Transatlantic Regulatory Cooperation:
Background and Analysis
Raymond J. Ahearn
Specialist in International Trade and Finance
January 21, 2010
Congressional Research Service
7-5700
www.crs.gov
RL34717
CRS Report for Congress
P
repared for Members and Committees of Congress
Transatlantic Regulatory Cooperation: Background and Analysis
Summary
Commercial ties between the United States and the 27-member European Union are substantial,
growing, and mutually beneficial. However, differences in regulatory approaches limit an even
more integrated marketplace from developing. To deal with this situation, a variety of
government-to-government efforts have been created to dismantle existing regulatory barriers and
to prevent new ones from emerging. These efforts fall under the rubric of transatlantic regulatory
cooperation (TRC) and are at the heart of today’s U.S.-EU economic relationship.
This report is intended to serve as an introduction and primer on a complicated, broad, and often
highly technical set of issues. Since the mid-1990s, both U.S. and European multinational
companies have viewed divergent ways of regulating markets for both goods and services as the
most serious barriers to transatlantic commerce. The primary reason why these companies seek to
achieve greater harmonization in standards and regulatory procedures is to reduce costs imposed
by having to comply with two different sets of regulations and standards.
TRC must deal with a number of key differences between the United States and EU concerning
approaches to regulation. These differences involve political support for regulation and public
attitudes towards risk and transparency. Until they converge or are re-aligned, a transatlantic gap
in regulatory policies is likely to persist.
Regulatory cooperation is an umbrella concept that incorporates a broad range of activities. At
one end of the spectrum are information exchanges and dialogues among regulators that are
designed to build trust and confidence. At the other end of the spectrum are activities designed to
harmonize regulatory approaches through acceptance of common principles and standards. In
between are activities that involve varying degrees of intrusion into the autonomy of regulators.
TRC initiatives have made progress in reducing costs to businesses and consumers in some
sectors, but not in others. One of the key obstacles to more extensive cooperation frequently cited
is the domestic orientation of regulatory agencies involved in the process. To promote more
effective TRC, two policy options are commonly advanced: (1) attracting high-level political
support and (2) increasing dramatically the involvement of legislators (Congress and the
European Parliament). The Transatlantic Economic Council (TEC), which was created in April
2007, was designed, in part, to generate the kind of high-level political support that previous
initiatives may have lacked.
TRC has been mostly an executive branch driven process. Yet, through authorization and
appropriations of the many different regulatory agencies involved in TRC, Congress could play a
more central role if it decided to move in this direction. As domestic regulation takes place in an
increasingly integrated transatlantic marketplace, Congress will be called upon to balance the
often competing demands of trade expansion and barrier reduction against domestic health and
safety concerns.
For additional information, see CRS Report RL34735, Transatlantic Regulatory Cooperation: A
Possible Role for Congress, by Raymond J. Ahearn and Vincent Morelli.
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Transatlantic Regulatory Cooperation: Background and Analysis
Contents
Introduction ................................................................................................................................ 1
U.S.-EU Regulatory Barriers....................................................................................................... 2
Rationale for Transatlantic Regulatory Cooperation..................................................................... 4
Economic Rationale .............................................................................................................. 4
Political Rationale................................................................................................................. 5
Counter-Arguments............................................................................................................... 6
U.S.-EU Differences in Regulatory Approaches .......................................................................... 7
Political Cycles ..................................................................................................................... 7
Values and Public Preferences ............................................................................................... 8
Transparency and Rule-Making............................................................................................. 8
Institutional Capacity to Undertake Reforms ......................................................................... 9
Forms of Transatlantic Regulatory Cooperation......................................................................... 10
Information Exchanges and Dialogues ................................................................................ 10
Mutual Recognition Agreements ......................................................................................... 11
Harmonization/Agreement on Regulatory Standards............................................................ 12
Results of Past Initiatives at Regulatory Cooperation................................................................. 13
Highlights of Past Initiatives ............................................................................................... 13
Accomplishments................................................................................................................ 14
Disappointments ................................................................................................................. 16
Obstacles and Options for More Extensive Cooperation ...................................................... 17
The Transatlantic Economic Council ......................................................................................... 18
Role of Congress....................................................................................................................... 20
Appendixes
Appendix A. Congressional Hearings on Transatlantic Regulatory Cooperation......................... 22
Appendix B. U.S.-EU Regulatory Cooperation by Sector, U.S. Regulatory Agency, and
Committee Oversight ............................................................................................................. 23
Contacts
Author Contact Information ...................................................................................................... 24
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Transatlantic Regulatory Cooperation: Background and Analysis
Introduction
The United States and the 27-Member European Union (EU) share a huge, dynamic and mutually
beneficial economic partnership.1 Not only is the U.S.-EU commercial relationship, what many
call the transatlantic economy, the largest in the world, it is also arguably the most important.2
While the transatlantic market is today highly integrated due in large part to a massive amount of
foreign direct investment by both U.S. and European companies in each other’s markets,
differences in regulatory approaches, standards, and philosophies militate against the
development of an even tighter and more integrated marketplace. Regulatory differences are also
behind some of the most politically sensitive bilateral trade disputes.
