshiprsquo in Mark A Pollack and Gregory Shaffereds Transatlantic Governance in the Global Economy (Lanham MDRowman amp Littlefield) pp 153-178
Pollack Mark A and Gregory C Shaffer 2001c lsquoWho Governsrsquo inMark A Pollack and Gregory Shaffer eds Transatlantic Governance inthe Global Economy (Lanham MD Rowman amp Littlefield) pp 287-305
Reidenberg Joel 2001 lsquoE-Commerce and Trans-Atlantic PrivacyrsquoHouston Law Review Vol 8 717-49
Schaefer Matthew 2002 lsquoGovernment Procurement DisputesLessons from the Dispute over the Massachusetts 1996 Act RegulatingState Contracts with Companies Doing Business with Burma(Myanmar)rsquo paper presented at the Conference on Dispute Preventionand Dispute Settlement in the Transatlantic Partnership EuropeanUniversity Institute Florence 5-6 July 2001 final version submitted26 January 2002
Shaffer Gregory 1999 lsquoThe Power of EU Collective Action The Impactof EU Data Privacy Regulation on US Business Practicersquo EuropeanLaw Journal Vol 5
Shaffer Gregory 2000 lsquoGlobalization and Social Protection TheImpact of EU and International Rules in Ratcheting Up of US PrivacyStandardsrsquo Yale Journal of International Law Vol 25 pp 1-88
Shaffer Gregory C 2002 lsquoManaging US-EU Trade Relations throughMutual Recognition and Safe Harbour Agreements lsquoNewrsquo and lsquoGlobalrsquoApproaches to Transatlantic Economic Governancersquo in Ernst-UlrichPetersmann ed Dispute Avoidance and Dispute Settlement in theTransatlantic Partnership (unpublished manuscript) (working paper onfile with the author)
Sindelar Leslie 2001 lsquoNot So Fair After AllmdashInternational Aspects ofthe Fairness in Music Licensing Actrsquo The Transnational Lawyer Vol14 435-71
Steffenson Becky J 2001 The Institutionalization of EU-US RelationsDecision Making Institution Building and the New Transatlantic
93
Agenda unpublished PhD dissertation University of GlasgowDepartment of Politics
Tansini R and T Vera 2001 lsquoLos procesos de integracioacuten enAmeacuterica Latina El caso de Mercosurrsquo Informacioacuten Comercial EspantildeolaFebrero-Marzo nuacutem 790 107-117
Vogel David 1997 Barriers or Benefits Regulation in TransatlanticTrade (Washington DC Brookings Institution)
Vogel David 2001 Ships Passing in the Night The Changing Politics ofRisk Regulation in the United States and the European Union RSCASWorking Paper No 200116
Woolcock Stephen 2000 lsquoEuropean Trade Policy Global Pressuresand Domestic Constraintsrsquo in Helen Wallace and William Wallaceeds Policy-Making in the European Union (New York Oxford UniversityPress) pp 373-99
Yerkey Gary G 2000a lsquoEU Accuses US of Failing to ImplementMRAs on Electrical Safety Pharmaceuticalsrsquo International TradeReporter Vol 17 1662 (2 November)
Yerkey Gary G 2000b lsquoUS European CEOs Call on Governments toResolve Dispute Over MRA by Dec 18rsquo International Trade ReporterVol 17 1662 (30 November)
Young Alasdair 2001 Trading Up or Trading Blows US Politics andTransatlantic Trade in Genetically Modified Food RSCAS WorkingPaper No 200130
Young Alasdair R 2002 lsquoRisk Positive Integration and SystemFriction The Single European Market and World Tradersquo paperpresented at the Council of European Studies Conference 14-16March 2002
94
Notes
1 The EU and the 50 US States website of the European Union Mission tothe United Stateshttpwwweurunionorgpartnerusstatesusstateshtm
2 Ibid
3 As Miles Kahler wrote in 1995 lsquoIncreasingly the points of conflict amongthe industrialized countries are not the familiar ones of barriers toexchange at the border but an entire array of ldquodomesticrdquo policies thatproduce conflict by appearing to restrict market access or alter theterms of competition The agenda of behind-the-border issues that hasbecome more prominent in the 1990s will only grow as economicintegration continues and groups mobilize to seek new benchmarks foran international ldquolevel playing fieldrdquo rsquo (Kahler 1995 5) For gooddiscussions of regulatory barriers in USEU trade relations see alsoVogel 1997 Young 2002
4 This section draws on the analysis presented in Pollack and Shaffer2001a
5 For good discussions see Gardner 1997 Peterson and Cowles 1998
6 Pollack and Shaffer 2001c 291
7 lsquoTransatlantic Declarationrsquo text available on-line athttpwwweurunionorgpartnertransatldechtm
8 See eg Featherstone and Ginsburg 1996 Peterson 1996
9 lsquoThe New Transatlantic Agendarsquo text available on-line athttpwwweurunionorgpartneragendahtm
1 0 lsquoJoint US-EU Action Planrsquo text available on-line athttpwwweurunionorgpartneractplanhtm
1 1 Gardner 1997
1 2 Commission of the European Communities 1998a
1 3 lsquoTransatlantic Economic Partnership Action Planrsquo text available on-lineat httpeuropaeuintcommtradebilateralusa1109tephtm For auseful review of the TEP see Commission of the EuropeanCommunities 2000
95
1 5 For good discussions of the TABD see Cowles 2001a 2001b and thewebsite of the TABD at httpwwwtabdorg
1 6 lsquoCincinnati Recommendations Transatlantic Business DialoguersquoNovember 16-18 2000 p 4 Available on-line athttpwwwtabdorgrecommendationsCincinnati00pdf
1 7 Ibid page 5
1 8 Cowles 2001b
1 9 Steffenson 2001
2 0 Pollack ed 2001 12
2 1 For an excellent discussion of the TACD and its activities see Bignamiand Charnovitz 2001 and the TACD website at httpwwwtacdorg
2 2 For example sixty-five consumer groups issued a statement in 2000stating that the EU and the US had largely ignored consumer tradepolicy recommendations TACD press release lsquoUS amp EU ConsumerGroups Call for Swift Action to Balance Trade Dialoguersquo 30 March 2000
2 3 The USIA funding for the TAED ($100000) was subject to approval fromthe Senate Finance Committee In January 2000 the objection of SenatorJesse Helms to TAED funding blocked the approval of funds andstopped the State Department from issuing the grant The TAED arguedthat this demonstrated the US governmentrsquos lack of dedication to theproject See lsquoTransatlantic Environment Dialogue suspends its activitiesdue to the failure of US government to stick to its commitmentsrsquoaccessed on 12 March 2002 on the TAED websitehttpwwwtiesweborgtaedindexhtml For a good general discussionof the TAED see Bignami and Charnovitz 2001
2 4 To summarise the TAED recommended the removal of subsidies forenvironmentally unfriendly energy sources (such as coal) demanded thatsustainability assessments be applied to a number of WTO agreementsand expressed it opposition to the multilateral TRIPs Technical Barriersto Trade and SPS Agreements It aired concerns about biotechnologyeco-labelling and the Precautionary Principle the MRAs and Chemicaland Electrical Waste Management (WEEEs) It stressed transparency intransatlantic and multilateral decision making urged both governmentsto support the Kyoto Treaty and to stop challenging environmentallegislation at the WTO The message to the EUUS Summit Lisbon May31 2000 was that lsquoUntil such time as parity exists betweenenvironmental governance and multilateral trade rules we demand thatboth the United States and the European Union immediately agree tomutual moratorium on WTO challenges and threatened challengesrsquo Fora good discussion of the TAED and its activities see Bignami andCharnovitz 2001
2 5 For an excellent discussion of the TALD see Knauss and Trubek 2001
96
2 6 Commission of the European Communities 2001a
2 7 Philippart and Winand 2001
2 8 Kahler 1995 See also Vogel 1997 Young 2002
2 9 For excellent overviews of the WTO dispute resolution procedure and itspredecessor within the GATT see Petersmann 1997 Hudec 1998 Buschand Reinhardt 2001 and BP Chair in Transatlantic Relations 2001 Fora provocative challenge to the DSU see Barfield 2001
3 0 This section draws largely on Abbottrsquos (2001) account of transatlanticdisputes over TBTs in general and the hushkits case in particular Forother accounts of the hushkits dispute see also Claes 2000 andPeterson 2001 58-59
3 1 Commission of the European Communities lsquoCommission Proposes NewLegislation to Fight Aircraft Noisersquo Press Release IP 011683
3 2 For a detailed analyses of transatlantic disputes over food safety andgenetically modified organisms see Pollack and Shaffer 2001b Vogel2001 and Young 2001
3 3 The text of the report can be found athttpeuropaeuintcommexternal_relationsusbiotechbiotechhtm
3 4 Schaefer 2002 1-2 See also Hellweg 2000
3 5 For useful background on the case filed before the WTO as DS160 seeHelfer 2000 LaFrance 2001 and Sindelar 2001
3 6 Commission of the European Communities lsquoEU and US Agree onTemporary Compensation in Copyright Disputersquo Press Release IP011860
3 7 For good discussions of potential reforms of the bilateral relationship aswell as WTO dispute settlement including a wide range of proposals seeeg BP Chair in Transatlantic Relations 2001 Charnovitz 2001 Barfield2001 and Petersmann 2001
3 8 Some countries such as the United Kingdom have establishedguidelines for policymakers to take trade implications of proposedregulations into account but neither the US nor the EU currentlyemploys any statutory requirement to undertake such an impactassessment
3 9 Bermann 1996 961 For an excellent set of essays on various aspects oftransatlantic regulatory cooperation see also Bermann Herdegen andLindstreth (eds) 2001
4 0 Ibid p 966
97
4 1 For excellent analyses of USEU competition-policy cooperation fromwhich this analysis is largely drawn see eg Evenett Lehmann and Steil2000 Devuyst 2001 Damro 2001 and Mehta 2002
4 2 Devuyst 2001 142-145
4 3 See eg Kolasky and Greenfield 2001 Evans 2002
4 4 Commission 2001c 38-40
4 5 This section draws extensively from research reported in Shaffer 2002
4 6 Subsidiaries of US firms in the EC account for about one-third of ECimports from the United States while subsidiaries of EC firms in theUnited States account for about 38 of US imports from the EC SeePollack and Shaffer 2001a 14
4 7 Agreement on Mutual Recognition Between the European Communityand the United States of America Available on-line athttpeuropaeuintcommtradepdf0713mra-usenpdf
4 8 The five excluded sectors were information technology pressureequipment road safety equipment lawn mowers and personal protectiveequipment such as helmets
4 9 However as an exception tests of pharmaceutical good manufacturingpractices are to be performed by regulatory bodies and not privatelaboratories in accordance with that annex
5 0 Yerkey 2000a 2000b
5 1 Quoted in Shaffer 2002 23
5 2 Agreement Between the European Community and the United States ofAmerica on Mutual Recognition of Certificates of Conformity for MarineEquipment Available on-line athttpeuropaeuintcommtradepdfmareqpdf
5 3 See Shaffer 2002
5 4 See Shaffer 2002
5 5 This section draws extensively from research reported in Shaffer 2002
5 6 The above figures are from the prepared testimony of Assistant Secretaryof Commerce Franklin Vargo before the House Committee onInternational Relations See lsquoIssues in US-European Union TradeEuropean Privacy Legislation and BiotechnologyFood Safety PolicyrsquoFederal News Service (May 7 1998)
5 7 Mazumdar 2002 See also Shaffer 2000 Reidenberg 2001
5 8 Commission Decision of 26 July 2000 pursuant to Directive 9546ECof the European Parliament and of the Council on the adequacy of the
98
protection provided by the safe harbour privacy principals and relatedfrequently asked questions issued by the US Department of CommerceAvailable on-line athttpeuropaeuintcommtradepdfsafeharbourpdf For generalinformation on safe harbour documents see Safe Harbor Documentshttpwwwexportsgovsafeharborsh_documentshtm
5 9 Guide to the Implementation of Directives Based on the New Approachand the Global Approach Available on-line athttpeuropaeuintcommenterprisenewapproachlegislationguidedocument1999_1282_enpdf
6 0 See Shaffer 2002
6 1 For a good discussion of the obstacles posed by US federalism inregulatory cooperation see Commission of the European Communities2000
6 2 lsquoEU-US Guidelines on Regulatory Cooperation and Transparencyrsquoavailable on-line athttpeuropaeuintcommenterpriseenterprise_policygov_relationsregulcooptransathtm See also lsquoTransatlantic Bid to Cut Red TapersquoEuropean Report 10 April 2002 and Micheal Mann lsquoDrive to Head OffTrade Riftsrsquo Financial Times 13 April 2002
6 3 See the DG Trade website lsquoBilateral Trade Relations Canadarsquo accessedat httpeuropaeuintcommtradebilateralcanadacanadahtml
6 4 For useful and up-to-date reviews of the EUCanada relationship see inaddition to the DG Trade web page cited above the websites of theEuropean Union Delegation to Canadahttpwwweudelcanorgenglishindexcfm and the Canadian Missionto the European Union httpwwwdfait-maecigccaeu-missionconten_ehtml
6 5 For more information about Mercosur visit the following internetaddress httpwwwmercosurorg
6 6 Tansini and Vera 2001
6 7 lsquoEUChile Deal Reached on Free Trade Agreementrsquo European Report 27April 2002
6 8 Ibid
6 9 Camarero and Tamarit (2002) Source OECD International SectoralDatabase
7 0 For more information about the EU and Latin America visit the followinginternet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 1 The Lomeacute Convention replaced the Yaounde Convention of 1963 afterthe accession of the UK to the Community It was renewed in 1979
99
(Lomeacute II) 1985 (Lomeacute III) 1989 (Lomeacute IV) and 1995 (Lomeacute IV) andconsists of a system of preferences for imports in which industrial goodsalmost free of tariffs and agricultural receive different treatments InJune 2000 the Lomeacute Convention was replaced by the CotonouAgreement which stabilized what can be seen as a transitory regimeaiming to incorporate the ACP countries in the WTO general rules
7 2 What characterizes first-generation agreements is their conventionalbilateral and technical structure and their reference to possiblereciprocal cooperation In practical terms however these treaties onlyextended the Most Favoured Nation (MFN) status to its signatories
7 3 The second-generation agreements referred mainly to specificcommercial and cooperation questions
7 4 For the conclusions of the Madrid summit see the Latin America webpage of the Commissionrsquos Directorate-General for Tradehttpeuropaeuintcommtradebilaterallaclachtm
7 5 In October 1998 hurricane Mitch one of the worst natural disastersever to have hit the region caused a material damage equivalent to 10of the regionrsquos GDP The EU not only played a significant role in theinternational communityrsquos emergency aid but also launched in 1998a medium-term rehabilitation plan called the Regional Programme forthe Reconstruction of Central America (PRRAC) Funding was set ateuro 250 million committed for the 1999-2002 period but to beimplemented within six years The target countries were HondurasNicaragua El Salvador and Guatemala
7 6 For details on the provisions of the EU-Chile Association Agreement andthe status of the ratification procedure seehttpeuropaeuintcommexternal_relationschileintroindexhtm
7 7 The information about the results of the different negotiation rounds canbe updated at the following internet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 8 For an assessment of the trade-diverting effects of Mercosur seeNagarajan (1998)
7 9 Commission of the European Communities 1998b
8 0 Messerlin 2001b
8 1 Pascal Lamy lsquoFacing the Challenge of Globalization Regional Integrationor Multilateral Rulesrsquo Buenos Aires 1 March 2002 Reproduced on theDG Trade website athttpeuropaeuintcommtradespeeches_articlesspla99_enhtml
Lead Author
Mark A Pollack
The Political Economy ofthe Transatlantic Partnership
Robert Schuman Centrefor Advanced Studies
EUROPEAN UNIVERSITY INSTITUTE
Report prepared by theTransatlantic Programme
for and with the contribution of
Her Majestyrsquos TreasuryUnited Kingdom
Ministry of FinanceThe Netherlands
v
Of the aforementioned proposals the EU and the US have arguablymade the most progress in promoting cooperation among theirrespective domestic regulators with a growing number of formalregulatory agreements adopted since 1997 and an even larger numberof informal contacts among EU and US regulators taking place on aregular basis across a full range of issue-areas Such regulatorycontacts hold significant promise allowing regulators on both sides ofthe Atlantic to learn from each other coordinate their regulatoryefforts and avoid transatlantic regulatory disputes before they beginHowever as Section 4 of this report demonstrates in detail successfulregulatory cooperation is not a lsquomagic bulletrsquo for trade disputes butrather a lsquohothouse flowerrsquo which must be carefully nurtured and canbe easily frustrated by any of a number of potential obstaclesincluding the persistence of distinctive European and Americanregulatory philosophies and procedures the multi-level nature of theEU and US political systems and the insistence by both sides onmaintaining domestic regulatory sovereignty Overcoming theseobstacles will require the identification of lsquobest practicersquo in regulatorycooperation gradual increase in regulatory trust among EU and USregulators and a careful balancing by political leaders of domesticregulatory aims on the one hand and the importance of thetransatlantic economic relationship on the other
The EUrsquos ever-closer economic relationship with the United States hasnot developed in a vacuum but rather coincides with a second majordevelopment namely the rapid increase during the 1990s of EU tradeand foreign direct investment with the countries of North and SouthAmerica analyzed in Section 5 of the report Concurrent with itsgreater economic presence in the Americas the Union has pursued awide range of trade and economic agreements with the countries of theregion including an increasingly close trade and regulatoryrelationship with Canada a free trade agreement with Mexico andother agreements with Chile Mercosur and other Latin Americancountries
In May 2002 leaders of the European Union and Latin Americancountries met in Madrid for their second summit meeting confirmingthe conclusion of negotiations on an EUChile Association Agreementand calling for further development of bilateral ties including theeventual conclusion of a similar association agreement with MercosurIn these and future negotiations the EU should give special attentionto expanding market access for Latin American goods and servicesespecially for so-called lsquosensitive productsrsquo currently subject to high EUtariffs as well as focusing on the reduction of other means ofprotection such as tariff quotas that are applied trade in goodsservices investment public procurement intellectual property rightstechnical standards and rules of origin
vi
The European Unionrsquos economic relationships with the countries of theAmericas like its bilateral relationship with the United States isnested in turn within the multilateral trading system of the WorldTrade Organization the further development of which is a sharedpriority for both the European Union and the United States During hisrecent trip to Argentina EU Trade Commissioner Pascal Lamy stressedthe importance of ensuring that bilateral and inter-regional tradeagreements with the United States Canada and the countries of LatinAmerica rest on the multilateral foundation of WTO trade law For thisreason he argued bilateral and interregional negotiations lsquomust not beallowed to detract our attention from the pursuit of the DohaDevelopment Agendarsquo Such a commitment should remain a centraltenet of EU trade policy in the years to come
Within the multilateral rules-based trading system finally theEuropean Union and the United States should also seek to developfurther their bilateral relationship the health of which is vital to theglobal economy as a whole Addressing the full range of challenges tothe transatlantic economic partnership will in turn require a carefuland extensive study not only of traditional trade issues such as theliberalization of tariffs and quotas but also and especially the domesticsources of transatlantic regulatory disputes and successful means ofpreventing and settling such disputes More specifically such as studywould have to undertake three essential tasks
bull A comprehensive listing and analysis of EU and US regulationscapable of restricting trade and investment in the transatlanticsmarketplace
bull A comprehensive survey and analysis of formal and informalregulatory cooperation focusing on both the obstacles to suchcooperation and instances of lsquobest practicersquo in overcoming thoseobstacles and
bull A systematic analysis of various means of bilateral and multilateraldispute resolution with a particular emphasis on the specificchallenges of transatlantic regulatory disputes
The insights generated by such a study would inform not only thefurther development of the transatlantic economic partnership but alsothe development of the rules-based multilateral trading system of theWorld Trade Organization
vii
About the Authors
This report was prepared by the Transatlantic Programme of theRobert Schuman Centre for Advanced Studies at the EuropeanUniversity Institute Florence
The following persons contributed to the writing of one or moreportions of this reportRebecca Steffenson (European University Institute) contributed toSection 2Alasdair Young (University of Glasgow) contributed to Section 3including the preparation of Tables 5-7 as well as Appendices 1-3Gregory C Shaffer (University of Wisconsin School of Law) contributedtwo case studies in Section 4Mariam Camarero (Universidad Jaume I) Cecilio Tamarit (Universidadde Valencia) and Andrea Ribeiro Hoffmann (University of Tuumlbingen)contributed to Section 5 andMark A Pollack (European University InstituteUniversity ofWisconsin-Madison) served as lead author for the report andcontributed to the writing of various sections
The Transatlantic Programme is also grateful to the following personsfor comments on early drafts of the reportHelen Wallace (Director Robert Schuman Centre for AdvancedStudies)Patrick Messerlin (Institut de Sciences politiques Paris)Claus-Dieter Ehlermann (European University Institute)Ernst-Ulrich Petersmann (European University Institute) andMichael Artis (European University Institute)
The Transatlantic Programme was established in 2000 with a majorgift from BP
1
ndash 1 ndashThe Transatlantic Marketplace and
the Changing EUUS Economic Agenda
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly over thecourse of the past decade Taken together the US and the EU accountfor roughly one half of both world GDP and global trade
Table 1 Transatlantic Trade 1980-2000 in millions of Euros(share of EU total)
1980 1990 2000
EU imports from US 50733(181)
88957(205)
197992(193)
EU exports to US 29543(140)
82004(200)
232037(247)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
The European Union and the United States are also each otherrsquos mostimportant trading partners As Table 1 illustrates the volume ofEUUS trade more than doubled during the 1990s and the twocountries are currently each otherrsquos largest trading partners Indeedrecent data on trade in services summarized in Table 2 demonstrateseven more clearly the importance of the transatlantic traderelationship with the United States accounting for some 40 of theEUrsquos total imports and exports of services which in turn account forbetween one-third and one-half of total transatlantic tradeFurthermore EUUS trade has been largely balanced over the decadeof the 1990s
2
Table 2 Transatlantic Trade in Services in millions of Euros(share of EU total)
1998 1999 2000
EU imports from US 79874(360)
99042(409)
116474(407)
EU exports to US 77039(334)
92199(373)
117403(403)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
Notwithstanding the impressive growth of EUUS trade it is theinvestment relationship that most clearly distinguishes thecontemporary transatlantic marketplace As Table 3 makes clear theEuropean Union in 2000 was far and away the largest investor in theUnited States its euro 794 billion in foreign direct investment (FDI)constituting 65 of total FDI in the US1 The United States is similarlythe largest source of FDI in the European Union with someeuro 561 billion invested in 2000 These high levels of EU investment areestimated to provide roughly 35 million jobs in the United States witha similar number of European jobs relying on US investment in theUnion2 The large and growing investment relationship also explains aconsiderable portion of the recent growth in bilateral USEU tradesince an estimated 20-30 percent of all bilateral trade takes the form ofintrafirm trade within firms operating on both sides of the Atlantic
Table 3 Transatlantic Foreign Direct Investment in millions of Euros(share of EU total)
1998 1999 2000
US FDI flows into EU 60697(571)
83798(754)
121271(688)
EU FDI flows to US 133416(602)
196794(632)
172027(475)
US FDI stocks in EU 366462(60)
439928(609)
561199(625)
EU FDI stocks in US 398190(483)
622496(524)
794523(513)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
3
With the simultaneous growth of transatlantic trade and investmentand the gradual decline in EU and US tariffs and quotas followingsuccessive waves of trade liberalization the transatlantic economicagenda has been transformed Prior to the 1990s much of the EUUSeconomic relationship was dominated by trade questions andspecifically by cooperation and conflict over tariffs quotas and otherdirect barriers to trade typically imposed at US and EU borders Withthe decline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade have increased in importance aspotential sources of international trade tension Such non-tariffbarriers have been addressed in the European Union for decadesthrough the use of regulatory harmonization and more recentlythrough the mutual recognition of national standards Similarly theGATT system began as early as the Tokyo Round (1973-1979) toaddress non-tariff barriers to trade most notably through theTechnical Barriers to Trade (TBT) Agreement and more recentlythrough the 1994 Sanitary and Phytosanitary Standards (SPS)Agreement both of which apply international law disciplines to trade-distorting national regulations
Notwithstanding these new rules however lsquobehind-the-borderrsquo US andEU regulations on a diverse array of topicsmdashranging from theenvironment and food safety to consumer protection and dataprivacymdashhave emerged during the past decade as significant obstaclesto transatlantic and global trade and investment3 In some cases suchdomestic regulations have led to trade disputes between the UnitedStates and the European Union and to increasing demands frombusinesses on both sides of the Atlantic for cooperation among US andEuropean regulatory authorities to prevent and settle such disputesand facilitate access to the European and American markets
In sum the ever-increasing levels of transatlantic trade andinvestment have created a de facto transatlantic marketplace and withit an increasing incentive for the European Union and the UnitedStates to cooperate in an effort to manage that marketplace facilitatemutually beneficial economic exchange and prevent or settle the tradeand economic disputes that inevitably arise in such a closerelationship In that context this report aims to summarize the stateof our scholarly understanding about the political economy of thetransatlantic economic relationship with an emphasis on theinstitutions for joint economic governance the new challenges posedby regulatory disputes and the promise and limits of transatlanticregulatory cooperation Accordingly Section 2 of the report examinesthe development and growth of post-Cold War institutions for themanagement of the EUUS economic partnership while Section 3examines the persistence of trade and economic disputes between theEU and the US including the rise of new and potentially intractableregulatory disputes and Section 4 examines the prospects and limitsof transatlantic regulatory cooperation as a possible solution to such
4
conflicts The fifth section of the report places the EUUS bilateralrelationship in the broader context of the relationship between theEuropean Union and the various countries of the Americas and thesixth concludes with a review of potential areas for furthertransatlantic cooperation and promising areas for further study
5
ndash 2 ndashInstitutions for Transatlantic Economic Governance
Origins and Effectiveness
Transatlantic relations between the United States and the countries ofWestern Europe have long been based on common values and interestsin terms of both security and economic interdependence Throughoutthe Cold War transatlantic cooperation took place largely though theNorth Atlantic Treaty Organization (NATO) in the area of security andthrough common US and European participation in variousmultilateral economic forums including the Organization for EconomicCooperation and Development (OECD) the G-7 (now G-8) group ofhighly industrialized economies and the World Trade Organization
Cooperation between the United States and its European partners istherefore not new but the character of the relationship changedsubstantially during the 1990s with an ever-greater emphasis oneconomic as well as security cooperation and a greater recognition bythe United States of the European Union (in addition to its memberstates) as an important interlocutor Three transatlantic agreementssigned in the 1990s underpin this new transatlantic partnership andthe increasingly liberalized EUUS economic relationship TheTransatlantic Declaration (1990) the New Transatlantic Agenda (NTA1995) and the Transatlantic Economic Partnership (TEP 1998) haveeach played an important role in creating a transatlantic framework foreconomic co-operation and introducing formal transatlanticinstitutions to manage the relationship This upgrading of the EUUSrelationship in turn can be traced to several interrelateddevelopments during that decade including the end of the Cold Warthe maturation of the European Union as an economic and politicalactor and the relentless expansion of transatlantic economic exchangewhich created pressures for joint management of the emergingtransatlantic marketplace4
The end of the Cold War was clearly a precipitating cause for theupgrading of the transatlantic relationship As early as 1990 the USpresidential administration of George HW Bush proposed aTransatlantic Declaration to reaffirm USEuropean solidarity followingthe fall of the Iron Curtain and the collapse of the Soviet Union Whilethat Transatlantic Declaration itself focused largely on security issuesrather than economic cooperation the diminution of the security
6
threat from post-Soviet Russia facilitated an increasing emphasis oneconomic issues by the Clinton Administration reflected in both the1995 New Transatlantic Agenda and the 1998 Transatlantic EconomicPartnership5
This economic focus has in turn been reinforced by the maturation ofthe European Union which emerged during the late 1980s and early1990s as the worldrsquos largest internal market and the most importanttrading partner of the United States Simultaneous with thedevelopment of the EUrsquos internal market came the increasing influenceof EU political institutions including the European Commission(which plays a vital role in the EU legislative process as well as servingas trade negotiator and economic regulator in fields such ascompetition policy) and the Council of Ministers and EuropeanParliament (which collectively adopt an increasingly large portion ofEuropean economic legislation) Although the powers of the respectiveEU institutions still varies considerably across sectors theCommission has clearly emerged as the Unionrsquos primary interlocutorwith the United States on economic issues while the legislativeactivities of the Council and the Parliament have the potential toinfluence economic interests in the United States The institutions ofthe New Transatlantic Agenda have therefore attempted to incorporatethe Commission and the Council presidency through biannualsummits and other high-level meetings as well as members of theEuropean Parliament through the Transatlantic Legislatorsrsquo Dialogue(see below)
Beyond the end of the Cold War and the maturation of the EuropeanUnion finally lies the relentless increase of transatlantic economicexchange Increased transatlantic trade and investment have creatednew demands for market access and economic cooperation fromproducer groups such as the Transatlantic Business Dialogue whileother consumer labour and environmental groups have sought toensure that transatlantic cooperation takes into account their diverseinterests Indeed as we shall see below the increasingly closeeconomic relationship between the EU and the US has created newprospects for both trade conflicts and regulatory cooperation and hasresulted in what might be termed lsquoscuttle diplomacyrsquomdashthe scurrying ofEU and US government authorities to cope with the incessant conflictswhich although they compose only a small fraction of EUUSeconomic exchange threaten to poison a mutually advantageouseconomic relationship6 Largely for this reason the United States andthe European Union have established an increasingly complexinstitutional structure designed to facilitate economic and securitycooperation resolve and prevent disputes and integrate civil-societygroups into the process of transatlantic economic governance
7
21 Transatlantic Economic Agreements in the 1990s
211 The Transatlantic Declaration
The process of institutionalizing the EUUS relationship begansimultaneously with the end of the Cold War in 1989 when USPresident Bush and EU Commission President Jacques Delors agreedto work to ensure regular meetings between high-level EU and USofficials On 27 February 1990 this agreement bore fruit in the shapeof a lsquoTransatlantic Declarationrsquo pursuant to which the US and ECagreed to establish an institutional framework lsquofor regular andintensive consultationrsquo Specifically the Declaration called for biannualEUUS summit meetings between the presidents of the United Statesthe European Commission and the European Council as well asregular meetings between the US Secretary of State the ECCommission and the US Cabinet These meetings it was hoped wouldopen lines of communication create networks facilitate informationsharing and reduce the impact of disputes in transatlantic relations
In substantive terms the Transatlantic Declaration identified threemajor goals
bull economic liberalizationbull educational scientific and cultural co-operation andbull cooperation in fighting international crime terrorism and
environmental degradation7
While these policy areas were identified as priorities the agreementfailed to provide a more detailed agenda for meeting its goals Thecontent of the agreement has been described as cosmetic minimalistand lacking in substantive innovations and would soon besupplemented by other more detailed economic agreements8
212 The New Transatlantic Agenda
The next stage in developing the transatlantic economic relationshipcame with the New Transatlantic Agenda (NTA) which was signed atthe EUUS Summit in Madrid in 1995 and established four priorityareas for closer cooperation
1 promoting peace and stability democracy and development aroundthe world (in particular in Central and Eastern Europe Russia andthe Middle East)
2 responding to global challenges (with a focus on international crimedrug trafficking terrorism migration and health andenvironmental issues)
3 lsquocontributing to the expansion of world trade and promoting closereconomic relationsrsquo (including both bilateral and multilateralliberalization of trade and investment) and
8
4 building bridges across the Atlantic (specifically direct contactsamong lsquobusiness people scientists educators and othersrsquo)9
In addition to the six-page NTA itself the two partners also adopted amuch more detailed Joint Action Plan (JAP) which outlined specificpolicy areas where deeper cooperation could be pursued The economicchapter of the JAP was arguably the most ambitious of the four callingfor both the strengthening of the multilateral trading system and thecreation of liberalized lsquotransatlantic marketplacersquo with a special focuson bilateral regulatory cooperation1 0 The NTA itself also acknowledgedthe role of the Transatlantic Business Dialogue which would laterprove to be influential in setting the agenda for transatlantic economiccooperation
In institutional terms the New Transatlantic Agenda established newtransatlantic governance mechanisms and a more established policyprocess First it created a Senior Level Group of EU and US officialstogether with a lower-level NTA Task Force to help drive coordinatemonitor and implement the agenda of transatlantic relations betweenthe continuing EUUS summits Although this framework has sincebeen criticized as excessively bureaucratic and focused on summit-driven lsquodeliverablesrsquo (see below) the NTA framework has proven usefulin coordinating EU and US responses to both economic and securityissues and remains the overarching framework for transatlanticrelations today
213 The Transatlantic Economic Partnership
The drive for an ever-closer transatlantic economic relationship wasrevived in 1998 amidst revelations that cooperation in many policyareas had fallen short of initial expectations1 1 Despite the NTA and itsinstitutions high-profile trade disputes over bananas beef andextraterritorial sanctions continued highlighting the need for furthertransatlantic commitment to facilitate economic exchange and containconflict In that context the European Commission took the initiativein April 1998 calling for negotiations on a lsquosingle comprehensiveagreementrsquo to implement a lsquoNew Transatlantic Marketplacersquo TheCommissionrsquos proposal had four central objectives
1 the lsquoremoval of technical barriers to trade in goods through anextensive process of mutual recognition andor harmonizationrsquo
2 the elimination lsquoby 2010 of all industrial tariffs on an MFN basisrsquo3 the formation of a lsquofree trade area in servicesrsquo and4 further liberalization in the areas of government procurement
intellectual property rights and investment1 2
The United States had little time to respond however as the initiativefailed to secure the support of the Council of Ministers In its placethe US and the EU agreed in May 1998 to a somewhat less ambitious
9
Transatlantic Economic Partnership (TEP) which aimed to tacklebilateral regulatory barriers to trade and to identify common positionswithin multilateral trade negotiations In substantive terms the TEPand its accompanying Action Plan focused more directly than the NTAon regulatory cooperation and on the possible harmonization ofstandards as a means of removing technical barriers to trade and itcommitted both sides to negotiations in specific issue-areas includingservices intellectual property food safety and biotechnology1 3
In addition the TEP created a new set of institutions to manage theeconomic aspects of the relationship including a lsquoTEP Steering Grouprsquocharged with monitoring implementing and reviewing TEP objectivesas well as expert-level working groups The TEP also emphasized theimportance of early warning of potential trade and regulatory disputesand fostered the creation of an institutionalized lsquoearly warning systemrsquofollowing the Bonn EUUS summit in June 1999 Finally the TEPexplicitly encouraged the participation of not only business but othercivil society groups which would lead in time to the creation of thetransatlantic consumer environment and labour dialogues
Table 4 Transatlantic Cooperation Agreements at a Glance
Transatlantic Agreement Year Impact on the Economic Relationship
The TransatlanticDeclaration 1990 Contains a broad commitment to
economic liberalization
The New TransatlanticAgenda (NTA) and JointAction Plan (JAP)
1995
Includes a chapter on contributing tothe expansion of world trade andpromoting closer economic relationsJAP discusses building a lsquonewtransatlantic marketplacersquo throughincreased regulatory co-operation
Transatlantic EconomicPartnership (TEP) 1998
Outlines three main goals for thetransatlantic economic relationship1) market access gains for goods
services and agricultural products2) multilateral and bilateral trade
liberalization of goods services andcapital
3) deepening dialogue between non-governmental organizationsparliamentarians and government
10
22 An Overview of Existing Transatlantic Institutions
Todayrsquos transatlantic economic relationship is managed largely by a setof institutions that were created in stages by the TransatlanticDeclaration the NTA and the TEP Combined these institutionsconstitute a framework for long-term as well as day-to-day economiccooperation and dispute resolution
221 EUUS Summits
The biannual EUUS summit is the primary forum forintergovernmental exchange in the NTA process consisting of thehighest level of contact between the Presidents of the US the EUCommission and the Council Presidency The transatlantic policy cyclebegins and ends with these biannual summits where decisions arelsquomadersquo about the general scope for co-operation and wherelsquodeliverablesrsquo - in the form of new bilateral agreements about regulatorycooperation or the resolution of specific disputesmdashare announced Thesummits encourage policy co-ordination because they create deadlinesfor progress reports and exert pressure on lower-level officials toproduce results
222 Senior Level Group and the NTA Task Force
The Senior Level Group serves as a contact point between the EUUSSummit and the working level of the transatlantic dialogue It hasroughly six formal members including the US Undersecretary of Statefor Economic Affairs Commission delegates from the Directorates-General for external relations and trade Council Presidencyrepresentatives and representatives of the lsquoArticle 133 committeersquodealing with international trade matters The primary tasks of the SLGare to prepare the agenda of the biannual summits lsquoshopping fordeliverablesrsquo to be announced on those occasions and to monitor theimplementation of the NTA and the TEP
Logistically the SLG typically meets twice during each CouncilPresidency with the first meeting used to assess potential areas ofcooperation and conflict and the second meeting finalizing the agendafor the EUUS summit and confirming the contents of its progressreport which is presented to summit leaders Below the SLG an lsquoNTATask Forcersquo meets somewhat more frequently (often throughvideoconferencing) to follow specific dossiers in both the security andeconomic realms
223 TEP Steering Committee and Working Groups
The TEP institutions including the Steering Group and workinggroups bring together policy experts to deal with economic issues ingreater detail The Steering Group consists of the US Deputy Assistant
11
Secretary of State for Economic Affairs Commission officials at theHead-of-Unit level and a Council Presidency representative Originallydesigned to coordinate negotiating approaches within the WTO and toact as an lsquoearly warning systemrsquo to identify possible trade disputes theTEP Steering Group has evolved into the primary coordinating body fortransatlantic economic relations including negotiations aboutregulatory cooperation in specific areas
The Steering Group is assisted by the TEP working groups which aresector-specific and thus mirror the sectors laid out by the TEPincluding agriculture biotechnology trade services and globalelectronic commerce Their main task is to find areas where the EUand the US can work together under the TEP framework and to reportany progress or problems to the Steering Group
224 The Transatlantic Early Warning System
The 1998 TEP declaration highlighted the need to identify potentialtrade disputes before they emerge At the Bonn EUUS summit inJune 1999 the two sides announced plans to formalize an EarlyWarning System for this purpose1 4 Essentially the transatlantic earlywarning system sparks an inter-agency process to identify potentialeconomic disputes at an early stage most notably with regard todomestic EU or US legislation that might act as a barrier totransatlantic trade and investment The task of spotting such potentialdisputes is delegated to the TEP Steering Group which reports earlywarning items to the Senior Level Group which in turn may take theminto account when preparing the EUUS summit agenda The TEPSteering Group also assigns contact points facilitating consultationsand agreeing on timelines for reporting back on items highlighted aspotential transatlantic policy frictions Unlike similar early warningsystems within the European Union however the transatlantic earlywarning system does not require that either side pause or reconsiderits proposed legislation or regulations The result is a system whichwhile respecting the regulatory sovereignty of both sides does notguarantee prevention or resolution of potential conflicts
12
Figure 1 The Transatlantic Early Warning System
The EUUS SummitTop-level discussions on
potential and exiting disputes
The Senior Level GroupReviews friction points reports to summitorand refers back to TEP Steering Group
or NTA Task Force
TEP Steering GroupIdentifies and monitorseconomic friction points
225 The Transatlantic Legislatorsrsquo Dialogue
An underlying feature of the early warning concept is the desire to getboth EU and US domestic policy makers to consider the externalimplications of internal policies However the Early Warning System isa bureaucratic tool The important task of raising awareness betweenEU and US legislators lies with the Transatlantic Legislatorsrsquo Dialogue(TLD) another product of the NTArsquos lsquobuilding bridgesrsquo chapter The TLDbrings together members of the US Congress and the EuropeanParliament so as to create awareness on each side of the transatlantictrade impact of EU and US legislative acts
Thus far however the TLD has not lived up to initial expectations forthree reasons First TLD participation is largely limited to members ofthe US House of Representatives and the European Parliament with aparticular interest in transatlantic relations and may not includemembers of committees drafting legislation with transatlanticrepercussions the US Senate moreover is thus far excluded from theTLD Second there is insufficient contact between the TLD and otherparts of the transatlantic dialogue for example the SLG Thirdmeetings of the TLD have been held only rarely and typically withweak attendance on the US side and the Dialogue has yet to engage inor settle any serious economic disputes between the United States andthe European Union
226 The Transatlantic Civil Society Dialogues
The fourth and final chapter of the NTA encourages the establishmentof lsquopeople to peoplersquo links as a way of building bridges across the
13
Atlantic and bringing a civil-society component to transatlanticcooperation In addition to supporting ad hoc exchange betweeneducators and scientists the EU and the US have encouraged and insome cases subsidized the establishment of formal dialogues amongEuropean and American business consumer and environmentalgroups and labour unions The 1995 NTA made specific mention ofthe Transatlantic Business Dialogue (TABD) while the 1998 TEPinvited civil society input lsquoon issues relevant to international trade as aconstructive contribution to policy makingrsquo In practice however not alldialogues have been created or function as equals
The Transatlantic Business Dialogue
The TABD is the oldest best organized and most influential dialoguein the transatlantic economic relationship Launched in 1995 at theinitiative of the US Commerce Department and the EU Commissionthe TABD brings together some 200 European and American CEOs forannual meetings which make joint recommendations on thetransatlantic policy issues1 5 From the beginning the TABD focusedthe attention of US and European legislators and regulators on theimportance of non-tariff barriers to trade calling explicitly for EUUSregulatory cooperation and mutual recognition of standardsmdashanapproach it has labelled lsquoapproved once accepted everywherersquo1 6 Inkeeping with this approach the TABD has been active in pressing forthe adoption and implementation of specific agreements including the1997 Mutual Recognition Agreements and the 2000 Safe HarbourAgreement on data privacy (examined below) In addition the TABDparticipates actively in the transatlantic early warning systemidentifying in its annual reports those domestic laws and regulationsthat might create obstacles to transatlantic trade and investment1 7
One result of this process is that the TABD has become a valuablesource of information for EU and US policy makers Sixty percent ofthe TABDrsquos original recommendations resurfaced in the NTA and theJoint Action Plan1 8 Some members estimate that one-third of itsrecommendations have been taken on board by transatlantic policymakers1 9 Nevertheless there is an increasing perception within theTABD that much of the lsquolow-hanging fruitrsquo has been picked in terms oftransatlantic trade liberalization and regulatory cooperation and a fearthat governments lsquocanrsquot deliverrsquo regulatory reforms demanded bybusiness2 0 In addition the TABD faces the challenge of interactingwith the other officially recognized dialogues with which it may notalways agree
The Transatlantic Consumer Dialogue
The decision to include consumers environmentalists and workers inthe transatlantic dialogue was the result of pressure from NGOs theEuropean Commission and eventually the US State Department The
14
success of the TABD sparked criticism from the NGO communitywhich argued that the influence of the TABD was unbalanced by anabsence of civil society input In response to these concerns the StateDepartment and the European Commission both agreed to providefunds to establish a new Transatlantic Consumer Dialogue There wassome objection to government sponsorship of the groups particularlyin the US where it was feared that the consumer dialogue was a wayto lsquogreenwashrsquo the TEP There was also a divide among its membersover the issue of trade liberalization most notably at the first meetingof the TACD which was overshadowed by a dispute between groupssuch as Public Citizen which generally oppose trade liberalization andother groups such as Consumer Union which support tradeliberalization as a means of increasing consumer choice2 1
Despite this rocky start the TACD has become an efficientorganization with a secretariat in London and a Steering Committeethat has organized its roughly 60 members into working groups onfood electronic commerce and trade In its working groups annualmeetings and recommendations the TACD has focused largely ontransatlantic regulatory issuesmdashin areas such as data privacy foodsafety and the application of the lsquoprecautionary principlersquo in riskregulationmdashbecause many consumer groups feared a downward spiralof regulatory standards as a result of increasing trade liberalizationNevertheless despite its high level of activity some members of theTACD feel that they have not had a sufficient impact on the NTAprocess which they regard as being dominated by a free-tradeagenda2 2
The Transatlantic Environmental and Labour Dialogues
Attempts to forge a functioning dialogue between the European andAmerican environmental and labour movements have been the leastsuccessful Despite initial attempts to create an environmentaldialogue the TAED suspended its activities in 2000 citing a lack offunding from the US side2 3 The TAED had until this point held threemeetings and established a Steering Committee as well as WorkingGroups on Climate Protection Bio-diversity and Forest ConservationFood and Agriculture and Industry The TAED also offered a numberof official recommendations on safe energy sources biotechnologywaste management and emissions standards although TAEDmembers like their TACD counterparts argued that the TABDcontinued to enjoy privileged access to EU and US policymakers2 4
Finally while the Transatlantic Labour Dialogue is officially still afunctioning forum it is the least developed of the transatlantic civil-society dialogues The TALD is little more than a modest exchangebetween the European Trade Union Confederation (ETUC) and theAmerican Federation of Labour and the Congress of IndustrialOrganizations (AFL-CIO) with no organizational structure secretariat
15
or formal objectives The TALD did hold several meetings in 1998 and1999 and 2000 but produced only six recommendations from thosemeetings Simplifying only slightly the ETUC and AFL-CIO havechosen to emphasize their shared interests in a global labour dialogueand have demonstrated little commitment to a specificallytransatlantic agenda within the framework of the NTA or the TEP2 5
In sum the transatlantic civil-society dialogues have arguably served auseful purpose in fostering transatlantic discussion among businessesand non-governmental organizations (most notably in the businessand consumer sectors) and in producing concrete recommendationsfor transatlantic economic cooperation However the relative weight ofthese organizations remains highly uneven and the currentarrangement is highly segmented and marked by a lack of anylsquodialogue among the dialoguesrsquo which might lead to the creation of agenuine transatlantic public sphere
23 An Effective Framework for Economic Cooperation
