The article looks at one of the most important and controversial issues in the context of the TTIP – the reduction of no-tariff barriers (NTBs) to trade between the European Union (EU) and the United States (US) – by focusing on the most widely spread and serious NTBs: the technical barriers to trade (TBT) and the sanitary and phytosanitary (SPS) measures. After a short introduction into the structure of the TTIP (part 2), the paper sets out the notions of TBT and SPS measures and their international legal framework within the World Trade Organization (WTO) (part 3), as well as the problem of regulatory barriers to trade in the context of globalization and regional trade agreements (part 4). Part 5 outlines the position of the European Commission (EC) on the methods for improving regulatory cooperation in the TTIP, and part 6 elaborates on the practical implementation of those methods in a horizontal manner and in specific sectors, as well as on the significance of this cooperation for arriving at better regulatory convergence between the EU and the US. Part 7 includes concluding remarks.
The importance NTBs in the last decades has increased immensely. The term comprises a large category of barriers to trade, the most widely spread of which are the TBT and SPS measures. TBT are technical requirements concerning intrinsic and extrinsic characteristics of products and means for production. Their purposeis protection of life, health, or the environment, consumer protection, prevention of deceptive practices, or protection or support of other legitimate values. SPS measures are legal or administrative rules for the protection of people and animals from risks related to food safety or of people, animals and plants from risks related to pests and diseases. Dedicated agreements within the framework of the WTO address these specific barriers and require application of such measures without discrimination and without creating unnecessary obstacles to trade. These agreements do not however oblige WTO Members to harmonize national regulations around international standards.
National governments have been engaged in different forms of regulatory cooperation from non-formal memoranda to binding international treaties. Given the stalled negotiations in the WTO, deep-integration regional trade agreements have taken over the agenda and aim at achieving improved regulatory compatibility between their parties. The TTIP is expected to include particularly far-reaching and innovative strategies in this respect. Negotiations on it started in 2013 and were planned to finish by 2016. However, the EC recently declared this deadline unrealistic, given the difficulties for the parties to reach a consensus on a number of sensitive issues. In the interest of transparency, the EC has published position papers and textual proposals on the most important subjects to be included in the TTIP.
The EC proposals on regulatory cooperation can be divided in two main groups. The “horizontal” chapters include guidelines for realizing regulatory action, outline the general principles and best practices, and define methods for cooperation between regulators. The sector-specific annexes then set out rules in specific economic sectors with the purpose to diminish unnecessary and duplicative regulatory requirements. In particular, a Regulatory Cooperation chapter contains the main principles and procedures for conducting consultations, transparency, impact assessment and a framework for future cooperation between regulators of both parties. A general commitment to pursue regulatory cooperation is introduced. Complementary to it is a chapter on Good Regulatory Practices: principles designed to encourage good governance in the regulatory process and more specifically transparency, predictability and accountability, such as public description of the processes and mechanisms for developing and reviewing regulatory acts, providing early information and stakeholder consultations in the process of preparation of regulatory acts, as well as opportunities for them to provide feedback on the existing framework. Separate chapters on TBT and SPS measures lay down some more specific provisions, such as mutual recognition of regulators’ competence to guarantee that firms, equipment and products for export meet the SPS requirements of the importing country. Finally, seven sectors are outlined in which the TTIP can lead to concrete regulatory improvements: chemicals, cosmetics, engineering, medical devices, motor vehicles, pharmaceuticals and textiles.
The horizontal chapters, including the one on good regulatory practices, are a reflection of a growing understanding that regulatory cooperation needs to encompass all phases of the policy cycle, anticipate novel issues and tackle challenges in implementation. These are a variety of soft-law techniques encouraging exchange of information and continuous dialogue between regulators, principles and practices in domestic legislation that are crucial for building trust between regulators, as well as institutional provisions ensuring the creation of a permanent forum which would facilitate future cooperation and maintain the idea of the TTIP as a “living agreement”. Thus, even if parties do not agree on harmonized rules or mutual recognition of each other’s standards, regulatory cooperation can lead in the future to an improved decision-making process by regulators and to saving of resources through coordination of the process prior to adopting rules, such as information exchange on testing, inspections or clinical trials. In this way the parties would not only base their regulations on richer and more up-to-date data but would also avoid duplication of efforts, tests and checks.
A good example of regulatory convergence in the making is the motor vehicles sector where the EU and US regulations differ profoundly (the EU system is based on prior type-approval in compliance with international standards and the US one – on self-certification built upon domestic ones). However, it is widely accepted that both systems ensure high level of consumer safety and protection of the environment. Thus, it is envisaged that in the TTIP the parties will create a list of regulationsfor which equivalence can be recognized, so that compliance with the regulations of one partner can be considered as compliance with the corresponding domestic ones. For other sectors, however, such as chemicals or cosmetics, the divergence between the regulatory systems of the EU and the US is more profound and related to political choices and consumer preferences, such as the use of the precautionary principle as part of the EU legislative acts. In these areas neither harmonization, nor mutual recognition would be possible. Still, a variety of soft-law approaches to cooperation can be considered, such as cooperation on novel and emerging issues (e.g. nanomaterials and endocrine disruptors), rapprochement in the classification and labelling of chemicals, or convergence of data requirements and scientific safety assessment methods for cosmetics.
Overall, there are rising concerns that the regulatory cooperation in the TTIP can be used as a vehicle for race to the bottom (thereby lowering the EU standards), and will slow down regulatory action, weaken the possibility of national parliaments to influence the decision-making process and tip the balance of interests towards trade and investment and away from consumer and environmental protection. Thus, it is of utmost importance for the negotiators to guarantee that the process of future cooperation between the EU and the US regulators in the context of the TTIP takes into account the sovereign right of each of the parties to enact legislation required reflecting its own chosen level of protection, including the desired level of precaution in the face of scientific uncertainly. The mechanism for cooperation should also include a broad consultative process with all interested parties, both as concerns the horizontal aspects of cooperation and the regulatory cooperation initiatives in the sectoral annexes.
Link to the article in Bulgarian language: НОВО ПОКОЛЕНИЕ СВОБОДНА ТЪРГОВИЯ МЕЖДУ ЕС И САЩ– ТРАНСАТЛАНТИЧЕСКОТО ПАРТНЬОРСТВО ЗА ТЪРГОВИЯ И ИНВЕСТИЦИИ (ТПТИ) И РЕГУЛАТОРНИТЕ БАРИЕРИ ПРЕД ТЪРГОВИЯТА
Dispute Settlement Lawyer, WTO Appellate Body Secretariat. The views and opinions expressed in this article are those of the author and do not reflect the official policy or position of its institution.