To deal with this situation, a variety of government-to-government efforts and transatlantic
dialogues have been created to increase understanding between policymakers and regulators on
both sides of the Atlantic, to minimize existing regulatory barriers, and to prevent the emergence
of new regulatory barriers. These efforts, falling under the rubric of transatlantic regulatory
cooperation (TRC), are seen as being important to today’s U.S.-EU economic relationship.
Proponents maintain that TRC undertakings can not only prevent disruptive and costly trade
disputes from occurring, but also spur trade and investment flows by reducing costs for producers
and consumers on both sides of the Atlantic.
Since the establishment of the New Transatlantic Agenda (NTA) in 1995, there have been a
number of new TRC initiatives, all aimed at removing or reducing regulatory barriers to trade.3
While each of these initiatives has made some progress towards reducing regulatory burdens,
many U.S. and European companies heavily engaged in the transatlantic marketplace maintain
that the results have not been materially significant.
At the 2007 U.S.-EU Summit, leaders of the EU and U.S. committed their governments to
increasing the efficiency and transparency of transatlantic economic cooperation and to
accelerating the reduction and elimination of barriers to international trade and investment with
the ultimate objective of achieving a barrier free transatlantic market. They also agreed on a
Framework for Advancing Transatlantic Economic Integration (the Framework) and created a
new institutional structure, the Transatlantic Economic Council (TEC), to advance the process of
regulatory cooperation and barrier reduction. Headed on both sides by ministerial-level
appointees, the TEC is designed to oversee the efforts outlined in the Framework, with the goal of
accelerating progress and guiding work between the Summits.4
Whether the TEC will herald a new era of more effective cooperation remains to be seen. Much
could depend upon whether the TEC can exert enough political leverage to convince regulators to
make reforms that will result in reduction of regulatory barriers between the EU and the United
1 For background on the European Union, see CRS Report RS21372, The European Union: Questions and Answers, by
Kristin Archick and Derek E. Mix.
2 For background on EU-U.S. commercial ties, see CRS Report RL30608, EU-U.S. Economic Ties: Framework, Scope,
and Magnitude, by William H. Cooper; and CRS Report RL34381, European Union-U.S. Trade and Investment
Relations: Key Issues, coordinated by Raymond J. Ahearn.
3 The NTA committed the United States and EU to work together to achieve four major goals, including the expansion
of world trade and closer economic relations. Implementation of the agenda is guided by a joint EU-U.S. Action Plan
which is coordinated by a group of senior level officials.
4For background on the 2007 U.S.-EU Summit and the TEC, see http://www.whitehouse.gov/infocus/eusummit/2007/.
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States, as well as increase the role that legislators on both sides of the Atlantic play in the process.
Four TEC meetings have been held since it was established in 2007, the most recent on October
27, 2009, in Washington, D.C.
In this context, Congress might play an important and pivotal role in transatlantic regulatory
cooperation. Through authorization and appropriations of many different independent regulatory
agencies, Congress is in a position to facilitate or impede progress in this undertaking. As
domestic regulation takes place in an increasingly integrated transatlantic marketplace, Congress
must try to balance the often competing demands of trade expansion and barrier reduction against
domestic health and safety concerns.