In recent months both official reviews and academic studies havefocused on the institutions of the NTA and the TEP asking whetherthese institutions are an adequate framework for transatlanticeconomic as well as security cooperation In its 2001 review of theNTA for example the European Commission argued that institutionssuch as the TEP Steering Group the NTA Task Force and the SeniorLevel Group serve useful purposes in fostering dialogue andcooperation between EU officials and their US counterparts but alsonoted a number of weaknesses in the current structure including thesummit-driven demand for often artificial lsquodeliverablesrsquo at six-monthintervals and the difficulty in focusing on medium- to long-termpriorities given the inevitable demands of pressing short-term issuesThe Commission therefore proposed a number of reforms to thecurrent institutions including the establishment of explicit medium-term priorities and the possible reduction of the number of EUUSsummits to one per year2 6
By and large the Commissionrsquos recommendations were welcomed bythe United States government which agreed to the establishment of aset of medium-term priorities in the context of the June 2001 Goumlteborgsummit By contrast no progress has been made on the suggestion ofreducing the number of transatlantic summits largely because of thedifficulties posed by the rotating six-month presidency on the EU sideIn addition as we have seen a number of calls have been made inrecent years for a more transparent and accountable process oftransatlantic economic governance with more balanced input fromcivil society and with a greater role for democratically electedlegislators Thus far however these calls have met with no systematicresponse from either the US or the EU
16
Moving from institutions to lsquodeliverablesrsquo a recent study by EricPhilippart and Pascaline Winand has attempted to measure the policyoutputs of the NTA by examining the joint reports of the Senior LevelGroup since 1995 in order to determine to what extent and in whichareas the goals of the Joint Action Plan had been missed met orexceeded Summarizing a complex analysis Philippart and Winandfind that the extent and level of cooperation varies both across andwithin the four chapters of the NTA with genuine joint action in someareas and lower levels of cooperation (such as the exchange ofinformation) or inactivity in others In the area of foreign policycooperation for example the authors find that EUUS cooperation hasbeen most successful and resulted in the most extensive joint actionwithin Europe itself while yielding fewer and less binding outcomes inother regions In the area of economic cooperation the authors findthat the NTA has been most active in the establishment of alsquotransatlantic marketplacersquo with relatively extensive trade andregulatory cooperation but far less active and successful incoordinating economic policies in the World Trade Organization andother multilateral fora2 7 In the following two sections therefore weturn from a discussion of institutions and process to a more explicitanalysis of specific economic issues relating to the management oftrade disputes as well as bilateral efforts at regulatory cooperation
17
ndash 3 ndashTrade and Regulatory Disputes
in the Transatlantic Economic Partnership
Despite the obvious importance of EUUS trade and investmentrelationshipmdashor indeed because of itmdasheconomic disputes have beenand remain an important feature of the transatlantic partnershipIndeed the settlement and where possible prevention of suchdisputes was a large part of the motivation behind the establishment ofthe New Transatlantic Agenda and retains an important place inbilateral economic relations
31 Classifying Disputes Traditional Trade Issues vs NewlsquoBehind-the-Borderrsquo Regulatory Disputes
Transatlantic economic disputes arise from various sources and canbe settledmdashor left unsettledmdashby a similar variety of means In terms oftheir sources we can distinguish between two broad categories oftransatlantic trade disputes (1) lsquotraditionalrsquo trade disputes regardingdiscriminatory national measures such as tariffs and quotas imposedat the border as well as subsidies antidumping actions and safeguardmeasures which discriminate explicitly between domestic and foreignproducers and (2) lsquonew-stylersquo disputes about the trade-distortingeffects of lsquobehind-the-borderrsquo regulations that act as non-tariff barriersto international trade in goods services and intellectual property
With the gradual decline of tariffs and quotas as direct barriers toinvestment and the simultaneous increase in domestic economicregulation on both sides of the Atlantic in response to concerns aboutthe environment consumer protection public health and the like thefrequency of these new-style disputes has increased drastically duringthe course of the 1990s and early 2000s Some of these disputes likethe ongoing conflicts over the regulation and marketing of hormone-treated beef and genetically modified organisms (GMOs) havegenerated considerable controversy on both sides of the Atlantic andplaced strains on the transatlantic economic partnership
The rise of such transatlantic regulatory disputes in turn hasprompted questions about what Miles Kahler and others have termedlsquosystem frictionrsquo between the respective regulatory systems of the
18
European Union and the United States In a survey of transatlanticeconomic relations conducted in 1995 Kahler concluded that thereexisted at best partial evidence of system friction between the UnitedStates and the European Union noting that some issues (egagriculture and audiovisual services) did indeed divide the US and EUsystems fundamentally while on other lsquonewrsquo issues like labourstandards and the environment the EU and the US generally sharedcommon views2 8
Surveying the landscape of transatlantic economic relations sevenyears later it remains true that the European Union and the UnitedStates are united by many common values and common interestsNevertheless in a growing number of issue-areas including food safetydata privacy copyright protection taxation accountancy standardsand others the United States and the European Union have arguablyexperienced lsquosystem frictionrsquo in the form of a large number ofsimmering regulatory disputes summarized in Appendix 1 at the endof this report
Table 5 Classifying US-EU Trade Disputes
Agriculture Industrial goods Services
Border-measures
Bananas (alsoGATS)Belgian ricedutiesTariff-rate quotacorn gluten feed
Harbour taxAnti-dumping(steel uranium)CVD (steel)Safeguard actions(steel)
Tra
dit
ion
al
Subsidies Export subsidies AirbusFSC
Regulatorybarriers
Beef hormonesGMOs
Hush kitsPublicprocurement
Audio-visualProfessionalservicesTelecommuni-cationsData privacy
New
sty
le
IPR Havana Club Irish MusiccopyrightGreek protectionof movies
19
As Table 5 makes clear the contemporary transatlantic relationship ischaracterized by both traditional trade conflicts and new-styleregulatory disputes Indeed traditional disputes about tariffs andquotas (eg bananas) subsidies (eg Foreign Sales Corporations) anti-dumping measures and safeguard actions (eg steel) constitute someof the most high-profile disputes between the United States and theEuropean Union With a few exceptions however these disputesprimarily concern traditional trade measures that are within the lsquocorebusinessrsquo of the multilateral trading system which has wellestablished rules and an effective functioning dispute settlementprocedure within the World Trade Organization Put simply the WTODispute Settlement Understanding provides a body of multilateralrules governing the permissible use of tariffs quotas and other trade-restrictive practices a forum for consultation and if necessarylitigation among the parties to a dispute before WTO panels and theAppellate Body a binding requirement for member states to complywith DSU panel and Appellate body decisions and authorizedretaliation in the event of prolonged noncompliance with thosedecisions2 9
By contrast regulatory disputes implicate national laws andregulations that are often adopted for legitimate reasons of consumerand environmental protection or public health and after extensivedemocratic or administrative processes For this reason transatlanticregulatory disputes can be more bitter and intractable than traditionaltrade disputes insofar as both sides believe that they are lsquodoing theright thingrsquo and insofar as domestic political actors resistsubordinating domestic regulations to the exigencies of internationaltrade Such regulatory disputes also create particularly difficultquestions for the WTO dispute settlement procedure insofar as theycall for a politically sensitive balance between the economic imperativeof liberalized international trade on the one hand and the economicand non-economic motivations behind domestic regulations on theother hand
Largely for this reason both the United States and the EuropeanUnion have generally avoided bringing such regulatory conflicts beforethe World Trade Organization preferring in most instances to managetheir regulatory differences through bilateral consultation andcooperation Table 6 which summarizes EUUS WTO disputes bysubject matter demonstrates clearly the continuing dominance oftraditional trade issues (tariffs subsidies countervailing duties andantidumping) and the effort by both sides to keep politically sensitiveregulatory issues away from the WTO (For more information about thesubjects and status of all EUUS trade disputes before the WTO seeAppendices 2 and 3 at the end of this report)
Simplifying slightly existing regulatory as well as traditional tradedisputes can be addressed in any one of three ways (summarized in
20
Table 7 page 22) First the EU and the US may engage in directconsultations about regulatory barriers to trade and resolve thedispute without resorting to WTO dispute resolution examples includethe dispute over airplane lsquohush kitsrsquo resolved through a negotiatedsettlement between the EU and the US and the public procurementcase involving a Massachusetts state law imposing sanctions againstfirms doing business in Myanmar which was resolved unilaterallythrough the application of US federal law Second one party maychallenge the legality of the otherrsquos regulations before the WTO as inthe case of the US challenge to the EU ban on hormone-treated beefor the EU challenge to a provision of US copyright law in cases wherethe disputed regulation is ruled to be in violation of WTOrequirements however compliance has proven difficult Third andfinally given the difficulties of resolving such disputes through eitherbilateral negotiations or WTO litigation the bulk of regulatory disputesare allowed to simmer indefinitely with periodic consultations andexchange of information among the two sides but no resolution of theresulting trade tensions As Appendix 1 makes clear the overwhelmingmajority of current transatlantic regulatory disputes fall into this thirdcategory
Table 6 Transatlantic Trade Disputes in the WTO Overview and Context
Tariffsquotascustomsdutiesrules oforigin
retaliatorymeasures
Tradedefence
instruments(a-d CVDsubsidies)
TechnicalTBTs
(classi-ficationlabelingtesting)
Substantive TBTs
(process ampproductrequire-ments)
Subsidies GATS TRIPS TRIMS GPA Other
EU - US(EU asthirdparty)
6 9 (11) 1 (1) 1 3 1 2
EU - Restof World(RoW)
14 6 1 1 3 4 3 4
RoW ndash EU 12 3 4 2 1 1
US ndash EU(US asthirdparty)
8 (1) (1) 1 (1) 8 1 8
US - RoW 10 7 3 2 7 2 6 3 1
RoW ndash US 7 21 5 1 1 1
RoW ndash RoW 17 30 1 6 10 3
Sources Adapted from DG Trade WTO - Dispute Settlement (updated 15102) httpeuropaeuintcommtradepdfcasesxls accessed15202 and the WTOs dispute database (httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
21
22
Table 7 Methods of Dispute Resolution with Examples
Negotiated Agreement orUnilateral Action
WTO Dispute Settlement SimmeringDisputes
HushkitsMassachusettsMyanmar(public procurement)
Beef hormones(EU not in compliance)Irish Musiccopyright (EUUScompensation agreement)
GMOs
The sources of such regulatory disputes and the difficulties they posefor traditional dispute settlement procedures are illustrated below infour brief case studies focusing on (1) the US challenge to EUlegislation prohibiting the use of airplane lsquohush kitsrsquo (2) the USchallenge to the EUrsquos ban on hormone-treated beef and the relateddispute over the EUrsquos moratorium on the approval of geneticallymodified foods and crops (3) the EUrsquos challenge to the aforementionedMassachusetts public procurement law and (4) the EUrsquos challenge to aprovision of the US Copyright Act Although not a thorough review ofthe entire universe of EUUS regulatory disputes these four cases doillustrate the types of regulations adopted and challenged by both theEU and the US as well as the various methods of dispute resolutionmentioned above The policy implications of these cases are discussedin Section 36
32 Case Study Airplane lsquoHushkitsrsquo
Many EUUS disputes concern the technical barriers to trade (TBTs)caused by divergent national regulations setting technical standards inareas ranging from the specifications for industrial machinery andemissions standards for motor vehicles to nutritional labelingrequirements for packaged foods As Kenneth W Abbott has pointedout in a recent study many such national regulations are identified bybusiness or governments as TBTs within the transatlantic relationshipand a far smaller percentage of these have emerged as high-profiletrade disputes3 0 To date no disputes have been litigated between theEU and the US under the TBT Agreement although one particularlyprominent case did create significant tensions in the transatlanticrelationship namely the US challenge to the EUrsquos ban on airplanelsquohushkitsrsquo
Hushkits are equipment packages designed to reduce the noiseemissions of aircraft through the use of sound-absorbing materialswith the aim of bringing particularly older planes into compliance withthe so-called lsquoChapter 3rsquo noise pollution standards adopted within theInternational Civil Aviation Organization (ICAO) In 1999 theEuropean Union which had long pressed unsuccessfully for theadoption of stricter standards within the ICAO adopted a Regulation
23
establishing a ban on the registration of older aircraft fitted withhushkits on the grounds that such aircraft only barely complied withChapter 3 standards and were substantially more polluting thannewer planes The ban on new registrations was to enter into force inMay of 2000 from April 2002 moreover hushkitted aircraft registeredin third countries would not be allowed to operate within EU territory
Although nominally intended to decrease noise pollution aroundairports in heavily populated regions of Europe the EUrsquos hushkitsRegulation met with howls of protest in the United States where theuse of hushkits had been encouraged by US authorities as a cost-effective way of meeting Chapter 3 standards A ban on the registrationof hushkitted aircraft the US argued would therefore impose adisproportionate burden on US airlines which estimated that theRegulation cost them some $2 billion by depressing the value of theirexisting fleets while benefiting European carriers that had relied moreextensively on the purchase of new aircraft designed specifically tomeet Chapter 3 specifications In legal terms moreover the UnitedStates argued that the Regulation violated the terms of the ICAOagreement which simply set a performance standard for planes anddid not authorize parties to set more demanding standards or tomandate a specific design standard (eg a ban on the use ofhushkits) The US accordingly lodged a formal ICAO complaint againstthe 15 EU member states in March of 2000
After extensive bilateral discussion as well as multilateral negotiationswithin the ICAO in October 2001 the US and the EU reached asettlement of the case The first step in this settlement was themultilateral resolution adopted on 4 October in the ICAO assemblyurging states to pursue a lsquobalanced approachrsquo to noise reductionadopting local operating restrictions only where supported by anassessment of the costs and benefits and only after fully assessingalternative measures to reduce noise At the same time the ICAOagreed to a new and stricter set of lsquoChapter 4rsquo standards to take effectbeginning in 2006
Consistent with the provisions of the ICAO agreements the EU agreedon 25 October to withdraw the original Hushkits Regulation by April2002 (the date when it would have applied to third-country aircraft) inreturn for which the US agreed to withdraw its complaint before theICAO In place of the original Regulation the Commission issued aproposal in November 2001 for a new Directive replacing the generalban on hushkitted places with a more discriminating provisionallowing noise-sensitive airports in congested urban areas to limit theuse of planes that are lsquomarginallyrsquo compliant with Chapter 3standards3 1 This draft Directive was approved by the EuropeanParliament in its first reading in March 2002 and at this writing ispending adoption by the Council of Ministers and the Parliament
24
Despite the initial acrimony between the US and the EU the hushkitscase represents a successful effort at bilateral dispute resolution in abroader multilateral setting In this case the European Union agreedafter receiving assurance and guidance from the ICAO to adopt a morediscriminating and less trade-distorting regulatory approach whichsatisfies the trade concerns of the United States while allowing the EUto address the problems of noise pollution around the Unionrsquos mostcongested urban airports As we shall see presently however not allsuch regulatory conflicts have proven so amenable to negotiatedagreement
33 Case Study Hormone-Treated Beef andGenetically Modified Organisms
EU and US food-safety regulations constitute some of the mostimportant regulatory barriers to international trade and have been thesource of some of the most politically difficult and intractabletransatlantic regulatory disputes pitting each sidersquos sovereign right toregulate the safety of its food against its international obligationsunder WTO law3 2 Within the United States regulation of food safetywas among the earliest and most politically sensitive tasks of thefederal government which has delegated much of the power fordomestic regulation to agencies like the Food and Drug Administration(FDA) which has jealously guarded its reputation as an independentand impartial regulator making decisions on the basis of scientifictests rather than political pressures In the EU by contrast foodsafety regulation is carried out in part by national regulators and inpart by the EUrsquos political bodies including the Council of Ministersthe European Parliament and the Commission The deficiencies of thispatchwork regulatory process was painfully revealed however by aseries of food safety crises during the latter half of the 1990s includingmost notably the BSE crisis of 1996 and the Union has respondedforcefully with the creation of a European Food Safety Authority andwith an insistence on the application of the so-called lsquoprecautionaryprinciplersquo justifying regulatory action in the absence of clear scientificevidence and on the basis of consumer concerns and social andeconomic criteria
Precisely because food safety regulations can act as non-tariff barriersto trade in agricultural products the EU and the US have agreed tosubject their domestic regulations to the discipline of internationalguidelines such as the United Nations Codex AlimentariusCommission which establishes international standards for food safetyand more recently through the 1994 WTO Agreement on theApplication of Sanitary and Phytosanitary Measures (the SPSAgreement) The SPS Agreement does not establish bindinginternational standards for food safety nor does it automaticallypreempt the adoption of domestic standards that might constitute
25
non-tariff barriers to trade The agreement does however incorporateand promote the adoption of international standards as well asestablish trade rules that limit the ability of states to adopt food safetyregulations that are not scientifically grounded The terms of the SPSAgreement are moreover enforceable under the WTO disputesettlement procedure
The consequences of the divergent EU and US regulatory processesand the difficulties of resolving disputes through the WTO disputesettlement procedure can be illustrated most clearly by the long-standing EUUS dispute over the issue of hormone-treated beef Theconflict began in 1989 when the European Union announced a ban onthe sale and marketing of beef treated with any one of six growth-promoting hormones that had been tested and certified as safe by theFDA In 1995 following the entry into force of the SPS Agreement theUnited States took legal action before the WTO alleging that the EUban was inconsistent with the terms of the SPS Agreement since it wasnot based on scientific evidence risk assessment or internationalstandards After a protracted legal battle involving the issuing of apanel report and a subsequent appeal the WTO Appellate Body heldwith the United States that the EU had failed to base its ban on ascientific risk assessment and ordered the EU to bring its domesticregulations into compliance with WTO law
Despite the clear ruling against it the European Union faced withopposition from public opinion and hopeful of producing additionalscientific findings that would eventually justify the maintenance of theban failed to comply with the Appellate Bodyrsquos decision The UnitedStates therefore retaliated against the EU in May of 1999 imposingtariffs of $1168 million against EU agricultural products such as foiegras Roquefort cheese and Dijon mustard These US tariffs in turnsparked protests among French and European farmers who seized onthe beef-hormones case as a symbol of the threat posed byAmericanization and globalization to European regulations andtraditions Since 1999 the United States and the European Unionhave continued to consult regularly about this case but the Unionremains firm in its refusal to alter its domestic law and the UnitedStates persists in the application of retaliatory sanctions against theEU
The transatlantic dispute over the regulation of genetically modifiedorganisms (GMOs)mdashor more precisely genetically modified foods andcropsmdashis analytically similar to the beef hormones case although thepotential economic stakes in this area of GMOs are potentially fargreater Here again the US Food and Drug Administration decided inthe early 1990s that genetically modified foods were not substantiallydifferent from conventional foods and therefore required no specialprocedures for approval or marketing and on that basis US farmersand seed producers have quickly embraced the use of genetically
26
modified foods and crops By contrast the European Union has takena more cautious approach in a series of Directives and Regulationsrequiring specific approval procedures for genetically modified crops aswell as labeling of foods from genetically modified varieties Since1998 moreover the Council has maintained a de facto moratorium onthe approval of new GM varieties even though the EUrsquos scientificcommittees have continued to formally approve a number of varietiesas posing no health risks to consumers
The GMO issue has been the subject of intense consultation betweenthe US and the EU in recent years including the creation of an EU-USBiotechnology Forum which issued a joint report on the subject inDecember 20003 3 as well as a Biotech Working Group within theTransatlantic Economic Partnership Such fora have provided for auseful exchange of information among regulators as well as tradeofficials yet the positions of the two sides remain far apart with atbest modest signs of convergence in the EU and US approaches Thusfar the United States has refrained from bringing a case against theEU before the WTO partly of fear that the European Union facing apotential backlash against both GMOs and the WTO would be unableto comply The issue therefore remains a simmering irritant in thetransatlantic relationship with the potential to flare into a majordispute should the United States eventually decide to litigate the issuebefore the WTO
34 Public Procurement The MassachusettsMyanmar Case
The previous two cases involved US challenges to EU regulationssetting requirements for the marketing and use of industrial oragricultural products Regulatory disputes can however be directed atUS as well as EU regulations and they can concern regulationsgoverning questions other than product standards An excellentexample is the EUUS dispute over the 1996 Act adopted by the stateof Massachusetts regulating state contracts with companies doingbusiness in Myanmar (formerly Burma) The law in question wasadopted in June of 1996 by the Massachusetts State Legislature withthe avowed aim of securing human rights and democratic elections inMyanmar which was then under military rule and subject to sanctionsfrom the US federal government as well as the EU Specifically theMassachusetts law imposed sanctions on foreign as well as domesticfirms doing business in Myanmar with the aim of motivating suchfirms to withdraw from activities in that country
As Matthew Schaefer points out in an excellent analysis of the casethe MassachusettsMyanmar dispute illustrates two recurrenttensions in EUUS trade relations3 4 First the case illustrates theproblems encountered when individual US states like Massachusettswhich are not directly party to the WTO adopt laws and regulations in
27
possible contravention of WTO law Anticipating such problems duringthe negotiation of the 1994 Government Procurement Agreement(GPA) the European Union had emphasized the importance for the USof binding the states and the US federal government responded byasking each of the states to submit a voluntary lsquoletter of commitmentrsquoagreeing to be bound 37 states including Massachusetts submittedsuch letters resulting in a substantial but incomplete mechanism toensure state-level compliance with the GPA
Second the Massachusetts law in question also represents theextraterritorial application of US (state or federal) laws which employtrade and other economic provisions to secure a foreign policy aim (inthis case the cause of democracy and human rights in Myanmar)Specifically the Massachusetts law attempted to penalize not onlyAmerican firms but also foreign firms for investing in Myanmar even ifsuch investments were legal in those firmsrsquo home countries In thislatter sense the MassachusettsMyanmar case bears a strikingsimilarity to the extraterritorial sanctions applied by the US in thewell-known Helms-Burton and Iran-Libya Sanctions Acts in which theUS federal government adopted extraterritorial sanctions againstcorporations doing business in Cuba Iran and Libya (The latter caseswere resolved at least temporarily when President Clinton agreed in1998 to waive such sanctions in a bilateral agreement with the leadersof the European Union)
In the Massachusetts case the law was challenged before the WTO bythe European Union (joined by Japan) which sought to have the lawruled incompatible with US obligations under the GPA Before the WTOpanel could rule however the law was successfully challenged andoverruled under US federal law when the US Supreme Court held thatfederal action in this area (ie the federal sanctions law againstBurma) had pre-empted such sanctions by the State of Massachusettswhose law was therefore held to be unconstitutional
The successful resolution of the MassachusettsMyanmar disputesuggests several lessons for the prevention and settlement of similarcases in the future according to Schaefer In terms of disputeprevention he argues this case points to the importance of informingstate governors and legislators about the constitutional limitations onthe extraterritorial use of economic sanctions as well as theirobligations under WTO agreements (at least insofar as the statesthemselves agree to be bound by them) In terms of dispute settlementfinally the Massachusetts case suggests that litigation in domesticcourts under US law may be more a more effective and comprehensiveconstraint on state sanctions than WTO law which should thereforebe employed with restraint in such cases
28
35 Intellectual Property Rights The Irish Music Case
In addition to trade in goods and services and public procurementnational laws and regulations regarding intellectual property rightscan also have international trade repercussions even when thoseregulations apply without discrimination to domestic as well as foreignproducers Indeed protection of intellectual property has been thesubject of no fewer than 11 WTO disputes between the United Statesand the European Union since 1995 The challenges posed byintellectual property disputes are illustrated most strikingly by the so-called lsquoIrish music casersquo in which the European Union challengedprovisions of US copyright law before the World Trade Organization 3 5
The US law in question was the 1976 Copyright Act as amended bythe 1998 Fairness in Music Licensing Act Specifically Article 110(5) ofthe amended Act included a lsquobusiness exemptionrsquo according to whichestablishments such as bars shops and restaurants below a certainsize (ie 2000-3750 square feet) were allowed to play radio andtelevision music without paying fees to royalty-collecting bodies Therelevant provisions of the Act had been adopted only after long anddifficult negotiations between the representatives of US performingrights organizations on the one side and the National LicensedBeverage Association on the other and sought (however successfully)to balance the rights of copyright holders with the interests of smallrestaurant and bar owners
Although the US law applied equally to domestic as well as foreigncopyright holders in 1997 the Irish Music Rights Organization (IMRO)a collective music management company representing Irish musicianssuch as the rock group U2 filed a complaint about the law before theEuropean Commission IMRO claimed that the derogation in the lawwas in violation of US commitments under both the InternationalAgreement on Trade Related Aspects of International Property Rights(TRIPS) as well as the Berne Convention for the Protection of Literaryand Artistic Works since it failed to protect authorsrsquo rights resultingin an estimated loss of euro 121 million annually for IMROrsquos membersThe Commission having investigated the case agreed with IMRO thatthe law violated US obligations under the TRIPS agreement andinitiated a formal complaint before the World Trade Organization in1998
In June 2000 a WTO panel issued a decision in favour of theEuropean Union calling on the US to bring subparagraph (B) ofSection 110(5) of the Copyright Act (the aforementioned businessexemption) into conformity with the TRIPS agreement In response tothe panelrsquos report the United States announced that it would notappeal the panel decision but also that it would require time to amendits existing copyright legislation In the interim the United States andthe European Union agreed to establish a WTO arbitration panel
29
which would decide on the level of compensation to be granted by theUS to the EU pending modification of the Act In November 2001 thearbitrators accordingly assessed the annual losses suffered by EUcopyright owners and hence the level of compensation to be paid bythe United States at some $108 million In light of this finding EUTrade Commissioner Pascal Lamy and US Trade Representative (USTR)Robert Zoellick agreed the following month to a temporary solutionwhereby the USTR would seek authorization from Congress toestablish a special fund worth $33 million over three years to financeprojects and activities for the benefit of EU music creators pendingrevision of the US law
The December 2001 agreement between the US and the EU waspresented by EU Trade Commissioner Pascal Lamy as lsquoa good exampleof how we can manage our problems in a cooperative manner whilekeeping in mind our international commitmentsrsquo3 6 However while theUS and the EU have indeed reached an amicable three-year agreementon this issue the Irish Music case also serves as an additionalexample of the difficulties encountered by both sides in amendingdomestic regulations in response to trade concerns and WTO rulingsAlthough the European Union side insisted on the US obligation toamend its law and explicitly retained its right to return to the WTO inthe event of noncompliance at this writing there is no sign of anyimminent US effort to bring its domestic law into compliance and anextended US agreement to compensation remains a probablealternative for the foreseeable future
36 Dealing with Trade and Regulatory Conflicts
Transatlantic trade disputesmdashboth traditional disputes and new-styleregulatory conflictsmdashare inevitable in a relationship as close as EUUSrelationship and are not likely to disappear anytime in the nearfuture Many of these disputesmdashespecially old-style tariff quotasantidumping and subsidies disputesmdashare dealt with effectively by WTOdispute resolution New-style disputes however often involve domesticlaws adopted for legitimate purposes after democratic deliberation andlitigation in such cases can place severe strain on the WTO systemparticularly in cases like beef-hormones copyright and potentiallyGMOs where the losing party would have difficulty complying with anadverse WTO ruling
In light of these challenges scholars and practitioners haverecommended a range of potential reforms in US and EU domesticpolitics in the bilateral relationship and in the multilateral WTOsystem to prevent and settle regulatory disputes Although a complete
30
review of these recommendations is beyond the scope of this report3 7 some of the most promising proposed reforms include the following
bull Changes in Domestic Regulation Perhaps the most promisingsuggestions for reform are those that require no formal internationalagreement but rather domestic reforms that could be undertakeneither unilaterally or through an informal process of mutualcoordination The Transatlantic Business Dialogue for examplehas proposed that the United States and the European Union bothundertake to conduct lsquoTrade Impact Assessmentsrsquo of draftregulations so that legislators are made aware of the potential tradeimplications of proposed regulations before they are adopted Sucha procedural change could be undertaken within the respectivedomestic systems of the US and the EU and without compromisingthe regulatory sovereignty of either side and would have theadvantage of implicating legislators who thus far have been largelyabsent from the NTA process3 8 In a similar vein US observers haveadvocated the adoption by the EU of some form of advise-and-consent procedures for the adoption of regulations which wouldprovide domestic as well as foreign stakeholders with advancewarning of proposed regulations and improve the quality of EUgovernance more generally Finally as we have seen in theMassachusettsMyanmar case it has been proposed that theUnited States should do more in the future to implicate subfederalstates in international trade agreements and to inform them oftheir obligations under US constitutional as well as internationaltrade law
bull Changes in the Bilateral Relationship Notwithstanding theirincreasing complexity the institutions of the NTA and the TEP havenot prevented the rise of new regulatory disputes nor have theybeen able consistently to settle amicably all those that do arisegiven the difficulty for both sides of changing domestic regulationsadopted in response to legitimate public concerns Nevertheless anumber of bilateral reforms have recently been proposed includingmost notably the further development of the bilateral early warningsystem increased regulatory cooperation and the expansion of theTransatlantic Legislators Dialogue With regard to the firstinterviews with policy-makers on both sides of the Atlantic revealthat the early warning system has proven useful in identifyingobscure technical barriers to trade but the same policy-makersemphasize that increased early warning does not provide aguarantee that legislators or regulators will be willing or able toadjust domestic regulations and indeed the survey of regulatorydisputes undertaken above suggests that increased early warningwould not have been capable of resolving disputes over beefhormones or copyright where the primary impediment to resolutionof the disputes was not lack of information but the regulatorysovereignty of legislators and regulators on each side For this
31
reason particular emphasis has been placed on the promise ofenhanced regulatory cooperation (examined in detail in the nextsection) and on the further development of the TLD (where theprimary challenge will be to provide an incentive for domesticallyoriented parliamentarians and congressmen to participate intransatlantic consultations)
bull Reform of WTO Dispute Settlement The WTO Dispute SettlementUnderstanding establishes a binding and efficient system for theresolution of international trade disputes and most WTO memberstates are broadly satisfied with the operation of the systemNevertheless the WTO dispute resolution system is placed underparticular strain in regulatory disputes such as the beef-hormonesand Irish music cases reviewed above where it is called to balancetrade and regulatory objectives and where compliance is politicallydifficult for the losing parties In light of these weaknesses variousscholars and practitioners have suggested reforms to both WTOrules and to the DSU including most notably the clarification of thelsquoprecautionary principlersquo in WTO law and moving from retaliation tocompensation in cases of noncompliance with DSU rulings Both ofthese proposals merit further discussion in the coming review of theDispute Settlement Understanding (scheduled to be completed inMay 2003) and in the ongoing Doha Round of trade talks In themeantime the EU and the US would do well to continue theirgeneral pattern of restraint in addressing regulatory disputesbilaterally and avoiding any potential lsquooverloadingrsquo of the WTOdispute settlement procedure
Future negotiations between the EU and the US as well as futurestudies designed to inform those negotiations would do well to explorethe viability of these proposed reforms
32
ndash 4 ndashTransatlantic Regulatory Cooperation
One of the most striking features of the period since the 1995 NewTransatlantic Agenda has been the dramatic increase in both formaland informal cooperation among the regulatory authorities of theUnited States and the European Union In the past five years alonethe United States and the European Union have signed nine formalregulatory cooperation agreements in areas as diverse as competitionpolicy data privacy customs procedures veterinary standards andthe mutual recognition of testing and certification procedures (Table 8)These formal regulatory agreements moreover represent only afraction of the contacts that occur among US and EU regulators bothbilaterally and in various multilateral fora
41 Why Cooperate
The incentives for US and EU regulators to engage in formal andinformal cooperation vary across different issue-areas but cangenerally be classed into two broad categories3 9 First regulators maycooperate because they view such cooperation as useful in carrying outtheir essential rulemaking responsibilities in an increasingly integratedtransatlantic and global marketplace Such cooperation need not andtypically does not involve joint rulemaking activities but focusesinstead on exchanges of information identification of best practiceand early notification of new regulations being considered within eitherpolity In the area of food safety for example the EuropeanCommission and the US Food and Drug Administration have notidentified or implemented common standards for the reasonsdiscussed above yet the two regulators do engage in an ongoingdialogue both bilaterally and within the Codex Alimentarius (the globalbody for the establishment of food safety standards) and theCommission consulted extensively with its US counterparts in thedesign of the newly created European Food Safety Authority Similarbilateral exchanges occur regularly in other issue-areas as well aswithin multilateral standard-setting bodies such as the InternationalStandards Organization (for industrial standards) and theInternational Conference on Harmonization (for registration ofpharmaceuticals)
33
Table 8 Transatlantic Regulatory Cooperation Agreements
Agreement Targeted Regulations Year
Competition Policy Agreement Competition regulations 1991
ECUS Agreement on DrugPrecursors
Illicit drug regulations 1997
ECUS Customs and CooperationAgreement
Customs certifications 1997
EUUS General Mutual RecognitionAgreements
Conformity assessmenttesting in six sectorstelecommunicationsequipment electromagneticcompatibility electricalsafety recreational craftmedical devices andpharmaceutical goodmanufacturing practices
1997
EUUS Positive Comity Agreement Competition relations 1998
EUUS Agreement Concerning theEstablishment of Global TechnicalRegulations for Wheeled VehiclesEquipment and Parts
Technical regulations 1999
EUUS Veterinary EquivalenceAgreement
Animal export certifications 1999
EUUS Safe Harbour Agreement Data protection regulations 2000
Joint Declaration on USEUCooperation in the Field ofMetrology and MeasurementStandards
Measurement equivalence inproduct certification
2000
EUUS Agreement on MutualRecognition of Certificates ofConformity for Marine Equipment
Mutual recognition of marineequipment regulations
2001
EUUS Guidelines on RegulatoryCooperation and Transparency
Non-binding guidelines forcooperation among EU andUS regulators regardingtechnical barriers to trade
2002
Source European Commission DG TRADEhttpeuropaeuintcommtradebilateralusausahtm
34
A second and partially overlapping motivation for regulatorycooperation already touched on in Section 3 above is to avoid orresolve bilateral disputes about the potential trade-distorting effects ofnational regulations As we have seen domestic economic regulationscan become a source of transatlantic economic tension in two distinctways First domestic regulations in areas such as consumer orenvironmental protection food safety or copyright protection cancreate non-tariff barriers to international trade and investmentexamples include the recent disputes over the EUrsquos Data PrivacyDirective and its ban on hormone-treated beef as well as exemptionsto the US Copyright Act Second US and EU domestic regulators mayapply their domestic regulations in an extrajurisdictional fashion asfor example when EU and US competition authorities insist on theright to review mergers among firms in the other constituency insofaras the proposed merger creates effects in the regulatorrsquos domesticjurisdiction or when the US (or its constituent states) employs tradeand economic sanctions as an instrument of foreign policy In suchcases George Bermann has pointed out lsquothe line between simpleregulatory [cooperation] hellip and the settlement of trade disputes canbecome highly blurredrsquo4 0
The full range of regulatory cooperation agreements and practicesbetween the United States and the European Union is beyond thescope of this preliminary report Indeed interviews with practitionersfrom the United States and the European Union reveal thatconsiderable informal cooperation takes place across virtually everyconceivable area of US and EU regulation with little attention from thepress scholars or political actors Even in the absence of a full-scalecross-sectoral analysis however we can nevertheless undertake threebrief case studies of regulatory cooperation in the fields of competitionpolicy the negotiation of EUUS Mutual Recognition Agreements andthe Safe Harbour Agreement on data privacy regulation Takentogether these three cases illustrate the range of incentives forregulatory cooperation as well as the various means for suchcooperation and the significant obstacles that often stand in its way
42 Case Study Transatlantic Competition Policy Cooperation
One of the earliest regulatory cooperation agreements signed betweenEU and US authorities and one of the most successful concernscooperation in the enforcement of each sidersquos respective competitionpolicy laws including most notably the examination of proposedmergers and acquisitions
The incentives for cooperation in this area are substantial4 1 First asin other areas of regulation EU and US regulators confront similarproblems and are increasingly called upon to rule upon the samecases placing a premium on the sharing of information Second both
35
US and EU courts have ruled that their respective regulatorsmdashnamelythe Department of Justice and the Federal Trade Commission on theUS side and the Directorate-General for Competition on the EUsidemdashmay enforce domestic competition laws extraterritorially againstfirms based outside their domestic jurisdiction if and insofar thebehavior in question (eg a proposed merger) produces effects oncompetition in the domestic market Such extraterritorial applicationof both EU and US competition law raises serious issues about theduplication of effort by the two sets of regulators not to mention theadverse economic and political impact of inconsistent or conflictingdecisions on the same case by EU and US regulators
These concerns increased substantially in the early 1990s moreoverwith the rapid rise in cross-border mergers and acquisitions thataccompanied the completion of the Unionrsquos lsquo1992rsquo internal marketinitiative At approximately the same time moreover the EuropeanUnion adopted the 1990 Merger Control Regulation which gave theCommission regulatory authority to review mergers above certain sizethresholds and made the Commission an important interlocutor forthe EU in this area It was in this context of increasing cross-bordermergers and increasing EU authority over such mergers thatCompetition Commissioner Leon Brittan proposed in 1990 to expandEU competition policy cooperation with third countries beginning witha formal agreement with the United States US regulators respondedpositively to Brittanrsquos proposal and US and EU regulators agreed in1991 to adopt an agreement committing them to cooperation in thearea of competition policy including the sharing of non-confidentialinformation and coordination of enforcement activities This agreementwas later supplemented by two secondary agreements the 1998Positive Comity Agreement (which seeks to restrict the extra-territorialapplication of antitrust laws in non-merger cases but has beenformally invoked only once) and by the 1999 AdministrativeArrangements on Attendance in Hearings (which provide guidelines forthe participation of EU and US regulators in each otherrsquos hearings)
In the decade since the signature of the first Competition PolicyAgreement EUUS competition policy cooperation has generallyoperated smoothly and successfully with regulators from theCommission the Justice Department and the FTC sharing informationand coordinating enforcement activities on a daily basis andcooperating successfully on over 600 cases during the course of the1990s including almost 500 merger decisions The general success ofEUUS competition policy cooperation in the area of merger controlcan be attributed to the broad transatlantic agreement among EU andUS regulators about the basic scope and tools of policy which hasfacilitated the task of coordinating enforcement actions and generatingmutual trust among regulators
36
Nevertheless as Youri Devuyst points out in an excellent review oftransatlantic competition policy cooperation successful cooperationand conflict prevention between US and EU regulators can behampered by persistent differences in the scope and focus of US andEU competition law the procedures employed by both sides and theexigencies of confidentiality which limit the sharing of information byUS and EU agencies These limitations can be illustrated in theatypical but well-known BoeingMcDonnell Douglas merger (bothAmerican firms) which was approved by the FTC in July 1997 only tobe held up by Commission insistence that the companies agree toformal undertakings to satisfy its competition concerns Although thecase caused substantial strains in the transatlantic relationship thecompanies concerned eventually agreed to the Commissionrsquos proposedremedies allowing the merger to proceed4 2
An even more dramatic difference of opinion occurred with regard tothe proposed merger of two other US firms GE and Honeywell in2001 Here again US regulators approved the proposed merger only tosee the European Commission reject it in July 2001 after announcingthat the firmsrsquo proposed remedies had failed to satisfy theCommissionrsquos concerns Perhaps most strikingly and unlike theprevious case of EUUS disagreement in the BoeingMcDonnellDouglas merger a number of analysts claimed that the disagreementbetween US and EU regulators reflected an underlying andfundamental difference in the criteria for assessing proposedmergers4 3 Although the resulting predictions of other imminentUSEU conflicts are almost certainly overstated it is worthwhilenoting that the Commission in its December 2001 Green Paper on thereview of the Merger Control Regulation proposes to launch a debateon whether the Union should abandon its traditional lsquodominance testrsquo(ie assessing whether a proposed merger would create a dominantposition for the merged firm in the relevant market) in favour of alsquosubstantial lessening of competitionrsquo test (similar to that already usedin the US Canada and Australia)4 4 Whether the Union will move inthis direction remains unclear If so however it would represent astriking example of regulatory convergence among regulators alreadynotable for their similar (if not identical) regulatory philosophies andprocedures
43 Case Study EUUS Mutual Recognition Agreements4 5
As transatlantic tariff barriers have decreased firms have becomemore concerned with what they term duplicative regulatory compliancecosts and many have pressed for their removal This pressure hasincreased with rising transatlantic investment since divergent EU andUS standards and certification requirements most directly affecttransatlantic corporate groups and these groups more easilycoordinate lobbying on both sides of the Atlantic4 6 Transatlantic firms
37
under the auspices of the Transatlantic Business Dialogue inparticular have pressed for enhanced regulatory cooperation throughmutual recognition agreements culminating in the 1997 EUUSMutual Recognition Agreement (MRA) providing for mutual recognitionof testing and certification requirements and the more ambitious MRArelating to marine equipment signed in 2000 These agreements havebeen promoted as a major achievement of the New TransatlanticAgenda and as a flexible means of reconciling the regulatoryapproaches of the United States and the European Union andfacilitating access to both domestic markets
Notwithstanding these potential advantages however majorchallenges for transatlantic regulatory cooperation in this and otherareas are posed by the significant institutional asymmetries betweenthe United Statesrsquo and EUrsquos respective regulatory systems in an arrayof fields Where regulators adopt similar regulatory structures andsystems and enact similar substantive standards they more easilyunderstand and accept each otherrsquos regulatory determinationsRegulatory symmetry facilitates regulatory trust and confidenceenabling regulatory cooperation to occur as in the competition policycase examined above
In many issue-areas however US and EU regulators tend to work indifferent regulatory cultures Generally EU and national regulatorsoperate under the dual mission of ensuring free trade within theinternal market on the one hand while ensuring public safety throughhigh product and process standards on the other They thus are quiteaccustomed to interacting with foreign regulators and testing bodies onan ongoing basis As a consequence the Commissionrsquos DG Enterpriseand DG Trade units rarely tousled when negotiating and implementingthe 1997 Mutual Recognition Agreement The US Food and DrugAdministration (FDA) by contrast has traditionally defined its rolesolely as that of protecting US public health and has not operatedunder a dual mission of also facilitating market exchange Because theFDA is an independent regulatory authority anxious to protect itsregulatory autonomy US trade and commerce authorities encountermore difficulties in negotiating bilateral agreements concerning areaswithin the FDArsquos jurisdiction
Overall institutional adaptation for the negotiation andimplementation the 1997 MRA has been much easier for the EUwhich already has a mechanism for coordinating the mutualrecognition of product testing and certification among fifteen memberstates speaking eleven different languages This relatively deregulatedsystem consists of EU legislators setting lsquoessential requirementsrsquo in EUlsquonew approachrsquo directives which are supplemented by large numbersof harmonized lsquovoluntaryrsquo technical standards that in turn are widelyadopted Before marketing their products firms either self-certify theircompliance with these requirements or hire accredited testing and
38
certification laboratories Firms and laboratories remain subject topost-marketing member state regulatory controls as well as market-reputational constraints Member state regulators interact on a regularbasis through working groups committees and informalarrangements Overall this EU system can be characterized asgovernance by coordinated cross-border public-private networks
US regulatory officials however oversaw very different regulatorysystems in the areas covered by the 1997 MRA For example the USFederal Communications Commission (FCC) itself certified alltelecommunications equipment until the negotiation of thetransatlantic mutual recognition agreement at which time it adopted adecentralized EU model of certification The FDA continues to certifymost medical devices whereas EU authorities have permitted testingby private notified bodies since the mid-1990s The US OccupationalHealth and Safety Administration (OSHA) requires OSHA-accreditedlaboratories to certify all electrical safety equipment used in theworkplace whereas the EU has permitted manufacturers to self-certifythe equipmentrsquos conformity with European requirements since 1973
EU and US authorities began to seriously address issues of regulatorycoordination at the beginning of the 1990s In May 1989 US Secretaryof Commerce Robert Mosbacher and Commission Vice-PresidentMartin Bangemann agreed to explore the possibility of transatlanticmutual recognition agreements as well as mechanisms to grant USfirms greater access to EU standard-setting procedures After 1995these efforts were championed explicitly and repeatedly byTransatlantic Business Dialogue which became a prominent advocateof transatlantic MRAs4 7
EU and US negotiators initially discussed negotiating mutualrecognition arrangements in eleven sectors but ultimately whittledthis down to six4 8 In consequence the 1997 MRA consists of aframework agreement and six annexes respectively coveringtelecommunications equipment electromagnetic compatibilityelectrical safety recreational craft medical devices andpharmaceutical good manufacturing practices Each of the annexes isin fact a separate agreement for a separate sector covering definedcategories and lists of products
As with all trade negotiations the EU and the United States wereconcerned that the final results be lsquobalancedrsquo The United Stateswished to conclude an agreement on telecommunications equipmentfirst but the EU refused because it felt that US firms would benefitmore if the agreement covered only this sector EU negotiators thusinsisted that an agreement on pharmaceuticals and medical devices becompleted simultaneously The MRA sets up a new transatlanticstructure for overseeing its implementation First the MRA creates aJoint Committee which consists of US and EU trade officials who meet
39
twice annually Second the annexes create Joint Sectoral Committeesto oversee the annexesrsquo implementation
The 1997 Mutual Recognition Agreement does not cover recognition ofthe adequacy or equivalency of US and EU standards as such Ratherthe 1997 MRA only addresses mutual recognition by certificationbodies (known as lsquoConformity Assessment Bodiesrsquo) of each otherrsquosseparate standards4 9 Since neither the United States nor the EUrelinquishes sovereign control over the substance of their standardstrading firms still must meet the separate requirements of the worldrsquostwo largest markets In addition these assessment evaluations aresubject to certain pre-approval and post-approval conditions
Implementation of the 1997 MRA moreover remains uneven Thetelecommunications electromagnetic compatibility and recreationalcraft annexes all have been implemented as required In contrastimplementation of the electrical safety medical device andpharmaceutical GMP annexes remain in dispute in part because theFDA and OSHA have been slow to recognize the equivalency ofcertification by European government regulators or privatelaboratories and in part because of the magnitude and theunfamiliarity of US regulatorsrsquo task in assessing the equivalence ofstandards from 15 different member states submitting documentationin up to 11 different languages5 0 In the words of one FDA official theFDA has lsquorefused to compromise its mission of protecting public healthfor balance of trade purposesrsquo5 1 Thus all three annexes initiallydesired by the US administration are in operation while the threeannexes desired by the Commission are not Since the US executivehas less control over the US agencies responsible for implementationboth partiesrsquo choices are somewhat constrained
On June 12 2001 the United States and the EU initialed anAgreement on Mutual Recognition of Certificates of Conformity forMarine Equipment5 2 Unlike the 1997 Mutual Recognition Agreementand its six annexes this new agreement provides for mutualrecognition of each partiesrsquo standards and procedures as lsquoequivalentrsquofor purposes of certifications issued by conformity assessment bodieslocated in the partiesrsquo respective territories (Articles 3 and 4) Pre-existing harmonization of standards in this sector made possible thepartiesrsquo mutual recognition of lsquoequivalencersquo These standards wereagreed under the auspices of the International Maritime Organization(IMO) located in Geneva This new mutual recognition agreementshould be much easier to implement because less training andinformation exchange are required insofar as testing bodies will not becertifying under separate standards or procedures The parties alsoagreed up-front to recognize each otherrsquos existing conformityassessment bodies so that no application procedures are required forimplementation (Article 6) Thus while this agreement is relativelynarrow in product coverage it is much broader in scope
40
Transatlantic businesses that first touted the benefits of EUUSmutual recognition arrangements now realize their underestimation ofthe difficulties of implementation5 3 These constraints involve not justregulators and regulatory cultures but market forces as well Themarket has not reacted favourably to the recognition of newConformity Assessment Bodies as provided under the 1997 MRA Fromthe perspective of manufacturers they typically develop long-termworking relationships with certifying laboratories which constitute aform of cost-effective firm-laboratory partnership Moreover alaboratoryrsquos mark itself may be important in some markets so thatfirms may continue obtaining formal certification from EU notifiedbodies for the EU market and US laboratories for the United States Asa result most firms may continue using the same laboratories eventhough these laboratories cannot directly certify products asConformity Assessment Bodies but must work through sub-contracting arrangements with accredited laboratories on the otherside of the Atlantic5 4 As for laboratories they will not invest in theaccreditation procedures required to become a Conformity AssessmentBody if they fear that the benefits are limited or too uncertainAccreditation costs can be substantial involving seminars workshopstraining programs audits and joint inspections with authorities acrossthe Atlantic The MRArsquos success in consequence may requireconsiderable market promotion
Perhaps the most important lesson from the implementation of theEUUS MRAs is that agreements that both guarantee public safetyand reduce trade barriers cannot be accomplished on the cheap Theyrequire sustained political will of leaders in each jurisdiction to allocatesignificant resources to finance the coordination of cross-borderregulatory networks EU member states sustained such political willand dedicated such resources over decades in order to create thesingle market Even so they too have encountered significant setbacksand obstacles While it is far too early to pre-judge the 1997 MRA itseems clear that the full benefits of the agreement will be reaped only ifboth sides take concrete steps to ensure that sufficient regulatoryresources are made available to the regulators charged withimplementing the agreement in practice
44 Case Study Data Privacy and the Safe Harbour Agreement5 5
Data privacy protection became a transatlantic issue because of thegrowing interdependence of the US and European economies and therising importance of information technology US affiliates in Europeproduce over a trillion dollars of goods and services annuallyconstituting lsquoover half of all the foreign production of US companiesrsquo5 6
These companies depend on information flows not only with thirdparty suppliers customers consultants marketers and other serviceproviders but also internally within their complex networks of
41
affiliates joint ventures and partnerships The EUUS dispute overdata privacy protection and efforts at cooperation demonstrate theinherent interrelation between social regulation and open trade policieswhere regulation (or the lack thereof) has external effects Alleged USunder-regulation can jeopardize the privacy interests of EU residentsAlleged EU over-regulation can limit the commercial operations of USenterprises In an interdependent transatlantic economy US and EUauthorities attempt to manage the ensuing conflicts of norms andmesh where possible their divergent regulatory systems
On October 24 1998 Directive 9546EC on the Protection ofIndividuals with Regard to the Processing of Personal Data and theFree Movement of Such Data became effective The EU through itsDirective takes primarily a regulatory approach to data privacyprotection as opposed to private ordering through market processesExcept for public security criminal law and related exceptions theDirective covers all processing of all personal data by whatever meansand is not limited to action by government business sector or field ofuse (arts 2-3) The Directive prohibits data controllers from processinginformation unless the individual lsquounambiguouslyrsquo consents to theprocessing and that consent is informed (arts 7 8 10 14) TheDirective provides multiple means for enforcement It requires memberstates to grant individuals a permanent right of access to obtain copiesof the data about them and have it corrected or its use enjoined (arts12 28) It obliges member states to provide a judicial remedy forinfringements of data privacy rights including the right to receivedamages (arts 22-24) To support effective enforcement each memberstate must designate an independent public authority lsquoresponsible formonitoring the application within its territoryrsquo of the Directiversquosprovisions (art 28) These supervisory authorities are to be grantedsignificant powers (arts 18 28)5 7
In contrast the United States has stressed lsquoself-regulationrsquo by theprivate sector backed by regulation which tends to be sector-specificand less stringent Congressrsquos targeting of specific sectors andconcerns is reflected in the following statutory titles The DriverrsquosPrivacy Protection Act of 1994 the Video Privacy Protection Act of1988 The Electronic Communications Privacy Act of 1986 the CableCommunications Policy Act of 1984 and The Fair Credit Reporting Actof 1971 Overall the US approach is fragmented involving standard-setting and enforcement by a wide variety of actors including federaland state legislatures agencies and courts industry associationsindividual companies and market forces US legislation providescitizens with significantly greater protection against the collection anduse of personal information by government in particular the federalgovernment than by the private sector
Article 25 of the EU Directive provides that member states shallprohibit all data transfers to a third country if the Commission finds
42
that the country does not ensure lsquoan adequate level of protectionrsquo ofdata privacy Since it appeared that the United States might notprovide for lsquoadequatersquo data privacy protection under the Directiversquoscriteria US and EU authorities engaged in intensive negotiations toavoid a ban on data flows to the United States culminating in theiragreement on Safe Harbour Principles in March 20005 8 Under theagreement EU member states now must recognize that US firmsrsquoadherence to these Principles is sufficient to protect them frommember state challenge Member state authorities however may stillchallenge transfers to firms that do not adopt and comply with thePrinciples
The guidelines set forth seven core data privacy principles for industryto follow which respectively cover the following issues Notice ChoiceOnward Transfer Security Data Integrity Access and EnforcementThe parties supplemented the Principles with a document entitledlsquoFrequently Asked Questionsrsquo (FAQs) designed to guide firms andauthorities in the Principlesrsquo application Many of the FAQs specify thescope of exceptions thereby providing some leeway to US firms
Companies join the Safe Harbour program by annually certifying to theUS Department of Commerce that they will comply with the PrinciplesThe Department of Commerce then places the companyrsquos name on itsweb site list of certifying firms Self-regulatory organizations (such asBBB Online and TRUSTe) backed by the US Federal TradeCommission offer the primary means for the Principlesrsquo enforcementIn this way the Principlesrsquo application resembles the EUrsquos new andglobal approaches to internal market harmonization5 9 As under thenew approach the Safe Harbour Principles set forth lsquoessentialrequirementsrsquo that firms must meet As under the global approachfirms self-certify their adherence which certification is backed first byaudits from self-regulatory organizations and then (ultimately) by theauthority of the state As of February 23 2002 156 companies hadcertified their adherence to the Principles
The Directive also provides other ways to comply with it in particularthrough obtaining lsquounambiguousrsquo consent from the lsquodata subjectrsquo inEurope (art 7) and the signature of a lsquomodel contractrsquo with data privacyauthorities in member states (Article 26) In January 2002 theCommission approved standard contract clauses covering privacyprotection that can be applied to all data transfers from the EUregardless of a firmrsquos adherence to the Safe Harbour Principles Firmsalso can sign ad hoc contracts with individual member state dataprivacy authorities In addition firms can sign contracts with affiliateswhen transferring personal information such as information containedin personnel files
The Safe Harbour Principles are still at an inchoate stage so that itremains too early to assess their impact Some commentators have
43
questioned the effectiveness of the Principles given that relatively fewUS companies have signed them However some practitioners pointout that companies will not certify their procedures until theiroperations are in compliance6 0 For large companies this allegedly caninvolve considerable re-engineering of their information systemscreation of new internal policies and training of personnel
Nonetheless companies engaged in transatlantic business operate inthe shadow of the Directiversquos potential enforcement Under theDirective US businesses face potential litigation before Europeancourts and administrative bodies unless they adhere to the SafeHarbour Principles Even though privacy advocates have criticized theSafe Harbour Principles the agreement represents a potentially usefultool for such advocates In addition the agreement has increased thedemand for legal consulting and other privacy services within theUnited States For example the Better Business Bureau OnLinecreated a privacy seal program which incorporates the Safe HarbourPrinciples and the Electronic Frontier Foundation a public interestorganization has associated with information technology companies tolaunch a program named TRUSTe to rate the privacy protection ofInternet sites which program also is certified under Safe Harbour
In a world of increased economic interdependence the Safe HarbourPrinciples point to the importance of regulatory cooperation acrossborders involving public and private actors Certification groups suchas BBB OnLine meet with European data protection officials so thatthey become comfortable in the workings of an alternative USapproach Government officials including in Europe realize that theydo not have the resources to enforce the Directiversquos provisions solelyon their own and thus rely on public-private networks in an attemptto ensure better global practices affecting EU constituentsNonetheless to make the Principles work will require sustained cross-border cooperation
45 The Challenge of Transatlantic Regulatory Cooperation
Although brief and selective this review of cooperation across threesectors suggests several tentative conclusions about both the benefitsand the potential obstacles to transatlantic regulatory cooperation
With regard to the potential benefits of transatlantic regulatorycooperation we have identified two First as we have seen regulatorycooperation has the potential to enhance the efficiency of regulationthrough the exchange of information and best practice the provision ofearly warning of potential disputes the avoidance or management ofconflicting regulatory decisions and the gradual building of mutualtrust among regulators Second regulatory cooperation can facilitatetransatlantic trade and investment by removing duplicative regulatory
44
requirements and other non-tariff barriers within the transatlanticmarketplace Such cooperation moreover need not involve thecomplete harmonization or convergence of EU and US regulationsalthough there is some preliminary evidence of convergence in specificissue-areas including the acceptance by the United States of a mutualrecognition scheme similar to that long practiced in the EuropeanUnion and the EUrsquos active discussion of moving from its currentlsquodominance testrsquo to a possible new standard for regulatory mergerscloser to that employed by competition authorities in the UnitedStates
Yet despite the obvious promise of transatlantic regulatorycooperation a broad survey of EUUS cooperation in various areasincluding the three case studies analyzed above points to a number ofpotential obstacles to successful transatlantic regulatory cooperation
bull Regulatory Independence In a number of areas US regulatorsenjoy greater regulatory independence than their Europeancounterparts and may resist what they perceive to be an effort tocompromise domestic regulatory standards and processes in theinterests of international trade The result in some cases is that theUSTR and other central agencies of the federal governmentencounter difficulty guaranteeing compliance with regulatoryagreements by specific regulatory agencies such as the FDA andOSHA if and insofar as these agencies believe that implementationof those agreements would compromise established US regulatorystandards and procedures
bull Transparency and Administrative Law Requirements Across awide range of issue-areas US regulators express concern about thedifferent administrative-law requirements for regulators in the USand the European Union most notably in the area of transparencyIn the United States regulators are required to adhere to thelsquonotice-and-commentrsquo rulemaking procedures of the AdministrativeProcedure Act which requires agencies to provide public notice ofproposed regulations in the Federal Register allow individuals tosubmit comments prior to the final adoption of new rules and keepa public record of the regulatory process The EU rulemakingprocedure although typically characterized by widespreadconsultation of interested parties does not incorporate thesefeatures
bull Confidential Information T h e need to pr o tect con f id e n tia lin f or m a ti on of fir m s an d ot h er pr iva te pa r tie s also pla ce s lim i ts on th ea b i lity of both sid es to co op er a t e in th e ad o p tion an d im p lem en ta tion of reg ula tion s pa r ti cula r l y in th e en f or cem e n t of US an d EU com p etiti on la w s reg a r d in g ca r tel s an d con cen tr a tio n s wh er e fi r m sh a v e been mor e reluct a n t to ag r ee to th e sh a r in g of con f i d en tia lin f or m a ti on th a n in th e ar e a of mer g er con tr o l revi ew ed ab ove
45
bull Multi-Level Governance The United States and the EuropeanUnion are both federal or quasi-federal governance systems withregulatory powers divided in most sectors between the federalEUlevel on the one hand and individual statesmember states or evenlocal governments on the other In terms of regulatory cooperationthis division of regulatory powers means that US executive-branchnegotiators and EU Commission officials are frequently chargedwith negotiating regulatory agreements in areas where the statesretain at least partial regulatory competence and to charges fromboth sides that their counterparts are unable to lsquodeliver the statesrsquoExamples of such state regulatory powers on the US side includethe regulation of insurance and other services as well as publicprocurement where the EU has insisted that the participation ofindividual states is vital to the enforcement of regulatoryagreements6 1 Similar problems afflict the EU side whereCommission efforts to engage in regulatory cooperation may befrustrated by resistance among individual member states as in thecase of GMOs or by the slow adoption of EU-level regulations as inthe case of financial services
bull Regulatory Sovereignty Ultimately the adoption of the broadregulatory frameworks for economic activity consumer andenvironmental protection and other areas is entrusted on bothsides of the Atlantic to democratically accountable bodies such asthe Congress and President in the US and the Council of Ministersand European Parliament in the European Union Within theEuropean Union the harmonization and mutual recognition ofnational regulations has been accomplished in large part through adeliberate transfer of regulatory sovereignty to the European level(as in EU merger control) through the pooling of regulatorysovereignty in the Council of Ministers and the EuropeanParliament (as in data privacy and food safety) and through themutual recognition of standards as enforced by the European Courtof Justice To date however the European Union and the UnitedStates have proven unwilling to compromise their regulatorysovereignty in the various agreements reviewed above indeed eventhe most successful experiment in transatlantic regulatorycooperation that in competition policy is predicated explicitly oneach sidersquos ability to cooperate without any substantial change to itsdomestic regulatory objectives and procedures
The existence of these various obstacles does not of course mean thattransatlantic regulatory cooperation is doomed to failure Some areaslike competition policy are subject to relatively few obstacles tosuccessful cooperation while others such as food safety encountermultiple obstacles Even in difficult areas like food safety moreoverregular exchange of information has proven useful in allowingregulators on each side to understand each otherrsquos regulatoryphilosophies and procedures and gradually to build up the trust
46
among regulators that will be required for the successful operation offuture efforts at mutual recognition or harmonization of regulations
As a first step in this direction the European Union and the UnitedStates agreed in April 2002 to the adoption of a set of non-bindinglsquoEUUS Guidelines on Regulatory Cooperation and TransparencyrsquoAlthough this joint statement of principles does not bind either the USor the EU to any specific regulatory measures and explicitly excludesthe sensitive area of agriculture the agreement does call forregularized exchange of information between EU and US regulatorsand for consideration of harmonization or mutual recognition ofstandards lsquoas may be appropriate in specific casesrsquo to minimizeunnecessary technical barriers to trade In addition the documentsuggests that both EU and US regulators should apply potentially far-reaching principles of transparency in rule-making including publicnotification of and comment on proposed regulations Theimplementation of the guidelines is to be reviewed on an ongoing basisby the TEPTBT Working Group6 2
The significance of the new EUUS Guidelines will depend on theirimplementation in practice across an array of issue-areas in themonths and years to come Regardless of the success of this specificendeavor however regulatory cooperation remains an importantpriority for the European Union and the United States in achievingtheir respective regulatory aims while also preventing and resolvingpotential trade disputes For this reason the conclusion to this reportsuggests a careful and systematic study of current attempts atregulatory cooperation across issue-areas identifying key obstaclesand lsquobest practicersquo at overcoming those obstacles would represent asubstantial contribution to future efforts in this area
47
ndash 5 ndashThe European Union and the Americas
EUUS economic relations do not take place in a vacuum As wehave seen transatlantic efforts at trade liberalization regulatorycooperation and dispute resolution are nested within and frequentlymake explicit use of the rules-based multilateral trading system of theWorld Trade Organization the next round of which both the UnitedStates and the European Union have identified as a priority in thecoming years
Just as importantly the story of the EUrsquos ever-closer economicrelationship with the United States coincides with a second majordevelopment namely the rapid increase of EU trade with the countriesof North and South America Prior to the 1990s the United States wasthe most important trading partner and the largest source of foreigndirect investment in Canada Mexico and throughout most of LatinAmerica and this important role for the US has been further enhancedby the adoption and implementation of the North American Free TradeAgreement (NAFTA) with Mexico and Canada as well the earlynegotiations regarding the possible creation of a multilateral FreeTrade Area of the Americas During the course of the 1990s howeverthe European Union has developed an increasingly close andinstitutionalized relationship with Canada Mexico the Mercosurcustoms union and other countries of Central and South Americawhere it now rivals the economic importance of the United States
In institutional terms the EUUS relationship finds its closestcounterpart in the Unionrsquos bilateral relationship with Canadamdashthisdespite an EUCanada economic relationship that is dwarfed by eachsidersquos economic relationship with the US In economic terms theEUCanada relationship is substantially less important than Canadarsquosbilateral relationship with the United States which is far and awayCanadarsquos largest trading partner taking some 87 of total Canadianexports The integration of Canadarsquos economy with that of other Northand South American states moreover has increased in recent yearswith the implementation of NAFTA and a free trade agreement withChile Nevertheless the European Union ranks as Canadarsquos second-largest trading partner after the United States while Canada accountsfor approximately 17 of EU imports and 22 of total EU exports Asin the EUUS relationship moreover foreign direct investment has
48
outpaced trade as a source of interdependence in the EUCanadarelationship with Canada holding 32 of all FDI in the Union whilethe EU is the second largest investor in Canada after the US holdingsome 8 of all foreign direct investment in Canada6 3
Institutionally the EUCanada relationship is structured by a series ofbilateral agreements including the 1990 Declaration on EuropeanCommunity-Canada Relations and the 1996 Joint Political Declarationon EU-Canada Relations and its accompanying Joint EU-CanadaAction Plan and by a series of regular high-level summits that parallelthose held between the EU and the US The EU and Canada have alsosigned a number of important regulatory cooperation agreements inrecent years including a 1996 customs cooperation agreement a setof Mutual Recognition Agreements agreed in 1998 and agreements onveterinary equivalence and cooperation policy cooperation both signedin 1999 Trade disputes between the EU and Canada are relativelyrare and have generally been dealt with successfully through bilateralconsultation or through the WTO dispute resolution procedure6 4
The Union has come also to play an increasingly important economicrole in Latin America characterized by a sharp increase in both tradeand especially foreign direct investment in the region At the sametime the Union has pursued a wide range of trade and economicagreements with the countries of Latin America including a free tradeagreement with Mexico and other agreements with Mercosur andother Latin American countries In the rest of this section thereforewe examine the EUrsquos economic relationship with the countries of LatinAmerica focusing in turn on the changing patterns of EULatinAmerican trade and investment EU economic agreements with thecountries of the region and the remaining challenges for the EULatinAmerica relationship
51 The EU and Latin America Trade and Investment
The pattern of the trade relationships between the EU and the mainLatin American countries has changed substantially during the lastdecade Although none of them was a major trade partner the largercountries of Latin America already represented an importantproportion of EU exports and imports in 1990 when Mercosur plusMexico and Chile accounted for 43 of extra-EU exports and 32 ofits imports The trade balance was very favourable to the Europeanside with a deficit of over US$8 billion During the 1990s Europeconsolidated its Latin American export markets and increased itsmarket share in Argentina Mexico Chile and especially Brazil In2000 the EU maintained the proportion of its exports towards theanalysed countries while increasing the proportion of imports up to35 The trade balance has improved versus Argentina Mexicoand Brazil whereas the deficit has increased significantly with Chile
49
The total deficit with the countries has now turned into a surplus ofmore than 5 billion
Table 9 EULatin American Trade and Investment(ExportsImports and Foreign Direct Investment as apercentage of total extra-EU flows Trade Balances aremillions of US$)
of EUexports
of EUimports
Trade balance of EUFDI
1990 2000 1990 2000 1990 2000 1999 2000
Argentina 03 08 08 06 -2252 737 54 15
Brazil 25 18 09 17 -5711 -1031 38 53
MERCOSUR 28 25 19 23 -8368 301 92 68
Mexico 11 15 07 07 1231 6973 06 08
Chile 03 04 06 05 -1336 -1653 19 ---
Note figures with an asterisk correspond to year 1999Source European Commission DG-Trade
Moving from Latin America as a whole to individual countries andgroupings we come first to the Mercosur countries (Argentina BrazilParaguay and Uruguay) which created a customs union in 1994 andhave since increased partly thanks to their own process of economicintegration their openness towards the rest of the world6 5 The twosmallest countries are considerably more open (a tradeGDP ratio of70 in Paraguay and 33 in Uruguay in 1999) whereas thisproportion is 19 in Argentina and 15 in Brazil6 6 Although intra-area trade accounts for 20 of their total flows trade with NAFTA andthe EU has also increased during the nineties The financial crises ofthe end of the decade have especially since 1998 temporally put ahalt in the process and affected their external demand By 2000 theEU as a bloc had overtaken the United States as Mercosurrsquos singlelargest trade partner representing 30 of their exports and 35 oftheir imports
The EU and Mercosur can be considered complementary economicblocs in both agricultural and industrial products The EU is the mainexport market for Mercosur agriculture with a 40 share (the USrepresents only 9) More precisely 50 of Mercosur exports towardsthe EU are agricultural products and are concentrated in a smallrange of products such as oilseeds (particularly soy) and animal feedproducts We should also mention coffee (10 of EU imports fromMercosur) livestock and meat and derivatives fruit and derivativestobacco and fish products In contrast EU exports of agricultural
50
products to Mercosur are modest (approximately 6 of total) and areconcentrated in three groups of products alcoholic beverages dairyproducts and other edible animal products and cocoa derivatives Thetrade balance is negative for the EU in agricultural products althoughthe opposite happens in the case of industrial goods The EU is themain supplier of industrial and capital goods to the area includingmost importantly automobiles machinery and mechanical appliancesand a third group of products from the electrical industry (mainlyradiotelephony appliances and parts)
Economic relations between Argentina and the EU developed verypositively since the signature in 1990 of the ECArgentina frameworkagreement on trade and economic co-operation During the 1990sArgentina advanced towards being an open market economy and optedfor an outward-looking external policy where Mercosur and the EUplayed a key role The EU is Argentinarsquos second largest trading partner(after Brazil) overall trade with the EU has more than doubled duringthe last 10 years and represents around 25 of total trade Howeverthe crisis that started at the end of last decade has interrupted thispositive trend The main components of EU imports are agriculturalproducts and raw materials while EU exports to Argentina concentrateon machinery and transport equipment chemicals and manufacturedgoods
Brazil is the largest Latin American economy its GDP accounting for35 of the area or 65 of Mercosur Brazilrsquos domestic market with apopulation over 160 million people constitutes a potentially attractivedestination for both US and EU exports Brazil also signed a co-operation agreement in 1995 with the EU which is now its maintrading partner destination of 268 of its exports and origin of 252of its imports although the US follows very closely (243 and 233respectively) Although during the last years the EU has progressivelyreduced its share of the Brazilian market in favour of the US Brazilremains the EUrsquos main trade partner in Latin America Like Argentinathe process of opening to international competition started between1990 and 1993 As a result Brazilrsquos trade surpluses of the 1990squickly turned into substantial deficits later in the decade only slowlycorrected after the 1999 devaluation The main components of EUimports (1999 data) were vegetable products prepared foodstuffsmineral products transportation equipment wood and wood pulpproducts and machinery and mechanical appliances the latter alsoimportant in EU exports together with transportation equipmentchemical products base metals plastics and rubber
Mexico is the tenth-largest world economy and the most importantLatin-American exporter its total exports amounting to US$166 billionin 2000 In order to qualify its relative size it should be compared withBrazil the second larger exporter in the region (and ninth worldeconomy in terms of GDP) which exported only US$55 billion Mexico
51
is traditionally one of the EUrsquos most important trade partners in LatinAmerica sharing with Brazil its high potential for growth as an exportmarket Mexico has also followed a process of opening to internationalcompetition during the end of the eighties and all the nineties first byunilateral tariff reductions then by subscribing to ten free tradeagreements with the majority of the Latin American countries or areasCanada and the US (creating NAFTA) and in Europe with the EFTAand the EU
During the period 1994-2000 Mexican exports to the US increased240 while their composition has substantially diversified Oil-relatedexports represented only 98 of the total in 2000 compared to 248in 1990 Agricultural products did not account for more than 25 andthe rest of the exports were manufactured goods In contrast 75 ofMexicorsquos imports are intermediate goods 134 capital goods and theproportion of consumption goods is only 117 The EU is Mexicorsquossecond trading partner after the US although the data reveals theoverwhelming dependence of Mexico on the US economy 887 of itsexports are directed to the US and 73 of its imports come from it Inthe EU Germany and Spain represent Mexicorsquos largest export marketswith 09 each Germany is the main European supplier representinga 33 of Mexicorsquos imports As mentioned above Mexicorsquos tradebalance with the EU is highly deficitary
Chile is considered the most open stable and liberalized economy inLatin America Despite its relatively modest size Chile is an importanttrading nation due to its high tradeGDP ratio (over 40) Chile is thefifth Latin American exporter (US$182 billion in 2000) withagriculture and fishery accounting for 10 of the total and the other90 distributed between mining (449 ) and industry (442) Incontrast Chilersquos imports are concentrated in the industrial sector(77) with mining (135) and agriculture (22) lagging far behindIt should be stressed that Chilean trade is globally balanced andexhibits important surpluses with the European Union and Asia Incontrast Chile cumulates its largest deficit with Argentina its main oilsupplier
The EU is Chilersquos main trading partner taking in approximately 25 ofthe countries imports during 20016 7 Among the EU countries theUnited Kingdom and Italy accumulate 34 of Chilersquos trade each andFrance 3 Chile is not only a market for EU exporters of goods andservices but also an important source of imports both in agriculturaland industrial goods The main components of EU imports from Chileare manufactured goods raw materials agricultural products andbeverages and tobacco EU exports of goods are concentrated inmachinery and transport equipment chemical products andmanufactured goods
52
Latin America in general and particularly Mercosur has been involvedin the general trend that directed large capital flows towards emergingand developing economies In 1990 only 16 of overall foreign directinvestment was received by developing countries whereas in 2000 thisproportion had reached 37 Latin America and the Caribbeanreceived around 11 of these flows during the period 1995-99 Brazilreceived one third of the investment in the area whereas Argentinaand Chilersquos proportions were 16 and 8 respectively thanks to theacquisitions of domestic firms by the Spanish companies Repsol andEndesa However due to its instability Argentina has experienced asignificant reduction in foreign investment since 2000 Mexico is thesecond destination of FDI in Latin America (17 during the periodabove mentioned) and in contrast with other countries such asArgentina these flows exhibit a very stable behaviour
Although Mexico followed a process of capital movements liberalizationsimilar to the experiences of Brazil and Argentina a factor behind thestability of these movements is related to its process of regionalintegration with North America Many multinational enterprises haveinvested in Mexico as a platform to produce manufactured goodsdirected towards the US and Canadian markets As an examplebetween 1995 and 2000 more than 60 of cumulated FDI went to themanufacturing sector and 65 had its origin in the US Theseinvestment flows have contributed to the modernization of theindustrial sector and to a significant improvement in Mexicorsquoscompetitive position in the automobile electronic and textileindustries which can help to explain the excellent export performanceof this country in recent years Finally in 2000 the banking sector hascumulated 30 of the total flows of FDI received by Mexico whereasservices telecommunications and the oil industry have had a verylimited interest for foreign investors This fact is in contrast with theother large Latin American economies
The majority of the FDI that the Mercosur countries received in thesecond half of the nineties was directed towards the privatization of thepublic firms especially in the area of services (CEPAL 2001) Due tothis process FDI has abandoned its traditional destinations (forexample in 1995 55 of the FDI stock of Brazil was concentrated inmanufacturing) to be employed in mergers and acquisitions mainly inthe service sector According to Tansini and Vera in 1998 and 199978 of these acquisitions were directed towards Argentina and 18had Chile as destination6 8 In 1999 30 of the capital flows receivedby Brazil were absorbed by the privatizations although since then themajority of the resources were devoted to consolidating andrestructuring these firms
The European Unionrsquos share of foreign direct investment inLatin America increased dramatically during the 1990s with netinflows from the EU increasing from US$1077 billion in 1993 to
53
US$17068 billion in 1997 nearly overtaking total inflows to the regionfrom the United States Within Europe moreover there has been ashift in the primary investors in Latin America with Spain inparticular joining the United Kingdom and Germany as the leadingEuropean investors in the region (see Figure 2) During the 1980s theUK produced more than 50 of the cumulated FDI flows in Mercosurplus Chile6 9 followed by Germany (25) In the 1990s by contrastGermany increased its participation to more than 30 whereas Spainmore than doubled its share to 24 Germanyrsquos FDI concentrated inmanufacturing (such as the automobile industry) during the first halfof the decade especially in Argentina and Brazil with their largedomestic markets Since 1995 Spain is the main European investordirecting its interests in the privatization sectors bankingtelecommunications and energy Other EU countries with importantFDI flows in Mercosur and Chile during the nineties have beenthe Netherlands France and Portugal (the latter with Brazil as itsprimary destination) According to the EC Commission the EUrsquos stockof foreign direct investment in 1999 was euro 1 billion in Uruguayeuro 31 billion in Argentina and euro 34 billion in Brazil EU investment inParaguay is virtually non-existent whereas Chile cumulateseuro 104 billion although in this country the US is still the main foreigninvestor
52 EU Trade Agreements with Latin American Countries7 0
The first symbolic push for the intensification of EU relations withLatin America followed the 1969 lsquoDeclaration of Buenos Airesrsquo issuedby the Latin American members of the Special Committee for LatinAmerican Coordination and calling for an institutionalization of theEULatin America political dialogue and closer economic cooperationbetween both regions
Unlike some previous attempts this time the EU responded positivelyand a regular dialogue between the group of Latin Americanambassadors in Brussels (GRULA) and EC representatives wasinitiated The major substantive measure advanced in this dialoguewas the policy developed toward the Caribbean countries which wereincorporated together with other European former colonies in Africaand the Pacific in the so-called ACP Group and were accorded a specialregime as stated in the Lomeacute Convention of 19757 1 Apart from thatthe Communityrsquos official policy during this period was limited tobilateral economic treaties with the major Latin American countries(so-called first generation agreements) such as the non-preferentialtrade agreements with Argentina in 1970 Uruguay in 1973 Brazil in1973 and Mexico in 19757 2
54
Table 10 EULatin American Trade Agreements
Agreement Objectives Year ofentry into
fEUMexico FreeTrade Agreement(EconomicPartnershipPolitical Co-operation and Co-operationAgreement)
Liberalizes over 96 per cent of EU-Mexicotrade by 2007 at the latest fullyliberalizes industrial products by 2003for the EU and 2007 for Mexico withnegotiations on tariff phase-out ofagricultural items deferred until 2003includes rules on intellectual propertyand dispute settlements and providesEU access to the Mexican procurementand services markets similar to NAFTA
2000
CentralAmericaEUFramework Co-operationAgreement andRegionalProgramme for theReconstruction ofCentral America(PRRAC)
The Framework Agreement seeks tostrength the co-operation in theeconomic financial commercial socio-cultural areas and environment Asecond aim is to reinforce the CentralAmerican Integration System ThePPRAC is a specific program for recoveryfrom the effects caused by hurricaneMitch
Both since1999
AndeanCommunityEUCo-operationagreement andGSP
Political aspects anti-drug dialogueCommercial aspects since 1998 theGeneral System of Preferences is appliedunder a new regime As a result 75 ofproducts imported from the AndeanCommunity to the EU are exempt fromcustom duties Framework Co-operationAgreement to promote regionalintegration
1998(politicaldialogueand co-
operation)and 1999
(GSP)
EUChile AssociationAgreement
Governments concluded negotiations inApril 2002 on a wide-ranging AssociationAgreement including the creation of a free-trade area in goods and services anagreement on wines and spirits andprovisions on public procurementinvestment competition and intellectualproperty
Awaitingratificationby the EUand Chile
MercosurEuropeanUnion
Framework agreement came into force in1999 Negotiations on an interregionalfree-trade agreement began in 1999 andare ongoing
Frameworkagreementsince 1999Free-tradeagreementexpected in
2005
Source Flocircres (2001) DG Trade (European Commission) and Camarero andTamarit (2002)
55
Figure 2 EU Foreign Direct Investment in MERCOSUR + Chile(Cumulated flows Country shares EU = 100)
Source OECD International Direct Investment Statistics YearbookNote For clarity some EU countries with smaller investment shares in MERCOSURhave been excluded
From the mid-1970s to mid-1980s the official policy of the EC towardsLatin America was based mainly on the Inter-Parliamentary Dialoguebetween the European Parliament and Latin Americanparliamentarians and on bilateral economic treaties With regard tothe latter a new round of lsquosecond-generationrsquo agreements was signedbetween 1980 and 1985 with individual countries such as Argentina in1980 Uruguay in 1980 and Brazil in 1982 and with sub-regionssuch as the Andean Pact (created in 1969 between VenezuelaColombia Equator Peru and Bolivia) in 1983 and the CentralAmerican Common Market in 1986 7 3
From the mid-1980s onward Latin America became the focus of moresubstantial political and economic policies from the EU On thepolitical side a variety of multilateral fora have been set up The SanJoseacute Group was launched in Costa Rica in 1984 with the aim ofsupporting progress in the peace process and democracy in CentralAmerica From that date annual meetings have been organizedextending their aims to other fields like the rule of law and humanrights the fight against the trafficking of drugs and educationaltechnical and cultural co-operation The Rio Group was established in1986 again meeting on an annual basis with a membership includingall the South American countries as well as Mexico Finally twosummit meetingsmdashthe first in Rio de Janeiro in June 1999 and a
0
10
20
30
40
50
60
1980-90
1991-98
56
second held under the Spanish EU Presidency in Madrid in May2002mdashbrought together the leaders of 48 countries from the EU andLatin America The first summit in Rio agreed upon an Action Plan toincrease co-operation in the political and cultural spheres and calledfor negotiation of association agreements with Chile and Mercosurwhile the Madrid summit further developed political cooperation andconfirmed the conclusion of a bilateral EUChile AssociationAgreement7 4
The 1990s and early 2000s finally have witnessed the conclusion bythe EU of a round of so-called lsquothird-generationrsquo treaties between theEU and various Latin American countries and trade blocs The primaryagreements in force or under negotiation between the Union and thecountries of Latin America are summarized in Table 10 In all thecases the nature of these agreements is twofold encompassingpolitical agreements on questions such as democracy the environmentand human rights and as well as economic agreements regarding theliberalization of trade and investment
521 The EUMexico Free Trade Agreement
Since 1975 the EU has signed several agreements with MexicoAlthough these agreements were not significantly different from othersalready in force with other countries in the same geographic areaMexico had always received a particular treatment Thus in the 70sMexico benefited from the treatment of most favoured nationneglecting the fact that this country was not a member of the GATT atthat time Later Mexico was eligible under the GSP scheme benefitingfrom this treatment until 1995 when this system was revisited andMexico lost much of its preferential access to the EU marketNegotiations aiming at the establishment of an FTA with the EUstarted during the same year The primary reason was the concern inthe EU about possible trade diversion due to the Mexican entry intoNAFTA in 1994 A general agreement removing trade barriers betweenthe EU and Mexico would minimize any trade diversion effect
Although the most important part of the agreement is the creation of afree trade area between the EU and Mexico the so-called GlobalAgreement includes a rather wide package institutionalising a regularpolitical dialogue and extending the bilateral co-operation Thisagreement places the EU in a better position to compete for access tothe Mexican market In 2007 all industrial goods will be free of tariffsMoreover in trade volume 52 of EC exports will enter the Mexicanmarket duty free by 2003 and for the remaining 48 a maximum dutyof 5 will be applied This extremely quick dismantling calendar willplace economic operators on both sides on an equal footing with otherpreferential partners in real time Concerning agricultural and fisheriesproducts some European special sensitivities are respected allowingat the same time for preferential access to European and Mexican
57
exporters into their respective markets The agreement also includespreferential treatment in services providing service providers from theEU with access to the Mexican market which will be equivalent if notsuperior to that currently enjoyed by operators from Mexicorsquos otherpreferential partners in particular the US and Canada In the servicessector EU banks and insurance companies will be authorized tooperate and establish directly on the Mexican territory Theliberalization of investment and payments related to investments willtake place in 2003 The agreement also provides access to the Mexicanprocurement market similar to NAFTA Finally provisions are madeabout intellectual property competition and dispute settlement
The agreement covers other aspects apart from trade Thus the EUfosters co-operation programmes with Mexico for an annual amount onaverage of euro 13 million during the 1990-99 period There were alsosignificant activities under horizontal programmes such as AL-Invest(Latin American Investment Programmes) and ALFA (Latin AmericanAcademic Formation)
522 Relations with Central America
The most important part of the cooperation between the EU and LatinAmerica and more specifically with Central America has beenimplemented through the so-called cooperation agreements The firstbilateral agreements with individual Central American countries weresigned during the 1970s and early 1980s Later on a second wave ofagreements were adopted covering a wider range of areas topicsbeginning with the First Framework Agreement of Co-operation forCentral America signed in 1985 This agreement belongs to the mostadvanced second-generation type and covers areas such ascommercial promotion and well as agricultural industrial andeconomic co-operation The Second Framework Agreement of Co-operation signed in 1993 is considered as a lsquothird generationrsquo type7 5
This Agreement came into force in 1999 including two novelties apackage of aid for refugees and a programme to support democracyand human rights The previsions of financial technical and economicco-operation aid with these countries from 2000 to 2006 are close toeuro 500 million Furthermore the Commission has decided to participatein the initiative for highly indebted poor countries (HIPC) The eligibleLatin American countries are Honduras and Nicaragua which stand toreceive as much as euro 30 million Additionally the European InvestmentBank has made several loans to the Central American Bank forEconomic Integration (CABEI) in order to support reconstruction in theregion
58
523 Relations with the Andean Community and Chile
The EU has established a complete institutional framework with theAndean Community implementing different instruments in each field(political dialogue trade and co-operation) with a special emphasis onthe question of lsquoanti-drugrsquo measures
Trade relations between the EU and the Andean Community haveincreased 32 over the last nine years currently representing 08 ofthe EUrsquos total trade and 167 of total trade for the AndeanCommunity It is worthwhile to note that 90 of Andean exportsconsist of raw materials or primary production while 85 of the EUrsquosexports are manufactured products From 1999 on the EU hasgranted under the Generalized System of Preferences (GSP)preferential access for all industrial products as well as numerousagricultural products especially for those Andean countries committedto fighting against drug production and trafficking
In the area of political co-operation the Andean region was the first inLatin America to conclude a regional co-operation agreement with theEU The present regional framework agreement was signed in 1993and entered into force in 1998 The amount of the aid to the areareached some euro 6 millionyear for the period 1982-97
Finally the EU has also established several bilateral agreements withChile including the Framework Agreement signed in 1996 andcurrently in force This agreement covers political and economiccooperation and formed the cornerstone for a new EUChileAssociation Agreement the negotiation of which was completed inApril 2002 The agreement which is currently awaiting ratification byboth parties calls for the creation of a free-trade area in goods andservices an agreement on wines and spirits including both market-access questions and the use of protected names a Sanitary andPhytosanitary Agreement new rules on public procurementinvestment competition and intellectual property and a dispute-resolution mechanism7 6
524 The Launching of a Free Trade Area with Mercosur77
The EU is currently the main trade partner of Mercosur The EUgenerally imports agricultural and primary products from Mercosurwhile it exports primarily industrial commodities7 8 The EU has aFramework Agreement of co-operation similar to others with severalcountries or blocs in Latin America In June 2000 negotiations werere-opened aiming at signing a new Inter-regional AssociationAgreement This new agreement would cover not only commercialaspects but also many others like political dialogue or cooperation(social and humanitarian economic and development) between the twoblocs