This report is intended to serve as an introduction and primer on a complicated, broad, and often
highly technical set of issues. It is presented in seven parts: the first section describes the nature
and scope of U.S.-EU regulatory barriers; the second section explains the rationale for regulatory
cooperation; the third section highlights the differences in U.S.-EU regulatory approaches; the
fourth section examines the various forms of regulatory cooperation; the fifth section evaluates
the results of past initiatives at regulatory cooperation; the sixth section analyzes the creation and
operation of the Transatlantic Economic Council; and the last section highlights the role of
Congress in transatlantic regulatory cooperation. This report will be updated as events warrant.
U.S.-EU Regulatory Barriers
Since the mid-1990s, both U.S. and European multinational companies (MNCs) have viewed
divergent ways of regulating markets for both goods and services as the most serious barriers to
transatlantic commerce. Redundant standards, testing, and certification procedures are seen by
these companies as far more costly and harmful than any trade barriers imposed at the border,
such as tariffs or quotas. While the purpose of many regulations is to protect consumers and the
environment, divergent domestic regulations and standards can affect the competitive position of
firms, helping some and disadvantaging others by affecting the importation of products not
produced or grown according to those requirements.5
To the extent that product standards differ, exporters may find their goods prohibited from certain
markets or subject to expensive re-labeling, re-packaging, or re-testing. For example, European
winemakers intending to sell in the U.S. market must label their bottles according to U.S.
requirements, which are different than EU requirements. Similarly, U.S. exports to the EU of
poultry washed with anti-microbial treatments have been blocked for years by different health
and safety standards.
Different regulations add to the cost of doing business on both sides of the Atlantic and serve as
non-tariff barriers to trade in many different economic activities and sectors. These include but
certainly are not limited to differences in accounting and financial reporting requirements,
antitrust or competition procedures, consumer protection (safety and health) standards,
environmental regulations, and personal data transmission. Each of these divergences can
materialize into politically charged disputes and threaten the functioning of the transatlantic
market.
5 Daniel C. Esty, “Regulatory Competition in Focus,” Journal of International Economic Law (2000), pp. 215-217.
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In no area has this been a greater problem than in chemicals. In this sector, the U.S. and EU have
fundamentally different regulations on issues such as genetically modified organisms (GMOs),
hormones, and the registration and restriction of chemical substances. In the case of GMOs, these
differences have translated into longer authorization times and stricter standards for approval,
release, and marketing of GMOs in the EU than in the U.S. Moreover, GMOs have been the
subject of a long and bitter trade dispute brought before the World Trade Organization.6
Pharmaceuticals is another sector where regulatory differences have been described as not only
significant, but also bewildering. Just in the area of drug approvals, primary regulatory elements
governing testing protocols, submission of clinical data, and certification of good manufacturing
practices vary considerably between the U.S. and EU. Moreover, within the EU, where public
health policy is still a national prerogative, rules and protocols can vary greatly from member
state to member state. Because each member state has its own rules and protocols, it can be quite
expensive for pharmaceutical companies to achieve marketing authorization throughout the EU or
even a subset of countries.7
Another example comes from the automotive sector, where American and European car makers
sell similar products in the United States and Europe. But there are different standards and testing
requirements for all kinds of parts, ranging from headlights, wiper blades, light beams, and seat
belts to crash standards—which critics maintain are without measurable differences in safety
benefits. There are even multiple crash test dummies of the same or similar size and purpose—a
clear example of where regulatory requirements diverge.8
Despite the salience of regulatory barriers in transatlantic commerce, a comprehensive, sector-by-
sector study or inventory of regulatory barriers has not been undertaken. Proponents argue that
such a report could identify regulatory differences that impose substantial burdens on transatlantic
commerce and possibilities for their reduction or convergence without compromising either U.S.
or EU health and safety priorities. In 2003, the European Commission (EC) proposed that such a
study be undertaken and jointly funded, but the U.S. government did not back the initiative. Both
sides, however, note the major regulatory divergences that are considered trade barriers in their
respective annual trade barrier reports. In the 2008 U.S. trade barriers report, for example, 12
pages are devoted specifically to EU regulatory barriers.9
6 Reinhard Quick, “Transatlantic Regulatory Cooperation on Chemicals—An Idealist’s Dream?,” German Marshall
Fund Academic Research Conference, Ford School, University of Michigan. Available at
http://www.fordschool.umich.edu/news/events_details/re_coop_and-comp_08/, and Gregory C. Shaffer and Mark A.