59
The fifth round of negotiation between the EU and Mercosur took placein July 2001 The main point in this round was the presentation bythe EU of its offer for the reduction of tariff and non-tariff barriers inorder to liberalize trade in goods services and public procurementThese reductions would cover all the industrial products and 90 ofagricultural products over a period of no longer than ten yearsMercosurrsquos answer to that proposal was given during the sixth roundin October 2001 presenting its own offer in terms of tariff and non-tariff reduction and public procurement At the same time there hasbeen an exchange of views on political dialogue as well as someimprovement in the area of technical and scientific co-operationenergy transport telecommunications and information technologyNegotiations continue but conclusion of the agreement is not expecteduntil 2005
53 Challenges for EULatin American Economic Relations
As even this brief survey has made clear the European Union todayplays a substantial economic and political role in Latin America EUtrade with and foreign direct investment in the region have increaseddramatically during the course of the past decade with the EU nowemerging as the most important economic partner for Mercosur inparticular At the same time the EUrsquos political and economicagreements have demonstrated ever-greater ambition and anincreasingly broad economic agenda embracing not only tariff andquota reductions but also provisions on non-tariff barriersinvestment and public procurement as well as political provisionsregarding democracy and human rights
The completion of a more ambitious system of economic agreementswith the Latin American countries remains a goal for both the UnitedStates and the European Union However there are importantqualitative differences between the strategies of the two trade blocswhile the European Union is trying to keep the development of a hub-and-spoke system of bilateral agreements with individual countries or(as in the case of Mercosur) customs unions the United States hasannounced its desire to create a multilateral Free Trade Area of theAmericas The countries of the region for their part havedemonstrated a decades-long commitment to economic liberalizationlocked in place by a series of both multilateral and bilateral tradeagreements amongst themselves as well as with the United States andthe European Union although their commitment to proceeding alongthese lines has been tested by the recent economic crisis in Argentina
The EULatin America summit meeting held in Madrid in May 2002witnessed the conclusion of the EUChile free trade agreement whichis now awaiting ratification by both sides but further negotiations lieahead particularly in the case of the proposed EUMercosur
60
agreement which remains far from a conclusion not expected before2005 In these negotiations the EU should give special attention toexpanding market access for the Mercosur countries especially for so-called lsquosensitive productsrsquo Although the EU has presented itself as achampion of free trade within various multilateral fora it is clear thatthe Union has actively sought to preserve barriers in some industrialsubsectors and especially in the agricultural sector where theCommission has estimated that some 10-12 of all EU imports fromthe Mercosur countries are currently labelled as lsquosensitiversquo7 9 Removalof these barriers would benefit not only Latin American countries butalso European consumers who are currently playing higher prices foran amount equivalent to 5-7 of the Unionrsquos GDP8 0 In addition thenegotiation process should cover not only tariffs (since over 50 of allimports from Mercosur are eligible for an average tariff lower than25) but also other means of market-access protection such as tariffquotas which are applied extensively to agriculture and food productsAdditional areas for negotiation include trade in goods servicesinvestment public procurement intellectual property rights technicalstandards and rules of origin
Finally neither these EULatin American negotiations nor theextensive EUUS cooperation outlined in the previous sections of thisreport should distract the European Union or the United States fromtheir shared priority namely the successful completion of alsquoDevelopment Roundrsquo of multilateral trade talks within the WTODuring his recent trip to Argentina EU Trade Commissioner PascalLamy stressed the importance of ensuring that bilateral and inter-regional trade agreements such as those that the EU has concludedwith the countries of Latin America rest on the multilateral foundationof WTO trade law For this reason he argued bilateral andinterregional negotiations lsquomust not be allowed to detract our attentionfrom the pursuit of the Doha Development Agendarsquo8 1 Such acommitment should remain a central tenet of EU trade policy in theyears to come
61
ConclusionsThe New Transatlantic Economic Agenda
The United States and the European Union have an extraordinarilyclose and important economic relationship the health of which is vitalto the global economy as a whole Both partners stand to gain a greatdeal by making the relationship more productive Both stand to lose ifdisputes cause interruptions and acrimony and if the relationship failsto adapt to new pressures and new challenges
The agenda of transatlantic economic relations has evolved andexpanded to reflect the increasingly integrated nature of thetransatlantic marketplace To be sure traditional trade questionsmdashandtrade tensionsmdashpersist between the European Union and the UnitedStates Despite the generally low level of tariffs between the EU andUS tariff peaks and quotas remain for both sides in a number ofsensitive areas which can and should be subject to further reductionsin the Doha Round of trade liberalization talks within the World TradeOrganization In addition to tariffs and quotas a number of othertraditional trade measuresmdashincluding most notably antidumpingsubsidies and safeguard measuresmdashcontinue to plague thetransatlantic partnership most strikingly in the current dispute overUS safeguard actions in the steel sector Nevertheless while theseriousness of these disputes should not be underestimated themultilateral rules-based trading system of the World TradingOrganization is generally well equipped to address such issues andthe United States and the European Union should continue in theirefforts to use and support the WTO as a forum for both negotiationand dispute resolution
Perhaps the greatest challenge to the transatlantic economicrelationship however is the expansion of the transatlantic economicagenda to encompass domestic regulations that are adopted forlegitimate purposes but act in practice as non-tariff barriers to tradefragmenting the transatlantic market and in some cases leading tobitter and intractable trade disputes As we have seen these types ofdisputes also create enormous legal and political challenges to thedispute settlement procedure of the WTO where judgments in areassuch as the beef hormones and Irish music disputes have createdpolitical controversy without (at this writing) securing full compliancefrom the states concerned
62
For these reasons any attempt to deepen transatlantic economicintegration between the United States and the European Union mustaddress not only tariffs quotas and similar disputes about subsidiesantidumping actions and safeguard measures but also the new-styleregulatory disputes that are likely to become the most importantbarriers in the transatlantic marketplace and place the greateststrains on the EUUS relationship and the multilateral WTO systemin the medium- to long-term future
Addressing these challenges in turn will require a careful andextensive study and more comprehensive understanding not only oftraditional trade issues but also and especially the domestic sourcesof transatlantic regulatory disputes existing efforts to resolve suchdisputes and possible new mechanisms for preventing and settlingfuture regulatory disputes between the European Union and theUnited States
Such a study would necessarily be wide-ranging involving not onlyeconomists who would identify the potential benefits of economicliberalization but also political scientists political economists andlegal scholars who would identify the domestic sources oftransatlantic regulatory disputes the possibility of preventing suchdisputes through early warning andor regulatory cooperation and themost promising means of settling disputes either bilaterally ormultilaterally Any such study would therefore have to undertakethree fundamental tasks
1 A comprehensive listing and analysis based on publiclyavailable sources of EU and US regulations capable of restrictingtrade and investment between the European Union and the UnitedStates
This report has taken a first step towards such an analysis with thecompilation of regulatory barriers identified by the United States andthe EU in their respective trade barriers reports for 2001 (see Appendix1) but further research is required to identify both the sources and theseriousness of problematic regulations
bull In terms of sources a useful first step would be to identify whetherthe regulations in question were adopted by the local state orfederal (EU) levels of government and whether they were adoptedthrough legislation or by regulatory authorities
bull In terms of seriousness a preliminary effort should be made toidentify the economic impact of the regulations in question ontransatlantic trade and investment Such an analysis could draw onthe research done by the US and the EU as well as on the periodicreports of the World Trade Organization and the Transatlantic
63
Business Dialogue but should be conducted by independenteconomists it is to be accepted as authoritative by both parties
In addition an effort should be made by scholars and practitioners onboth sides of the Atlantic to identify new challenges to the relationshipparticularly those arising from the application of new technologiessuch as electronic commerce and biotechnology
2 A comprehensive survey and analysis of transatlanticregulatory cooperation including areas of informal cooperationamong regulators as well as areas of formal agreement
Section 4 of this report identified regulatory cooperation as aparticularly promising means of preventing as well as settlingtransatlantic regulatory disputes yet it also identified a number ofpolitical legal and institutional barriers which can hindermdashand havehinderedmdashcooperation across a range of issue-areas Given therecognized promise of regulatory cooperation among EU and USauthorities as a means of realizing our joint regulatory aims andavoiding future regulatory disputes more detailed studies oftransatlantic regulatory cooperation are vital in order to identifybarriers to regulatory cooperation as well as instances of lsquobest practicersquoin overcoming those barriers
3 A systematic analysis of various means of bilateral andmultilateral dispute resolution with particular emphasis on thespecific challenges of transatlantic regulatory disputes
Finally while emphasis can and should be placed on prevention ratherthan settlement of transatlantic disputes future studies should focuson new and innovative means of dispute settlement in regulatorydisputes given the acknowledged difficulties of litigating regulatorydisputes before the WTO Dispute Settlement Body At the domesticlevel the prospects for the adoption of lsquotrade impact assessmentsrsquo aswell as a more general move toward transparent regulatory procedureson both sides of the Atlantic should be examined At the bilaterallevel special attention should be directed toward the possibleexpansion of early warning as well as the possible use of bilateralarbitration and mediation outside the WTO At the multilateral levelfinally the EU and US should jointly examine the possible revision ofWTO rules to clarify the use of the precautionary principle and toconsider possible amendments to the WTO Dispute SettlementUnderstanding to be undertaken in May 2003
Appendix 1 EU-US Barriers to Trade in Goods Services and Foreign Investment
Type ofmeasure EU concerns about US rules US concerns about EU rules
Tariffs Tariff peaks Food products Textiles Footwear Leathergoods Jewelry Ceramics and glass Trucks Railway carsOptical fibers Tubes for computer monitorsSANCTIONS IN RETALIATION FOR THE EU BAN ON HORMONE-TREATED BEEFTariff quotas dairy products tobacco
BANANAS (tariff quota + discriminatorylicensing) (settled)CUMULATIVE RECOVERY SYSTEM (brown rice)ADMINISTRATION OF CUSTOMS DUTIES FOR RICE(B) (agreement 1101)
Trade defenceinstruments
1916 ANTIDUMPING ACTSAFEGUARD MEASURES ON STEEL WIRE ROD (32000)SAFEGUARD MEASURES ON WELDED STEEL PIPE (32000)BYRD AMENDMENT (ANTI-DUMPING DUTIES GO TO INJUREDINDUSTRY)FAILURE TO LIFT COUNTERVAILING DUTIES AFTER SUNSET REVIEWSQUOTA ON THE IMPORT OF WHEAT GLUTEN (WITHDRAWN 62001)METHODOLOGY OF COUNTERVAILING DUTIES WITH RESPECT TOBRITISH STEEL ANTI-DUMPING DUTIES ON SEAMLESS PIPE
Othercustomsbarriers
Excessive invoicing requirementsEU not recognized as a country of originTEXTILES amp LEATHER CUSTOMS FORMALITIES amp RULES OF ORIGINTuna (certification of origin)
Other leviesand charges
Customs fees (eg Merchandise Processing Fee)HARBOUR MAINTENANCE TAX and Harbour Services Fee50 tax on imported equipment for boats Taxes that falldisproportionately on European automakersbull Luxury tax (70)bull Gas Guzzler tax (85)bull CAFEacute penalties (~100)
65
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade
SHRIMP-TURTLE ndash to import shrimp countries must be certifiedas matching US efforts to protect sea turtles (EU third party)Tuna-dolphin ndash to import tuna countries must be approvedby the National Marine Fisheries ServiceGeneral prohibition on the importation of dairy productsmade from unpasturized milkEffective prohibition on the importation of yogurtMilk protein for yogurt must come from approved diariesDivergence from international standardsReliance on third-party conformity assessment (eg reelectrical equipment and domestic appliances)US and Canadian content labeling of carsApproval slower than for US-produced drugsOver-the-counter drug approval requires US market historyExtensive product description (textiles amp leather)Citrus fruits must be landed at North Atlantic portsRules on all imports of ruminant animals and animalproducts from all EU countries because of BSEBan on some uncooked meat productsStrict condition on imports of egg products (continuousinspection of production process)Low acid canned food (eg fish and dairy products) subject todetailed prior approval systemPre-clearance inspection of apples and pears from somemember states for pestsProhibition on imports of all animals and products from amember state where a disease exists (not just region wherefound)Approval of wine labels
HORMONE-TREATED BEEFLack of national treatment with respect toGEOGRAPHICAL INDICATIONS for agriculturalproducts and foodPoultry treated with chlorinated waterEffective moratorium on approval of GMproducts since 498Mandatory labeling of all foods containingmore than 1 GM ingredientsStringent certification of non-hormone-treated beef (new US program seemsadequate)Food feed and fertilizer containing specifiedrisk materials (narrower product range thanprevious rule)Treatment and traceability of raw materialsfor production of gelatine for humanconsumption (agreement near on healthcertificate that would enable US exports toresume)EU approval of 3rd country establishmentsexporting animal products (esp dairy)Derogation from EU standards required forUS wine (on-going negotiations to try toresolve)Heat or pressure treatment of softwoodpacking material (new EU rule similar todraft international standard)Metric-only labeling (implementation delayedto 2009)
66
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade(continued)
Excessive post-entry quarantine of hardy nursery stocksExporters of meat or meat products to the US may notprocess meat from countries that are not recognized as freefrom diseases of concern to the US
Slow and arbitrary new aircraft certificationHushkits (dispute brought to ICAO work onan ICAO standard)Labeling of TSP (fertilizer) disadvantages USexportsRestrictive limits on low frequency emissionsfrom electrical and electronic equipment
Regulatorybarriers totrade (USstate and EUmember statelevel)
Duplicate approval of wine labelsState-level safety certification and environmental protectionrequirements (especially of agricultural and food products)Ban on fuel additive MTBE (CA)
Bans on some approved GM products(A I amp L)No approvals for planting certain GMproducts (G P)Unresponsive to requests for field trials ofGM crops (Gr)Ban on GM in animal feed adopted (It) - notin forceHCFC bans by Sw amp FnAdditional navigation light requirements(Fn) ndash suspendedTesting of wheat leading to virtual ban onimports (transshipment recently permitted)(Gr)Harsh interpretation of EU SPSrequirements caused or threatened to causeproblems for processed meat productspoultry products game meat seafoodanimal feed wood products (It)Qualitative imports standards and high test-ing and registration fees for bull semen (It)
67
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Servicesbarriers
50 tax on all non-emergency repairs to US-owned shipscarried out outside the USBarriers in mobile communications (investment restrictionslengthy procedures)De-facto reciprocity requirements regarding satellite-basedcommunications servicesExclusive digital terrestrial television standard (ATSC ) differentfrom EU (DVB-T)Impractical for foreign securities firms to establish branches inorder to engage in broker-dealer activitiesForeign mutual funds unable to make public offerings becauseof registration conditionsForeign investment is restricted in coastal and domesticshippingPartnership with US entity required for granting of licenses forlandings sub-marine cablesOnly US citizens or corporations organized under US law canoperate or maintain power facilities on Federal landForeign stake in airlines capped at 49 (25 of voting stock)Foreign-built vessels prohibited from engaging in coastwisetrade either directly between or via a foreign port and cannot beregistered for dredging towing or salvage
State-level measures Prohibitions on EU exporters distributing rebottling or retailingtheir own wineSome states require insurance companies to already beestablished in another stateSome states require insurers to buy reinsurance from state-licensed insurance companies
European content requirements for TVbroadcastsAccess to the single aviation marketrestricted to firms majority-owned andcontrolled by EU nationalsBanking insurance and investmentservices rules require reciprocaltreatment by home country (no US firmsadversely affected)
Member state measures Content requirements for radiobroadcasts (Fr)Requirements that cinemas showEuropean films (It Sp)Nationality requirements affecting tovarying degrees the provision of legalservices (A Dk Fn Fr G It)Strict restrictions on advertising byforeign legal consultants (Dk)Nationality requirements affecting tovarying degrees the provision ofaccounting services (A Dk Fr)
68
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Foreigninvestmentbarriers
National security vetting (Exon-Florio Amendment)US subsidiary required to exploit deep-water ports or to fish inUS Exclusive Economic ZoneFishing-vessel-owning entities must be 75 owned andcontrolled by US citizensForeign individuals or foreign-controlled corporations cannotacquire licenses for using nuclear materialsConditional national treatment governs participation ingovernment research programmes (subsidiaries in US allowed toparticipate but eligibility process more cumbersome)
Mirror-image reciprocity applies toinvestments in the extraction ofhydrocarbons (no US firms adverselyaffected)
NotesIncludes measures in effect + those for which implementation has been suspended as a result of agreementDoes not include non-discriminatory measures systemic barriers (such as the presence of monopolies the pricing ofpharmaceuticals or delays and lack of transparency in standard setting) government procurement intellectual propertyprotection subsidies (including FSC) or issues being prosecuted under EU rules
Barriers in small caps are the subject of WTO proceedings (consultations have been requested)
Sources Commission Report on United States Barriers to Trade and Investment 2001 USTR National Trade Estimate ReportForeign Trade Barriers 2001
69
Appendix 2 WTO Cases by the EU against the US (excludes cases as third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS38Cuban Libertyand DemocraticSolidarity Act
Extraterritorial application of the USembargo of trade with Cuba in so far as itrestricts trade between the EU and Cubaor between the EU and the US Thecreation of a right of action in favour ofUS citizens to sue EU persons andcompanies in US courts in order to obtaincompensation for Cuban properties Thedenial of visas and exclusion from the USof persons involved in confiscating ortrafficking in confiscated property
GATT (V XI XIII)
GATS (II III VIXI XVI XVIIAnnex onMovement ofNaturalPersons)
596 1096 Understandingreached (497)
WTDS39Tariff increaseson productsfrom the EU
The measures were taken in response tothe adoption of EU legislation on the useof hormones in livestock farming andseek unilaterally to settle the issuewithout resorting to the mechanisms ofthe WTO
GATT (I II XXIII)
DSU (3 22 23)
496 996 [No report]
WTDS63Anti-dumpingmeasures onimports of solidurea from theformer GermanDemocraticRepublic
By maintaining the order against the fivestates of the former GDR the US hasignored de jure and de facto their fullintegration into the reunified FederalRepublic of Germany and thus theeconomic integration of their companiesinto the German market economy
Anti-Dumping(92 11)
1296 ndash
70
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS85Measuresaffecting textilesand apparelproducts
Changes to rules of origin of textile andapparel products which entered intoforce on 1 July 1996 adversely affectexports of EU fabrics scarves and otherflat textile products which are no longerrecognized as being of EU origin and losethe free access to the US that theyenjoyed before
Textiles (24 4244)
Rules of origin(2)
GATT (III)
TBT (2)
697 ndash Negotiatedsolution (997)
WTDS88Measureaffectinggovernmentprocurement
Massachusetts law regulating statecontracts with companies doing businesswith or in Burma (Myanmar)
GPA (VIIIb XXIII)
697 998 Law overturnedunder US law
WTDS100Measuresaffecting importsof poultryproducts
Ban on imports of poultry and poultryproducts produced in the EU until theUnited States is able to obtain additionalassurances of product safety No groundsgiven
GATT (I III XXI)
SPS (2 3 4 58 Annex C)
TBT (2 5)
897 ndash
WTDS108Tax treatmentfor Foreign SalesCorporation
The FSC scheme provides for anexemption to the general rulesestablished in the US Internal RevenueCode which results in substantial taxsavings for US companies exportingthrough FSCs
Subsidies (3)
Agriculture (8 910)
1197 798 Panel found infavour of the EUEU not considerFSCReplacement Actadequate Panelfound in favourof the EUAppellate Bodyreport check
71
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS118HarbourMaintenance Tax
Ad valorem tax (0125) on allwaterborne imports entering US ports
GATT (I II IIIVIII X)
298 ndash Reform proposed(HarbourServices Fee)but EU stillviews asproblematic
WTDS136Anti-dumpingAct of 1916
The Act imposes penal sanctions againstthe importation of goods and their sale inthe US when the price is lower than inthe country of production or in otherforeign countries where the goods areexported
GATT (III4 VI1and VI2)
WTO (XVI4)
Anti-Dumping(1234 amp 5)
698 1198 Appellate Bodyfound in favourof the EU
Implementationpending
WTDS138Imposition ofcountervailingduties on certainhot-rolled leadand bismuthcarbon steelproductsoriginating in theUK
Methodology relied on the presumption(based mostly on pre-WTO legislation andpractice) that benefits from priorsubsidies pass through without the needto show that a benefit continues to beconferred
Subsidies (11b10 14 194)
698 199 Appellate Bodyupheld Panelreport favouringEU (500)
WTDS151Measuresaffecting textilesand apparelproducts (II)
Same as WTDS85 Same asWTDS85
1198 ndash Negotiatedsolution (997)
72
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS152Sections 301-310 of the TradeAct of 1974
Imposes specific strict time limits withinwhich unilateral determinations must bemade that other WTO Members havefailed to comply with their WTOobligations and trade sanctions must betaken against such WTO Members
DSU (3 21 2223)
WTO (XVI4)
GATT (I II IIIVIII XI)
1198 199 US through aStatement ofAdministrativeActionundertaken toact consistentwith WTOobligationsPanel ruled thatso long asrespectedcompatible(1199)
WTDS160Section 110(5) ofUS CopyrightAct
Section 110(5) of the US Copyright Actpermits under certain conditions theplaying of radio and television music inpublic places without the payment of aroyalty fee
TRIPS (9(1) 13) 199 499 Panel found infavour of the EU(700) EU andUS havenegotiated anarrangement
Implementationpending
73
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS165Import measureson certainproducts fromthe EU
100 tariffs on certain product inretaliation for the EUs failure to bring itsbanana trade regime into compliance withWTO ruling
GATT (I II VIII)
DSU (3 21 2223)
399 599 Appellate Bodyfound in favourof the EU(1200)
US broughtsanctions intoagreement
Sanctionssuspended asresult of 401agreement
WTDS166Safeguardmeasures onimports of wheatgluten from theEU
Methodology not ensure that all injurydue to imports Imports from Canadawere excluded from the investigation
GATT (I XIX)
Agriculture (42)
Safeguard (214 5 8 12)
399 699 Appellate Body(1200) found infavour of the EU
WTDS176Section 211OmnibusAppropriationsAct
Section 211 provides that the registrationor renewal in the US of a trademarkpreviously abandoned by a trademarkowner whose business and assets havebeen confiscated under Cuban law is nolonger permitted without consent ofprevious owner No US court shallrecognize or enforce such rights
TRIPS (2 15 1641 42 62)
799 600 Appellate Bodyfound in favourof the EU (102)
74
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS186Section 337 ofthe Tariff Act of1930 andamendmentsthereto
Under Section 337 the US caninvestigate whether imported goodsinfringe US intellectual property rightsand can exclude them from entry into theUS Despite amendment the EUconsiders that the procedures andremedies are substantially different fromprocedures concerning domestic goodsand discriminate against Europeanindustries and goods
GATT (III)
TRIPS (2 3 927 41 42 4950 51)
100 ndash
WTDS200Section 306 ofthe Trade Act of1974 andamendmentsthereto(lsquocarouselrsquo)
Section 306 provides for a mandatorymodification (every 6 months) of theproducts subject to sanctions imposedagainst a WTO member which has notcomplied with a WTO panel ruling
DSU (3 21 2223)
GATT (I II XIXXIII)
600 ndash
WTDS212Countervailingmeasuresconcerningcertain productsfrom the EU (14cases)
US application of countervailing dutiesbased on an irrefutable presumption thatnon-recurring subsidies granted to aproducer prior to a change of ownershiplsquopass throughrsquo to the current producerfollowing the change of ownership
SCM (10 19 21) 1100 801 Panelestablished
75
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS213Countervailingduties on certaincorrosion-resistant carbonsteel flatproducts fromGermany
Results of a full sunset review whichmaintains CV duties The original dutywas imposed prior to entry into force ofWTO agreements EU considers that itwould not have been possible to imposethis duty (less than 1) if theinvestigation had been governed by theSCM agreement
SCM (10 11921)
1100 801 Panelestablished
WTDS214Definitivesafeguardmeasures onimports of steelwire rod andcircular weldedcarbon qualityline pipe
EU considers that Sections 201 and 202of the Trade Act of 1974 and Section 311of the NAFTA Implementation Act containprovisions which prevent the US fromrespecting Safeguards Agreement
Safeguards (2 34 5 8 12)
GATT (I XIX)
1100 801 Panelestablished
WTDS217Continueddumping andsubsidy OffsetAct of 2000(ByrdAmendment)
The Act mandates the distribution of theproceeds of duties levied pursuant to aCVD an AD order or a finding under theAntidumping Act of 1921 to the affecteddomestic producers
AD (5 8 18)
SCM (11 1832)
GATT (X)
WTO (XVI)
1200 701 Panelestablished andjoined with panelestablished byCanada andMexico(WTDS234)
76
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS225Anti-dumpingduties onseamless pipefrom Italy
Results of a sunset review which foundthat anti-dumping duties on imports ofseamless line and pressure pipe fromItaly will continue at a rate of 127 EUconsiders this finding is in breach of ADAgreement (duties not lower than 2)
AD (58 111113 17)
GATT (XXII1)
201 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 152027
7
Appendix 3 WTO Cases by the US against the EU and Its Member States(excludes cases as a third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS13Duties onimported grains
Reference price system used to determinethe duties applicable to imports of grainsappear to result in the application ofhigher rates of duties to shipments of USgrains than is permitted under the EUWTO tariff schedule and to discriminateagainst US exports of grains
GATT (I II VIIX)
Agreement onImplementingGATT Article VII(109 11 22Annex I)
795 397 Negotiatedagreement(1195)
Request forpanel withdrawnfollowingimplementation(497)
WTDS26Measuresaffecting meatand meatproducts(Hormones)
EU measures prohibiting the importationof meat and meat products that havebeen treated with growth hormones
GATT (III or XI)
SPS (2 3 5)
TBT (2)
Agriculture (4)
196 496 Appellate Bodyfound in favourof US (298)
Sanctions inplace
78
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS27Import regimefor bananas
EU regime for the importation sale anddistribution of bananas established byCouncil Reg No 40493 and subsequentlegislation regulations and administrativemeasures including those reflecting theprovisions of the Framework Agreementon Bananas which implementsupplement and amend that regime
GATT (I II III XXI XIII)
Licensing (1 3)
Agriculture
TRIMs (2)
GATS (II XVIXVII)
296 496 Appellate Bodyfound in favourof the US andEcuador (997)
Compliancepanel foundrevised EUregime stillincompatible(499)
US Ecuador andEU negotiatedsettlement(401)
WTDS37Portugal ndashPatent protectionunder theIndustrialProperty Act
The term granted existing patents underthe Portuguese Industrial Property Actappears to be inconsistent with Portugalsobligations under the TRIPS Agreement
(GATS (33 6570)
496 Negotiatedsolution (596)
WTDS62Customsclassification ofsome computerequipment
Reclassification of certain LAN adaptercards automatic data processingmachines and units thereof astelecommunications apparatus raised thetariff applied them
GATT (II) 1196 297 Appellate Bodyoverturned Panelreport favouringUS (698)
79
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS67UK ndash Customsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS68Ireland ndashCustomsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS80Belgium ndash-measuresaffectingcommercialtelephonedirectoryservices
Conditions for obtaining a license topublish commercial directories inBelgium
GATS (II VI VIIIXVII)
597 ndash
WTDS82Ireland ndashmeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPS Agreement
TRIPS (9-14 6365)
597 198
80
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS83Denmark ndashmeasuresaffecting theenforcement ofintellectualproperty rights
Denmark does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
597 ndash Negotiatedsolution (301)
WTDS86Sweden ndashMeasuresaffecting theenforcement ofintellectualproperty rights
Sweden does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
697 ndash Negotiatedsolution (697)
WTDS104Export subsidiesndash processedcheese
Export subsidies including under aninward processing arrangement in favourof processed cheese distort markets fordairy products and adversely affect USsales of dairy products
Agriculture (8 910 11)
Subsidies (3)
1097 ndash
WTDS115Ireland ndashMeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPs Agreement
TRIPS (9-14 6365 70)
198 198
81
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS124Enforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
TV stations in Greece regularly broadcastcopyrighted motion pictures and TVprograms without the authorization ofcopyright owners Effective remediesagainst copyright infringement do notappear to be provided or enforced
TRIPS (41 61) 598 ndash Negotiatedsolution (301)
WTDS125Greece ndashEnforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
Same as WTDS124 Same asWTDS124
Same asWTDS124
Sameas
WTDS124
Same asWTDS124
WTDS127Belgium ndashCertain incometax measuresconstitutingsubsidies
Belgian corporate taxpayers receive aspecial tax exemption for recruiting adepartmental head for exports
Subsidies (3) 598 ndash
82
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS128Netherlands ndashCertain incometax measuresconstitutingsubsidies
Dutch income tax law permits exportersto establish a special export reserve forincome derived from export sales
Subsidies (3) 598 ndash
WTDS129Greece ndash Certainincome taxmeasuresconstitutingsubsidies
Greek exporters are entitled to a specialannual tax deduction calculated as apercentage of export income
Subsidies (3) 598 ndash
WTDS130Ireland ndashCertain incometax measuresconstitutingsubsidies
Under Irish income tax law specialtrading houses qualify for a special taxrate in respect of trading income from theexport sale of Irish-manufactured goods
Subsidies (3) 598 ndash
WTDS131France ndash Certainincome taxmeasuresconstitutingsubsidies
French companies may deducttemporarily certain start-up expenses ofits foreign operations through a taxdeductible reserve account
Subsidies (3) 598 ndash
83
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS158Import regimefor bananas II
Failure to implement the DisputeSettlement Bodys recommendations andrulings in WTDS27 within a reasonableperiod
199 See WTDS27
WTDS172Measuresrelating to thedevelopment of aflightmanagementsystem
French government has agreed to grantand the Commission has approved aloan on preferential and non-commercialterms to develop a FMS for Airbusaircraft
Subsidies (5 6)
GATT (XXIII1b)
599 ndash
WTDS173France -Measuresrelating to thedevelopment of aflightmanagementsystem
See WTDS172 See WTDS172 SeeWTDS172
SeeWTDS172
See WTDS172
WTDS174Protection oftrademarks andgeographicalindications foragriculturalproducts andfoodstuffs
EU rule does not provide nationaltreatment with respect to geographicalIndications nor sufficient protection topre-existing trademarks that are similaror identical to a geographical indication
TRIPS (3 16 2463 65)
699 ndash
84
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS210Belgium -Administrationof measuresestablishingcustoms dutiesfor rice
Belgian customs values and duties forrice would lead to a denial of duty rebatesfor US rice and to duties in excess of thebound rate
GATT (I II VIIVIII X XI)
CVA (1)
TBT (2 3 5 67 9)
Agriculture (4)
1000 101 Negotiatedsolution (1101)
WTDS223Tariff-rate quotaon corn glutenfeed from the US
TRQ triggered by DSB ruling against theUS in WTDS166
Safeguards (8182 83)
GATT (I II XIX)
101 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
85
87
References and Recommended Reading
Primary Sources Web sites
European Commission DG TRADE Bilateral Trade Relations USAhttpeuropaeuintcommtradebilateralusausahtm
European Union Europa Web Site httpeuropaeuint
European Union Mission to the United Stateshttpwwweurunionorg
Transatlantic Business Dialogue httpwwwtabdcom
Transatlantic Consumers Dialogue httpwwwtacdorg
Transatlantic Environmental Dialoguehttpwwwtiesweborgtaedindexhtm
Transatlantic Legislators Dialoguehttpwwweuroparleuintintcooptlddefault_enhtm
Transatlantic Information Exchange Service httpwwwtiesweborg
United States Mission to the European Union httpwwwuseube
United States Trade Representative Western EuropeEU pagehttpwwwustrgovregionseu-medwesteurindexshtm
World Trade Organization httpwwwwtoorg
Primary Sources Official Government Documents
CEPAL 2001 Informe de la Inversioacuten Extranjera en Ameacuterica Latina y elCaribe Antildeo 2000 Naciones Unidas Chile
Commission of the European Communities 1998a The NewTransatlantic Marketplace Draft Communication from the Commissionto the Council the European Parliament and the Economic and SocialCommittee available athttpeuropaeuintcommdg01sectionahtm
Commission of the European Communities 1998b Commission staffworking paper concerning the establishment of an inter-regionalassociation between the European Union and Mercosurhttpeuropaeuintcommexternal_relation
88
Commission of the European Communities 2000 The TransatlanticEconomic Partnership Overview and Assessment Coordination DGTRADEE3 October
Commission of the European Communities 2001a Reinforcing theTransatlantic Relationship Focusing on Strategy and Delivering ResultsCOM(2001)154 of 20 March 2001 Available on-line athttpwwweurunionorgpartnerTransatlAgendapdf
Commission of the European Communities 2001b Report on UnitedStates Barriers to Trade and Investment July available on-line athttpeuropaeuintcommtradepdfusrbt2001pdf
Commission of the European Communities 2001c Green Paper on theReview of Council Regulation (EEC) No 406489 COM(2001)7456final of 11122001
UNCTAD 2001 Informe sobre las inversiones en el mundo UnitedNations New York and Geneva
US Department of Agriculture (1998) Agriculture in the WTOSituation and Outlook Series WRS-98-4 Washington EconomicResearch Service
United States Trade Representative 2001 2001 National TradeEstimate Report on Foreign Trade Barriers available on-line athttpwwwustrgovhtml2001_contentshtm
World Trade Organization 2000 Trade Policy Review The EuropeanUnion Report by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
World Trade Organization 2001 Trade Policy Review United StatesReport by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
Secondary Sources
Abbott Kenneth W 20001 lsquoDisputes over Technical Barriers toTrade Are the Rules and Procedures Adequatersquo paper prepared forthe Conference on Dispute Prevention and Dispute Settlement in theTransatlantic Partnership European University Institute Fiesole 5-6July
Atlantic Council of the United States 2001 Changing Terms of TradeManaging the New Transatlantic Economy Policy Paper April(Washington DC The Atlantic Council of the United States)
Barfield Claude E 2001 Free Trade Sovereignty Democracy TheFuture of the World Trade Organization (Washington AmericanEnterprise Institute Press)
Bermann George 1996 lsquoRegulatory Cooperation between theEuropean Commission and US Administrative Agenciesrsquo
89
Administrative Law Journal of the American University Vol 9 pp 933-983
Bermann George Matthias Herdegen and Peter Lindstreth eds2001 Transatlantic Regulatory Co-Operation Legal Problems andPolitical Prospects (New York Oxford University Press)
Bignami Francesca and Steve Charnovitz 2001 lsquoTransatlantic CivilSociety Dialoguesrsquo Chapter 10 in Pollack and Shaffer TransatlanticGovernance in the Global Economy
BP Chair in Transatlantic Relations 2001 Resolving and PresentingUS-EU Trade Disputes Six Prize-Winning Essays (Florence EuropeanUniversity Institute Robert Schuman Centre for Advanced Studies 9May 2001)
Busch Marc L and Eric Reinhardt 2001 lsquoTesting International TradeLaw Empirical Studies of GATTWTO Dispute Settlementrsquo in Daniel LM Kennedy and James D Southwick eds The Political Economy ofInternational Trade Law Essays in Honor of Robert E Hudec (NewYork Cambridge University Press)
Camarero M and CR Tamarit 2002 lsquoLa Unioacuten Europea y lasAmeacutericas consecuencias del establecimiento de un acuerdo deasociacioacuten interregional entre la UE y Mercosurrsquo Papeles de EconomiacuteaEspantildeola n 91 (forthcoming)
Charnovitz Steve 2001 lsquoRethinking WTO Trade Sanctionsrsquo AmericanJournal of International Law Vol 95 (October)
Claes Benedicte A 2000 lsquoComment Aircraft Noise Regulation in theEuropean Union The Hushkit Problemrsquo Southern Methodist UniversitySchool of Law Journal of Air Law and Commerce Vol 65 329-382
Cowles Maria Green 2001a lsquoThe New Transatlantic DialogueTransforming the New Transatlantic Dialoguersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 213-233
Cowles Maria Green 2001b lsquoTransatlantic Cooperation and Discordin the New Economy A Case Study of the Global Business Dialogue one-Commercersquo paper delivered at the Biennial Conference of theEuropean Community Studies Association Madison Wisconsin 31May
Damro Chad 2001 lsquoBuilding an International Identity The EU andExtraterritorial Competition Policyrsquo Journal of European Public PolicyVol 8 No 2 (April) 208-226
Devuyst Youri 2001 lsquoTransatlantic Competition Policy Cooperationrsquoin Mark A Pollack and Gregory Shaffer eds Transatlantic Governancein the Global Economy (Lanham MD Rowman amp Littlefield) pp 127-151
Evans David S 2002 lsquoThe New Trustbusters Brussels andWashington Part Waysrsquo Foreign Affairs JanuaryFebruary
90
Evenett Simon J Alexander Lehmann and Benn Steil 2000 AntitrustGoes Global What Future for Transatlantic Cooperation (WashingtonDC Brookings Institution Press)
Falke Andreas 2001 lsquoThe EU-US Conflict over Sanctions PolicyConfronting the Hegemonrsquo European Foreign Affairs Review Vol 5No 2 139-163
Featherstone Kevin and Roy Ginsberg 1996 The United States andthe European Union in the 1990s Partners in Transition (LondonPalgrave)
Flores R 2001 lsquoRegional Economic Integrationrsquo in Investing in LatinAmerican Growth Unlocking Opportunities in Brazil Mexico Argentinaand Chile EAU Australian Department of Foreign Affairs and TradeChap 12 pp 259-282
Frankel JA E Stein and SJ Wei 1998 lsquoContinental Trading BlocsAre they Natural or Supernaturalrsquo in JA Frankel ed TheRegionalization of the World Economy (Chicago The University ofChicago Press)
Frost Ellen 1997 Transatlantic Trade A Strategic Agenda(Washington DC Institute for International Economics)
Gardner Anthony 1997 A New Era in US-EU Relations The ClintonAdministration and the New Transatlantic Agenda (London Avebury)
Giordano P A Valladio and M-F Durand eds 2001 Vers un accordentre lrsquoEurope et le Mercosur (Presses de Science Po Paris)
Helfer Laurence R 2000 lsquoWorld Music on a US Stage ABerneTRIPS and Economic Analysis of the Fairness in MusicLicensing Actrsquo Boston University Law Review Vol 80 93-204
Helweg Jason 2000 lsquoThe Retreat of the State The MassachusettsBurma Law and Local Empowerment in the Context ofGlobalization(s)rsquo Wisconsin International Law Journal Vol 18 477-510
Hindley Michael 1999 lsquoNew Institutions for Transatlantic TradersquoInternational Affairs Vol 75 45-60
Hudec Robert 1998 lsquoThe New WTO Dispute Settlement Procedure AnOverview of the First Three Yearsrsquo Minnesota Journal of Global TradeVol 8 22-24
Kahler Miles 1995 Regional Futures and Transatlantic Relations (NewYork Council on Foreign Relations Press)
Keohane Robert O Andrew Moravcsik and Anne-Marie Slaughter2001 lsquoLegalized Dispute Resolution Interstate and TransnationalrsquoInternational Organization Vol 54 No 4 457-488
Knauss Jody and David Trubek 2001 lsquoThe Transatlantic LaborDialogue Minimal Action in a Weak Structurersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 235-254
91
Kolasky William J and Leon B Greenfield 2001 lsquoA View to a KillThe Lost GEHoneywell Deal Reveals a Trans-Atlantic Clash ofEssentialsrsquo Legal Times 30 July 2001 p 28
Kuner Christopher 2001 lsquoBeyond Safe Harbour European DataProtection Law and Electronic Commercersquo International Lawyer Vol31
LaFrance Mary 2001 lsquoCongress Trips Over International Law WTOFinds Unfairness in Music Licensing Actrsquo Journal of Art andEntertainment Law Vol 11 397-424
Lorvellec Louis 1997 lsquoBack to the Fields after the Storm Agriculturein the European Union after the Uruguay Round Agreementsrsquo DrakeJournal of Agricultural Law Vol 2 (Winter) p 411
Mazumdar Anandashankar 2002 lsquoEuropean Commission Gives FinalApproval to Model Clauses to Protect Personal Datarsquo InternationalTrade Reporter Vol 19 187 (31 January)
Mehta K 2002 lsquoInternational Competition Policy Cooperationrsquorevised version of a paper presented at the BP Chair Conference onDispute Prevention and Dispute Settlement in the TransatlanticPartnership European University Institute Florence July 2001
Messerlin Patrick A 2001a Measuring the Cost of Protection in Europe(Washington DC Institute for International Economics)
Messerlin Patrick A 2001b lsquoNiveau et coucircts du protectionnismeeuropeacuteenrsquo in Giordano P A Valladao y M-F Durand (eds) Vers unaccord entre lrsquoEurope et le Mercosur Presses de Science Po Paris
Mishkin FS and MA Savastano 2001 lsquoMonetary Policy Strategiesfor Latin Americarsquo Journal of Development Economics 66 415-444
Nagarajan N 1998 lsquoMercosur and Trade Diversion What Do theImport Figures Tell Usrsquo Economic Papers No 129 EuropeanCommission
Petersmann Ernst-Ulrich ed 1997 The GATTWTO DisputeSettlement System International Law International Organizations andDispute Settlement (Kluwer Law International)
Peterson John 1996 Europe and America Prospects for Partnership(New York St Martinrsquos Press 1996)
Peterson John 2001 lsquoGet Away from Me Closer Yoursquore Near Me TooFar Europe and America after the Uruguay Roundrsquo in Mark A Pollackand Gregory Shaffer eds Transatlantic Governance in the GlobalEconomy (Lanham MD Rowman amp Littlefield) pp 45-72
Peterson John and Maria Green Cowles 1998 lsquoUS EconomicDiplomacy What Makes the EU Differentrsquo Governance Vol 11 No 3pp 251-71
Philippart Eric and Pascaline Winand 2001 lsquoDeeds Not WordsEvaluating and Explaining the US-EU Policy Outputrsquo in Philippart and
92
Winand eds Ever Closer Partnership Policymaking in US-EU Relations(Brussels Peter Lang) pp 431-463
Pollack Mark A ed 2001 The New Transatlantic Agenda at Five ACritical Assessment (San Domenico di Fiesole BP Chair inTransatlantic Relations Robert Schuman Centre for AdvancedStudies European University Institute)
Pollack Mark A and Gregory C Shaffer 2001a lsquoTransatlanticGovernance in Historical and Theoretical Perspectiversquo in Mark APollack and Gregory Shaffer eds Transatlantic Governance in theGlobal Economy (Lanham MD Rowman amp Littlefield) pp 3-42
Pollack Mark A and Gregory C Shaffer 2001b lsquoThe Challenge ofReconciling Regulatory Differences Food Safety and GMOs in theTransatlantic Relationshiprsquo in Mark A Pollack and Gregory Shaffereds Transatlantic Governance in the Global Economy (Lanham MDRowman amp Littlefield) pp 153-178
Pollack Mark A and Gregory C Shaffer 2001c lsquoWho Governsrsquo inMark A Pollack and Gregory Shaffer eds Transatlantic Governance inthe Global Economy (Lanham MD Rowman amp Littlefield) pp 287-305
Reidenberg Joel 2001 lsquoE-Commerce and Trans-Atlantic PrivacyrsquoHouston Law Review Vol 8 717-49
Schaefer Matthew 2002 lsquoGovernment Procurement DisputesLessons from the Dispute over the Massachusetts 1996 Act RegulatingState Contracts with Companies Doing Business with Burma(Myanmar)rsquo paper presented at the Conference on Dispute Preventionand Dispute Settlement in the Transatlantic Partnership EuropeanUniversity Institute Florence 5-6 July 2001 final version submitted26 January 2002
Shaffer Gregory 1999 lsquoThe Power of EU Collective Action The Impactof EU Data Privacy Regulation on US Business Practicersquo EuropeanLaw Journal Vol 5
Shaffer Gregory 2000 lsquoGlobalization and Social Protection TheImpact of EU and International Rules in Ratcheting Up of US PrivacyStandardsrsquo Yale Journal of International Law Vol 25 pp 1-88
Shaffer Gregory C 2002 lsquoManaging US-EU Trade Relations throughMutual Recognition and Safe Harbour Agreements lsquoNewrsquo and lsquoGlobalrsquoApproaches to Transatlantic Economic Governancersquo in Ernst-UlrichPetersmann ed Dispute Avoidance and Dispute Settlement in theTransatlantic Partnership (unpublished manuscript) (working paper onfile with the author)
Sindelar Leslie 2001 lsquoNot So Fair After AllmdashInternational Aspects ofthe Fairness in Music Licensing Actrsquo The Transnational Lawyer Vol14 435-71
Steffenson Becky J 2001 The Institutionalization of EU-US RelationsDecision Making Institution Building and the New Transatlantic
93
Agenda unpublished PhD dissertation University of GlasgowDepartment of Politics
Tansini R and T Vera 2001 lsquoLos procesos de integracioacuten enAmeacuterica Latina El caso de Mercosurrsquo Informacioacuten Comercial EspantildeolaFebrero-Marzo nuacutem 790 107-117
Vogel David 1997 Barriers or Benefits Regulation in TransatlanticTrade (Washington DC Brookings Institution)
Vogel David 2001 Ships Passing in the Night The Changing Politics ofRisk Regulation in the United States and the European Union RSCASWorking Paper No 200116
Woolcock Stephen 2000 lsquoEuropean Trade Policy Global Pressuresand Domestic Constraintsrsquo in Helen Wallace and William Wallaceeds Policy-Making in the European Union (New York Oxford UniversityPress) pp 373-99
Yerkey Gary G 2000a lsquoEU Accuses US of Failing to ImplementMRAs on Electrical Safety Pharmaceuticalsrsquo International TradeReporter Vol 17 1662 (2 November)
Yerkey Gary G 2000b lsquoUS European CEOs Call on Governments toResolve Dispute Over MRA by Dec 18rsquo International Trade ReporterVol 17 1662 (30 November)
Young Alasdair 2001 Trading Up or Trading Blows US Politics andTransatlantic Trade in Genetically Modified Food RSCAS WorkingPaper No 200130
Young Alasdair R 2002 lsquoRisk Positive Integration and SystemFriction The Single European Market and World Tradersquo paperpresented at the Council of European Studies Conference 14-16March 2002
94
Notes
1 The EU and the 50 US States website of the European Union Mission tothe United Stateshttpwwweurunionorgpartnerusstatesusstateshtm
2 Ibid
3 As Miles Kahler wrote in 1995 lsquoIncreasingly the points of conflict amongthe industrialized countries are not the familiar ones of barriers toexchange at the border but an entire array of ldquodomesticrdquo policies thatproduce conflict by appearing to restrict market access or alter theterms of competition The agenda of behind-the-border issues that hasbecome more prominent in the 1990s will only grow as economicintegration continues and groups mobilize to seek new benchmarks foran international ldquolevel playing fieldrdquo rsquo (Kahler 1995 5) For gooddiscussions of regulatory barriers in USEU trade relations see alsoVogel 1997 Young 2002
4 This section draws on the analysis presented in Pollack and Shaffer2001a
5 For good discussions see Gardner 1997 Peterson and Cowles 1998
6 Pollack and Shaffer 2001c 291
7 lsquoTransatlantic Declarationrsquo text available on-line athttpwwweurunionorgpartnertransatldechtm
8 See eg Featherstone and Ginsburg 1996 Peterson 1996
9 lsquoThe New Transatlantic Agendarsquo text available on-line athttpwwweurunionorgpartneragendahtm
1 0 lsquoJoint US-EU Action Planrsquo text available on-line athttpwwweurunionorgpartneractplanhtm
1 1 Gardner 1997
1 2 Commission of the European Communities 1998a
1 3 lsquoTransatlantic Economic Partnership Action Planrsquo text available on-lineat httpeuropaeuintcommtradebilateralusa1109tephtm For auseful review of the TEP see Commission of the EuropeanCommunities 2000
95
1 5 For good discussions of the TABD see Cowles 2001a 2001b and thewebsite of the TABD at httpwwwtabdorg
1 6 lsquoCincinnati Recommendations Transatlantic Business DialoguersquoNovember 16-18 2000 p 4 Available on-line athttpwwwtabdorgrecommendationsCincinnati00pdf
1 7 Ibid page 5
1 8 Cowles 2001b
1 9 Steffenson 2001
2 0 Pollack ed 2001 12
2 1 For an excellent discussion of the TACD and its activities see Bignamiand Charnovitz 2001 and the TACD website at httpwwwtacdorg
2 2 For example sixty-five consumer groups issued a statement in 2000stating that the EU and the US had largely ignored consumer tradepolicy recommendations TACD press release lsquoUS amp EU ConsumerGroups Call for Swift Action to Balance Trade Dialoguersquo 30 March 2000
2 3 The USIA funding for the TAED ($100000) was subject to approval fromthe Senate Finance Committee In January 2000 the objection of SenatorJesse Helms to TAED funding blocked the approval of funds andstopped the State Department from issuing the grant The TAED arguedthat this demonstrated the US governmentrsquos lack of dedication to theproject See lsquoTransatlantic Environment Dialogue suspends its activitiesdue to the failure of US government to stick to its commitmentsrsquoaccessed on 12 March 2002 on the TAED websitehttpwwwtiesweborgtaedindexhtml For a good general discussionof the TAED see Bignami and Charnovitz 2001
2 4 To summarise the TAED recommended the removal of subsidies forenvironmentally unfriendly energy sources (such as coal) demanded thatsustainability assessments be applied to a number of WTO agreementsand expressed it opposition to the multilateral TRIPs Technical Barriersto Trade and SPS Agreements It aired concerns about biotechnologyeco-labelling and the Precautionary Principle the MRAs and Chemicaland Electrical Waste Management (WEEEs) It stressed transparency intransatlantic and multilateral decision making urged both governmentsto support the Kyoto Treaty and to stop challenging environmentallegislation at the WTO The message to the EUUS Summit Lisbon May31 2000 was that lsquoUntil such time as parity exists betweenenvironmental governance and multilateral trade rules we demand thatboth the United States and the European Union immediately agree tomutual moratorium on WTO challenges and threatened challengesrsquo Fora good discussion of the TAED and its activities see Bignami andCharnovitz 2001