Pollack, “Reconciling Regulatory Differences: The Ongoing Transatlantic Dispute over the Regulation of
Biotechnology,” in The Future of Transatlantic Economic Relations, edited by David M. Andrews, Mark A. Pollack,
Gregory C. Shaffer, and Helen Wallace, Robert Schuman Centre for Advanced Studies, 2005, pp. 220-221.
7 Keith Maskus and Yin He, “Trans-Atlantic Regulatory Cooperation in Pharmaceuticals: An Intellectual Property and
Trade Perspective,” German Marshall Fund Academic Policy Research Conference, May 8-9, 2008, Ford School,
University of Michigan, p. 8. Available at http://www.fordschool.umich.edu/news/events_details/
reg_coop_and_comp_08/.
8 Vann H. Wilber and Paul T. Eichbrecht, “Transatlantic Trade, the Automotive Sector: The Role of Regulation in a
Global Industry, Where We Have Been and Where We Need To Go, How Far Can EU-US Cooperation Go Toward
Achieving Regulatory Harmonization,” German Marshall Fund Academic Policy Research Conference, Ford School,
University of Michigan, p. 7. Available at http://fordschool.umich.edu/news/events_details/re_coop_and_comp_08/.
9 Office of the U.S. Trade Representative, 2008 National Trade Estimate Report on Foreign Trade Barriers, pp. 9-21.
Available at http://www.ustr.gov.
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Rationale for Transatlantic Regulatory Cooperation
Efforts to enhance TRC draw on both economic and political justifications and are strongly
supported by business interests and governments on both sides of the Atlantic. At the same time,
within the United States, some interests, mostly academics, see greater benefits derived from
regulatory competition and independence, whereby each side is free to maintain its own approach
to regulating consumer, health, and environmental issues. The case for non-cooperation or at least
caution is also based on concerns that domestic health and safety standards may be compromised
by a process that is driven substantially by business interests and stakeholders and could be
affected by a “race to the bottom” regarding U.S. and EU standards.
Economic Rationale
The primary reason why many export industries seek to achieve greater harmonization in
international standards is to reduce costs associated with complying with two different sets of
regulations and standards. To the extent that transatlantic regulatory standards and procedures
differ, the costs of engaging in transatlantic commerce increase.10
A good example comes from the auto industry. According to a trade association, a U.S.-based
producer of light trucks looked into exporting a model to Europe and found that its design was
incompatible with a European regulation on exterior edge projection (the U.S. has no comparable
standard). The truck was never exported because it would have required a major and costly re-
design. The same truck manufacturer then undertook to ensure that another model on the drawing
boards would have maximum export potential built into its design. In order to sell this product in
Europe, the manufacturer reportedly utilized 100 unique parts, incurred an additional $42 million
in design and developmental costs, and committed an additional 130 people to the program. Yet,
the performance of the vehicle, in terms of safety, was unchanged. European-based manufacturers
face the same issues in reverse when contemplating selling a European-designed model in the
United States. These separate regulations, in turn, may cost manufactures millions of extra dollars
to comply with, but may result in no changes in the vehicle in terms of safety or fuel economy.11
A 2005 OECD study is often cited to illustrate how costly regulatory barriers to producers and
consumers on both sides of the Atlantic. This study estimates that regulatory divergences between
the U.S. and Europe costs the United States a sum that is equivalent to 1%-3% of GDP annually.12
In addition to cost savings that might be derived from the harmonization of regulations so as to
facilitate open markets, it is argued that regulatory cooperation between states will help ensure
that regulatory standards will not serve as obstacles to freer trade or unfair trade advantages.13
10 David Vogel, “Can it be done? Suggestions for better regulatory cooperation between the US and Europe,”
Transatlantic Thinkers #7, BertelsmannStiftung, p. 3. Available at http://www.bertelsmann-stiftung.de/cps/rde/xchg/
bst_engl/hs.xsl/prj_7072-7084.htm.
11 Vann H. Wilber and Paul T. Eichbrecht, “Transatlantic Trade, the Automotive Sector: The Role of Regulation in a
Global Industry, Where We Have Been and Where We Need To Go, How Far Can EU-US Cooperation Go Toward
Achieving Regulatory Harmonization,” German Marshall Fund Academic Policy Research Conference, May 8-9, 2008,
p. 5. Available at http://fordschool.umich.edu/news/events_details/re_coop_andcomp_08/.
12 OECD Working Paper No. 432, On the Benefits of Liberalizing Product Markets and Reducing Barriers to
International Trade and Investment: The Case of the United States and European Union May 26, 2005.
13 The initial impetus for promoting a transatlantic dialogue on regulatory standards was the European Community’s
(continued...)
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Just as internal regulatory divergences can become a source of competitive advantage or trade
tension, proponents of regulatory convergence assert that differences in emissions standards,
labeling requirements and attitudes towards public health risks between countries can become a
market access barrier for foreign products or provide domestic producers with “unfair”
competitive advantages.
Proponents of regulatory cooperation maintain that it could have the effect of preventing a
welfare-reducing “race to the bottom” as jurisdictions seek to advance the competitiveness of
their own industries through lax regulation or lower standards. This rationale for regulatory
cooperation served to justify a large expansion of federal legislation and institutions in the United
States in the areas of environmental regulation, consumer protection, health and safety, and labor
protections. Similar fears of trade distortions and races to the bottom led to the implementation of
sweeping harmonization programs and centralized legislation in the EU.14
Cast in the context of the global economy, some view TRC as a way for the U.S. and EU to
promote global regulatory standards. In the absence of world standards, the U.S. and Europe are
often competing for acceptance of their respective regulations in third markets. Proponents of
TRC indicate that the net effect of this competition is that India and China can play the United
States off against Europe, developing their own technical standards and financial regulations,
complicating world trade for everyone.15
Political Rationale
Supporters of TRC note that since the end of the Cold War, the United States and Europe have
been searching for various ways to bolster the foundation of the relationship. Absent the common
enemy embodied in the threat posed by the former Soviet Union, both sides have felt freer to
pursue their own narrow economic and political interests. In the process, trade disputes have
appeared to increase in frequency, focusing often on differences in regulation, rather than the
traditional barriers of tariffs and subsidies.
To deal with the joint task of giving the relationship a new rationale as well as bolstering overall
ties, numerous attempts have been made since the 1995 NTA to enhance transatlantic economic
cooperation. In this context, efforts to advance regulatory cooperation have been part of attempts
to reinvigorate and upgrade the bilateral relationship. Annual summits, attended by the U.S.
President, the President of the European Commission, and the President of the European Council,
have been the venue for bringing high-level political attention and focus on efforts to enhance
transatlantic regulatory cooperation. Regulatory cooperation, now entailing an expanding group
of stakeholders and networks, has become a significant component of the U.S.-EU economic
relationship. Supporters argue that through such cooperation the partners may be able to find
(...continued)
1992 internal market program. At the heart of this program was an effort to establish European-wide standards.
Progress along these lines raised concerns in the U.S. business community that the new standards and regulations could
be used to disadvantage U.S. exporters and products.
14 Daniel C. Esty and Damien Geradin, “Regulatory Co-opetition,” Journal of International Economic Law (2000),
235-255, p. 236.
15 Transatlantic Policy Network (TPN), Completing the Transatlantic Market, February 2007, pp. 6-7. Available at
http://tpnonline.org.
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ways to amicably and expeditiously resolve commercial disputes, as well as establish joint
approaches to a number of common regulatory challenges that have global importance.16
Because the United States and European Union collectively represent over 50% of global
production, in areas where they can agree on a common regulatory policy or approach, they are
well-positioned to promote it globally. Where they disagree, there is often deadlock, reflecting the
equal size of their economies and markets.17
While there are other forums (such as the World Trade Organization and international treaties) to
promote regulatory cooperation, they are seen as having shortcomings. The WTO, for example,
promotes regulatory cooperation by giving some international standards legal effect, nudging
WTO Members to actively participate in international standardization bodies. It also puts national
provisions to the test in various committees and offers its members a platform to facilitate
regulatory cooperation.18 But the number of transatlantic regulatory differences that fall within
the scope of WTO rules constitute a relatively small proportion of the regulatory policies and
procedures that involve firms on both sides of the Atlantic. Moreover, the few regulatory-based
trade disputes that the WTO has decided sometimes exacerbate rather than lessen tensions
between the US and EU.19 For this reason, it is argued that the United States and EU need to
develop bilateral mechanisms for coordinating their regulatory policies.20
Counter-Arguments
Although there is strong support for TRC among business and government leaders on both sides
of the Atlantic, the concept and rationale have their critics. This opposition is based, in part, on an
alternative view of the benefits of regulatory competition as opposed to a centrally adopted
regulatory framework constructed through regulatory cooperation. These mostly academic critics
see benefits in variations in regulatory approaches across jurisdictions (either intra-state or
interstate) as a way of disciplining overarching governments and creating incentives for
bureaucratic efficiency. They argue that regulatory competition leads to the adoption of standards
of varying stringency that efficiently match the needs and desires of each jurisdiction. Because
conditions, tastes, and incomes tend to vary across jurisdictions, this school of thought maintains
that an optimal regulatory policy for one jurisdiction will not necessarily be optimal for another.