2 5 For an excellent discussion of the TALD see Knauss and Trubek 2001
96
2 6 Commission of the European Communities 2001a
2 7 Philippart and Winand 2001
2 8 Kahler 1995 See also Vogel 1997 Young 2002
2 9 For excellent overviews of the WTO dispute resolution procedure and itspredecessor within the GATT see Petersmann 1997 Hudec 1998 Buschand Reinhardt 2001 and BP Chair in Transatlantic Relations 2001 Fora provocative challenge to the DSU see Barfield 2001
3 0 This section draws largely on Abbottrsquos (2001) account of transatlanticdisputes over TBTs in general and the hushkits case in particular Forother accounts of the hushkits dispute see also Claes 2000 andPeterson 2001 58-59
3 1 Commission of the European Communities lsquoCommission Proposes NewLegislation to Fight Aircraft Noisersquo Press Release IP 011683
3 2 For a detailed analyses of transatlantic disputes over food safety andgenetically modified organisms see Pollack and Shaffer 2001b Vogel2001 and Young 2001
3 3 The text of the report can be found athttpeuropaeuintcommexternal_relationsusbiotechbiotechhtm
3 4 Schaefer 2002 1-2 See also Hellweg 2000
3 5 For useful background on the case filed before the WTO as DS160 seeHelfer 2000 LaFrance 2001 and Sindelar 2001
3 6 Commission of the European Communities lsquoEU and US Agree onTemporary Compensation in Copyright Disputersquo Press Release IP011860
3 7 For good discussions of potential reforms of the bilateral relationship aswell as WTO dispute settlement including a wide range of proposals seeeg BP Chair in Transatlantic Relations 2001 Charnovitz 2001 Barfield2001 and Petersmann 2001
3 8 Some countries such as the United Kingdom have establishedguidelines for policymakers to take trade implications of proposedregulations into account but neither the US nor the EU currentlyemploys any statutory requirement to undertake such an impactassessment
3 9 Bermann 1996 961 For an excellent set of essays on various aspects oftransatlantic regulatory cooperation see also Bermann Herdegen andLindstreth (eds) 2001
4 0 Ibid p 966
97
4 1 For excellent analyses of USEU competition-policy cooperation fromwhich this analysis is largely drawn see eg Evenett Lehmann and Steil2000 Devuyst 2001 Damro 2001 and Mehta 2002
4 2 Devuyst 2001 142-145
4 3 See eg Kolasky and Greenfield 2001 Evans 2002
4 4 Commission 2001c 38-40
4 5 This section draws extensively from research reported in Shaffer 2002
4 6 Subsidiaries of US firms in the EC account for about one-third of ECimports from the United States while subsidiaries of EC firms in theUnited States account for about 38 of US imports from the EC SeePollack and Shaffer 2001a 14
4 7 Agreement on Mutual Recognition Between the European Communityand the United States of America Available on-line athttpeuropaeuintcommtradepdf0713mra-usenpdf
4 8 The five excluded sectors were information technology pressureequipment road safety equipment lawn mowers and personal protectiveequipment such as helmets
4 9 However as an exception tests of pharmaceutical good manufacturingpractices are to be performed by regulatory bodies and not privatelaboratories in accordance with that annex
5 0 Yerkey 2000a 2000b
5 1 Quoted in Shaffer 2002 23
5 2 Agreement Between the European Community and the United States ofAmerica on Mutual Recognition of Certificates of Conformity for MarineEquipment Available on-line athttpeuropaeuintcommtradepdfmareqpdf
5 3 See Shaffer 2002
5 4 See Shaffer 2002
5 5 This section draws extensively from research reported in Shaffer 2002
5 6 The above figures are from the prepared testimony of Assistant Secretaryof Commerce Franklin Vargo before the House Committee onInternational Relations See lsquoIssues in US-European Union TradeEuropean Privacy Legislation and BiotechnologyFood Safety PolicyrsquoFederal News Service (May 7 1998)
5 7 Mazumdar 2002 See also Shaffer 2000 Reidenberg 2001
5 8 Commission Decision of 26 July 2000 pursuant to Directive 9546ECof the European Parliament and of the Council on the adequacy of the
98
protection provided by the safe harbour privacy principals and relatedfrequently asked questions issued by the US Department of CommerceAvailable on-line athttpeuropaeuintcommtradepdfsafeharbourpdf For generalinformation on safe harbour documents see Safe Harbor Documentshttpwwwexportsgovsafeharborsh_documentshtm
5 9 Guide to the Implementation of Directives Based on the New Approachand the Global Approach Available on-line athttpeuropaeuintcommenterprisenewapproachlegislationguidedocument1999_1282_enpdf
6 0 See Shaffer 2002
6 1 For a good discussion of the obstacles posed by US federalism inregulatory cooperation see Commission of the European Communities2000
6 2 lsquoEU-US Guidelines on Regulatory Cooperation and Transparencyrsquoavailable on-line athttpeuropaeuintcommenterpriseenterprise_policygov_relationsregulcooptransathtm See also lsquoTransatlantic Bid to Cut Red TapersquoEuropean Report 10 April 2002 and Micheal Mann lsquoDrive to Head OffTrade Riftsrsquo Financial Times 13 April 2002
6 3 See the DG Trade website lsquoBilateral Trade Relations Canadarsquo accessedat httpeuropaeuintcommtradebilateralcanadacanadahtml
6 4 For useful and up-to-date reviews of the EUCanada relationship see inaddition to the DG Trade web page cited above the websites of theEuropean Union Delegation to Canadahttpwwweudelcanorgenglishindexcfm and the Canadian Missionto the European Union httpwwwdfait-maecigccaeu-missionconten_ehtml
6 5 For more information about Mercosur visit the following internetaddress httpwwwmercosurorg
6 6 Tansini and Vera 2001
6 7 lsquoEUChile Deal Reached on Free Trade Agreementrsquo European Report 27April 2002
6 8 Ibid
6 9 Camarero and Tamarit (2002) Source OECD International SectoralDatabase
7 0 For more information about the EU and Latin America visit the followinginternet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 1 The Lomeacute Convention replaced the Yaounde Convention of 1963 afterthe accession of the UK to the Community It was renewed in 1979
99
(Lomeacute II) 1985 (Lomeacute III) 1989 (Lomeacute IV) and 1995 (Lomeacute IV) andconsists of a system of preferences for imports in which industrial goodsalmost free of tariffs and agricultural receive different treatments InJune 2000 the Lomeacute Convention was replaced by the CotonouAgreement which stabilized what can be seen as a transitory regimeaiming to incorporate the ACP countries in the WTO general rules
7 2 What characterizes first-generation agreements is their conventionalbilateral and technical structure and their reference to possiblereciprocal cooperation In practical terms however these treaties onlyextended the Most Favoured Nation (MFN) status to its signatories
7 3 The second-generation agreements referred mainly to specificcommercial and cooperation questions
7 4 For the conclusions of the Madrid summit see the Latin America webpage of the Commissionrsquos Directorate-General for Tradehttpeuropaeuintcommtradebilaterallaclachtm
7 5 In October 1998 hurricane Mitch one of the worst natural disastersever to have hit the region caused a material damage equivalent to 10of the regionrsquos GDP The EU not only played a significant role in theinternational communityrsquos emergency aid but also launched in 1998a medium-term rehabilitation plan called the Regional Programme forthe Reconstruction of Central America (PRRAC) Funding was set ateuro 250 million committed for the 1999-2002 period but to beimplemented within six years The target countries were HondurasNicaragua El Salvador and Guatemala
7 6 For details on the provisions of the EU-Chile Association Agreement andthe status of the ratification procedure seehttpeuropaeuintcommexternal_relationschileintroindexhtm
7 7 The information about the results of the different negotiation rounds canbe updated at the following internet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 8 For an assessment of the trade-diverting effects of Mercosur seeNagarajan (1998)
7 9 Commission of the European Communities 1998b
8 0 Messerlin 2001b
8 1 Pascal Lamy lsquoFacing the Challenge of Globalization Regional Integrationor Multilateral Rulesrsquo Buenos Aires 1 March 2002 Reproduced on theDG Trade website athttpeuropaeuintcommtradespeeches_articlesspla99_enhtml
Lead Author
Mark A Pollack
The Political Economy ofthe Transatlantic Partnership
Robert Schuman Centrefor Advanced Studies
EUROPEAN UNIVERSITY INSTITUTE
Report prepared by theTransatlantic Programme
for and with the contribution of
Her Majestyrsquos TreasuryUnited Kingdom
Ministry of FinanceThe Netherlands
vi
The European Unionrsquos economic relationships with the countries of theAmericas like its bilateral relationship with the United States isnested in turn within the multilateral trading system of the WorldTrade Organization the further development of which is a sharedpriority for both the European Union and the United States During hisrecent trip to Argentina EU Trade Commissioner Pascal Lamy stressedthe importance of ensuring that bilateral and inter-regional tradeagreements with the United States Canada and the countries of LatinAmerica rest on the multilateral foundation of WTO trade law For thisreason he argued bilateral and interregional negotiations lsquomust not beallowed to detract our attention from the pursuit of the DohaDevelopment Agendarsquo Such a commitment should remain a centraltenet of EU trade policy in the years to come
Within the multilateral rules-based trading system finally theEuropean Union and the United States should also seek to developfurther their bilateral relationship the health of which is vital to theglobal economy as a whole Addressing the full range of challenges tothe transatlantic economic partnership will in turn require a carefuland extensive study not only of traditional trade issues such as theliberalization of tariffs and quotas but also and especially the domesticsources of transatlantic regulatory disputes and successful means ofpreventing and settling such disputes More specifically such as studywould have to undertake three essential tasks
bull A comprehensive listing and analysis of EU and US regulationscapable of restricting trade and investment in the transatlanticsmarketplace
bull A comprehensive survey and analysis of formal and informalregulatory cooperation focusing on both the obstacles to suchcooperation and instances of lsquobest practicersquo in overcoming thoseobstacles and
bull A systematic analysis of various means of bilateral and multilateraldispute resolution with a particular emphasis on the specificchallenges of transatlantic regulatory disputes
The insights generated by such a study would inform not only thefurther development of the transatlantic economic partnership but alsothe development of the rules-based multilateral trading system of theWorld Trade Organization
vii
About the Authors
This report was prepared by the Transatlantic Programme of theRobert Schuman Centre for Advanced Studies at the EuropeanUniversity Institute Florence
The following persons contributed to the writing of one or moreportions of this reportRebecca Steffenson (European University Institute) contributed toSection 2Alasdair Young (University of Glasgow) contributed to Section 3including the preparation of Tables 5-7 as well as Appendices 1-3Gregory C Shaffer (University of Wisconsin School of Law) contributedtwo case studies in Section 4Mariam Camarero (Universidad Jaume I) Cecilio Tamarit (Universidadde Valencia) and Andrea Ribeiro Hoffmann (University of Tuumlbingen)contributed to Section 5 andMark A Pollack (European University InstituteUniversity ofWisconsin-Madison) served as lead author for the report andcontributed to the writing of various sections
The Transatlantic Programme is also grateful to the following personsfor comments on early drafts of the reportHelen Wallace (Director Robert Schuman Centre for AdvancedStudies)Patrick Messerlin (Institut de Sciences politiques Paris)Claus-Dieter Ehlermann (European University Institute)Ernst-Ulrich Petersmann (European University Institute) andMichael Artis (European University Institute)
The Transatlantic Programme was established in 2000 with a majorgift from BP
1
ndash 1 ndashThe Transatlantic Marketplace and
the Changing EUUS Economic Agenda
The European Union and the United States are the largest economiesand the largest trade and investment partners on earth and theinterdependence of these two economies has grown rapidly over thecourse of the past decade Taken together the US and the EU accountfor roughly one half of both world GDP and global trade
Table 1 Transatlantic Trade 1980-2000 in millions of Euros(share of EU total)
1980 1990 2000
EU imports from US 50733(181)
88957(205)
197992(193)
EU exports to US 29543(140)
82004(200)
232037(247)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
The European Union and the United States are also each otherrsquos mostimportant trading partners As Table 1 illustrates the volume ofEUUS trade more than doubled during the 1990s and the twocountries are currently each otherrsquos largest trading partners Indeedrecent data on trade in services summarized in Table 2 demonstrateseven more clearly the importance of the transatlantic traderelationship with the United States accounting for some 40 of theEUrsquos total imports and exports of services which in turn account forbetween one-third and one-half of total transatlantic tradeFurthermore EUUS trade has been largely balanced over the decadeof the 1990s
2
Table 2 Transatlantic Trade in Services in millions of Euros(share of EU total)
1998 1999 2000
EU imports from US 79874(360)
99042(409)
116474(407)
EU exports to US 77039(334)
92199(373)
117403(403)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
Notwithstanding the impressive growth of EUUS trade it is theinvestment relationship that most clearly distinguishes thecontemporary transatlantic marketplace As Table 3 makes clear theEuropean Union in 2000 was far and away the largest investor in theUnited States its euro 794 billion in foreign direct investment (FDI)constituting 65 of total FDI in the US1 The United States is similarlythe largest source of FDI in the European Union with someeuro 561 billion invested in 2000 These high levels of EU investment areestimated to provide roughly 35 million jobs in the United States witha similar number of European jobs relying on US investment in theUnion2 The large and growing investment relationship also explains aconsiderable portion of the recent growth in bilateral USEU tradesince an estimated 20-30 percent of all bilateral trade takes the form ofintrafirm trade within firms operating on both sides of the Atlantic
Table 3 Transatlantic Foreign Direct Investment in millions of Euros(share of EU total)
1998 1999 2000
US FDI flows into EU 60697(571)
83798(754)
121271(688)
EU FDI flows to US 133416(602)
196794(632)
172027(475)
US FDI stocks in EU 366462(60)
439928(609)
561199(625)
EU FDI stocks in US 398190(483)
622496(524)
794523(513)
Source DG Trade httpeuropaeuintcommtradepdfbilstatecono_usaxls
3
With the simultaneous growth of transatlantic trade and investmentand the gradual decline in EU and US tariffs and quotas followingsuccessive waves of trade liberalization the transatlantic economicagenda has been transformed Prior to the 1990s much of the EUUSeconomic relationship was dominated by trade questions andspecifically by cooperation and conflict over tariffs quotas and otherdirect barriers to trade typically imposed at US and EU borders Withthe decline in tariffs and quotas in most areas of transatlantic tradehowever non-tariff barriers to trade have increased in importance aspotential sources of international trade tension Such non-tariffbarriers have been addressed in the European Union for decadesthrough the use of regulatory harmonization and more recentlythrough the mutual recognition of national standards Similarly theGATT system began as early as the Tokyo Round (1973-1979) toaddress non-tariff barriers to trade most notably through theTechnical Barriers to Trade (TBT) Agreement and more recentlythrough the 1994 Sanitary and Phytosanitary Standards (SPS)Agreement both of which apply international law disciplines to trade-distorting national regulations
Notwithstanding these new rules however lsquobehind-the-borderrsquo US andEU regulations on a diverse array of topicsmdashranging from theenvironment and food safety to consumer protection and dataprivacymdashhave emerged during the past decade as significant obstaclesto transatlantic and global trade and investment3 In some cases suchdomestic regulations have led to trade disputes between the UnitedStates and the European Union and to increasing demands frombusinesses on both sides of the Atlantic for cooperation among US andEuropean regulatory authorities to prevent and settle such disputesand facilitate access to the European and American markets
In sum the ever-increasing levels of transatlantic trade andinvestment have created a de facto transatlantic marketplace and withit an increasing incentive for the European Union and the UnitedStates to cooperate in an effort to manage that marketplace facilitatemutually beneficial economic exchange and prevent or settle the tradeand economic disputes that inevitably arise in such a closerelationship In that context this report aims to summarize the stateof our scholarly understanding about the political economy of thetransatlantic economic relationship with an emphasis on theinstitutions for joint economic governance the new challenges posedby regulatory disputes and the promise and limits of transatlanticregulatory cooperation Accordingly Section 2 of the report examinesthe development and growth of post-Cold War institutions for themanagement of the EUUS economic partnership while Section 3examines the persistence of trade and economic disputes between theEU and the US including the rise of new and potentially intractableregulatory disputes and Section 4 examines the prospects and limitsof transatlantic regulatory cooperation as a possible solution to such
4
conflicts The fifth section of the report places the EUUS bilateralrelationship in the broader context of the relationship between theEuropean Union and the various countries of the Americas and thesixth concludes with a review of potential areas for furthertransatlantic cooperation and promising areas for further study
5
ndash 2 ndashInstitutions for Transatlantic Economic Governance
Origins and Effectiveness
Transatlantic relations between the United States and the countries ofWestern Europe have long been based on common values and interestsin terms of both security and economic interdependence Throughoutthe Cold War transatlantic cooperation took place largely though theNorth Atlantic Treaty Organization (NATO) in the area of security andthrough common US and European participation in variousmultilateral economic forums including the Organization for EconomicCooperation and Development (OECD) the G-7 (now G-8) group ofhighly industrialized economies and the World Trade Organization
Cooperation between the United States and its European partners istherefore not new but the character of the relationship changedsubstantially during the 1990s with an ever-greater emphasis oneconomic as well as security cooperation and a greater recognition bythe United States of the European Union (in addition to its memberstates) as an important interlocutor Three transatlantic agreementssigned in the 1990s underpin this new transatlantic partnership andthe increasingly liberalized EUUS economic relationship TheTransatlantic Declaration (1990) the New Transatlantic Agenda (NTA1995) and the Transatlantic Economic Partnership (TEP 1998) haveeach played an important role in creating a transatlantic framework foreconomic co-operation and introducing formal transatlanticinstitutions to manage the relationship This upgrading of the EUUSrelationship in turn can be traced to several interrelateddevelopments during that decade including the end of the Cold Warthe maturation of the European Union as an economic and politicalactor and the relentless expansion of transatlantic economic exchangewhich created pressures for joint management of the emergingtransatlantic marketplace4
The end of the Cold War was clearly a precipitating cause for theupgrading of the transatlantic relationship As early as 1990 the USpresidential administration of George HW Bush proposed aTransatlantic Declaration to reaffirm USEuropean solidarity followingthe fall of the Iron Curtain and the collapse of the Soviet Union Whilethat Transatlantic Declaration itself focused largely on security issuesrather than economic cooperation the diminution of the security
6
threat from post-Soviet Russia facilitated an increasing emphasis oneconomic issues by the Clinton Administration reflected in both the1995 New Transatlantic Agenda and the 1998 Transatlantic EconomicPartnership5
This economic focus has in turn been reinforced by the maturation ofthe European Union which emerged during the late 1980s and early1990s as the worldrsquos largest internal market and the most importanttrading partner of the United States Simultaneous with thedevelopment of the EUrsquos internal market came the increasing influenceof EU political institutions including the European Commission(which plays a vital role in the EU legislative process as well as servingas trade negotiator and economic regulator in fields such ascompetition policy) and the Council of Ministers and EuropeanParliament (which collectively adopt an increasingly large portion ofEuropean economic legislation) Although the powers of the respectiveEU institutions still varies considerably across sectors theCommission has clearly emerged as the Unionrsquos primary interlocutorwith the United States on economic issues while the legislativeactivities of the Council and the Parliament have the potential toinfluence economic interests in the United States The institutions ofthe New Transatlantic Agenda have therefore attempted to incorporatethe Commission and the Council presidency through biannualsummits and other high-level meetings as well as members of theEuropean Parliament through the Transatlantic Legislatorsrsquo Dialogue(see below)
Beyond the end of the Cold War and the maturation of the EuropeanUnion finally lies the relentless increase of transatlantic economicexchange Increased transatlantic trade and investment have creatednew demands for market access and economic cooperation fromproducer groups such as the Transatlantic Business Dialogue whileother consumer labour and environmental groups have sought toensure that transatlantic cooperation takes into account their diverseinterests Indeed as we shall see below the increasingly closeeconomic relationship between the EU and the US has created newprospects for both trade conflicts and regulatory cooperation and hasresulted in what might be termed lsquoscuttle diplomacyrsquomdashthe scurrying ofEU and US government authorities to cope with the incessant conflictswhich although they compose only a small fraction of EUUSeconomic exchange threaten to poison a mutually advantageouseconomic relationship6 Largely for this reason the United States andthe European Union have established an increasingly complexinstitutional structure designed to facilitate economic and securitycooperation resolve and prevent disputes and integrate civil-societygroups into the process of transatlantic economic governance
7
21 Transatlantic Economic Agreements in the 1990s
211 The Transatlantic Declaration
The process of institutionalizing the EUUS relationship begansimultaneously with the end of the Cold War in 1989 when USPresident Bush and EU Commission President Jacques Delors agreedto work to ensure regular meetings between high-level EU and USofficials On 27 February 1990 this agreement bore fruit in the shapeof a lsquoTransatlantic Declarationrsquo pursuant to which the US and ECagreed to establish an institutional framework lsquofor regular andintensive consultationrsquo Specifically the Declaration called for biannualEUUS summit meetings between the presidents of the United Statesthe European Commission and the European Council as well asregular meetings between the US Secretary of State the ECCommission and the US Cabinet These meetings it was hoped wouldopen lines of communication create networks facilitate informationsharing and reduce the impact of disputes in transatlantic relations
In substantive terms the Transatlantic Declaration identified threemajor goals
bull economic liberalizationbull educational scientific and cultural co-operation andbull cooperation in fighting international crime terrorism and
environmental degradation7
While these policy areas were identified as priorities the agreementfailed to provide a more detailed agenda for meeting its goals Thecontent of the agreement has been described as cosmetic minimalistand lacking in substantive innovations and would soon besupplemented by other more detailed economic agreements8
212 The New Transatlantic Agenda
The next stage in developing the transatlantic economic relationshipcame with the New Transatlantic Agenda (NTA) which was signed atthe EUUS Summit in Madrid in 1995 and established four priorityareas for closer cooperation
1 promoting peace and stability democracy and development aroundthe world (in particular in Central and Eastern Europe Russia andthe Middle East)
2 responding to global challenges (with a focus on international crimedrug trafficking terrorism migration and health andenvironmental issues)
3 lsquocontributing to the expansion of world trade and promoting closereconomic relationsrsquo (including both bilateral and multilateralliberalization of trade and investment) and
8
4 building bridges across the Atlantic (specifically direct contactsamong lsquobusiness people scientists educators and othersrsquo)9
In addition to the six-page NTA itself the two partners also adopted amuch more detailed Joint Action Plan (JAP) which outlined specificpolicy areas where deeper cooperation could be pursued The economicchapter of the JAP was arguably the most ambitious of the four callingfor both the strengthening of the multilateral trading system and thecreation of liberalized lsquotransatlantic marketplacersquo with a special focuson bilateral regulatory cooperation1 0 The NTA itself also acknowledgedthe role of the Transatlantic Business Dialogue which would laterprove to be influential in setting the agenda for transatlantic economiccooperation
In institutional terms the New Transatlantic Agenda established newtransatlantic governance mechanisms and a more established policyprocess First it created a Senior Level Group of EU and US officialstogether with a lower-level NTA Task Force to help drive coordinatemonitor and implement the agenda of transatlantic relations betweenthe continuing EUUS summits Although this framework has sincebeen criticized as excessively bureaucratic and focused on summit-driven lsquodeliverablesrsquo (see below) the NTA framework has proven usefulin coordinating EU and US responses to both economic and securityissues and remains the overarching framework for transatlanticrelations today
213 The Transatlantic Economic Partnership
The drive for an ever-closer transatlantic economic relationship wasrevived in 1998 amidst revelations that cooperation in many policyareas had fallen short of initial expectations1 1 Despite the NTA and itsinstitutions high-profile trade disputes over bananas beef andextraterritorial sanctions continued highlighting the need for furthertransatlantic commitment to facilitate economic exchange and containconflict In that context the European Commission took the initiativein April 1998 calling for negotiations on a lsquosingle comprehensiveagreementrsquo to implement a lsquoNew Transatlantic Marketplacersquo TheCommissionrsquos proposal had four central objectives
1 the lsquoremoval of technical barriers to trade in goods through anextensive process of mutual recognition andor harmonizationrsquo
2 the elimination lsquoby 2010 of all industrial tariffs on an MFN basisrsquo3 the formation of a lsquofree trade area in servicesrsquo and4 further liberalization in the areas of government procurement
intellectual property rights and investment1 2
The United States had little time to respond however as the initiativefailed to secure the support of the Council of Ministers In its placethe US and the EU agreed in May 1998 to a somewhat less ambitious
9
Transatlantic Economic Partnership (TEP) which aimed to tacklebilateral regulatory barriers to trade and to identify common positionswithin multilateral trade negotiations In substantive terms the TEPand its accompanying Action Plan focused more directly than the NTAon regulatory cooperation and on the possible harmonization ofstandards as a means of removing technical barriers to trade and itcommitted both sides to negotiations in specific issue-areas includingservices intellectual property food safety and biotechnology1 3
In addition the TEP created a new set of institutions to manage theeconomic aspects of the relationship including a lsquoTEP Steering Grouprsquocharged with monitoring implementing and reviewing TEP objectivesas well as expert-level working groups The TEP also emphasized theimportance of early warning of potential trade and regulatory disputesand fostered the creation of an institutionalized lsquoearly warning systemrsquofollowing the Bonn EUUS summit in June 1999 Finally the TEPexplicitly encouraged the participation of not only business but othercivil society groups which would lead in time to the creation of thetransatlantic consumer environment and labour dialogues
Table 4 Transatlantic Cooperation Agreements at a Glance
Transatlantic Agreement Year Impact on the Economic Relationship
The TransatlanticDeclaration 1990 Contains a broad commitment to
economic liberalization
The New TransatlanticAgenda (NTA) and JointAction Plan (JAP)
1995
Includes a chapter on contributing tothe expansion of world trade andpromoting closer economic relationsJAP discusses building a lsquonewtransatlantic marketplacersquo throughincreased regulatory co-operation
Transatlantic EconomicPartnership (TEP) 1998
Outlines three main goals for thetransatlantic economic relationship1) market access gains for goods
services and agricultural products2) multilateral and bilateral trade
liberalization of goods services andcapital
3) deepening dialogue between non-governmental organizationsparliamentarians and government
10
22 An Overview of Existing Transatlantic Institutions
Todayrsquos transatlantic economic relationship is managed largely by a setof institutions that were created in stages by the TransatlanticDeclaration the NTA and the TEP Combined these institutionsconstitute a framework for long-term as well as day-to-day economiccooperation and dispute resolution
221 EUUS Summits
The biannual EUUS summit is the primary forum forintergovernmental exchange in the NTA process consisting of thehighest level of contact between the Presidents of the US the EUCommission and the Council Presidency The transatlantic policy cyclebegins and ends with these biannual summits where decisions arelsquomadersquo about the general scope for co-operation and wherelsquodeliverablesrsquo - in the form of new bilateral agreements about regulatorycooperation or the resolution of specific disputesmdashare announced Thesummits encourage policy co-ordination because they create deadlinesfor progress reports and exert pressure on lower-level officials toproduce results
222 Senior Level Group and the NTA Task Force
The Senior Level Group serves as a contact point between the EUUSSummit and the working level of the transatlantic dialogue It hasroughly six formal members including the US Undersecretary of Statefor Economic Affairs Commission delegates from the Directorates-General for external relations and trade Council Presidencyrepresentatives and representatives of the lsquoArticle 133 committeersquodealing with international trade matters The primary tasks of the SLGare to prepare the agenda of the biannual summits lsquoshopping fordeliverablesrsquo to be announced on those occasions and to monitor theimplementation of the NTA and the TEP
Logistically the SLG typically meets twice during each CouncilPresidency with the first meeting used to assess potential areas ofcooperation and conflict and the second meeting finalizing the agendafor the EUUS summit and confirming the contents of its progressreport which is presented to summit leaders Below the SLG an lsquoNTATask Forcersquo meets somewhat more frequently (often throughvideoconferencing) to follow specific dossiers in both the security andeconomic realms
223 TEP Steering Committee and Working Groups
The TEP institutions including the Steering Group and workinggroups bring together policy experts to deal with economic issues ingreater detail The Steering Group consists of the US Deputy Assistant
11
Secretary of State for Economic Affairs Commission officials at theHead-of-Unit level and a Council Presidency representative Originallydesigned to coordinate negotiating approaches within the WTO and toact as an lsquoearly warning systemrsquo to identify possible trade disputes theTEP Steering Group has evolved into the primary coordinating body fortransatlantic economic relations including negotiations aboutregulatory cooperation in specific areas
The Steering Group is assisted by the TEP working groups which aresector-specific and thus mirror the sectors laid out by the TEPincluding agriculture biotechnology trade services and globalelectronic commerce Their main task is to find areas where the EUand the US can work together under the TEP framework and to reportany progress or problems to the Steering Group
224 The Transatlantic Early Warning System
The 1998 TEP declaration highlighted the need to identify potentialtrade disputes before they emerge At the Bonn EUUS summit inJune 1999 the two sides announced plans to formalize an EarlyWarning System for this purpose1 4 Essentially the transatlantic earlywarning system sparks an inter-agency process to identify potentialeconomic disputes at an early stage most notably with regard todomestic EU or US legislation that might act as a barrier totransatlantic trade and investment The task of spotting such potentialdisputes is delegated to the TEP Steering Group which reports earlywarning items to the Senior Level Group which in turn may take theminto account when preparing the EUUS summit agenda The TEPSteering Group also assigns contact points facilitating consultationsand agreeing on timelines for reporting back on items highlighted aspotential transatlantic policy frictions Unlike similar early warningsystems within the European Union however the transatlantic earlywarning system does not require that either side pause or reconsiderits proposed legislation or regulations The result is a system whichwhile respecting the regulatory sovereignty of both sides does notguarantee prevention or resolution of potential conflicts
12
Figure 1 The Transatlantic Early Warning System
The EUUS SummitTop-level discussions on
potential and exiting disputes
The Senior Level GroupReviews friction points reports to summitorand refers back to TEP Steering Group
or NTA Task Force
TEP Steering GroupIdentifies and monitorseconomic friction points
225 The Transatlantic Legislatorsrsquo Dialogue
An underlying feature of the early warning concept is the desire to getboth EU and US domestic policy makers to consider the externalimplications of internal policies However the Early Warning System isa bureaucratic tool The important task of raising awareness betweenEU and US legislators lies with the Transatlantic Legislatorsrsquo Dialogue(TLD) another product of the NTArsquos lsquobuilding bridgesrsquo chapter The TLDbrings together members of the US Congress and the EuropeanParliament so as to create awareness on each side of the transatlantictrade impact of EU and US legislative acts
Thus far however the TLD has not lived up to initial expectations forthree reasons First TLD participation is largely limited to members ofthe US House of Representatives and the European Parliament with aparticular interest in transatlantic relations and may not includemembers of committees drafting legislation with transatlanticrepercussions the US Senate moreover is thus far excluded from theTLD Second there is insufficient contact between the TLD and otherparts of the transatlantic dialogue for example the SLG Thirdmeetings of the TLD have been held only rarely and typically withweak attendance on the US side and the Dialogue has yet to engage inor settle any serious economic disputes between the United States andthe European Union
226 The Transatlantic Civil Society Dialogues
The fourth and final chapter of the NTA encourages the establishmentof lsquopeople to peoplersquo links as a way of building bridges across the
13
Atlantic and bringing a civil-society component to transatlanticcooperation In addition to supporting ad hoc exchange betweeneducators and scientists the EU and the US have encouraged and insome cases subsidized the establishment of formal dialogues amongEuropean and American business consumer and environmentalgroups and labour unions The 1995 NTA made specific mention ofthe Transatlantic Business Dialogue (TABD) while the 1998 TEPinvited civil society input lsquoon issues relevant to international trade as aconstructive contribution to policy makingrsquo In practice however not alldialogues have been created or function as equals
The Transatlantic Business Dialogue
The TABD is the oldest best organized and most influential dialoguein the transatlantic economic relationship Launched in 1995 at theinitiative of the US Commerce Department and the EU Commissionthe TABD brings together some 200 European and American CEOs forannual meetings which make joint recommendations on thetransatlantic policy issues1 5 From the beginning the TABD focusedthe attention of US and European legislators and regulators on theimportance of non-tariff barriers to trade calling explicitly for EUUSregulatory cooperation and mutual recognition of standardsmdashanapproach it has labelled lsquoapproved once accepted everywherersquo1 6 Inkeeping with this approach the TABD has been active in pressing forthe adoption and implementation of specific agreements including the1997 Mutual Recognition Agreements and the 2000 Safe HarbourAgreement on data privacy (examined below) In addition the TABDparticipates actively in the transatlantic early warning systemidentifying in its annual reports those domestic laws and regulationsthat might create obstacles to transatlantic trade and investment1 7
One result of this process is that the TABD has become a valuablesource of information for EU and US policy makers Sixty percent ofthe TABDrsquos original recommendations resurfaced in the NTA and theJoint Action Plan1 8 Some members estimate that one-third of itsrecommendations have been taken on board by transatlantic policymakers1 9 Nevertheless there is an increasing perception within theTABD that much of the lsquolow-hanging fruitrsquo has been picked in terms oftransatlantic trade liberalization and regulatory cooperation and a fearthat governments lsquocanrsquot deliverrsquo regulatory reforms demanded bybusiness2 0 In addition the TABD faces the challenge of interactingwith the other officially recognized dialogues with which it may notalways agree
The Transatlantic Consumer Dialogue
The decision to include consumers environmentalists and workers inthe transatlantic dialogue was the result of pressure from NGOs theEuropean Commission and eventually the US State Department The
14
success of the TABD sparked criticism from the NGO communitywhich argued that the influence of the TABD was unbalanced by anabsence of civil society input In response to these concerns the StateDepartment and the European Commission both agreed to providefunds to establish a new Transatlantic Consumer Dialogue There wassome objection to government sponsorship of the groups particularlyin the US where it was feared that the consumer dialogue was a wayto lsquogreenwashrsquo the TEP There was also a divide among its membersover the issue of trade liberalization most notably at the first meetingof the TACD which was overshadowed by a dispute between groupssuch as Public Citizen which generally oppose trade liberalization andother groups such as Consumer Union which support tradeliberalization as a means of increasing consumer choice2 1
Despite this rocky start the TACD has become an efficientorganization with a secretariat in London and a Steering Committeethat has organized its roughly 60 members into working groups onfood electronic commerce and trade In its working groups annualmeetings and recommendations the TACD has focused largely ontransatlantic regulatory issuesmdashin areas such as data privacy foodsafety and the application of the lsquoprecautionary principlersquo in riskregulationmdashbecause many consumer groups feared a downward spiralof regulatory standards as a result of increasing trade liberalizationNevertheless despite its high level of activity some members of theTACD feel that they have not had a sufficient impact on the NTAprocess which they regard as being dominated by a free-tradeagenda2 2
The Transatlantic Environmental and Labour Dialogues
Attempts to forge a functioning dialogue between the European andAmerican environmental and labour movements have been the leastsuccessful Despite initial attempts to create an environmentaldialogue the TAED suspended its activities in 2000 citing a lack offunding from the US side2 3 The TAED had until this point held threemeetings and established a Steering Committee as well as WorkingGroups on Climate Protection Bio-diversity and Forest ConservationFood and Agriculture and Industry The TAED also offered a numberof official recommendations on safe energy sources biotechnologywaste management and emissions standards although TAEDmembers like their TACD counterparts argued that the TABDcontinued to enjoy privileged access to EU and US policymakers2 4
Finally while the Transatlantic Labour Dialogue is officially still afunctioning forum it is the least developed of the transatlantic civil-society dialogues The TALD is little more than a modest exchangebetween the European Trade Union Confederation (ETUC) and theAmerican Federation of Labour and the Congress of IndustrialOrganizations (AFL-CIO) with no organizational structure secretariat
15
or formal objectives The TALD did hold several meetings in 1998 and1999 and 2000 but produced only six recommendations from thosemeetings Simplifying only slightly the ETUC and AFL-CIO havechosen to emphasize their shared interests in a global labour dialogueand have demonstrated little commitment to a specificallytransatlantic agenda within the framework of the NTA or the TEP2 5
In sum the transatlantic civil-society dialogues have arguably served auseful purpose in fostering transatlantic discussion among businessesand non-governmental organizations (most notably in the businessand consumer sectors) and in producing concrete recommendationsfor transatlantic economic cooperation However the relative weight ofthese organizations remains highly uneven and the currentarrangement is highly segmented and marked by a lack of anylsquodialogue among the dialoguesrsquo which might lead to the creation of agenuine transatlantic public sphere
23 An Effective Framework for Economic Cooperation
In recent months both official reviews and academic studies havefocused on the institutions of the NTA and the TEP asking whetherthese institutions are an adequate framework for transatlanticeconomic as well as security cooperation In its 2001 review of theNTA for example the European Commission argued that institutionssuch as the TEP Steering Group the NTA Task Force and the SeniorLevel Group serve useful purposes in fostering dialogue andcooperation between EU officials and their US counterparts but alsonoted a number of weaknesses in the current structure including thesummit-driven demand for often artificial lsquodeliverablesrsquo at six-monthintervals and the difficulty in focusing on medium- to long-termpriorities given the inevitable demands of pressing short-term issuesThe Commission therefore proposed a number of reforms to thecurrent institutions including the establishment of explicit medium-term priorities and the possible reduction of the number of EUUSsummits to one per year2 6
By and large the Commissionrsquos recommendations were welcomed bythe United States government which agreed to the establishment of aset of medium-term priorities in the context of the June 2001 Goumlteborgsummit By contrast no progress has been made on the suggestion ofreducing the number of transatlantic summits largely because of thedifficulties posed by the rotating six-month presidency on the EU sideIn addition as we have seen a number of calls have been made inrecent years for a more transparent and accountable process oftransatlantic economic governance with more balanced input fromcivil society and with a greater role for democratically electedlegislators Thus far however these calls have met with no systematicresponse from either the US or the EU
16
Moving from institutions to lsquodeliverablesrsquo a recent study by EricPhilippart and Pascaline Winand has attempted to measure the policyoutputs of the NTA by examining the joint reports of the Senior LevelGroup since 1995 in order to determine to what extent and in whichareas the goals of the Joint Action Plan had been missed met orexceeded Summarizing a complex analysis Philippart and Winandfind that the extent and level of cooperation varies both across andwithin the four chapters of the NTA with genuine joint action in someareas and lower levels of cooperation (such as the exchange ofinformation) or inactivity in others In the area of foreign policycooperation for example the authors find that EUUS cooperation hasbeen most successful and resulted in the most extensive joint actionwithin Europe itself while yielding fewer and less binding outcomes inother regions In the area of economic cooperation the authors findthat the NTA has been most active in the establishment of alsquotransatlantic marketplacersquo with relatively extensive trade andregulatory cooperation but far less active and successful incoordinating economic policies in the World Trade Organization andother multilateral fora2 7 In the following two sections therefore weturn from a discussion of institutions and process to a more explicitanalysis of specific economic issues relating to the management oftrade disputes as well as bilateral efforts at regulatory cooperation
17
ndash 3 ndashTrade and Regulatory Disputes
in the Transatlantic Economic Partnership
Despite the obvious importance of EUUS trade and investmentrelationshipmdashor indeed because of itmdasheconomic disputes have beenand remain an important feature of the transatlantic partnershipIndeed the settlement and where possible prevention of suchdisputes was a large part of the motivation behind the establishment ofthe New Transatlantic Agenda and retains an important place inbilateral economic relations
31 Classifying Disputes Traditional Trade Issues vs NewlsquoBehind-the-Borderrsquo Regulatory Disputes
Transatlantic economic disputes arise from various sources and canbe settledmdashor left unsettledmdashby a similar variety of means In terms oftheir sources we can distinguish between two broad categories oftransatlantic trade disputes (1) lsquotraditionalrsquo trade disputes regardingdiscriminatory national measures such as tariffs and quotas imposedat the border as well as subsidies antidumping actions and safeguardmeasures which discriminate explicitly between domestic and foreignproducers and (2) lsquonew-stylersquo disputes about the trade-distortingeffects of lsquobehind-the-borderrsquo regulations that act as non-tariff barriersto international trade in goods services and intellectual property
With the gradual decline of tariffs and quotas as direct barriers toinvestment and the simultaneous increase in domestic economicregulation on both sides of the Atlantic in response to concerns aboutthe environment consumer protection public health and the like thefrequency of these new-style disputes has increased drastically duringthe course of the 1990s and early 2000s Some of these disputes likethe ongoing conflicts over the regulation and marketing of hormone-treated beef and genetically modified organisms (GMOs) havegenerated considerable controversy on both sides of the Atlantic andplaced strains on the transatlantic economic partnership
The rise of such transatlantic regulatory disputes in turn hasprompted questions about what Miles Kahler and others have termedlsquosystem frictionrsquo between the respective regulatory systems of the
18
European Union and the United States In a survey of transatlanticeconomic relations conducted in 1995 Kahler concluded that thereexisted at best partial evidence of system friction between the UnitedStates and the European Union noting that some issues (egagriculture and audiovisual services) did indeed divide the US and EUsystems fundamentally while on other lsquonewrsquo issues like labourstandards and the environment the EU and the US generally sharedcommon views2 8
Surveying the landscape of transatlantic economic relations sevenyears later it remains true that the European Union and the UnitedStates are united by many common values and common interestsNevertheless in a growing number of issue-areas including food safetydata privacy copyright protection taxation accountancy standardsand others the United States and the European Union have arguablyexperienced lsquosystem frictionrsquo in the form of a large number ofsimmering regulatory disputes summarized in Appendix 1 at the endof this report
Table 5 Classifying US-EU Trade Disputes
Agriculture Industrial goods Services
Border-measures
Bananas (alsoGATS)Belgian ricedutiesTariff-rate quotacorn gluten feed
Harbour taxAnti-dumping(steel uranium)CVD (steel)Safeguard actions(steel)
Tra
dit
ion
al
Subsidies Export subsidies AirbusFSC
Regulatorybarriers
Beef hormonesGMOs
Hush kitsPublicprocurement
Audio-visualProfessionalservicesTelecommuni-cationsData privacy
New
sty
le
IPR Havana Club Irish MusiccopyrightGreek protectionof movies
19
As Table 5 makes clear the contemporary transatlantic relationship ischaracterized by both traditional trade conflicts and new-styleregulatory disputes Indeed traditional disputes about tariffs andquotas (eg bananas) subsidies (eg Foreign Sales Corporations) anti-dumping measures and safeguard actions (eg steel) constitute someof the most high-profile disputes between the United States and theEuropean Union With a few exceptions however these disputesprimarily concern traditional trade measures that are within the lsquocorebusinessrsquo of the multilateral trading system which has wellestablished rules and an effective functioning dispute settlementprocedure within the World Trade Organization Put simply the WTODispute Settlement Understanding provides a body of multilateralrules governing the permissible use of tariffs quotas and other trade-restrictive practices a forum for consultation and if necessarylitigation among the parties to a dispute before WTO panels and theAppellate Body a binding requirement for member states to complywith DSU panel and Appellate body decisions and authorizedretaliation in the event of prolonged noncompliance with thosedecisions2 9
By contrast regulatory disputes implicate national laws andregulations that are often adopted for legitimate reasons of consumerand environmental protection or public health and after extensivedemocratic or administrative processes For this reason transatlanticregulatory disputes can be more bitter and intractable than traditionaltrade disputes insofar as both sides believe that they are lsquodoing theright thingrsquo and insofar as domestic political actors resistsubordinating domestic regulations to the exigencies of internationaltrade Such regulatory disputes also create particularly difficultquestions for the WTO dispute settlement procedure insofar as theycall for a politically sensitive balance between the economic imperativeof liberalized international trade on the one hand and the economicand non-economic motivations behind domestic regulations on theother hand
Largely for this reason both the United States and the EuropeanUnion have generally avoided bringing such regulatory conflicts beforethe World Trade Organization preferring in most instances to managetheir regulatory differences through bilateral consultation andcooperation Table 6 which summarizes EUUS WTO disputes bysubject matter demonstrates clearly the continuing dominance oftraditional trade issues (tariffs subsidies countervailing duties andantidumping) and the effort by both sides to keep politically sensitiveregulatory issues away from the WTO (For more information about thesubjects and status of all EUUS trade disputes before the WTO seeAppendices 2 and 3 at the end of this report)
Simplifying slightly existing regulatory as well as traditional tradedisputes can be addressed in any one of three ways (summarized in
20
Table 7 page 22) First the EU and the US may engage in directconsultations about regulatory barriers to trade and resolve thedispute without resorting to WTO dispute resolution examples includethe dispute over airplane lsquohush kitsrsquo resolved through a negotiatedsettlement between the EU and the US and the public procurementcase involving a Massachusetts state law imposing sanctions againstfirms doing business in Myanmar which was resolved unilaterallythrough the application of US federal law Second one party maychallenge the legality of the otherrsquos regulations before the WTO as inthe case of the US challenge to the EU ban on hormone-treated beefor the EU challenge to a provision of US copyright law in cases wherethe disputed regulation is ruled to be in violation of WTOrequirements however compliance has proven difficult Third andfinally given the difficulties of resolving such disputes through eitherbilateral negotiations or WTO litigation the bulk of regulatory disputesare allowed to simmer indefinitely with periodic consultations andexchange of information among the two sides but no resolution of theresulting trade tensions As Appendix 1 makes clear the overwhelmingmajority of current transatlantic regulatory disputes fall into this thirdcategory
Table 6 Transatlantic Trade Disputes in the WTO Overview and Context
Tariffsquotascustomsdutiesrules oforigin
retaliatorymeasures
Tradedefence
instruments(a-d CVDsubsidies)
TechnicalTBTs
(classi-ficationlabelingtesting)
Substantive TBTs
(process ampproductrequire-ments)
Subsidies GATS TRIPS TRIMS GPA Other
EU - US(EU asthirdparty)
6 9 (11) 1 (1) 1 3 1 2
EU - Restof World(RoW)
14 6 1 1 3 4 3 4
RoW ndash EU 12 3 4 2 1 1
US ndash EU(US asthirdparty)
8 (1) (1) 1 (1) 8 1 8
US - RoW 10 7 3 2 7 2 6 3 1
RoW ndash US 7 21 5 1 1 1
RoW ndash RoW 17 30 1 6 10 3
Sources Adapted from DG Trade WTO - Dispute Settlement (updated 15102) httpeuropaeuintcommtradepdfcasesxls accessed15202 and the WTOs dispute database (httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
21
22
Table 7 Methods of Dispute Resolution with Examples
Negotiated Agreement orUnilateral Action
WTO Dispute Settlement SimmeringDisputes
HushkitsMassachusettsMyanmar(public procurement)
Beef hormones(EU not in compliance)Irish Musiccopyright (EUUScompensation agreement)
GMOs
The sources of such regulatory disputes and the difficulties they posefor traditional dispute settlement procedures are illustrated below infour brief case studies focusing on (1) the US challenge to EUlegislation prohibiting the use of airplane lsquohush kitsrsquo (2) the USchallenge to the EUrsquos ban on hormone-treated beef and the relateddispute over the EUrsquos moratorium on the approval of geneticallymodified foods and crops (3) the EUrsquos challenge to the aforementionedMassachusetts public procurement law and (4) the EUrsquos challenge to aprovision of the US Copyright Act Although not a thorough review ofthe entire universe of EUUS regulatory disputes these four cases doillustrate the types of regulations adopted and challenged by both theEU and the US as well as the various methods of dispute resolutionmentioned above The policy implications of these cases are discussedin Section 36
32 Case Study Airplane lsquoHushkitsrsquo
Many EUUS disputes concern the technical barriers to trade (TBTs)caused by divergent national regulations setting technical standards inareas ranging from the specifications for industrial machinery andemissions standards for motor vehicles to nutritional labelingrequirements for packaged foods As Kenneth W Abbott has pointedout in a recent study many such national regulations are identified bybusiness or governments as TBTs within the transatlantic relationshipand a far smaller percentage of these have emerged as high-profiletrade disputes3 0 To date no disputes have been litigated between theEU and the US under the TBT Agreement although one particularlyprominent case did create significant tensions in the transatlanticrelationship namely the US challenge to the EUrsquos ban on airplanelsquohushkitsrsquo
Hushkits are equipment packages designed to reduce the noiseemissions of aircraft through the use of sound-absorbing materialswith the aim of bringing particularly older planes into compliance withthe so-called lsquoChapter 3rsquo noise pollution standards adopted within theInternational Civil Aviation Organization (ICAO) In 1999 theEuropean Union which had long pressed unsuccessfully for theadoption of stricter standards within the ICAO adopted a Regulation
23
establishing a ban on the registration of older aircraft fitted withhushkits on the grounds that such aircraft only barely complied withChapter 3 standards and were substantially more polluting thannewer planes The ban on new registrations was to enter into force inMay of 2000 from April 2002 moreover hushkitted aircraft registeredin third countries would not be allowed to operate within EU territory
Although nominally intended to decrease noise pollution aroundairports in heavily populated regions of Europe the EUrsquos hushkitsRegulation met with howls of protest in the United States where theuse of hushkits had been encouraged by US authorities as a cost-effective way of meeting Chapter 3 standards A ban on the registrationof hushkitted aircraft the US argued would therefore impose adisproportionate burden on US airlines which estimated that theRegulation cost them some $2 billion by depressing the value of theirexisting fleets while benefiting European carriers that had relied moreextensively on the purchase of new aircraft designed specifically tomeet Chapter 3 specifications In legal terms moreover the UnitedStates argued that the Regulation violated the terms of the ICAOagreement which simply set a performance standard for planes anddid not authorize parties to set more demanding standards or tomandate a specific design standard (eg a ban on the use ofhushkits) The US accordingly lodged a formal ICAO complaint againstthe 15 EU member states in March of 2000
After extensive bilateral discussion as well as multilateral negotiationswithin the ICAO in October 2001 the US and the EU reached asettlement of the case The first step in this settlement was themultilateral resolution adopted on 4 October in the ICAO assemblyurging states to pursue a lsquobalanced approachrsquo to noise reductionadopting local operating restrictions only where supported by anassessment of the costs and benefits and only after fully assessingalternative measures to reduce noise At the same time the ICAOagreed to a new and stricter set of lsquoChapter 4rsquo standards to take effectbeginning in 2006
Consistent with the provisions of the ICAO agreements the EU agreedon 25 October to withdraw the original Hushkits Regulation by April2002 (the date when it would have applied to third-country aircraft) inreturn for which the US agreed to withdraw its complaint before theICAO In place of the original Regulation the Commission issued aproposal in November 2001 for a new Directive replacing the generalban on hushkitted places with a more discriminating provisionallowing noise-sensitive airports in congested urban areas to limit theuse of planes that are lsquomarginallyrsquo compliant with Chapter 3standards3 1 This draft Directive was approved by the EuropeanParliament in its first reading in March 2002 and at this writing ispending adoption by the Council of Ministers and the Parliament
24
Despite the initial acrimony between the US and the EU the hushkitscase represents a successful effort at bilateral dispute resolution in abroader multilateral setting In this case the European Union agreedafter receiving assurance and guidance from the ICAO to adopt a morediscriminating and less trade-distorting regulatory approach whichsatisfies the trade concerns of the United States while allowing the EUto address the problems of noise pollution around the Unionrsquos mostcongested urban airports As we shall see presently however not allsuch regulatory conflicts have proven so amenable to negotiatedagreement
33 Case Study Hormone-Treated Beef andGenetically Modified Organisms
EU and US food-safety regulations constitute some of the mostimportant regulatory barriers to international trade and have been thesource of some of the most politically difficult and intractabletransatlantic regulatory disputes pitting each sidersquos sovereign right toregulate the safety of its food against its international obligationsunder WTO law3 2 Within the United States regulation of food safetywas among the earliest and most politically sensitive tasks of thefederal government which has delegated much of the power fordomestic regulation to agencies like the Food and Drug Administration(FDA) which has jealously guarded its reputation as an independentand impartial regulator making decisions on the basis of scientifictests rather than political pressures In the EU by contrast foodsafety regulation is carried out in part by national regulators and inpart by the EUrsquos political bodies including the Council of Ministersthe European Parliament and the Commission The deficiencies of thispatchwork regulatory process was painfully revealed however by aseries of food safety crises during the latter half of the 1990s includingmost notably the BSE crisis of 1996 and the Union has respondedforcefully with the creation of a European Food Safety Authority andwith an insistence on the application of the so-called lsquoprecautionaryprinciplersquo justifying regulatory action in the absence of clear scientificevidence and on the basis of consumer concerns and social andeconomic criteria
Precisely because food safety regulations can act as non-tariff barriersto trade in agricultural products the EU and the US have agreed tosubject their domestic regulations to the discipline of internationalguidelines such as the United Nations Codex AlimentariusCommission which establishes international standards for food safetyand more recently through the 1994 WTO Agreement on theApplication of Sanitary and Phytosanitary Measures (the SPSAgreement) The SPS Agreement does not establish bindinginternational standards for food safety nor does it automaticallypreempt the adoption of domestic standards that might constitute
25
non-tariff barriers to trade The agreement does however incorporateand promote the adoption of international standards as well asestablish trade rules that limit the ability of states to adopt food safetyregulations that are not scientifically grounded The terms of the SPSAgreement are moreover enforceable under the WTO disputesettlement procedure
The consequences of the divergent EU and US regulatory processesand the difficulties of resolving disputes through the WTO disputesettlement procedure can be illustrated most clearly by the long-standing EUUS dispute over the issue of hormone-treated beef Theconflict began in 1989 when the European Union announced a ban onthe sale and marketing of beef treated with any one of six growth-promoting hormones that had been tested and certified as safe by theFDA In 1995 following the entry into force of the SPS Agreement theUnited States took legal action before the WTO alleging that the EUban was inconsistent with the terms of the SPS Agreement since it wasnot based on scientific evidence risk assessment or internationalstandards After a protracted legal battle involving the issuing of apanel report and a subsequent appeal the WTO Appellate Body heldwith the United States that the EU had failed to base its ban on ascientific risk assessment and ordered the EU to bring its domesticregulations into compliance with WTO law
Despite the clear ruling against it the European Union faced withopposition from public opinion and hopeful of producing additionalscientific findings that would eventually justify the maintenance of theban failed to comply with the Appellate Bodyrsquos decision The UnitedStates therefore retaliated against the EU in May of 1999 imposingtariffs of $1168 million against EU agricultural products such as foiegras Roquefort cheese and Dijon mustard These US tariffs in turnsparked protests among French and European farmers who seized onthe beef-hormones case as a symbol of the threat posed byAmericanization and globalization to European regulations andtraditions Since 1999 the United States and the European Unionhave continued to consult regularly about this case but the Unionremains firm in its refusal to alter its domestic law and the UnitedStates persists in the application of retaliatory sanctions against theEU
The transatlantic dispute over the regulation of genetically modifiedorganisms (GMOs)mdashor more precisely genetically modified foods andcropsmdashis analytically similar to the beef hormones case although thepotential economic stakes in this area of GMOs are potentially fargreater Here again the US Food and Drug Administration decided inthe early 1990s that genetically modified foods were not substantiallydifferent from conventional foods and therefore required no specialprocedures for approval or marketing and on that basis US farmersand seed producers have quickly embraced the use of genetically
26
modified foods and crops By contrast the European Union has takena more cautious approach in a series of Directives and Regulationsrequiring specific approval procedures for genetically modified crops aswell as labeling of foods from genetically modified varieties Since1998 moreover the Council has maintained a de facto moratorium onthe approval of new GM varieties even though the EUrsquos scientificcommittees have continued to formally approve a number of varietiesas posing no health risks to consumers
The GMO issue has been the subject of intense consultation betweenthe US and the EU in recent years including the creation of an EU-USBiotechnology Forum which issued a joint report on the subject inDecember 20003 3 as well as a Biotech Working Group within theTransatlantic Economic Partnership Such fora have provided for auseful exchange of information among regulators as well as tradeofficials yet the positions of the two sides remain far apart with atbest modest signs of convergence in the EU and US approaches Thusfar the United States has refrained from bringing a case against theEU before the WTO partly of fear that the European Union facing apotential backlash against both GMOs and the WTO would be unableto comply The issue therefore remains a simmering irritant in thetransatlantic relationship with the potential to flare into a majordispute should the United States eventually decide to litigate the issuebefore the WTO
34 Public Procurement The MassachusettsMyanmar Case
The previous two cases involved US challenges to EU regulationssetting requirements for the marketing and use of industrial oragricultural products Regulatory disputes can however be directed atUS as well as EU regulations and they can concern regulationsgoverning questions other than product standards An excellentexample is the EUUS dispute over the 1996 Act adopted by the stateof Massachusetts regulating state contracts with companies doingbusiness in Myanmar (formerly Burma) The law in question wasadopted in June of 1996 by the Massachusetts State Legislature withthe avowed aim of securing human rights and democratic elections inMyanmar which was then under military rule and subject to sanctionsfrom the US federal government as well as the EU Specifically theMassachusetts law imposed sanctions on foreign as well as domesticfirms doing business in Myanmar with the aim of motivating suchfirms to withdraw from activities in that country
As Matthew Schaefer points out in an excellent analysis of the casethe MassachusettsMyanmar dispute illustrates two recurrenttensions in EUUS trade relations3 4 First the case illustrates theproblems encountered when individual US states like Massachusettswhich are not directly party to the WTO adopt laws and regulations in
27
possible contravention of WTO law Anticipating such problems duringthe negotiation of the 1994 Government Procurement Agreement(GPA) the European Union had emphasized the importance for the USof binding the states and the US federal government responded byasking each of the states to submit a voluntary lsquoletter of commitmentrsquoagreeing to be bound 37 states including Massachusetts submittedsuch letters resulting in a substantial but incomplete mechanism toensure state-level compliance with the GPA
Second the Massachusetts law in question also represents theextraterritorial application of US (state or federal) laws which employtrade and other economic provisions to secure a foreign policy aim (inthis case the cause of democracy and human rights in Myanmar)Specifically the Massachusetts law attempted to penalize not onlyAmerican firms but also foreign firms for investing in Myanmar even ifsuch investments were legal in those firmsrsquo home countries In thislatter sense the MassachusettsMyanmar case bears a strikingsimilarity to the extraterritorial sanctions applied by the US in thewell-known Helms-Burton and Iran-Libya Sanctions Acts in which theUS federal government adopted extraterritorial sanctions againstcorporations doing business in Cuba Iran and Libya (The latter caseswere resolved at least temporarily when President Clinton agreed in1998 to waive such sanctions in a bilateral agreement with the leadersof the European Union)
In the Massachusetts case the law was challenged before the WTO bythe European Union (joined by Japan) which sought to have the lawruled incompatible with US obligations under the GPA Before the WTOpanel could rule however the law was successfully challenged andoverruled under US federal law when the US Supreme Court held thatfederal action in this area (ie the federal sanctions law againstBurma) had pre-empted such sanctions by the State of Massachusettswhose law was therefore held to be unconstitutional
The successful resolution of the MassachusettsMyanmar disputesuggests several lessons for the prevention and settlement of similarcases in the future according to Schaefer In terms of disputeprevention he argues this case points to the importance of informingstate governors and legislators about the constitutional limitations onthe extraterritorial use of economic sanctions as well as theirobligations under WTO agreements (at least insofar as the statesthemselves agree to be bound by them) In terms of dispute settlementfinally the Massachusetts case suggests that litigation in domesticcourts under US law may be more a more effective and comprehensiveconstraint on state sanctions than WTO law which should thereforebe employed with restraint in such cases
28
35 Intellectual Property Rights The Irish Music Case
In addition to trade in goods and services and public procurementnational laws and regulations regarding intellectual property rightscan also have international trade repercussions even when thoseregulations apply without discrimination to domestic as well as foreignproducers Indeed protection of intellectual property has been thesubject of no fewer than 11 WTO disputes between the United Statesand the European Union since 1995 The challenges posed byintellectual property disputes are illustrated most strikingly by the so-called lsquoIrish music casersquo in which the European Union challengedprovisions of US copyright law before the World Trade Organization 3 5
The US law in question was the 1976 Copyright Act as amended bythe 1998 Fairness in Music Licensing Act Specifically Article 110(5) ofthe amended Act included a lsquobusiness exemptionrsquo according to whichestablishments such as bars shops and restaurants below a certainsize (ie 2000-3750 square feet) were allowed to play radio andtelevision music without paying fees to royalty-collecting bodies Therelevant provisions of the Act had been adopted only after long anddifficult negotiations between the representatives of US performingrights organizations on the one side and the National LicensedBeverage Association on the other and sought (however successfully)to balance the rights of copyright holders with the interests of smallrestaurant and bar owners
Although the US law applied equally to domestic as well as foreigncopyright holders in 1997 the Irish Music Rights Organization (IMRO)a collective music management company representing Irish musicianssuch as the rock group U2 filed a complaint about the law before theEuropean Commission IMRO claimed that the derogation in the lawwas in violation of US commitments under both the InternationalAgreement on Trade Related Aspects of International Property Rights(TRIPS) as well as the Berne Convention for the Protection of Literaryand Artistic Works since it failed to protect authorsrsquo rights resultingin an estimated loss of euro 121 million annually for IMROrsquos membersThe Commission having investigated the case agreed with IMRO thatthe law violated US obligations under the TRIPS agreement andinitiated a formal complaint before the World Trade Organization in1998
In June 2000 a WTO panel issued a decision in favour of theEuropean Union calling on the US to bring subparagraph (B) ofSection 110(5) of the Copyright Act (the aforementioned businessexemption) into conformity with the TRIPS agreement In response tothe panelrsquos report the United States announced that it would notappeal the panel decision but also that it would require time to amendits existing copyright legislation In the interim the United States andthe European Union agreed to establish a WTO arbitration panel
29
which would decide on the level of compensation to be granted by theUS to the EU pending modification of the Act In November 2001 thearbitrators accordingly assessed the annual losses suffered by EUcopyright owners and hence the level of compensation to be paid bythe United States at some $108 million In light of this finding EUTrade Commissioner Pascal Lamy and US Trade Representative (USTR)Robert Zoellick agreed the following month to a temporary solutionwhereby the USTR would seek authorization from Congress toestablish a special fund worth $33 million over three years to financeprojects and activities for the benefit of EU music creators pendingrevision of the US law
The December 2001 agreement between the US and the EU waspresented by EU Trade Commissioner Pascal Lamy as lsquoa good exampleof how we can manage our problems in a cooperative manner whilekeeping in mind our international commitmentsrsquo3 6 However while theUS and the EU have indeed reached an amicable three-year agreementon this issue the Irish Music case also serves as an additionalexample of the difficulties encountered by both sides in amendingdomestic regulations in response to trade concerns and WTO rulingsAlthough the European Union side insisted on the US obligation toamend its law and explicitly retained its right to return to the WTO inthe event of noncompliance at this writing there is no sign of anyimminent US effort to bring its domestic law into compliance and anextended US agreement to compensation remains a probablealternative for the foreseeable future
36 Dealing with Trade and Regulatory Conflicts
Transatlantic trade disputesmdashboth traditional disputes and new-styleregulatory conflictsmdashare inevitable in a relationship as close as EUUSrelationship and are not likely to disappear anytime in the nearfuture Many of these disputesmdashespecially old-style tariff quotasantidumping and subsidies disputesmdashare dealt with effectively by WTOdispute resolution New-style disputes however often involve domesticlaws adopted for legitimate purposes after democratic deliberation andlitigation in such cases can place severe strain on the WTO systemparticularly in cases like beef-hormones copyright and potentiallyGMOs where the losing party would have difficulty complying with anadverse WTO ruling
In light of these challenges scholars and practitioners haverecommended a range of potential reforms in US and EU domesticpolitics in the bilateral relationship and in the multilateral WTOsystem to prevent and settle regulatory disputes Although a complete
30
review of these recommendations is beyond the scope of this report3 7 some of the most promising proposed reforms include the following
bull Changes in Domestic Regulation Perhaps the most promisingsuggestions for reform are those that require no formal internationalagreement but rather domestic reforms that could be undertakeneither unilaterally or through an informal process of mutualcoordination The Transatlantic Business Dialogue for examplehas proposed that the United States and the European Union bothundertake to conduct lsquoTrade Impact Assessmentsrsquo of draftregulations so that legislators are made aware of the potential tradeimplications of proposed regulations before they are adopted Sucha procedural change could be undertaken within the respectivedomestic systems of the US and the EU and without compromisingthe regulatory sovereignty of either side and would have theadvantage of implicating legislators who thus far have been largelyabsent from the NTA process3 8 In a similar vein US observers haveadvocated the adoption by the EU of some form of advise-and-consent procedures for the adoption of regulations which wouldprovide domestic as well as foreign stakeholders with advancewarning of proposed regulations and improve the quality of EUgovernance more generally Finally as we have seen in theMassachusettsMyanmar case it has been proposed that theUnited States should do more in the future to implicate subfederalstates in international trade agreements and to inform them oftheir obligations under US constitutional as well as internationaltrade law
bull Changes in the Bilateral Relationship Notwithstanding theirincreasing complexity the institutions of the NTA and the TEP havenot prevented the rise of new regulatory disputes nor have theybeen able consistently to settle amicably all those that do arisegiven the difficulty for both sides of changing domestic regulationsadopted in response to legitimate public concerns Nevertheless anumber of bilateral reforms have recently been proposed includingmost notably the further development of the bilateral early warningsystem increased regulatory cooperation and the expansion of theTransatlantic Legislators Dialogue With regard to the firstinterviews with policy-makers on both sides of the Atlantic revealthat the early warning system has proven useful in identifyingobscure technical barriers to trade but the same policy-makersemphasize that increased early warning does not provide aguarantee that legislators or regulators will be willing or able toadjust domestic regulations and indeed the survey of regulatorydisputes undertaken above suggests that increased early warningwould not have been capable of resolving disputes over beefhormones or copyright where the primary impediment to resolutionof the disputes was not lack of information but the regulatorysovereignty of legislators and regulators on each side For this
31
reason particular emphasis has been placed on the promise ofenhanced regulatory cooperation (examined in detail in the nextsection) and on the further development of the TLD (where theprimary challenge will be to provide an incentive for domesticallyoriented parliamentarians and congressmen to participate intransatlantic consultations)
bull Reform of WTO Dispute Settlement The WTO Dispute SettlementUnderstanding establishes a binding and efficient system for theresolution of international trade disputes and most WTO memberstates are broadly satisfied with the operation of the systemNevertheless the WTO dispute resolution system is placed underparticular strain in regulatory disputes such as the beef-hormonesand Irish music cases reviewed above where it is called to balancetrade and regulatory objectives and where compliance is politicallydifficult for the losing parties In light of these weaknesses variousscholars and practitioners have suggested reforms to both WTOrules and to the DSU including most notably the clarification of thelsquoprecautionary principlersquo in WTO law and moving from retaliation tocompensation in cases of noncompliance with DSU rulings Both ofthese proposals merit further discussion in the coming review of theDispute Settlement Understanding (scheduled to be completed inMay 2003) and in the ongoing Doha Round of trade talks In themeantime the EU and the US would do well to continue theirgeneral pattern of restraint in addressing regulatory disputesbilaterally and avoiding any potential lsquooverloadingrsquo of the WTOdispute settlement procedure
Future negotiations between the EU and the US as well as futurestudies designed to inform those negotiations would do well to explorethe viability of these proposed reforms
32
ndash 4 ndashTransatlantic Regulatory Cooperation
One of the most striking features of the period since the 1995 NewTransatlantic Agenda has been the dramatic increase in both formaland informal cooperation among the regulatory authorities of theUnited States and the European Union In the past five years alonethe United States and the European Union have signed nine formalregulatory cooperation agreements in areas as diverse as competitionpolicy data privacy customs procedures veterinary standards andthe mutual recognition of testing and certification procedures (Table 8)These formal regulatory agreements moreover represent only afraction of the contacts that occur among US and EU regulators bothbilaterally and in various multilateral fora
41 Why Cooperate
The incentives for US and EU regulators to engage in formal andinformal cooperation vary across different issue-areas but cangenerally be classed into two broad categories3 9 First regulators maycooperate because they view such cooperation as useful in carrying outtheir essential rulemaking responsibilities in an increasingly integratedtransatlantic and global marketplace Such cooperation need not andtypically does not involve joint rulemaking activities but focusesinstead on exchanges of information identification of best practiceand early notification of new regulations being considered within eitherpolity In the area of food safety for example the EuropeanCommission and the US Food and Drug Administration have notidentified or implemented common standards for the reasonsdiscussed above yet the two regulators do engage in an ongoingdialogue both bilaterally and within the Codex Alimentarius (the globalbody for the establishment of food safety standards) and theCommission consulted extensively with its US counterparts in thedesign of the newly created European Food Safety Authority Similarbilateral exchanges occur regularly in other issue-areas as well aswithin multilateral standard-setting bodies such as the InternationalStandards Organization (for industrial standards) and theInternational Conference on Harmonization (for registration ofpharmaceuticals)
33
Table 8 Transatlantic Regulatory Cooperation Agreements
Agreement Targeted Regulations Year
Competition Policy Agreement Competition regulations 1991
ECUS Agreement on DrugPrecursors
Illicit drug regulations 1997
ECUS Customs and CooperationAgreement
Customs certifications 1997
EUUS General Mutual RecognitionAgreements
Conformity assessmenttesting in six sectorstelecommunicationsequipment electromagneticcompatibility electricalsafety recreational craftmedical devices andpharmaceutical goodmanufacturing practices
1997
EUUS Positive Comity Agreement Competition relations 1998
EUUS Agreement Concerning theEstablishment of Global TechnicalRegulations for Wheeled VehiclesEquipment and Parts
Technical regulations 1999
EUUS Veterinary EquivalenceAgreement
Animal export certifications 1999
EUUS Safe Harbour Agreement Data protection regulations 2000
Joint Declaration on USEUCooperation in the Field ofMetrology and MeasurementStandards
Measurement equivalence inproduct certification
2000
EUUS Agreement on MutualRecognition of Certificates ofConformity for Marine Equipment
Mutual recognition of marineequipment regulations
2001
EUUS Guidelines on RegulatoryCooperation and Transparency
Non-binding guidelines forcooperation among EU andUS regulators regardingtechnical barriers to trade
2002
Source European Commission DG TRADEhttpeuropaeuintcommtradebilateralusausahtm
34
A second and partially overlapping motivation for regulatorycooperation already touched on in Section 3 above is to avoid orresolve bilateral disputes about the potential trade-distorting effects ofnational regulations As we have seen domestic economic regulationscan become a source of transatlantic economic tension in two distinctways First domestic regulations in areas such as consumer orenvironmental protection food safety or copyright protection cancreate non-tariff barriers to international trade and investmentexamples include the recent disputes over the EUrsquos Data PrivacyDirective and its ban on hormone-treated beef as well as exemptionsto the US Copyright Act Second US and EU domestic regulators mayapply their domestic regulations in an extrajurisdictional fashion asfor example when EU and US competition authorities insist on theright to review mergers among firms in the other constituency insofaras the proposed merger creates effects in the regulatorrsquos domesticjurisdiction or when the US (or its constituent states) employs tradeand economic sanctions as an instrument of foreign policy In suchcases George Bermann has pointed out lsquothe line between simpleregulatory [cooperation] hellip and the settlement of trade disputes canbecome highly blurredrsquo4 0
The full range of regulatory cooperation agreements and practicesbetween the United States and the European Union is beyond thescope of this preliminary report Indeed interviews with practitionersfrom the United States and the European Union reveal thatconsiderable informal cooperation takes place across virtually everyconceivable area of US and EU regulation with little attention from thepress scholars or political actors Even in the absence of a full-scalecross-sectoral analysis however we can nevertheless undertake threebrief case studies of regulatory cooperation in the fields of competitionpolicy the negotiation of EUUS Mutual Recognition Agreements andthe Safe Harbour Agreement on data privacy regulation Takentogether these three cases illustrate the range of incentives forregulatory cooperation as well as the various means for suchcooperation and the significant obstacles that often stand in its way
42 Case Study Transatlantic Competition Policy Cooperation
One of the earliest regulatory cooperation agreements signed betweenEU and US authorities and one of the most successful concernscooperation in the enforcement of each sidersquos respective competitionpolicy laws including most notably the examination of proposedmergers and acquisitions
The incentives for cooperation in this area are substantial4 1 First asin other areas of regulation EU and US regulators confront similarproblems and are increasingly called upon to rule upon the samecases placing a premium on the sharing of information Second both
35
US and EU courts have ruled that their respective regulatorsmdashnamelythe Department of Justice and the Federal Trade Commission on theUS side and the Directorate-General for Competition on the EUsidemdashmay enforce domestic competition laws extraterritorially againstfirms based outside their domestic jurisdiction if and insofar thebehavior in question (eg a proposed merger) produces effects oncompetition in the domestic market Such extraterritorial applicationof both EU and US competition law raises serious issues about theduplication of effort by the two sets of regulators not to mention theadverse economic and political impact of inconsistent or conflictingdecisions on the same case by EU and US regulators
These concerns increased substantially in the early 1990s moreoverwith the rapid rise in cross-border mergers and acquisitions thataccompanied the completion of the Unionrsquos lsquo1992rsquo internal marketinitiative At approximately the same time moreover the EuropeanUnion adopted the 1990 Merger Control Regulation which gave theCommission regulatory authority to review mergers above certain sizethresholds and made the Commission an important interlocutor forthe EU in this area It was in this context of increasing cross-bordermergers and increasing EU authority over such mergers thatCompetition Commissioner Leon Brittan proposed in 1990 to expandEU competition policy cooperation with third countries beginning witha formal agreement with the United States US regulators respondedpositively to Brittanrsquos proposal and US and EU regulators agreed in1991 to adopt an agreement committing them to cooperation in thearea of competition policy including the sharing of non-confidentialinformation and coordination of enforcement activities This agreementwas later supplemented by two secondary agreements the 1998Positive Comity Agreement (which seeks to restrict the extra-territorialapplication of antitrust laws in non-merger cases but has beenformally invoked only once) and by the 1999 AdministrativeArrangements on Attendance in Hearings (which provide guidelines forthe participation of EU and US regulators in each otherrsquos hearings)
In the decade since the signature of the first Competition PolicyAgreement EUUS competition policy cooperation has generallyoperated smoothly and successfully with regulators from theCommission the Justice Department and the FTC sharing informationand coordinating enforcement activities on a daily basis andcooperating successfully on over 600 cases during the course of the1990s including almost 500 merger decisions The general success ofEUUS competition policy cooperation in the area of merger controlcan be attributed to the broad transatlantic agreement among EU andUS regulators about the basic scope and tools of policy which hasfacilitated the task of coordinating enforcement actions and generatingmutual trust among regulators
36
Nevertheless as Youri Devuyst points out in an excellent review oftransatlantic competition policy cooperation successful cooperationand conflict prevention between US and EU regulators can behampered by persistent differences in the scope and focus of US andEU competition law the procedures employed by both sides and theexigencies of confidentiality which limit the sharing of information byUS and EU agencies These limitations can be illustrated in theatypical but well-known BoeingMcDonnell Douglas merger (bothAmerican firms) which was approved by the FTC in July 1997 only tobe held up by Commission insistence that the companies agree toformal undertakings to satisfy its competition concerns Although thecase caused substantial strains in the transatlantic relationship thecompanies concerned eventually agreed to the Commissionrsquos proposedremedies allowing the merger to proceed4 2
An even more dramatic difference of opinion occurred with regard tothe proposed merger of two other US firms GE and Honeywell in2001 Here again US regulators approved the proposed merger only tosee the European Commission reject it in July 2001 after announcingthat the firmsrsquo proposed remedies had failed to satisfy theCommissionrsquos concerns Perhaps most strikingly and unlike theprevious case of EUUS disagreement in the BoeingMcDonnellDouglas merger a number of analysts claimed that the disagreementbetween US and EU regulators reflected an underlying andfundamental difference in the criteria for assessing proposedmergers4 3 Although the resulting predictions of other imminentUSEU conflicts are almost certainly overstated it is worthwhilenoting that the Commission in its December 2001 Green Paper on thereview of the Merger Control Regulation proposes to launch a debateon whether the Union should abandon its traditional lsquodominance testrsquo(ie assessing whether a proposed merger would create a dominantposition for the merged firm in the relevant market) in favour of alsquosubstantial lessening of competitionrsquo test (similar to that already usedin the US Canada and Australia)4 4 Whether the Union will move inthis direction remains unclear If so however it would represent astriking example of regulatory convergence among regulators alreadynotable for their similar (if not identical) regulatory philosophies andprocedures
43 Case Study EUUS Mutual Recognition Agreements4 5
As transatlantic tariff barriers have decreased firms have becomemore concerned with what they term duplicative regulatory compliancecosts and many have pressed for their removal This pressure hasincreased with rising transatlantic investment since divergent EU andUS standards and certification requirements most directly affecttransatlantic corporate groups and these groups more easilycoordinate lobbying on both sides of the Atlantic4 6 Transatlantic firms
37
under the auspices of the Transatlantic Business Dialogue inparticular have pressed for enhanced regulatory cooperation throughmutual recognition agreements culminating in the 1997 EUUSMutual Recognition Agreement (MRA) providing for mutual recognitionof testing and certification requirements and the more ambitious MRArelating to marine equipment signed in 2000 These agreements havebeen promoted as a major achievement of the New TransatlanticAgenda and as a flexible means of reconciling the regulatoryapproaches of the United States and the European Union andfacilitating access to both domestic markets
Notwithstanding these potential advantages however majorchallenges for transatlantic regulatory cooperation in this and otherareas are posed by the significant institutional asymmetries betweenthe United Statesrsquo and EUrsquos respective regulatory systems in an arrayof fields Where regulators adopt similar regulatory structures andsystems and enact similar substantive standards they more easilyunderstand and accept each otherrsquos regulatory determinationsRegulatory symmetry facilitates regulatory trust and confidenceenabling regulatory cooperation to occur as in the competition policycase examined above
In many issue-areas however US and EU regulators tend to work indifferent regulatory cultures Generally EU and national regulatorsoperate under the dual mission of ensuring free trade within theinternal market on the one hand while ensuring public safety throughhigh product and process standards on the other They thus are quiteaccustomed to interacting with foreign regulators and testing bodies onan ongoing basis As a consequence the Commissionrsquos DG Enterpriseand DG Trade units rarely tousled when negotiating and implementingthe 1997 Mutual Recognition Agreement The US Food and DrugAdministration (FDA) by contrast has traditionally defined its rolesolely as that of protecting US public health and has not operatedunder a dual mission of also facilitating market exchange Because theFDA is an independent regulatory authority anxious to protect itsregulatory autonomy US trade and commerce authorities encountermore difficulties in negotiating bilateral agreements concerning areaswithin the FDArsquos jurisdiction
Overall institutional adaptation for the negotiation andimplementation the 1997 MRA has been much easier for the EUwhich already has a mechanism for coordinating the mutualrecognition of product testing and certification among fifteen memberstates speaking eleven different languages This relatively deregulatedsystem consists of EU legislators setting lsquoessential requirementsrsquo in EUlsquonew approachrsquo directives which are supplemented by large numbersof harmonized lsquovoluntaryrsquo technical standards that in turn are widelyadopted Before marketing their products firms either self-certify theircompliance with these requirements or hire accredited testing and
38
certification laboratories Firms and laboratories remain subject topost-marketing member state regulatory controls as well as market-reputational constraints Member state regulators interact on a regularbasis through working groups committees and informalarrangements Overall this EU system can be characterized asgovernance by coordinated cross-border public-private networks
US regulatory officials however oversaw very different regulatorysystems in the areas covered by the 1997 MRA For example the USFederal Communications Commission (FCC) itself certified alltelecommunications equipment until the negotiation of thetransatlantic mutual recognition agreement at which time it adopted adecentralized EU model of certification The FDA continues to certifymost medical devices whereas EU authorities have permitted testingby private notified bodies since the mid-1990s The US OccupationalHealth and Safety Administration (OSHA) requires OSHA-accreditedlaboratories to certify all electrical safety equipment used in theworkplace whereas the EU has permitted manufacturers to self-certifythe equipmentrsquos conformity with European requirements since 1973
EU and US authorities began to seriously address issues of regulatorycoordination at the beginning of the 1990s In May 1989 US Secretaryof Commerce Robert Mosbacher and Commission Vice-PresidentMartin Bangemann agreed to explore the possibility of transatlanticmutual recognition agreements as well as mechanisms to grant USfirms greater access to EU standard-setting procedures After 1995these efforts were championed explicitly and repeatedly byTransatlantic Business Dialogue which became a prominent advocateof transatlantic MRAs4 7
EU and US negotiators initially discussed negotiating mutualrecognition arrangements in eleven sectors but ultimately whittledthis down to six4 8 In consequence the 1997 MRA consists of aframework agreement and six annexes respectively coveringtelecommunications equipment electromagnetic compatibilityelectrical safety recreational craft medical devices andpharmaceutical good manufacturing practices Each of the annexes isin fact a separate agreement for a separate sector covering definedcategories and lists of products
As with all trade negotiations the EU and the United States wereconcerned that the final results be lsquobalancedrsquo The United Stateswished to conclude an agreement on telecommunications equipmentfirst but the EU refused because it felt that US firms would benefitmore if the agreement covered only this sector EU negotiators thusinsisted that an agreement on pharmaceuticals and medical devices becompleted simultaneously The MRA sets up a new transatlanticstructure for overseeing its implementation First the MRA creates aJoint Committee which consists of US and EU trade officials who meet
39
twice annually Second the annexes create Joint Sectoral Committeesto oversee the annexesrsquo implementation
The 1997 Mutual Recognition Agreement does not cover recognition ofthe adequacy or equivalency of US and EU standards as such Ratherthe 1997 MRA only addresses mutual recognition by certificationbodies (known as lsquoConformity Assessment Bodiesrsquo) of each otherrsquosseparate standards4 9 Since neither the United States nor the EUrelinquishes sovereign control over the substance of their standardstrading firms still must meet the separate requirements of the worldrsquostwo largest markets In addition these assessment evaluations aresubject to certain pre-approval and post-approval conditions
Implementation of the 1997 MRA moreover remains uneven Thetelecommunications electromagnetic compatibility and recreationalcraft annexes all have been implemented as required In contrastimplementation of the electrical safety medical device andpharmaceutical GMP annexes remain in dispute in part because theFDA and OSHA have been slow to recognize the equivalency ofcertification by European government regulators or privatelaboratories and in part because of the magnitude and theunfamiliarity of US regulatorsrsquo task in assessing the equivalence ofstandards from 15 different member states submitting documentationin up to 11 different languages5 0 In the words of one FDA official theFDA has lsquorefused to compromise its mission of protecting public healthfor balance of trade purposesrsquo5 1 Thus all three annexes initiallydesired by the US administration are in operation while the threeannexes desired by the Commission are not Since the US executivehas less control over the US agencies responsible for implementationboth partiesrsquo choices are somewhat constrained
On June 12 2001 the United States and the EU initialed anAgreement on Mutual Recognition of Certificates of Conformity forMarine Equipment5 2 Unlike the 1997 Mutual Recognition Agreementand its six annexes this new agreement provides for mutualrecognition of each partiesrsquo standards and procedures as lsquoequivalentrsquofor purposes of certifications issued by conformity assessment bodieslocated in the partiesrsquo respective territories (Articles 3 and 4) Pre-existing harmonization of standards in this sector made possible thepartiesrsquo mutual recognition of lsquoequivalencersquo These standards wereagreed under the auspices of the International Maritime Organization(IMO) located in Geneva This new mutual recognition agreementshould be much easier to implement because less training andinformation exchange are required insofar as testing bodies will not becertifying under separate standards or procedures The parties alsoagreed up-front to recognize each otherrsquos existing conformityassessment bodies so that no application procedures are required forimplementation (Article 6) Thus while this agreement is relativelynarrow in product coverage it is much broader in scope
40
Transatlantic businesses that first touted the benefits of EUUSmutual recognition arrangements now realize their underestimation ofthe difficulties of implementation5 3 These constraints involve not justregulators and regulatory cultures but market forces as well Themarket has not reacted favourably to the recognition of newConformity Assessment Bodies as provided under the 1997 MRA Fromthe perspective of manufacturers they typically develop long-termworking relationships with certifying laboratories which constitute aform of cost-effective firm-laboratory partnership Moreover alaboratoryrsquos mark itself may be important in some markets so thatfirms may continue obtaining formal certification from EU notifiedbodies for the EU market and US laboratories for the United States Asa result most firms may continue using the same laboratories eventhough these laboratories cannot directly certify products asConformity Assessment Bodies but must work through sub-contracting arrangements with accredited laboratories on the otherside of the Atlantic5 4 As for laboratories they will not invest in theaccreditation procedures required to become a Conformity AssessmentBody if they fear that the benefits are limited or too uncertainAccreditation costs can be substantial involving seminars workshopstraining programs audits and joint inspections with authorities acrossthe Atlantic The MRArsquos success in consequence may requireconsiderable market promotion
Perhaps the most important lesson from the implementation of theEUUS MRAs is that agreements that both guarantee public safetyand reduce trade barriers cannot be accomplished on the cheap Theyrequire sustained political will of leaders in each jurisdiction to allocatesignificant resources to finance the coordination of cross-borderregulatory networks EU member states sustained such political willand dedicated such resources over decades in order to create thesingle market Even so they too have encountered significant setbacksand obstacles While it is far too early to pre-judge the 1997 MRA itseems clear that the full benefits of the agreement will be reaped only ifboth sides take concrete steps to ensure that sufficient regulatoryresources are made available to the regulators charged withimplementing the agreement in practice
44 Case Study Data Privacy and the Safe Harbour Agreement5 5
Data privacy protection became a transatlantic issue because of thegrowing interdependence of the US and European economies and therising importance of information technology US affiliates in Europeproduce over a trillion dollars of goods and services annuallyconstituting lsquoover half of all the foreign production of US companiesrsquo5 6
These companies depend on information flows not only with thirdparty suppliers customers consultants marketers and other serviceproviders but also internally within their complex networks of
41
affiliates joint ventures and partnerships The EUUS dispute overdata privacy protection and efforts at cooperation demonstrate theinherent interrelation between social regulation and open trade policieswhere regulation (or the lack thereof) has external effects Alleged USunder-regulation can jeopardize the privacy interests of EU residentsAlleged EU over-regulation can limit the commercial operations of USenterprises In an interdependent transatlantic economy US and EUauthorities attempt to manage the ensuing conflicts of norms andmesh where possible their divergent regulatory systems
On October 24 1998 Directive 9546EC on the Protection ofIndividuals with Regard to the Processing of Personal Data and theFree Movement of Such Data became effective The EU through itsDirective takes primarily a regulatory approach to data privacyprotection as opposed to private ordering through market processesExcept for public security criminal law and related exceptions theDirective covers all processing of all personal data by whatever meansand is not limited to action by government business sector or field ofuse (arts 2-3) The Directive prohibits data controllers from processinginformation unless the individual lsquounambiguouslyrsquo consents to theprocessing and that consent is informed (arts 7 8 10 14) TheDirective provides multiple means for enforcement It requires memberstates to grant individuals a permanent right of access to obtain copiesof the data about them and have it corrected or its use enjoined (arts12 28) It obliges member states to provide a judicial remedy forinfringements of data privacy rights including the right to receivedamages (arts 22-24) To support effective enforcement each memberstate must designate an independent public authority lsquoresponsible formonitoring the application within its territoryrsquo of the Directiversquosprovisions (art 28) These supervisory authorities are to be grantedsignificant powers (arts 18 28)5 7
In contrast the United States has stressed lsquoself-regulationrsquo by theprivate sector backed by regulation which tends to be sector-specificand less stringent Congressrsquos targeting of specific sectors andconcerns is reflected in the following statutory titles The DriverrsquosPrivacy Protection Act of 1994 the Video Privacy Protection Act of1988 The Electronic Communications Privacy Act of 1986 the CableCommunications Policy Act of 1984 and The Fair Credit Reporting Actof 1971 Overall the US approach is fragmented involving standard-setting and enforcement by a wide variety of actors including federaland state legislatures agencies and courts industry associationsindividual companies and market forces US legislation providescitizens with significantly greater protection against the collection anduse of personal information by government in particular the federalgovernment than by the private sector
Article 25 of the EU Directive provides that member states shallprohibit all data transfers to a third country if the Commission finds
42
that the country does not ensure lsquoan adequate level of protectionrsquo ofdata privacy Since it appeared that the United States might notprovide for lsquoadequatersquo data privacy protection under the Directiversquoscriteria US and EU authorities engaged in intensive negotiations toavoid a ban on data flows to the United States culminating in theiragreement on Safe Harbour Principles in March 20005 8 Under theagreement EU member states now must recognize that US firmsrsquoadherence to these Principles is sufficient to protect them frommember state challenge Member state authorities however may stillchallenge transfers to firms that do not adopt and comply with thePrinciples
The guidelines set forth seven core data privacy principles for industryto follow which respectively cover the following issues Notice ChoiceOnward Transfer Security Data Integrity Access and EnforcementThe parties supplemented the Principles with a document entitledlsquoFrequently Asked Questionsrsquo (FAQs) designed to guide firms andauthorities in the Principlesrsquo application Many of the FAQs specify thescope of exceptions thereby providing some leeway to US firms
Companies join the Safe Harbour program by annually certifying to theUS Department of Commerce that they will comply with the PrinciplesThe Department of Commerce then places the companyrsquos name on itsweb site list of certifying firms Self-regulatory organizations (such asBBB Online and TRUSTe) backed by the US Federal TradeCommission offer the primary means for the Principlesrsquo enforcementIn this way the Principlesrsquo application resembles the EUrsquos new andglobal approaches to internal market harmonization5 9 As under thenew approach the Safe Harbour Principles set forth lsquoessentialrequirementsrsquo that firms must meet As under the global approachfirms self-certify their adherence which certification is backed first byaudits from self-regulatory organizations and then (ultimately) by theauthority of the state As of February 23 2002 156 companies hadcertified their adherence to the Principles
The Directive also provides other ways to comply with it in particularthrough obtaining lsquounambiguousrsquo consent from the lsquodata subjectrsquo inEurope (art 7) and the signature of a lsquomodel contractrsquo with data privacyauthorities in member states (Article 26) In January 2002 theCommission approved standard contract clauses covering privacyprotection that can be applied to all data transfers from the EUregardless of a firmrsquos adherence to the Safe Harbour Principles Firmsalso can sign ad hoc contracts with individual member state dataprivacy authorities In addition firms can sign contracts with affiliateswhen transferring personal information such as information containedin personnel files
The Safe Harbour Principles are still at an inchoate stage so that itremains too early to assess their impact Some commentators have
43
questioned the effectiveness of the Principles given that relatively fewUS companies have signed them However some practitioners pointout that companies will not certify their procedures until theiroperations are in compliance6 0 For large companies this allegedly caninvolve considerable re-engineering of their information systemscreation of new internal policies and training of personnel
Nonetheless companies engaged in transatlantic business operate inthe shadow of the Directiversquos potential enforcement Under theDirective US businesses face potential litigation before Europeancourts and administrative bodies unless they adhere to the SafeHarbour Principles Even though privacy advocates have criticized theSafe Harbour Principles the agreement represents a potentially usefultool for such advocates In addition the agreement has increased thedemand for legal consulting and other privacy services within theUnited States For example the Better Business Bureau OnLinecreated a privacy seal program which incorporates the Safe HarbourPrinciples and the Electronic Frontier Foundation a public interestorganization has associated with information technology companies tolaunch a program named TRUSTe to rate the privacy protection ofInternet sites which program also is certified under Safe Harbour
In a world of increased economic interdependence the Safe HarbourPrinciples point to the importance of regulatory cooperation acrossborders involving public and private actors Certification groups suchas BBB OnLine meet with European data protection officials so thatthey become comfortable in the workings of an alternative USapproach Government officials including in Europe realize that theydo not have the resources to enforce the Directiversquos provisions solelyon their own and thus rely on public-private networks in an attemptto ensure better global practices affecting EU constituentsNonetheless to make the Principles work will require sustained cross-border cooperation
45 The Challenge of Transatlantic Regulatory Cooperation
Although brief and selective this review of cooperation across threesectors suggests several tentative conclusions about both the benefitsand the potential obstacles to transatlantic regulatory cooperation
With regard to the potential benefits of transatlantic regulatorycooperation we have identified two First as we have seen regulatorycooperation has the potential to enhance the efficiency of regulationthrough the exchange of information and best practice the provision ofearly warning of potential disputes the avoidance or management ofconflicting regulatory decisions and the gradual building of mutualtrust among regulators Second regulatory cooperation can facilitatetransatlantic trade and investment by removing duplicative regulatory
44
requirements and other non-tariff barriers within the transatlanticmarketplace Such cooperation moreover need not involve thecomplete harmonization or convergence of EU and US regulationsalthough there is some preliminary evidence of convergence in specificissue-areas including the acceptance by the United States of a mutualrecognition scheme similar to that long practiced in the EuropeanUnion and the EUrsquos active discussion of moving from its currentlsquodominance testrsquo to a possible new standard for regulatory mergerscloser to that employed by competition authorities in the UnitedStates
Yet despite the obvious promise of transatlantic regulatorycooperation a broad survey of EUUS cooperation in various areasincluding the three case studies analyzed above points to a number ofpotential obstacles to successful transatlantic regulatory cooperation
bull Regulatory Independence In a number of areas US regulatorsenjoy greater regulatory independence than their Europeancounterparts and may resist what they perceive to be an effort tocompromise domestic regulatory standards and processes in theinterests of international trade The result in some cases is that theUSTR and other central agencies of the federal governmentencounter difficulty guaranteeing compliance with regulatoryagreements by specific regulatory agencies such as the FDA andOSHA if and insofar as these agencies believe that implementationof those agreements would compromise established US regulatorystandards and procedures
bull Transparency and Administrative Law Requirements Across awide range of issue-areas US regulators express concern about thedifferent administrative-law requirements for regulators in the USand the European Union most notably in the area of transparencyIn the United States regulators are required to adhere to thelsquonotice-and-commentrsquo rulemaking procedures of the AdministrativeProcedure Act which requires agencies to provide public notice ofproposed regulations in the Federal Register allow individuals tosubmit comments prior to the final adoption of new rules and keepa public record of the regulatory process The EU rulemakingprocedure although typically characterized by widespreadconsultation of interested parties does not incorporate thesefeatures
bull Confidential Information T h e need to pr o tect con f id e n tia lin f or m a ti on of fir m s an d ot h er pr iva te pa r tie s also pla ce s lim i ts on th ea b i lity of both sid es to co op er a t e in th e ad o p tion an d im p lem en ta tion of reg ula tion s pa r ti cula r l y in th e en f or cem e n t of US an d EU com p etiti on la w s reg a r d in g ca r tel s an d con cen tr a tio n s wh er e fi r m sh a v e been mor e reluct a n t to ag r ee to th e sh a r in g of con f i d en tia lin f or m a ti on th a n in th e ar e a of mer g er con tr o l revi ew ed ab ove
45
bull Multi-Level Governance The United States and the EuropeanUnion are both federal or quasi-federal governance systems withregulatory powers divided in most sectors between the federalEUlevel on the one hand and individual statesmember states or evenlocal governments on the other In terms of regulatory cooperationthis division of regulatory powers means that US executive-branchnegotiators and EU Commission officials are frequently chargedwith negotiating regulatory agreements in areas where the statesretain at least partial regulatory competence and to charges fromboth sides that their counterparts are unable to lsquodeliver the statesrsquoExamples of such state regulatory powers on the US side includethe regulation of insurance and other services as well as publicprocurement where the EU has insisted that the participation ofindividual states is vital to the enforcement of regulatoryagreements6 1 Similar problems afflict the EU side whereCommission efforts to engage in regulatory cooperation may befrustrated by resistance among individual member states as in thecase of GMOs or by the slow adoption of EU-level regulations as inthe case of financial services
bull Regulatory Sovereignty Ultimately the adoption of the broadregulatory frameworks for economic activity consumer andenvironmental protection and other areas is entrusted on bothsides of the Atlantic to democratically accountable bodies such asthe Congress and President in the US and the Council of Ministersand European Parliament in the European Union Within theEuropean Union the harmonization and mutual recognition ofnational regulations has been accomplished in large part through adeliberate transfer of regulatory sovereignty to the European level(as in EU merger control) through the pooling of regulatorysovereignty in the Council of Ministers and the EuropeanParliament (as in data privacy and food safety) and through themutual recognition of standards as enforced by the European Courtof Justice To date however the European Union and the UnitedStates have proven unwilling to compromise their regulatorysovereignty in the various agreements reviewed above indeed eventhe most successful experiment in transatlantic regulatorycooperation that in competition policy is predicated explicitly oneach sidersquos ability to cooperate without any substantial change to itsdomestic regulatory objectives and procedures
The existence of these various obstacles does not of course mean thattransatlantic regulatory cooperation is doomed to failure Some areaslike competition policy are subject to relatively few obstacles tosuccessful cooperation while others such as food safety encountermultiple obstacles Even in difficult areas like food safety moreoverregular exchange of information has proven useful in allowingregulators on each side to understand each otherrsquos regulatoryphilosophies and procedures and gradually to build up the trust
46
among regulators that will be required for the successful operation offuture efforts at mutual recognition or harmonization of regulations
As a first step in this direction the European Union and the UnitedStates agreed in April 2002 to the adoption of a set of non-bindinglsquoEUUS Guidelines on Regulatory Cooperation and TransparencyrsquoAlthough this joint statement of principles does not bind either the USor the EU to any specific regulatory measures and explicitly excludesthe sensitive area of agriculture the agreement does call forregularized exchange of information between EU and US regulatorsand for consideration of harmonization or mutual recognition ofstandards lsquoas may be appropriate in specific casesrsquo to minimizeunnecessary technical barriers to trade In addition the documentsuggests that both EU and US regulators should apply potentially far-reaching principles of transparency in rule-making including publicnotification of and comment on proposed regulations Theimplementation of the guidelines is to be reviewed on an ongoing basisby the TEPTBT Working Group6 2
The significance of the new EUUS Guidelines will depend on theirimplementation in practice across an array of issue-areas in themonths and years to come Regardless of the success of this specificendeavor however regulatory cooperation remains an importantpriority for the European Union and the United States in achievingtheir respective regulatory aims while also preventing and resolvingpotential trade disputes For this reason the conclusion to this reportsuggests a careful and systematic study of current attempts atregulatory cooperation across issue-areas identifying key obstaclesand lsquobest practicersquo at overcoming those obstacles would represent asubstantial contribution to future efforts in this area
47
ndash 5 ndashThe European Union and the Americas
EUUS economic relations do not take place in a vacuum As wehave seen transatlantic efforts at trade liberalization regulatorycooperation and dispute resolution are nested within and frequentlymake explicit use of the rules-based multilateral trading system of theWorld Trade Organization the next round of which both the UnitedStates and the European Union have identified as a priority in thecoming years
Just as importantly the story of the EUrsquos ever-closer economicrelationship with the United States coincides with a second majordevelopment namely the rapid increase of EU trade with the countriesof North and South America Prior to the 1990s the United States wasthe most important trading partner and the largest source of foreigndirect investment in Canada Mexico and throughout most of LatinAmerica and this important role for the US has been further enhancedby the adoption and implementation of the North American Free TradeAgreement (NAFTA) with Mexico and Canada as well the earlynegotiations regarding the possible creation of a multilateral FreeTrade Area of the Americas During the course of the 1990s howeverthe European Union has developed an increasingly close andinstitutionalized relationship with Canada Mexico the Mercosurcustoms union and other countries of Central and South Americawhere it now rivals the economic importance of the United States
In institutional terms the EUUS relationship finds its closestcounterpart in the Unionrsquos bilateral relationship with Canadamdashthisdespite an EUCanada economic relationship that is dwarfed by eachsidersquos economic relationship with the US In economic terms theEUCanada relationship is substantially less important than Canadarsquosbilateral relationship with the United States which is far and awayCanadarsquos largest trading partner taking some 87 of total Canadianexports The integration of Canadarsquos economy with that of other Northand South American states moreover has increased in recent yearswith the implementation of NAFTA and a free trade agreement withChile Nevertheless the European Union ranks as Canadarsquos second-largest trading partner after the United States while Canada accountsfor approximately 17 of EU imports and 22 of total EU exports Asin the EUUS relationship moreover foreign direct investment has
48
outpaced trade as a source of interdependence in the EUCanadarelationship with Canada holding 32 of all FDI in the Union whilethe EU is the second largest investor in Canada after the US holdingsome 8 of all foreign direct investment in Canada6 3
Institutionally the EUCanada relationship is structured by a series ofbilateral agreements including the 1990 Declaration on EuropeanCommunity-Canada Relations and the 1996 Joint Political Declarationon EU-Canada Relations and its accompanying Joint EU-CanadaAction Plan and by a series of regular high-level summits that parallelthose held between the EU and the US The EU and Canada have alsosigned a number of important regulatory cooperation agreements inrecent years including a 1996 customs cooperation agreement a setof Mutual Recognition Agreements agreed in 1998 and agreements onveterinary equivalence and cooperation policy cooperation both signedin 1999 Trade disputes between the EU and Canada are relativelyrare and have generally been dealt with successfully through bilateralconsultation or through the WTO dispute resolution procedure6 4
The Union has come also to play an increasingly important economicrole in Latin America characterized by a sharp increase in both tradeand especially foreign direct investment in the region At the sametime the Union has pursued a wide range of trade and economicagreements with the countries of Latin America including a free tradeagreement with Mexico and other agreements with Mercosur andother Latin American countries In the rest of this section thereforewe examine the EUrsquos economic relationship with the countries of LatinAmerica focusing in turn on the changing patterns of EULatinAmerican trade and investment EU economic agreements with thecountries of the region and the remaining challenges for the EULatinAmerica relationship
51 The EU and Latin America Trade and Investment
The pattern of the trade relationships between the EU and the mainLatin American countries has changed substantially during the lastdecade Although none of them was a major trade partner the largercountries of Latin America already represented an importantproportion of EU exports and imports in 1990 when Mercosur plusMexico and Chile accounted for 43 of extra-EU exports and 32 ofits imports The trade balance was very favourable to the Europeanside with a deficit of over US$8 billion During the 1990s Europeconsolidated its Latin American export markets and increased itsmarket share in Argentina Mexico Chile and especially Brazil In2000 the EU maintained the proportion of its exports towards theanalysed countries while increasing the proportion of imports up to35 The trade balance has improved versus Argentina Mexicoand Brazil whereas the deficit has increased significantly with Chile
49
The total deficit with the countries has now turned into a surplus ofmore than 5 billion
Table 9 EULatin American Trade and Investment(ExportsImports and Foreign Direct Investment as apercentage of total extra-EU flows Trade Balances aremillions of US$)
of EUexports
of EUimports
Trade balance of EUFDI
1990 2000 1990 2000 1990 2000 1999 2000
Argentina 03 08 08 06 -2252 737 54 15
Brazil 25 18 09 17 -5711 -1031 38 53
MERCOSUR 28 25 19 23 -8368 301 92 68
Mexico 11 15 07 07 1231 6973 06 08
Chile 03 04 06 05 -1336 -1653 19 ---
Note figures with an asterisk correspond to year 1999Source European Commission DG-Trade
Moving from Latin America as a whole to individual countries andgroupings we come first to the Mercosur countries (Argentina BrazilParaguay and Uruguay) which created a customs union in 1994 andhave since increased partly thanks to their own process of economicintegration their openness towards the rest of the world6 5 The twosmallest countries are considerably more open (a tradeGDP ratio of70 in Paraguay and 33 in Uruguay in 1999) whereas thisproportion is 19 in Argentina and 15 in Brazil6 6 Although intra-area trade accounts for 20 of their total flows trade with NAFTA andthe EU has also increased during the nineties The financial crises ofthe end of the decade have especially since 1998 temporally put ahalt in the process and affected their external demand By 2000 theEU as a bloc had overtaken the United States as Mercosurrsquos singlelargest trade partner representing 30 of their exports and 35 oftheir imports
The EU and Mercosur can be considered complementary economicblocs in both agricultural and industrial products The EU is the mainexport market for Mercosur agriculture with a 40 share (the USrepresents only 9) More precisely 50 of Mercosur exports towardsthe EU are agricultural products and are concentrated in a smallrange of products such as oilseeds (particularly soy) and animal feedproducts We should also mention coffee (10 of EU imports fromMercosur) livestock and meat and derivatives fruit and derivativestobacco and fish products In contrast EU exports of agricultural
50
products to Mercosur are modest (approximately 6 of total) and areconcentrated in three groups of products alcoholic beverages dairyproducts and other edible animal products and cocoa derivatives Thetrade balance is negative for the EU in agricultural products althoughthe opposite happens in the case of industrial goods The EU is themain supplier of industrial and capital goods to the area includingmost importantly automobiles machinery and mechanical appliancesand a third group of products from the electrical industry (mainlyradiotelephony appliances and parts)
Economic relations between Argentina and the EU developed verypositively since the signature in 1990 of the ECArgentina frameworkagreement on trade and economic co-operation During the 1990sArgentina advanced towards being an open market economy and optedfor an outward-looking external policy where Mercosur and the EUplayed a key role The EU is Argentinarsquos second largest trading partner(after Brazil) overall trade with the EU has more than doubled duringthe last 10 years and represents around 25 of total trade Howeverthe crisis that started at the end of last decade has interrupted thispositive trend The main components of EU imports are agriculturalproducts and raw materials while EU exports to Argentina concentrateon machinery and transport equipment chemicals and manufacturedgoods
Brazil is the largest Latin American economy its GDP accounting for35 of the area or 65 of Mercosur Brazilrsquos domestic market with apopulation over 160 million people constitutes a potentially attractivedestination for both US and EU exports Brazil also signed a co-operation agreement in 1995 with the EU which is now its maintrading partner destination of 268 of its exports and origin of 252of its imports although the US follows very closely (243 and 233respectively) Although during the last years the EU has progressivelyreduced its share of the Brazilian market in favour of the US Brazilremains the EUrsquos main trade partner in Latin America Like Argentinathe process of opening to international competition started between1990 and 1993 As a result Brazilrsquos trade surpluses of the 1990squickly turned into substantial deficits later in the decade only slowlycorrected after the 1999 devaluation The main components of EUimports (1999 data) were vegetable products prepared foodstuffsmineral products transportation equipment wood and wood pulpproducts and machinery and mechanical appliances the latter alsoimportant in EU exports together with transportation equipmentchemical products base metals plastics and rubber
Mexico is the tenth-largest world economy and the most importantLatin-American exporter its total exports amounting to US$166 billionin 2000 In order to qualify its relative size it should be compared withBrazil the second larger exporter in the region (and ninth worldeconomy in terms of GDP) which exported only US$55 billion Mexico
51
is traditionally one of the EUrsquos most important trade partners in LatinAmerica sharing with Brazil its high potential for growth as an exportmarket Mexico has also followed a process of opening to internationalcompetition during the end of the eighties and all the nineties first byunilateral tariff reductions then by subscribing to ten free tradeagreements with the majority of the Latin American countries or areasCanada and the US (creating NAFTA) and in Europe with the EFTAand the EU
During the period 1994-2000 Mexican exports to the US increased240 while their composition has substantially diversified Oil-relatedexports represented only 98 of the total in 2000 compared to 248in 1990 Agricultural products did not account for more than 25 andthe rest of the exports were manufactured goods In contrast 75 ofMexicorsquos imports are intermediate goods 134 capital goods and theproportion of consumption goods is only 117 The EU is Mexicorsquossecond trading partner after the US although the data reveals theoverwhelming dependence of Mexico on the US economy 887 of itsexports are directed to the US and 73 of its imports come from it Inthe EU Germany and Spain represent Mexicorsquos largest export marketswith 09 each Germany is the main European supplier representinga 33 of Mexicorsquos imports As mentioned above Mexicorsquos tradebalance with the EU is highly deficitary
Chile is considered the most open stable and liberalized economy inLatin America Despite its relatively modest size Chile is an importanttrading nation due to its high tradeGDP ratio (over 40) Chile is thefifth Latin American exporter (US$182 billion in 2000) withagriculture and fishery accounting for 10 of the total and the other90 distributed between mining (449 ) and industry (442) Incontrast Chilersquos imports are concentrated in the industrial sector(77) with mining (135) and agriculture (22) lagging far behindIt should be stressed that Chilean trade is globally balanced andexhibits important surpluses with the European Union and Asia Incontrast Chile cumulates its largest deficit with Argentina its main oilsupplier
The EU is Chilersquos main trading partner taking in approximately 25 ofthe countries imports during 20016 7 Among the EU countries theUnited Kingdom and Italy accumulate 34 of Chilersquos trade each andFrance 3 Chile is not only a market for EU exporters of goods andservices but also an important source of imports both in agriculturaland industrial goods The main components of EU imports from Chileare manufactured goods raw materials agricultural products andbeverages and tobacco EU exports of goods are concentrated inmachinery and transport equipment chemical products andmanufactured goods
52
Latin America in general and particularly Mercosur has been involvedin the general trend that directed large capital flows towards emergingand developing economies In 1990 only 16 of overall foreign directinvestment was received by developing countries whereas in 2000 thisproportion had reached 37 Latin America and the Caribbeanreceived around 11 of these flows during the period 1995-99 Brazilreceived one third of the investment in the area whereas Argentinaand Chilersquos proportions were 16 and 8 respectively thanks to theacquisitions of domestic firms by the Spanish companies Repsol andEndesa However due to its instability Argentina has experienced asignificant reduction in foreign investment since 2000 Mexico is thesecond destination of FDI in Latin America (17 during the periodabove mentioned) and in contrast with other countries such asArgentina these flows exhibit a very stable behaviour
Although Mexico followed a process of capital movements liberalizationsimilar to the experiences of Brazil and Argentina a factor behind thestability of these movements is related to its process of regionalintegration with North America Many multinational enterprises haveinvested in Mexico as a platform to produce manufactured goodsdirected towards the US and Canadian markets As an examplebetween 1995 and 2000 more than 60 of cumulated FDI went to themanufacturing sector and 65 had its origin in the US Theseinvestment flows have contributed to the modernization of theindustrial sector and to a significant improvement in Mexicorsquoscompetitive position in the automobile electronic and textileindustries which can help to explain the excellent export performanceof this country in recent years Finally in 2000 the banking sector hascumulated 30 of the total flows of FDI received by Mexico whereasservices telecommunications and the oil industry have had a verylimited interest for foreign investors This fact is in contrast with theother large Latin American economies
The majority of the FDI that the Mercosur countries received in thesecond half of the nineties was directed towards the privatization of thepublic firms especially in the area of services (CEPAL 2001) Due tothis process FDI has abandoned its traditional destinations (forexample in 1995 55 of the FDI stock of Brazil was concentrated inmanufacturing) to be employed in mergers and acquisitions mainly inthe service sector According to Tansini and Vera in 1998 and 199978 of these acquisitions were directed towards Argentina and 18had Chile as destination6 8 In 1999 30 of the capital flows receivedby Brazil were absorbed by the privatizations although since then themajority of the resources were devoted to consolidating andrestructuring these firms
The European Unionrsquos share of foreign direct investment inLatin America increased dramatically during the 1990s with netinflows from the EU increasing from US$1077 billion in 1993 to
53
US$17068 billion in 1997 nearly overtaking total inflows to the regionfrom the United States Within Europe moreover there has been ashift in the primary investors in Latin America with Spain inparticular joining the United Kingdom and Germany as the leadingEuropean investors in the region (see Figure 2) During the 1980s theUK produced more than 50 of the cumulated FDI flows in Mercosurplus Chile6 9 followed by Germany (25) In the 1990s by contrastGermany increased its participation to more than 30 whereas Spainmore than doubled its share to 24 Germanyrsquos FDI concentrated inmanufacturing (such as the automobile industry) during the first halfof the decade especially in Argentina and Brazil with their largedomestic markets Since 1995 Spain is the main European investordirecting its interests in the privatization sectors bankingtelecommunications and energy Other EU countries with importantFDI flows in Mercosur and Chile during the nineties have beenthe Netherlands France and Portugal (the latter with Brazil as itsprimary destination) According to the EC Commission the EUrsquos stockof foreign direct investment in 1999 was euro 1 billion in Uruguayeuro 31 billion in Argentina and euro 34 billion in Brazil EU investment inParaguay is virtually non-existent whereas Chile cumulateseuro 104 billion although in this country the US is still the main foreigninvestor
52 EU Trade Agreements with Latin American Countries7 0
The first symbolic push for the intensification of EU relations withLatin America followed the 1969 lsquoDeclaration of Buenos Airesrsquo issuedby the Latin American members of the Special Committee for LatinAmerican Coordination and calling for an institutionalization of theEULatin America political dialogue and closer economic cooperationbetween both regions
Unlike some previous attempts this time the EU responded positivelyand a regular dialogue between the group of Latin Americanambassadors in Brussels (GRULA) and EC representatives wasinitiated The major substantive measure advanced in this dialoguewas the policy developed toward the Caribbean countries which wereincorporated together with other European former colonies in Africaand the Pacific in the so-called ACP Group and were accorded a specialregime as stated in the Lomeacute Convention of 19757 1 Apart from thatthe Communityrsquos official policy during this period was limited tobilateral economic treaties with the major Latin American countries(so-called first generation agreements) such as the non-preferentialtrade agreements with Argentina in 1970 Uruguay in 1973 Brazil in1973 and Mexico in 19757 2
54
Table 10 EULatin American Trade Agreements
Agreement Objectives Year ofentry into
fEUMexico FreeTrade Agreement(EconomicPartnershipPolitical Co-operation and Co-operationAgreement)
Liberalizes over 96 per cent of EU-Mexicotrade by 2007 at the latest fullyliberalizes industrial products by 2003for the EU and 2007 for Mexico withnegotiations on tariff phase-out ofagricultural items deferred until 2003includes rules on intellectual propertyand dispute settlements and providesEU access to the Mexican procurementand services markets similar to NAFTA
2000
CentralAmericaEUFramework Co-operationAgreement andRegionalProgramme for theReconstruction ofCentral America(PRRAC)
The Framework Agreement seeks tostrength the co-operation in theeconomic financial commercial socio-cultural areas and environment Asecond aim is to reinforce the CentralAmerican Integration System ThePPRAC is a specific program for recoveryfrom the effects caused by hurricaneMitch
Both since1999
AndeanCommunityEUCo-operationagreement andGSP
Political aspects anti-drug dialogueCommercial aspects since 1998 theGeneral System of Preferences is appliedunder a new regime As a result 75 ofproducts imported from the AndeanCommunity to the EU are exempt fromcustom duties Framework Co-operationAgreement to promote regionalintegration
1998(politicaldialogueand co-
operation)and 1999
(GSP)
EUChile AssociationAgreement
Governments concluded negotiations inApril 2002 on a wide-ranging AssociationAgreement including the creation of a free-trade area in goods and services anagreement on wines and spirits andprovisions on public procurementinvestment competition and intellectualproperty
Awaitingratificationby the EUand Chile
MercosurEuropeanUnion
Framework agreement came into force in1999 Negotiations on an interregionalfree-trade agreement began in 1999 andare ongoing
Frameworkagreementsince 1999Free-tradeagreementexpected in
2005
Source Flocircres (2001) DG Trade (European Commission) and Camarero andTamarit (2002)
55
Figure 2 EU Foreign Direct Investment in MERCOSUR + Chile(Cumulated flows Country shares EU = 100)
Source OECD International Direct Investment Statistics YearbookNote For clarity some EU countries with smaller investment shares in MERCOSURhave been excluded
From the mid-1970s to mid-1980s the official policy of the EC towardsLatin America was based mainly on the Inter-Parliamentary Dialoguebetween the European Parliament and Latin Americanparliamentarians and on bilateral economic treaties With regard tothe latter a new round of lsquosecond-generationrsquo agreements was signedbetween 1980 and 1985 with individual countries such as Argentina in1980 Uruguay in 1980 and Brazil in 1982 and with sub-regionssuch as the Andean Pact (created in 1969 between VenezuelaColombia Equator Peru and Bolivia) in 1983 and the CentralAmerican Common Market in 1986 7 3
From the mid-1980s onward Latin America became the focus of moresubstantial political and economic policies from the EU On thepolitical side a variety of multilateral fora have been set up The SanJoseacute Group was launched in Costa Rica in 1984 with the aim ofsupporting progress in the peace process and democracy in CentralAmerica From that date annual meetings have been organizedextending their aims to other fields like the rule of law and humanrights the fight against the trafficking of drugs and educationaltechnical and cultural co-operation The Rio Group was established in1986 again meeting on an annual basis with a membership includingall the South American countries as well as Mexico Finally twosummit meetingsmdashthe first in Rio de Janeiro in June 1999 and a
0
10
20
30
40
50
60
1980-90
1991-98
56
second held under the Spanish EU Presidency in Madrid in May2002mdashbrought together the leaders of 48 countries from the EU andLatin America The first summit in Rio agreed upon an Action Plan toincrease co-operation in the political and cultural spheres and calledfor negotiation of association agreements with Chile and Mercosurwhile the Madrid summit further developed political cooperation andconfirmed the conclusion of a bilateral EUChile AssociationAgreement7 4
The 1990s and early 2000s finally have witnessed the conclusion bythe EU of a round of so-called lsquothird-generationrsquo treaties between theEU and various Latin American countries and trade blocs The primaryagreements in force or under negotiation between the Union and thecountries of Latin America are summarized in Table 10 In all thecases the nature of these agreements is twofold encompassingpolitical agreements on questions such as democracy the environmentand human rights and as well as economic agreements regarding theliberalization of trade and investment
521 The EUMexico Free Trade Agreement
Since 1975 the EU has signed several agreements with MexicoAlthough these agreements were not significantly different from othersalready in force with other countries in the same geographic areaMexico had always received a particular treatment Thus in the 70sMexico benefited from the treatment of most favoured nationneglecting the fact that this country was not a member of the GATT atthat time Later Mexico was eligible under the GSP scheme benefitingfrom this treatment until 1995 when this system was revisited andMexico lost much of its preferential access to the EU marketNegotiations aiming at the establishment of an FTA with the EUstarted during the same year The primary reason was the concern inthe EU about possible trade diversion due to the Mexican entry intoNAFTA in 1994 A general agreement removing trade barriers betweenthe EU and Mexico would minimize any trade diversion effect
Although the most important part of the agreement is the creation of afree trade area between the EU and Mexico the so-called GlobalAgreement includes a rather wide package institutionalising a regularpolitical dialogue and extending the bilateral co-operation Thisagreement places the EU in a better position to compete for access tothe Mexican market In 2007 all industrial goods will be free of tariffsMoreover in trade volume 52 of EC exports will enter the Mexicanmarket duty free by 2003 and for the remaining 48 a maximum dutyof 5 will be applied This extremely quick dismantling calendar willplace economic operators on both sides on an equal footing with otherpreferential partners in real time Concerning agricultural and fisheriesproducts some European special sensitivities are respected allowingat the same time for preferential access to European and Mexican
57
exporters into their respective markets The agreement also includespreferential treatment in services providing service providers from theEU with access to the Mexican market which will be equivalent if notsuperior to that currently enjoyed by operators from Mexicorsquos otherpreferential partners in particular the US and Canada In the servicessector EU banks and insurance companies will be authorized tooperate and establish directly on the Mexican territory Theliberalization of investment and payments related to investments willtake place in 2003 The agreement also provides access to the Mexicanprocurement market similar to NAFTA Finally provisions are madeabout intellectual property competition and dispute settlement
The agreement covers other aspects apart from trade Thus the EUfosters co-operation programmes with Mexico for an annual amount onaverage of euro 13 million during the 1990-99 period There were alsosignificant activities under horizontal programmes such as AL-Invest(Latin American Investment Programmes) and ALFA (Latin AmericanAcademic Formation)
522 Relations with Central America
The most important part of the cooperation between the EU and LatinAmerica and more specifically with Central America has beenimplemented through the so-called cooperation agreements The firstbilateral agreements with individual Central American countries weresigned during the 1970s and early 1980s Later on a second wave ofagreements were adopted covering a wider range of areas topicsbeginning with the First Framework Agreement of Co-operation forCentral America signed in 1985 This agreement belongs to the mostadvanced second-generation type and covers areas such ascommercial promotion and well as agricultural industrial andeconomic co-operation The Second Framework Agreement of Co-operation signed in 1993 is considered as a lsquothird generationrsquo type7 5
This Agreement came into force in 1999 including two novelties apackage of aid for refugees and a programme to support democracyand human rights The previsions of financial technical and economicco-operation aid with these countries from 2000 to 2006 are close toeuro 500 million Furthermore the Commission has decided to participatein the initiative for highly indebted poor countries (HIPC) The eligibleLatin American countries are Honduras and Nicaragua which stand toreceive as much as euro 30 million Additionally the European InvestmentBank has made several loans to the Central American Bank forEconomic Integration (CABEI) in order to support reconstruction in theregion
58
523 Relations with the Andean Community and Chile
The EU has established a complete institutional framework with theAndean Community implementing different instruments in each field(political dialogue trade and co-operation) with a special emphasis onthe question of lsquoanti-drugrsquo measures
Trade relations between the EU and the Andean Community haveincreased 32 over the last nine years currently representing 08 ofthe EUrsquos total trade and 167 of total trade for the AndeanCommunity It is worthwhile to note that 90 of Andean exportsconsist of raw materials or primary production while 85 of the EUrsquosexports are manufactured products From 1999 on the EU hasgranted under the Generalized System of Preferences (GSP)preferential access for all industrial products as well as numerousagricultural products especially for those Andean countries committedto fighting against drug production and trafficking
In the area of political co-operation the Andean region was the first inLatin America to conclude a regional co-operation agreement with theEU The present regional framework agreement was signed in 1993and entered into force in 1998 The amount of the aid to the areareached some euro 6 millionyear for the period 1982-97
Finally the EU has also established several bilateral agreements withChile including the Framework Agreement signed in 1996 andcurrently in force This agreement covers political and economiccooperation and formed the cornerstone for a new EUChileAssociation Agreement the negotiation of which was completed inApril 2002 The agreement which is currently awaiting ratification byboth parties calls for the creation of a free-trade area in goods andservices an agreement on wines and spirits including both market-access questions and the use of protected names a Sanitary andPhytosanitary Agreement new rules on public procurementinvestment competition and intellectual property and a dispute-resolution mechanism7 6
524 The Launching of a Free Trade Area with Mercosur77
The EU is currently the main trade partner of Mercosur The EUgenerally imports agricultural and primary products from Mercosurwhile it exports primarily industrial commodities7 8 The EU has aFramework Agreement of co-operation similar to others with severalcountries or blocs in Latin America In June 2000 negotiations werere-opened aiming at signing a new Inter-regional AssociationAgreement This new agreement would cover not only commercialaspects but also many others like political dialogue or cooperation(social and humanitarian economic and development) between the twoblocs
59
The fifth round of negotiation between the EU and Mercosur took placein July 2001 The main point in this round was the presentation bythe EU of its offer for the reduction of tariff and non-tariff barriers inorder to liberalize trade in goods services and public procurementThese reductions would cover all the industrial products and 90 ofagricultural products over a period of no longer than ten yearsMercosurrsquos answer to that proposal was given during the sixth roundin October 2001 presenting its own offer in terms of tariff and non-tariff reduction and public procurement At the same time there hasbeen an exchange of views on political dialogue as well as someimprovement in the area of technical and scientific co-operationenergy transport telecommunications and information technologyNegotiations continue but conclusion of the agreement is not expecteduntil 2005
53 Challenges for EULatin American Economic Relations
As even this brief survey has made clear the European Union todayplays a substantial economic and political role in Latin America EUtrade with and foreign direct investment in the region have increaseddramatically during the course of the past decade with the EU nowemerging as the most important economic partner for Mercosur inparticular At the same time the EUrsquos political and economicagreements have demonstrated ever-greater ambition and anincreasingly broad economic agenda embracing not only tariff andquota reductions but also provisions on non-tariff barriersinvestment and public procurement as well as political provisionsregarding democracy and human rights
The completion of a more ambitious system of economic agreementswith the Latin American countries remains a goal for both the UnitedStates and the European Union However there are importantqualitative differences between the strategies of the two trade blocswhile the European Union is trying to keep the development of a hub-and-spoke system of bilateral agreements with individual countries or(as in the case of Mercosur) customs unions the United States hasannounced its desire to create a multilateral Free Trade Area of theAmericas The countries of the region for their part havedemonstrated a decades-long commitment to economic liberalizationlocked in place by a series of both multilateral and bilateral tradeagreements amongst themselves as well as with the United States andthe European Union although their commitment to proceeding alongthese lines has been tested by the recent economic crisis in Argentina
The EULatin America summit meeting held in Madrid in May 2002witnessed the conclusion of the EUChile free trade agreement whichis now awaiting ratification by both sides but further negotiations lieahead particularly in the case of the proposed EUMercosur
60
agreement which remains far from a conclusion not expected before2005 In these negotiations the EU should give special attention toexpanding market access for the Mercosur countries especially for so-called lsquosensitive productsrsquo Although the EU has presented itself as achampion of free trade within various multilateral fora it is clear thatthe Union has actively sought to preserve barriers in some industrialsubsectors and especially in the agricultural sector where theCommission has estimated that some 10-12 of all EU imports fromthe Mercosur countries are currently labelled as lsquosensitiversquo7 9 Removalof these barriers would benefit not only Latin American countries butalso European consumers who are currently playing higher prices foran amount equivalent to 5-7 of the Unionrsquos GDP8 0 In addition thenegotiation process should cover not only tariffs (since over 50 of allimports from Mercosur are eligible for an average tariff lower than25) but also other means of market-access protection such as tariffquotas which are applied extensively to agriculture and food productsAdditional areas for negotiation include trade in goods servicesinvestment public procurement intellectual property rights technicalstandards and rules of origin
Finally neither these EULatin American negotiations nor theextensive EUUS cooperation outlined in the previous sections of thisreport should distract the European Union or the United States fromtheir shared priority namely the successful completion of alsquoDevelopment Roundrsquo of multilateral trade talks within the WTODuring his recent trip to Argentina EU Trade Commissioner PascalLamy stressed the importance of ensuring that bilateral and inter-regional trade agreements such as those that the EU has concludedwith the countries of Latin America rest on the multilateral foundationof WTO trade law For this reason he argued bilateral andinterregional negotiations lsquomust not be allowed to detract our attentionfrom the pursuit of the Doha Development Agendarsquo8 1 Such acommitment should remain a central tenet of EU trade policy in theyears to come
61
ConclusionsThe New Transatlantic Economic Agenda
The United States and the European Union have an extraordinarilyclose and important economic relationship the health of which is vitalto the global economy as a whole Both partners stand to gain a greatdeal by making the relationship more productive Both stand to lose ifdisputes cause interruptions and acrimony and if the relationship failsto adapt to new pressures and new challenges
The agenda of transatlantic economic relations has evolved andexpanded to reflect the increasingly integrated nature of thetransatlantic marketplace To be sure traditional trade questionsmdashandtrade tensionsmdashpersist between the European Union and the UnitedStates Despite the generally low level of tariffs between the EU andUS tariff peaks and quotas remain for both sides in a number ofsensitive areas which can and should be subject to further reductionsin the Doha Round of trade liberalization talks within the World TradeOrganization In addition to tariffs and quotas a number of othertraditional trade measuresmdashincluding most notably antidumpingsubsidies and safeguard measuresmdashcontinue to plague thetransatlantic partnership most strikingly in the current dispute overUS safeguard actions in the steel sector Nevertheless while theseriousness of these disputes should not be underestimated themultilateral rules-based trading system of the World TradingOrganization is generally well equipped to address such issues andthe United States and the European Union should continue in theirefforts to use and support the WTO as a forum for both negotiationand dispute resolution
Perhaps the greatest challenge to the transatlantic economicrelationship however is the expansion of the transatlantic economicagenda to encompass domestic regulations that are adopted forlegitimate purposes but act in practice as non-tariff barriers to tradefragmenting the transatlantic market and in some cases leading tobitter and intractable trade disputes As we have seen these types ofdisputes also create enormous legal and political challenges to thedispute settlement procedure of the WTO where judgments in areassuch as the beef hormones and Irish music disputes have createdpolitical controversy without (at this writing) securing full compliancefrom the states concerned
62
For these reasons any attempt to deepen transatlantic economicintegration between the United States and the European Union mustaddress not only tariffs quotas and similar disputes about subsidiesantidumping actions and safeguard measures but also the new-styleregulatory disputes that are likely to become the most importantbarriers in the transatlantic marketplace and place the greateststrains on the EUUS relationship and the multilateral WTO systemin the medium- to long-term future
Addressing these challenges in turn will require a careful andextensive study and more comprehensive understanding not only oftraditional trade issues but also and especially the domestic sourcesof transatlantic regulatory disputes existing efforts to resolve suchdisputes and possible new mechanisms for preventing and settlingfuture regulatory disputes between the European Union and theUnited States
Such a study would necessarily be wide-ranging involving not onlyeconomists who would identify the potential benefits of economicliberalization but also political scientists political economists andlegal scholars who would identify the domestic sources oftransatlantic regulatory disputes the possibility of preventing suchdisputes through early warning andor regulatory cooperation and themost promising means of settling disputes either bilaterally ormultilaterally Any such study would therefore have to undertakethree fundamental tasks
1 A comprehensive listing and analysis based on publiclyavailable sources of EU and US regulations capable of restrictingtrade and investment between the European Union and the UnitedStates
This report has taken a first step towards such an analysis with thecompilation of regulatory barriers identified by the United States andthe EU in their respective trade barriers reports for 2001 (see Appendix1) but further research is required to identify both the sources and theseriousness of problematic regulations
bull In terms of sources a useful first step would be to identify whetherthe regulations in question were adopted by the local state orfederal (EU) levels of government and whether they were adoptedthrough legislation or by regulatory authorities
bull In terms of seriousness a preliminary effort should be made toidentify the economic impact of the regulations in question ontransatlantic trade and investment Such an analysis could draw onthe research done by the US and the EU as well as on the periodicreports of the World Trade Organization and the Transatlantic
63
Business Dialogue but should be conducted by independenteconomists it is to be accepted as authoritative by both parties
In addition an effort should be made by scholars and practitioners onboth sides of the Atlantic to identify new challenges to the relationshipparticularly those arising from the application of new technologiessuch as electronic commerce and biotechnology
2 A comprehensive survey and analysis of transatlanticregulatory cooperation including areas of informal cooperationamong regulators as well as areas of formal agreement
Section 4 of this report identified regulatory cooperation as aparticularly promising means of preventing as well as settlingtransatlantic regulatory disputes yet it also identified a number ofpolitical legal and institutional barriers which can hindermdashand havehinderedmdashcooperation across a range of issue-areas Given therecognized promise of regulatory cooperation among EU and USauthorities as a means of realizing our joint regulatory aims andavoiding future regulatory disputes more detailed studies oftransatlantic regulatory cooperation are vital in order to identifybarriers to regulatory cooperation as well as instances of lsquobest practicersquoin overcoming those barriers
3 A systematic analysis of various means of bilateral andmultilateral dispute resolution with particular emphasis on thespecific challenges of transatlantic regulatory disputes
Finally while emphasis can and should be placed on prevention ratherthan settlement of transatlantic disputes future studies should focuson new and innovative means of dispute settlement in regulatorydisputes given the acknowledged difficulties of litigating regulatorydisputes before the WTO Dispute Settlement Body At the domesticlevel the prospects for the adoption of lsquotrade impact assessmentsrsquo aswell as a more general move toward transparent regulatory procedureson both sides of the Atlantic should be examined At the bilaterallevel special attention should be directed toward the possibleexpansion of early warning as well as the possible use of bilateralarbitration and mediation outside the WTO At the multilateral levelfinally the EU and US should jointly examine the possible revision ofWTO rules to clarify the use of the precautionary principle and toconsider possible amendments to the WTO Dispute SettlementUnderstanding to be undertaken in May 2003
Appendix 1 EU-US Barriers to Trade in Goods Services and Foreign Investment
Type ofmeasure EU concerns about US rules US concerns about EU rules
Tariffs Tariff peaks Food products Textiles Footwear Leathergoods Jewelry Ceramics and glass Trucks Railway carsOptical fibers Tubes for computer monitorsSANCTIONS IN RETALIATION FOR THE EU BAN ON HORMONE-TREATED BEEFTariff quotas dairy products tobacco
BANANAS (tariff quota + discriminatorylicensing) (settled)CUMULATIVE RECOVERY SYSTEM (brown rice)ADMINISTRATION OF CUSTOMS DUTIES FOR RICE(B) (agreement 1101)
Trade defenceinstruments
1916 ANTIDUMPING ACTSAFEGUARD MEASURES ON STEEL WIRE ROD (32000)SAFEGUARD MEASURES ON WELDED STEEL PIPE (32000)BYRD AMENDMENT (ANTI-DUMPING DUTIES GO TO INJUREDINDUSTRY)FAILURE TO LIFT COUNTERVAILING DUTIES AFTER SUNSET REVIEWSQUOTA ON THE IMPORT OF WHEAT GLUTEN (WITHDRAWN 62001)METHODOLOGY OF COUNTERVAILING DUTIES WITH RESPECT TOBRITISH STEEL ANTI-DUMPING DUTIES ON SEAMLESS PIPE
Othercustomsbarriers
Excessive invoicing requirementsEU not recognized as a country of originTEXTILES amp LEATHER CUSTOMS FORMALITIES amp RULES OF ORIGINTuna (certification of origin)
Other leviesand charges
Customs fees (eg Merchandise Processing Fee)HARBOUR MAINTENANCE TAX and Harbour Services Fee50 tax on imported equipment for boats Taxes that falldisproportionately on European automakersbull Luxury tax (70)bull Gas Guzzler tax (85)bull CAFEacute penalties (~100)
65
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade
SHRIMP-TURTLE ndash to import shrimp countries must be certifiedas matching US efforts to protect sea turtles (EU third party)Tuna-dolphin ndash to import tuna countries must be approvedby the National Marine Fisheries ServiceGeneral prohibition on the importation of dairy productsmade from unpasturized milkEffective prohibition on the importation of yogurtMilk protein for yogurt must come from approved diariesDivergence from international standardsReliance on third-party conformity assessment (eg reelectrical equipment and domestic appliances)US and Canadian content labeling of carsApproval slower than for US-produced drugsOver-the-counter drug approval requires US market historyExtensive product description (textiles amp leather)Citrus fruits must be landed at North Atlantic portsRules on all imports of ruminant animals and animalproducts from all EU countries because of BSEBan on some uncooked meat productsStrict condition on imports of egg products (continuousinspection of production process)Low acid canned food (eg fish and dairy products) subject todetailed prior approval systemPre-clearance inspection of apples and pears from somemember states for pestsProhibition on imports of all animals and products from amember state where a disease exists (not just region wherefound)Approval of wine labels
HORMONE-TREATED BEEFLack of national treatment with respect toGEOGRAPHICAL INDICATIONS for agriculturalproducts and foodPoultry treated with chlorinated waterEffective moratorium on approval of GMproducts since 498Mandatory labeling of all foods containingmore than 1 GM ingredientsStringent certification of non-hormone-treated beef (new US program seemsadequate)Food feed and fertilizer containing specifiedrisk materials (narrower product range thanprevious rule)Treatment and traceability of raw materialsfor production of gelatine for humanconsumption (agreement near on healthcertificate that would enable US exports toresume)EU approval of 3rd country establishmentsexporting animal products (esp dairy)Derogation from EU standards required forUS wine (on-going negotiations to try toresolve)Heat or pressure treatment of softwoodpacking material (new EU rule similar todraft international standard)Metric-only labeling (implementation delayedto 2009)
66
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Regulatorybarriers totrade(continued)
Excessive post-entry quarantine of hardy nursery stocksExporters of meat or meat products to the US may notprocess meat from countries that are not recognized as freefrom diseases of concern to the US
Slow and arbitrary new aircraft certificationHushkits (dispute brought to ICAO work onan ICAO standard)Labeling of TSP (fertilizer) disadvantages USexportsRestrictive limits on low frequency emissionsfrom electrical and electronic equipment
Regulatorybarriers totrade (USstate and EUmember statelevel)
Duplicate approval of wine labelsState-level safety certification and environmental protectionrequirements (especially of agricultural and food products)Ban on fuel additive MTBE (CA)
Bans on some approved GM products(A I amp L)No approvals for planting certain GMproducts (G P)Unresponsive to requests for field trials ofGM crops (Gr)Ban on GM in animal feed adopted (It) - notin forceHCFC bans by Sw amp FnAdditional navigation light requirements(Fn) ndash suspendedTesting of wheat leading to virtual ban onimports (transshipment recently permitted)(Gr)Harsh interpretation of EU SPSrequirements caused or threatened to causeproblems for processed meat productspoultry products game meat seafoodanimal feed wood products (It)Qualitative imports standards and high test-ing and registration fees for bull semen (It)
67
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Servicesbarriers
50 tax on all non-emergency repairs to US-owned shipscarried out outside the USBarriers in mobile communications (investment restrictionslengthy procedures)De-facto reciprocity requirements regarding satellite-basedcommunications servicesExclusive digital terrestrial television standard (ATSC ) differentfrom EU (DVB-T)Impractical for foreign securities firms to establish branches inorder to engage in broker-dealer activitiesForeign mutual funds unable to make public offerings becauseof registration conditionsForeign investment is restricted in coastal and domesticshippingPartnership with US entity required for granting of licenses forlandings sub-marine cablesOnly US citizens or corporations organized under US law canoperate or maintain power facilities on Federal landForeign stake in airlines capped at 49 (25 of voting stock)Foreign-built vessels prohibited from engaging in coastwisetrade either directly between or via a foreign port and cannot beregistered for dredging towing or salvage
State-level measures Prohibitions on EU exporters distributing rebottling or retailingtheir own wineSome states require insurance companies to already beestablished in another stateSome states require insurers to buy reinsurance from state-licensed insurance companies
European content requirements for TVbroadcastsAccess to the single aviation marketrestricted to firms majority-owned andcontrolled by EU nationalsBanking insurance and investmentservices rules require reciprocaltreatment by home country (no US firmsadversely affected)
Member state measures Content requirements for radiobroadcasts (Fr)Requirements that cinemas showEuropean films (It Sp)Nationality requirements affecting tovarying degrees the provision of legalservices (A Dk Fn Fr G It)Strict restrictions on advertising byforeign legal consultants (Dk)Nationality requirements affecting tovarying degrees the provision ofaccounting services (A Dk Fr)
68
(Appendix 1 cont)
Type ofmeasure EU concerns about US rules US concerns about EU rules
Foreigninvestmentbarriers
National security vetting (Exon-Florio Amendment)US subsidiary required to exploit deep-water ports or to fish inUS Exclusive Economic ZoneFishing-vessel-owning entities must be 75 owned andcontrolled by US citizensForeign individuals or foreign-controlled corporations cannotacquire licenses for using nuclear materialsConditional national treatment governs participation ingovernment research programmes (subsidiaries in US allowed toparticipate but eligibility process more cumbersome)
Mirror-image reciprocity applies toinvestments in the extraction ofhydrocarbons (no US firms adverselyaffected)
NotesIncludes measures in effect + those for which implementation has been suspended as a result of agreementDoes not include non-discriminatory measures systemic barriers (such as the presence of monopolies the pricing ofpharmaceuticals or delays and lack of transparency in standard setting) government procurement intellectual propertyprotection subsidies (including FSC) or issues being prosecuted under EU rules
Barriers in small caps are the subject of WTO proceedings (consultations have been requested)
Sources Commission Report on United States Barriers to Trade and Investment 2001 USTR National Trade Estimate ReportForeign Trade Barriers 2001
69
Appendix 2 WTO Cases by the EU against the US (excludes cases as third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS38Cuban Libertyand DemocraticSolidarity Act
Extraterritorial application of the USembargo of trade with Cuba in so far as itrestricts trade between the EU and Cubaor between the EU and the US Thecreation of a right of action in favour ofUS citizens to sue EU persons andcompanies in US courts in order to obtaincompensation for Cuban properties Thedenial of visas and exclusion from the USof persons involved in confiscating ortrafficking in confiscated property
GATT (V XI XIII)
GATS (II III VIXI XVI XVIIAnnex onMovement ofNaturalPersons)
596 1096 Understandingreached (497)
WTDS39Tariff increaseson productsfrom the EU
The measures were taken in response tothe adoption of EU legislation on the useof hormones in livestock farming andseek unilaterally to settle the issuewithout resorting to the mechanisms ofthe WTO
GATT (I II XXIII)
DSU (3 22 23)
496 996 [No report]
WTDS63Anti-dumpingmeasures onimports of solidurea from theformer GermanDemocraticRepublic
By maintaining the order against the fivestates of the former GDR the US hasignored de jure and de facto their fullintegration into the reunified FederalRepublic of Germany and thus theeconomic integration of their companiesinto the German market economy
Anti-Dumping(92 11)
1296 ndash
70
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS85Measuresaffecting textilesand apparelproducts
Changes to rules of origin of textile andapparel products which entered intoforce on 1 July 1996 adversely affectexports of EU fabrics scarves and otherflat textile products which are no longerrecognized as being of EU origin and losethe free access to the US that theyenjoyed before
Textiles (24 4244)
Rules of origin(2)
GATT (III)
TBT (2)
697 ndash Negotiatedsolution (997)
WTDS88Measureaffectinggovernmentprocurement
Massachusetts law regulating statecontracts with companies doing businesswith or in Burma (Myanmar)
GPA (VIIIb XXIII)
697 998 Law overturnedunder US law
WTDS100Measuresaffecting importsof poultryproducts
Ban on imports of poultry and poultryproducts produced in the EU until theUnited States is able to obtain additionalassurances of product safety No groundsgiven
GATT (I III XXI)
SPS (2 3 4 58 Annex C)
TBT (2 5)
897 ndash
WTDS108Tax treatmentfor Foreign SalesCorporation
The FSC scheme provides for anexemption to the general rulesestablished in the US Internal RevenueCode which results in substantial taxsavings for US companies exportingthrough FSCs
Subsidies (3)
Agriculture (8 910)
1197 798 Panel found infavour of the EUEU not considerFSCReplacement Actadequate Panelfound in favourof the EUAppellate Bodyreport check
71
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS118HarbourMaintenance Tax
Ad valorem tax (0125) on allwaterborne imports entering US ports
GATT (I II IIIVIII X)
298 ndash Reform proposed(HarbourServices Fee)but EU stillviews asproblematic
WTDS136Anti-dumpingAct of 1916
The Act imposes penal sanctions againstthe importation of goods and their sale inthe US when the price is lower than inthe country of production or in otherforeign countries where the goods areexported
GATT (III4 VI1and VI2)
WTO (XVI4)
Anti-Dumping(1234 amp 5)
698 1198 Appellate Bodyfound in favourof the EU
Implementationpending
WTDS138Imposition ofcountervailingduties on certainhot-rolled leadand bismuthcarbon steelproductsoriginating in theUK
Methodology relied on the presumption(based mostly on pre-WTO legislation andpractice) that benefits from priorsubsidies pass through without the needto show that a benefit continues to beconferred
Subsidies (11b10 14 194)
698 199 Appellate Bodyupheld Panelreport favouringEU (500)
WTDS151Measuresaffecting textilesand apparelproducts (II)
Same as WTDS85 Same asWTDS85
1198 ndash Negotiatedsolution (997)
72
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS152Sections 301-310 of the TradeAct of 1974
Imposes specific strict time limits withinwhich unilateral determinations must bemade that other WTO Members havefailed to comply with their WTOobligations and trade sanctions must betaken against such WTO Members
DSU (3 21 2223)
WTO (XVI4)
GATT (I II IIIVIII XI)
1198 199 US through aStatement ofAdministrativeActionundertaken toact consistentwith WTOobligationsPanel ruled thatso long asrespectedcompatible(1199)
WTDS160Section 110(5) ofUS CopyrightAct
Section 110(5) of the US Copyright Actpermits under certain conditions theplaying of radio and television music inpublic places without the payment of aroyalty fee
TRIPS (9(1) 13) 199 499 Panel found infavour of the EU(700) EU andUS havenegotiated anarrangement
Implementationpending
73
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS165Import measureson certainproducts fromthe EU
100 tariffs on certain product inretaliation for the EUs failure to bring itsbanana trade regime into compliance withWTO ruling
GATT (I II VIII)
DSU (3 21 2223)
399 599 Appellate Bodyfound in favourof the EU(1200)
US broughtsanctions intoagreement
Sanctionssuspended asresult of 401agreement
WTDS166Safeguardmeasures onimports of wheatgluten from theEU
Methodology not ensure that all injurydue to imports Imports from Canadawere excluded from the investigation
GATT (I XIX)
Agriculture (42)
Safeguard (214 5 8 12)
399 699 Appellate Body(1200) found infavour of the EU
WTDS176Section 211OmnibusAppropriationsAct
Section 211 provides that the registrationor renewal in the US of a trademarkpreviously abandoned by a trademarkowner whose business and assets havebeen confiscated under Cuban law is nolonger permitted without consent ofprevious owner No US court shallrecognize or enforce such rights
TRIPS (2 15 1641 42 62)
799 600 Appellate Bodyfound in favourof the EU (102)
74
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS186Section 337 ofthe Tariff Act of1930 andamendmentsthereto
Under Section 337 the US caninvestigate whether imported goodsinfringe US intellectual property rightsand can exclude them from entry into theUS Despite amendment the EUconsiders that the procedures andremedies are substantially different fromprocedures concerning domestic goodsand discriminate against Europeanindustries and goods
GATT (III)
TRIPS (2 3 927 41 42 4950 51)
100 ndash
WTDS200Section 306 ofthe Trade Act of1974 andamendmentsthereto(lsquocarouselrsquo)
Section 306 provides for a mandatorymodification (every 6 months) of theproducts subject to sanctions imposedagainst a WTO member which has notcomplied with a WTO panel ruling
DSU (3 21 2223)
GATT (I II XIXXIII)
600 ndash
WTDS212Countervailingmeasuresconcerningcertain productsfrom the EU (14cases)
US application of countervailing dutiesbased on an irrefutable presumption thatnon-recurring subsidies granted to aproducer prior to a change of ownershiplsquopass throughrsquo to the current producerfollowing the change of ownership
SCM (10 19 21) 1100 801 Panelestablished
75
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS213Countervailingduties on certaincorrosion-resistant carbonsteel flatproducts fromGermany
Results of a full sunset review whichmaintains CV duties The original dutywas imposed prior to entry into force ofWTO agreements EU considers that itwould not have been possible to imposethis duty (less than 1) if theinvestigation had been governed by theSCM agreement
SCM (10 11921)
1100 801 Panelestablished
WTDS214Definitivesafeguardmeasures onimports of steelwire rod andcircular weldedcarbon qualityline pipe
EU considers that Sections 201 and 202of the Trade Act of 1974 and Section 311of the NAFTA Implementation Act containprovisions which prevent the US fromrespecting Safeguards Agreement
Safeguards (2 34 5 8 12)
GATT (I XIX)
1100 801 Panelestablished
WTDS217Continueddumping andsubsidy OffsetAct of 2000(ByrdAmendment)
The Act mandates the distribution of theproceeds of duties levied pursuant to aCVD an AD order or a finding under theAntidumping Act of 1921 to the affecteddomestic producers
AD (5 8 18)
SCM (11 1832)
GATT (X)
WTO (XVI)
1200 701 Panelestablished andjoined with panelestablished byCanada andMexico(WTDS234)
76
(Appendix 2 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions
Consultation Panel Status
WTDS225Anti-dumpingduties onseamless pipefrom Italy
Results of a sunset review which foundthat anti-dumping duties on imports ofseamless line and pressure pipe fromItaly will continue at a rate of 127 EUconsiders this finding is in breach of ADAgreement (duties not lower than 2)
AD (58 111113 17)
GATT (XXII1)
201 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 152027
7
Appendix 3 WTO Cases by the US against the EU and Its Member States(excludes cases as a third party)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS13Duties onimported grains
Reference price system used to determinethe duties applicable to imports of grainsappear to result in the application ofhigher rates of duties to shipments of USgrains than is permitted under the EUWTO tariff schedule and to discriminateagainst US exports of grains
GATT (I II VIIX)
Agreement onImplementingGATT Article VII(109 11 22Annex I)
795 397 Negotiatedagreement(1195)
Request forpanel withdrawnfollowingimplementation(497)
WTDS26Measuresaffecting meatand meatproducts(Hormones)
EU measures prohibiting the importationof meat and meat products that havebeen treated with growth hormones
GATT (III or XI)
SPS (2 3 5)
TBT (2)
Agriculture (4)
196 496 Appellate Bodyfound in favourof US (298)
Sanctions inplace
78
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS27Import regimefor bananas
EU regime for the importation sale anddistribution of bananas established byCouncil Reg No 40493 and subsequentlegislation regulations and administrativemeasures including those reflecting theprovisions of the Framework Agreementon Bananas which implementsupplement and amend that regime
GATT (I II III XXI XIII)
Licensing (1 3)
Agriculture
TRIMs (2)
GATS (II XVIXVII)
296 496 Appellate Bodyfound in favourof the US andEcuador (997)
Compliancepanel foundrevised EUregime stillincompatible(499)
US Ecuador andEU negotiatedsettlement(401)
WTDS37Portugal ndashPatent protectionunder theIndustrialProperty Act
The term granted existing patents underthe Portuguese Industrial Property Actappears to be inconsistent with Portugalsobligations under the TRIPS Agreement
(GATS (33 6570)
496 Negotiatedsolution (596)
WTDS62Customsclassification ofsome computerequipment
Reclassification of certain LAN adaptercards automatic data processingmachines and units thereof astelecommunications apparatus raised thetariff applied them
GATT (II) 1196 297 Appellate Bodyoverturned Panelreport favouringUS (698)
79
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS67UK ndash Customsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS68Ireland ndashCustomsclassification ofsome computerequipment
Same as WTDS62 Same asWTDS62
Same asWTDS62
Sameas
WTDS62
Same asWTDS62
WTDS80Belgium ndash-measuresaffectingcommercialtelephonedirectoryservices
Conditions for obtaining a license topublish commercial directories inBelgium
GATS (II VI VIIIXVII)
597 ndash
WTDS82Ireland ndashmeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPS Agreement
TRIPS (9-14 6365)
597 198
80
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS83Denmark ndashmeasuresaffecting theenforcement ofintellectualproperty rights
Denmark does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
597 ndash Negotiatedsolution (301)
WTDS86Sweden ndashMeasuresaffecting theenforcement ofintellectualproperty rights
Sweden does not appear to makeavailable provisional measures in thecontext of civil proceedings involvingintellectual property rights
TRIPS (50 6365)
697 ndash Negotiatedsolution (697)
WTDS104Export subsidiesndash processedcheese
Export subsidies including under aninward processing arrangement in favourof processed cheese distort markets fordairy products and adversely affect USsales of dairy products
Agriculture (8 910 11)
Subsidies (3)
1097 ndash
WTDS115Ireland ndashMeasuresaffecting thegrant ofcopyright andneighboringrights
Ireland appears not to grant copyrightand neighboring rights in accordancewith the TRIPs Agreement
TRIPS (9-14 6365 70)
198 198
81
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS124Enforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
TV stations in Greece regularly broadcastcopyrighted motion pictures and TVprograms without the authorization ofcopyright owners Effective remediesagainst copyright infringement do notappear to be provided or enforced
TRIPS (41 61) 598 ndash Negotiatedsolution (301)
WTDS125Greece ndashEnforcement ofintellectualproperty rightsfor motionpictures andtelevisionprograms
Same as WTDS124 Same asWTDS124
Same asWTDS124
Sameas
WTDS124
Same asWTDS124
WTDS127Belgium ndashCertain incometax measuresconstitutingsubsidies
Belgian corporate taxpayers receive aspecial tax exemption for recruiting adepartmental head for exports
Subsidies (3) 598 ndash
82
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS128Netherlands ndashCertain incometax measuresconstitutingsubsidies
Dutch income tax law permits exportersto establish a special export reserve forincome derived from export sales
Subsidies (3) 598 ndash
WTDS129Greece ndash Certainincome taxmeasuresconstitutingsubsidies
Greek exporters are entitled to a specialannual tax deduction calculated as apercentage of export income
Subsidies (3) 598 ndash
WTDS130Ireland ndashCertain incometax measuresconstitutingsubsidies
Under Irish income tax law specialtrading houses qualify for a special taxrate in respect of trading income from theexport sale of Irish-manufactured goods
Subsidies (3) 598 ndash
WTDS131France ndash Certainincome taxmeasuresconstitutingsubsidies
French companies may deducttemporarily certain start-up expenses ofits foreign operations through a taxdeductible reserve account
Subsidies (3) 598 ndash
83
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS158Import regimefor bananas II
Failure to implement the DisputeSettlement Bodys recommendations andrulings in WTDS27 within a reasonableperiod
199 See WTDS27
WTDS172Measuresrelating to thedevelopment of aflightmanagementsystem
French government has agreed to grantand the Commission has approved aloan on preferential and non-commercialterms to develop a FMS for Airbusaircraft
Subsidies (5 6)
GATT (XXIII1b)
599 ndash
WTDS173France -Measuresrelating to thedevelopment of aflightmanagementsystem
See WTDS172 See WTDS172 SeeWTDS172
SeeWTDS172
See WTDS172
WTDS174Protection oftrademarks andgeographicalindications foragriculturalproducts andfoodstuffs
EU rule does not provide nationaltreatment with respect to geographicalIndications nor sufficient protection topre-existing trademarks that are similaror identical to a geographical indication
TRIPS (3 16 2463 65)
699 ndash
84
(Appendix 3 cont)
Title andreferencenumber
Short description of the measures Relevant WTOprovisions Consultation Panel Status
WTDS210Belgium -Administrationof measuresestablishingcustoms dutiesfor rice
Belgian customs values and duties forrice would lead to a denial of duty rebatesfor US rice and to duties in excess of thebound rate
GATT (I II VIIVIII X XI)
CVA (1)
TBT (2 3 5 67 9)
Agriculture (4)
1000 101 Negotiatedsolution (1101)
WTDS223Tariff-rate quotaon corn glutenfeed from the US
TRQ triggered by DSB ruling against theUS in WTDS166
Safeguards (8182 83)
GATT (I II XIX)
101 ndash
Note Columns Consultation and Panel report the date these were requested
Source Adapted from DG Trade WTO - Dispute Settlement (updated 15102)httpeuropaeuintcommtradepdfcasesxls accessed 15202 and the WTOs dispute database(httpwwwwtoorgenglishtratop_edispu_edispu_status_ehtm) accessed 15202
85
87
References and Recommended Reading
Primary Sources Web sites
European Commission DG TRADE Bilateral Trade Relations USAhttpeuropaeuintcommtradebilateralusausahtm
European Union Europa Web Site httpeuropaeuint
European Union Mission to the United Stateshttpwwweurunionorg
Transatlantic Business Dialogue httpwwwtabdcom
Transatlantic Consumers Dialogue httpwwwtacdorg
Transatlantic Environmental Dialoguehttpwwwtiesweborgtaedindexhtm
Transatlantic Legislators Dialoguehttpwwweuroparleuintintcooptlddefault_enhtm
Transatlantic Information Exchange Service httpwwwtiesweborg
United States Mission to the European Union httpwwwuseube
United States Trade Representative Western EuropeEU pagehttpwwwustrgovregionseu-medwesteurindexshtm
World Trade Organization httpwwwwtoorg
Primary Sources Official Government Documents
CEPAL 2001 Informe de la Inversioacuten Extranjera en Ameacuterica Latina y elCaribe Antildeo 2000 Naciones Unidas Chile
Commission of the European Communities 1998a The NewTransatlantic Marketplace Draft Communication from the Commissionto the Council the European Parliament and the Economic and SocialCommittee available athttpeuropaeuintcommdg01sectionahtm
Commission of the European Communities 1998b Commission staffworking paper concerning the establishment of an inter-regionalassociation between the European Union and Mercosurhttpeuropaeuintcommexternal_relation
88
Commission of the European Communities 2000 The TransatlanticEconomic Partnership Overview and Assessment Coordination DGTRADEE3 October
Commission of the European Communities 2001a Reinforcing theTransatlantic Relationship Focusing on Strategy and Delivering ResultsCOM(2001)154 of 20 March 2001 Available on-line athttpwwweurunionorgpartnerTransatlAgendapdf
Commission of the European Communities 2001b Report on UnitedStates Barriers to Trade and Investment July available on-line athttpeuropaeuintcommtradepdfusrbt2001pdf
Commission of the European Communities 2001c Green Paper on theReview of Council Regulation (EEC) No 406489 COM(2001)7456final of 11122001
UNCTAD 2001 Informe sobre las inversiones en el mundo UnitedNations New York and Geneva
US Department of Agriculture (1998) Agriculture in the WTOSituation and Outlook Series WRS-98-4 Washington EconomicResearch Service
United States Trade Representative 2001 2001 National TradeEstimate Report on Foreign Trade Barriers available on-line athttpwwwustrgovhtml2001_contentshtm
World Trade Organization 2000 Trade Policy Review The EuropeanUnion Report by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
World Trade Organization 2001 Trade Policy Review United StatesReport by the Secretariat available on-line athttpwwwwtoorgenglishtratop_etpr_etp_rep_ehtm
Secondary Sources
Abbott Kenneth W 20001 lsquoDisputes over Technical Barriers toTrade Are the Rules and Procedures Adequatersquo paper prepared forthe Conference on Dispute Prevention and Dispute Settlement in theTransatlantic Partnership European University Institute Fiesole 5-6July
Atlantic Council of the United States 2001 Changing Terms of TradeManaging the New Transatlantic Economy Policy Paper April(Washington DC The Atlantic Council of the United States)
Barfield Claude E 2001 Free Trade Sovereignty Democracy TheFuture of the World Trade Organization (Washington AmericanEnterprise Institute Press)
Bermann George 1996 lsquoRegulatory Cooperation between theEuropean Commission and US Administrative Agenciesrsquo
89
Administrative Law Journal of the American University Vol 9 pp 933-983
Bermann George Matthias Herdegen and Peter Lindstreth eds2001 Transatlantic Regulatory Co-Operation Legal Problems andPolitical Prospects (New York Oxford University Press)
Bignami Francesca and Steve Charnovitz 2001 lsquoTransatlantic CivilSociety Dialoguesrsquo Chapter 10 in Pollack and Shaffer TransatlanticGovernance in the Global Economy
BP Chair in Transatlantic Relations 2001 Resolving and PresentingUS-EU Trade Disputes Six Prize-Winning Essays (Florence EuropeanUniversity Institute Robert Schuman Centre for Advanced Studies 9May 2001)
Busch Marc L and Eric Reinhardt 2001 lsquoTesting International TradeLaw Empirical Studies of GATTWTO Dispute Settlementrsquo in Daniel LM Kennedy and James D Southwick eds The Political Economy ofInternational Trade Law Essays in Honor of Robert E Hudec (NewYork Cambridge University Press)
Camarero M and CR Tamarit 2002 lsquoLa Unioacuten Europea y lasAmeacutericas consecuencias del establecimiento de un acuerdo deasociacioacuten interregional entre la UE y Mercosurrsquo Papeles de EconomiacuteaEspantildeola n 91 (forthcoming)
Charnovitz Steve 2001 lsquoRethinking WTO Trade Sanctionsrsquo AmericanJournal of International Law Vol 95 (October)
Claes Benedicte A 2000 lsquoComment Aircraft Noise Regulation in theEuropean Union The Hushkit Problemrsquo Southern Methodist UniversitySchool of Law Journal of Air Law and Commerce Vol 65 329-382
Cowles Maria Green 2001a lsquoThe New Transatlantic DialogueTransforming the New Transatlantic Dialoguersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 213-233
Cowles Maria Green 2001b lsquoTransatlantic Cooperation and Discordin the New Economy A Case Study of the Global Business Dialogue one-Commercersquo paper delivered at the Biennial Conference of theEuropean Community Studies Association Madison Wisconsin 31May
Damro Chad 2001 lsquoBuilding an International Identity The EU andExtraterritorial Competition Policyrsquo Journal of European Public PolicyVol 8 No 2 (April) 208-226
Devuyst Youri 2001 lsquoTransatlantic Competition Policy Cooperationrsquoin Mark A Pollack and Gregory Shaffer eds Transatlantic Governancein the Global Economy (Lanham MD Rowman amp Littlefield) pp 127-151
Evans David S 2002 lsquoThe New Trustbusters Brussels andWashington Part Waysrsquo Foreign Affairs JanuaryFebruary
90
Evenett Simon J Alexander Lehmann and Benn Steil 2000 AntitrustGoes Global What Future for Transatlantic Cooperation (WashingtonDC Brookings Institution Press)
Falke Andreas 2001 lsquoThe EU-US Conflict over Sanctions PolicyConfronting the Hegemonrsquo European Foreign Affairs Review Vol 5No 2 139-163
Featherstone Kevin and Roy Ginsberg 1996 The United States andthe European Union in the 1990s Partners in Transition (LondonPalgrave)
Flores R 2001 lsquoRegional Economic Integrationrsquo in Investing in LatinAmerican Growth Unlocking Opportunities in Brazil Mexico Argentinaand Chile EAU Australian Department of Foreign Affairs and TradeChap 12 pp 259-282
Frankel JA E Stein and SJ Wei 1998 lsquoContinental Trading BlocsAre they Natural or Supernaturalrsquo in JA Frankel ed TheRegionalization of the World Economy (Chicago The University ofChicago Press)
Frost Ellen 1997 Transatlantic Trade A Strategic Agenda(Washington DC Institute for International Economics)
Gardner Anthony 1997 A New Era in US-EU Relations The ClintonAdministration and the New Transatlantic Agenda (London Avebury)
Giordano P A Valladio and M-F Durand eds 2001 Vers un accordentre lrsquoEurope et le Mercosur (Presses de Science Po Paris)
Helfer Laurence R 2000 lsquoWorld Music on a US Stage ABerneTRIPS and Economic Analysis of the Fairness in MusicLicensing Actrsquo Boston University Law Review Vol 80 93-204
Helweg Jason 2000 lsquoThe Retreat of the State The MassachusettsBurma Law and Local Empowerment in the Context ofGlobalization(s)rsquo Wisconsin International Law Journal Vol 18 477-510
Hindley Michael 1999 lsquoNew Institutions for Transatlantic TradersquoInternational Affairs Vol 75 45-60
Hudec Robert 1998 lsquoThe New WTO Dispute Settlement Procedure AnOverview of the First Three Yearsrsquo Minnesota Journal of Global TradeVol 8 22-24
Kahler Miles 1995 Regional Futures and Transatlantic Relations (NewYork Council on Foreign Relations Press)
Keohane Robert O Andrew Moravcsik and Anne-Marie Slaughter2001 lsquoLegalized Dispute Resolution Interstate and TransnationalrsquoInternational Organization Vol 54 No 4 457-488
Knauss Jody and David Trubek 2001 lsquoThe Transatlantic LaborDialogue Minimal Action in a Weak Structurersquo in Mark A Pollack andGregory Shaffer eds Transatlantic Governance in the Global Economy(Lanham MD Rowman amp Littlefield) pp 235-254
91
Kolasky William J and Leon B Greenfield 2001 lsquoA View to a KillThe Lost GEHoneywell Deal Reveals a Trans-Atlantic Clash ofEssentialsrsquo Legal Times 30 July 2001 p 28
Kuner Christopher 2001 lsquoBeyond Safe Harbour European DataProtection Law and Electronic Commercersquo International Lawyer Vol31
LaFrance Mary 2001 lsquoCongress Trips Over International Law WTOFinds Unfairness in Music Licensing Actrsquo Journal of Art andEntertainment Law Vol 11 397-424
Lorvellec Louis 1997 lsquoBack to the Fields after the Storm Agriculturein the European Union after the Uruguay Round Agreementsrsquo DrakeJournal of Agricultural Law Vol 2 (Winter) p 411
Mazumdar Anandashankar 2002 lsquoEuropean Commission Gives FinalApproval to Model Clauses to Protect Personal Datarsquo InternationalTrade Reporter Vol 19 187 (31 January)
Mehta K 2002 lsquoInternational Competition Policy Cooperationrsquorevised version of a paper presented at the BP Chair Conference onDispute Prevention and Dispute Settlement in the TransatlanticPartnership European University Institute Florence July 2001
Messerlin Patrick A 2001a Measuring the Cost of Protection in Europe(Washington DC Institute for International Economics)
Messerlin Patrick A 2001b lsquoNiveau et coucircts du protectionnismeeuropeacuteenrsquo in Giordano P A Valladao y M-F Durand (eds) Vers unaccord entre lrsquoEurope et le Mercosur Presses de Science Po Paris
Mishkin FS and MA Savastano 2001 lsquoMonetary Policy Strategiesfor Latin Americarsquo Journal of Development Economics 66 415-444
Nagarajan N 1998 lsquoMercosur and Trade Diversion What Do theImport Figures Tell Usrsquo Economic Papers No 129 EuropeanCommission
Petersmann Ernst-Ulrich ed 1997 The GATTWTO DisputeSettlement System International Law International Organizations andDispute Settlement (Kluwer Law International)
Peterson John 1996 Europe and America Prospects for Partnership(New York St Martinrsquos Press 1996)
Peterson John 2001 lsquoGet Away from Me Closer Yoursquore Near Me TooFar Europe and America after the Uruguay Roundrsquo in Mark A Pollackand Gregory Shaffer eds Transatlantic Governance in the GlobalEconomy (Lanham MD Rowman amp Littlefield) pp 45-72
Peterson John and Maria Green Cowles 1998 lsquoUS EconomicDiplomacy What Makes the EU Differentrsquo Governance Vol 11 No 3pp 251-71
Philippart Eric and Pascaline Winand 2001 lsquoDeeds Not WordsEvaluating and Explaining the US-EU Policy Outputrsquo in Philippart and
92
Winand eds Ever Closer Partnership Policymaking in US-EU Relations(Brussels Peter Lang) pp 431-463
Pollack Mark A ed 2001 The New Transatlantic Agenda at Five ACritical Assessment (San Domenico di Fiesole BP Chair inTransatlantic Relations Robert Schuman Centre for AdvancedStudies European University Institute)
Pollack Mark A and Gregory C Shaffer 2001a lsquoTransatlanticGovernance in Historical and Theoretical Perspectiversquo in Mark APollack and Gregory Shaffer eds Transatlantic Governance in theGlobal Economy (Lanham MD Rowman amp Littlefield) pp 3-42
Pollack Mark A and Gregory C Shaffer 2001b lsquoThe Challenge ofReconciling Regulatory Differences Food Safety and GMOs in theTransatlantic Relationshiprsquo in Mark A Pollack and Gregory Shaffereds Transatlantic Governance in the Global Economy (Lanham MDRowman amp Littlefield) pp 153-178
Pollack Mark A and Gregory C Shaffer 2001c lsquoWho Governsrsquo inMark A Pollack and Gregory Shaffer eds Transatlantic Governance inthe Global Economy (Lanham MD Rowman amp Littlefield) pp 287-305
Reidenberg Joel 2001 lsquoE-Commerce and Trans-Atlantic PrivacyrsquoHouston Law Review Vol 8 717-49
Schaefer Matthew 2002 lsquoGovernment Procurement DisputesLessons from the Dispute over the Massachusetts 1996 Act RegulatingState Contracts with Companies Doing Business with Burma(Myanmar)rsquo paper presented at the Conference on Dispute Preventionand Dispute Settlement in the Transatlantic Partnership EuropeanUniversity Institute Florence 5-6 July 2001 final version submitted26 January 2002
Shaffer Gregory 1999 lsquoThe Power of EU Collective Action The Impactof EU Data Privacy Regulation on US Business Practicersquo EuropeanLaw Journal Vol 5
Shaffer Gregory 2000 lsquoGlobalization and Social Protection TheImpact of EU and International Rules in Ratcheting Up of US PrivacyStandardsrsquo Yale Journal of International Law Vol 25 pp 1-88
Shaffer Gregory C 2002 lsquoManaging US-EU Trade Relations throughMutual Recognition and Safe Harbour Agreements lsquoNewrsquo and lsquoGlobalrsquoApproaches to Transatlantic Economic Governancersquo in Ernst-UlrichPetersmann ed Dispute Avoidance and Dispute Settlement in theTransatlantic Partnership (unpublished manuscript) (working paper onfile with the author)
Sindelar Leslie 2001 lsquoNot So Fair After AllmdashInternational Aspects ofthe Fairness in Music Licensing Actrsquo The Transnational Lawyer Vol14 435-71
Steffenson Becky J 2001 The Institutionalization of EU-US RelationsDecision Making Institution Building and the New Transatlantic
93
Agenda unpublished PhD dissertation University of GlasgowDepartment of Politics
Tansini R and T Vera 2001 lsquoLos procesos de integracioacuten enAmeacuterica Latina El caso de Mercosurrsquo Informacioacuten Comercial EspantildeolaFebrero-Marzo nuacutem 790 107-117
Vogel David 1997 Barriers or Benefits Regulation in TransatlanticTrade (Washington DC Brookings Institution)
Vogel David 2001 Ships Passing in the Night The Changing Politics ofRisk Regulation in the United States and the European Union RSCASWorking Paper No 200116
Woolcock Stephen 2000 lsquoEuropean Trade Policy Global Pressuresand Domestic Constraintsrsquo in Helen Wallace and William Wallaceeds Policy-Making in the European Union (New York Oxford UniversityPress) pp 373-99
Yerkey Gary G 2000a lsquoEU Accuses US of Failing to ImplementMRAs on Electrical Safety Pharmaceuticalsrsquo International TradeReporter Vol 17 1662 (2 November)
Yerkey Gary G 2000b lsquoUS European CEOs Call on Governments toResolve Dispute Over MRA by Dec 18rsquo International Trade ReporterVol 17 1662 (30 November)
Young Alasdair 2001 Trading Up or Trading Blows US Politics andTransatlantic Trade in Genetically Modified Food RSCAS WorkingPaper No 200130
Young Alasdair R 2002 lsquoRisk Positive Integration and SystemFriction The Single European Market and World Tradersquo paperpresented at the Council of European Studies Conference 14-16March 2002
94
Notes
1 The EU and the 50 US States website of the European Union Mission tothe United Stateshttpwwweurunionorgpartnerusstatesusstateshtm
2 Ibid
3 As Miles Kahler wrote in 1995 lsquoIncreasingly the points of conflict amongthe industrialized countries are not the familiar ones of barriers toexchange at the border but an entire array of ldquodomesticrdquo policies thatproduce conflict by appearing to restrict market access or alter theterms of competition The agenda of behind-the-border issues that hasbecome more prominent in the 1990s will only grow as economicintegration continues and groups mobilize to seek new benchmarks foran international ldquolevel playing fieldrdquo rsquo (Kahler 1995 5) For gooddiscussions of regulatory barriers in USEU trade relations see alsoVogel 1997 Young 2002
4 This section draws on the analysis presented in Pollack and Shaffer2001a
5 For good discussions see Gardner 1997 Peterson and Cowles 1998
6 Pollack and Shaffer 2001c 291
7 lsquoTransatlantic Declarationrsquo text available on-line athttpwwweurunionorgpartnertransatldechtm
8 See eg Featherstone and Ginsburg 1996 Peterson 1996
9 lsquoThe New Transatlantic Agendarsquo text available on-line athttpwwweurunionorgpartneragendahtm
1 0 lsquoJoint US-EU Action Planrsquo text available on-line athttpwwweurunionorgpartneractplanhtm
1 1 Gardner 1997
1 2 Commission of the European Communities 1998a
1 3 lsquoTransatlantic Economic Partnership Action Planrsquo text available on-lineat httpeuropaeuintcommtradebilateralusa1109tephtm For auseful review of the TEP see Commission of the EuropeanCommunities 2000
95
1 5 For good discussions of the TABD see Cowles 2001a 2001b and thewebsite of the TABD at httpwwwtabdorg
1 6 lsquoCincinnati Recommendations Transatlantic Business DialoguersquoNovember 16-18 2000 p 4 Available on-line athttpwwwtabdorgrecommendationsCincinnati00pdf
1 7 Ibid page 5
1 8 Cowles 2001b
1 9 Steffenson 2001
2 0 Pollack ed 2001 12
2 1 For an excellent discussion of the TACD and its activities see Bignamiand Charnovitz 2001 and the TACD website at httpwwwtacdorg
2 2 For example sixty-five consumer groups issued a statement in 2000stating that the EU and the US had largely ignored consumer tradepolicy recommendations TACD press release lsquoUS amp EU ConsumerGroups Call for Swift Action to Balance Trade Dialoguersquo 30 March 2000
2 3 The USIA funding for the TAED ($100000) was subject to approval fromthe Senate Finance Committee In January 2000 the objection of SenatorJesse Helms to TAED funding blocked the approval of funds andstopped the State Department from issuing the grant The TAED arguedthat this demonstrated the US governmentrsquos lack of dedication to theproject See lsquoTransatlantic Environment Dialogue suspends its activitiesdue to the failure of US government to stick to its commitmentsrsquoaccessed on 12 March 2002 on the TAED websitehttpwwwtiesweborgtaedindexhtml For a good general discussionof the TAED see Bignami and Charnovitz 2001
2 4 To summarise the TAED recommended the removal of subsidies forenvironmentally unfriendly energy sources (such as coal) demanded thatsustainability assessments be applied to a number of WTO agreementsand expressed it opposition to the multilateral TRIPs Technical Barriersto Trade and SPS Agreements It aired concerns about biotechnologyeco-labelling and the Precautionary Principle the MRAs and Chemicaland Electrical Waste Management (WEEEs) It stressed transparency intransatlantic and multilateral decision making urged both governmentsto support the Kyoto Treaty and to stop challenging environmentallegislation at the WTO The message to the EUUS Summit Lisbon May31 2000 was that lsquoUntil such time as parity exists betweenenvironmental governance and multilateral trade rules we demand thatboth the United States and the European Union immediately agree tomutual moratorium on WTO challenges and threatened challengesrsquo Fora good discussion of the TAED and its activities see Bignami andCharnovitz 2001
2 5 For an excellent discussion of the TALD see Knauss and Trubek 2001
96
2 6 Commission of the European Communities 2001a
2 7 Philippart and Winand 2001
2 8 Kahler 1995 See also Vogel 1997 Young 2002
2 9 For excellent overviews of the WTO dispute resolution procedure and itspredecessor within the GATT see Petersmann 1997 Hudec 1998 Buschand Reinhardt 2001 and BP Chair in Transatlantic Relations 2001 Fora provocative challenge to the DSU see Barfield 2001
3 0 This section draws largely on Abbottrsquos (2001) account of transatlanticdisputes over TBTs in general and the hushkits case in particular Forother accounts of the hushkits dispute see also Claes 2000 andPeterson 2001 58-59
3 1 Commission of the European Communities lsquoCommission Proposes NewLegislation to Fight Aircraft Noisersquo Press Release IP 011683
3 2 For a detailed analyses of transatlantic disputes over food safety andgenetically modified organisms see Pollack and Shaffer 2001b Vogel2001 and Young 2001
3 3 The text of the report can be found athttpeuropaeuintcommexternal_relationsusbiotechbiotechhtm
3 4 Schaefer 2002 1-2 See also Hellweg 2000
3 5 For useful background on the case filed before the WTO as DS160 seeHelfer 2000 LaFrance 2001 and Sindelar 2001
3 6 Commission of the European Communities lsquoEU and US Agree onTemporary Compensation in Copyright Disputersquo Press Release IP011860
3 7 For good discussions of potential reforms of the bilateral relationship aswell as WTO dispute settlement including a wide range of proposals seeeg BP Chair in Transatlantic Relations 2001 Charnovitz 2001 Barfield2001 and Petersmann 2001
3 8 Some countries such as the United Kingdom have establishedguidelines for policymakers to take trade implications of proposedregulations into account but neither the US nor the EU currentlyemploys any statutory requirement to undertake such an impactassessment
3 9 Bermann 1996 961 For an excellent set of essays on various aspects oftransatlantic regulatory cooperation see also Bermann Herdegen andLindstreth (eds) 2001
4 0 Ibid p 966
97
4 1 For excellent analyses of USEU competition-policy cooperation fromwhich this analysis is largely drawn see eg Evenett Lehmann and Steil2000 Devuyst 2001 Damro 2001 and Mehta 2002
4 2 Devuyst 2001 142-145
4 3 See eg Kolasky and Greenfield 2001 Evans 2002
4 4 Commission 2001c 38-40
4 5 This section draws extensively from research reported in Shaffer 2002
4 6 Subsidiaries of US firms in the EC account for about one-third of ECimports from the United States while subsidiaries of EC firms in theUnited States account for about 38 of US imports from the EC SeePollack and Shaffer 2001a 14
4 7 Agreement on Mutual Recognition Between the European Communityand the United States of America Available on-line athttpeuropaeuintcommtradepdf0713mra-usenpdf
4 8 The five excluded sectors were information technology pressureequipment road safety equipment lawn mowers and personal protectiveequipment such as helmets
4 9 However as an exception tests of pharmaceutical good manufacturingpractices are to be performed by regulatory bodies and not privatelaboratories in accordance with that annex
5 0 Yerkey 2000a 2000b
5 1 Quoted in Shaffer 2002 23
5 2 Agreement Between the European Community and the United States ofAmerica on Mutual Recognition of Certificates of Conformity for MarineEquipment Available on-line athttpeuropaeuintcommtradepdfmareqpdf
5 3 See Shaffer 2002
5 4 See Shaffer 2002
5 5 This section draws extensively from research reported in Shaffer 2002
5 6 The above figures are from the prepared testimony of Assistant Secretaryof Commerce Franklin Vargo before the House Committee onInternational Relations See lsquoIssues in US-European Union TradeEuropean Privacy Legislation and BiotechnologyFood Safety PolicyrsquoFederal News Service (May 7 1998)
5 7 Mazumdar 2002 See also Shaffer 2000 Reidenberg 2001
5 8 Commission Decision of 26 July 2000 pursuant to Directive 9546ECof the European Parliament and of the Council on the adequacy of the
98
protection provided by the safe harbour privacy principals and relatedfrequently asked questions issued by the US Department of CommerceAvailable on-line athttpeuropaeuintcommtradepdfsafeharbourpdf For generalinformation on safe harbour documents see Safe Harbor Documentshttpwwwexportsgovsafeharborsh_documentshtm
5 9 Guide to the Implementation of Directives Based on the New Approachand the Global Approach Available on-line athttpeuropaeuintcommenterprisenewapproachlegislationguidedocument1999_1282_enpdf
6 0 See Shaffer 2002
6 1 For a good discussion of the obstacles posed by US federalism inregulatory cooperation see Commission of the European Communities2000
6 2 lsquoEU-US Guidelines on Regulatory Cooperation and Transparencyrsquoavailable on-line athttpeuropaeuintcommenterpriseenterprise_policygov_relationsregulcooptransathtm See also lsquoTransatlantic Bid to Cut Red TapersquoEuropean Report 10 April 2002 and Micheal Mann lsquoDrive to Head OffTrade Riftsrsquo Financial Times 13 April 2002
6 3 See the DG Trade website lsquoBilateral Trade Relations Canadarsquo accessedat httpeuropaeuintcommtradebilateralcanadacanadahtml
6 4 For useful and up-to-date reviews of the EUCanada relationship see inaddition to the DG Trade web page cited above the websites of theEuropean Union Delegation to Canadahttpwwweudelcanorgenglishindexcfm and the Canadian Missionto the European Union httpwwwdfait-maecigccaeu-missionconten_ehtml
6 5 For more information about Mercosur visit the following internetaddress httpwwwmercosurorg
6 6 Tansini and Vera 2001
6 7 lsquoEUChile Deal Reached on Free Trade Agreementrsquo European Report 27April 2002
6 8 Ibid
6 9 Camarero and Tamarit (2002) Source OECD International SectoralDatabase
7 0 For more information about the EU and Latin America visit the followinginternet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 1 The Lomeacute Convention replaced the Yaounde Convention of 1963 afterthe accession of the UK to the Community It was renewed in 1979
99
(Lomeacute II) 1985 (Lomeacute III) 1989 (Lomeacute IV) and 1995 (Lomeacute IV) andconsists of a system of preferences for imports in which industrial goodsalmost free of tariffs and agricultural receive different treatments InJune 2000 the Lomeacute Convention was replaced by the CotonouAgreement which stabilized what can be seen as a transitory regimeaiming to incorporate the ACP countries in the WTO general rules
7 2 What characterizes first-generation agreements is their conventionalbilateral and technical structure and their reference to possiblereciprocal cooperation In practical terms however these treaties onlyextended the Most Favoured Nation (MFN) status to its signatories
7 3 The second-generation agreements referred mainly to specificcommercial and cooperation questions
7 4 For the conclusions of the Madrid summit see the Latin America webpage of the Commissionrsquos Directorate-General for Tradehttpeuropaeuintcommtradebilaterallaclachtm
7 5 In October 1998 hurricane Mitch one of the worst natural disastersever to have hit the region caused a material damage equivalent to 10of the regionrsquos GDP The EU not only played a significant role in theinternational communityrsquos emergency aid but also launched in 1998a medium-term rehabilitation plan called the Regional Programme forthe Reconstruction of Central America (PRRAC) Funding was set ateuro 250 million committed for the 1999-2002 period but to beimplemented within six years The target countries were HondurasNicaragua El Salvador and Guatemala
7 6 For details on the provisions of the EU-Chile Association Agreement andthe status of the ratification procedure seehttpeuropaeuintcommexternal_relationschileintroindexhtm
7 7 The information about the results of the different negotiation rounds canbe updated at the following internet address httpeuropaeuintcommexternal_relationsmercosurintroindexhtm
7 8 For an assessment of the trade-diverting effects of Mercosur seeNagarajan (1998)
7 9 Commission of the European Communities 1998b
8 0 Messerlin 2001b
8 1 Pascal Lamy lsquoFacing the Challenge of Globalization Regional Integrationor Multilateral Rulesrsquo Buenos Aires 1 March 2002 Reproduced on theDG Trade website athttpeuropaeuintcommtradespeeches_articlesspla99_enhtml
Lead Author
Mark A Pollack
The Political Economy ofthe Transatlantic Partnership
Robert Schuman Centrefor Advanced Studies
EUROPEAN UNIVERSITY INSTITUTE
Report prepared by theTransatlantic Programme
for and with the contribution of
Her Majestyrsquos TreasuryUnited Kingdom
Ministry of FinanceThe Netherlands