Some consumer groups caution against the influential role that business groups play in
transatlantic regulatory cooperation. The concern is that safety and health concerns may be
compromised if business groups play such a prominent role in negotiations over testing
requirements and standards for their own products. Rather than reducing barriers per se, the Trans
16 Simon J. Everett and Robert M. Stern, “Condemned To Cooperate?,” German Marshall Fund Academic Policy
Research Conference, May 8-9, 2008, University of Michigan, p. 7. Available at http://www.fordschool.umich.edu/
news/events_details/re_coop_08/.
17 Gregory Shaffer and Mark Pollack, “How Hard and Soft Law Interact in International Regulatory Governance:
Alternatives, Complements or Antagonists?,” German Marshall Fund Academic Policy Research Conference, May 8-9,
2008. University of Michigan, p. 5. Available at http://www.fordschool.umich.edu/news/events_details/
reg_coop_andcomp_08.
18 Reinhard Quick, “Regulatory Cooperation—A Subject of Bilateral Trade Negotiations or Even for the WTO?,”
Journal of World Trade Law 42(3), 2008, p. 405.
19 David Vogel, op. cit., p. 4.
20 Ibid., p. 5.
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Atlantic Consumers Dialogue maintains that the purpose of regulatory cooperation between the
United States and EU should be to promote higher health and safety standards, thereby improving
consumer welfare on both sides of the Atlantic.21
Opponents of TRC assert from this perspective that a great number of centralized regulatory
programs should be dismantled and regulatory powers should be decentralized. They believe that
regulatory cooperation also reaches its limits where there is lack of institutional architecture to
enforce decisions.22
U.S.-EU Differences in Regulatory Approaches
Transatlantic regulatory cooperation must deal with a number of key differences between the
United States and EU concerning approaches to regulation. Key differences bear on political
cycles affecting regulation, public preferences and tolerance for risk, attitudes towards
transparency, and institutional capacities to undertake regulatory reforms. These key
differences—whether they pertain to product safety, environmental protection, securities trading,
or customs procedures—in how regulations are developed and applied, in turn, raise challenges
about whether and how to merge, harmonize, or converge the varied approaches. Until the
regulatory structures themselves become more convergent or aligned, the major divergences in
regulatory policies are unlikely to disappear.
Political Cycles
Over the last 50 years, the political cycles of regulatory policy stringency and expansion in the
EU and the United States have not moved together. In the process, many important European and
American regulations have diverged.23
Beginning in the 1960s, many U.S. regulatory standards were likely more comprehensive and
stringent than those adopted by the EU and most member states. The U.S. was typically first to
identify new consumer and environmental risks and more likely to adopt relatively risk-averse or
precautionary standards for dealing with those risks. For example, from the early 1960s through
the mid-1980s, American standards for the approval of new pharmaceutical products were more
stringent than in any EU member state, and American automobile emission standards were
consistently more stringent than those adopted in Europe. The United States also restricted the use
of lead in gasoline more rapidly than did Europe and also acted more aggressively to restrict the
use of ozone-depleting chemicals.24
But over the last 15 years, a number of European standards have become more stringent and
comprehensive than U.S. standards.25 For example, European standards for the approval and
21 Trans Atlantic Consumer Dialogue, “Position Paper and Resolution on Horizontal Regulatory Initiatives in EU-U.S.
Regulatory Cooperation,” February 2007. Available at http://www.tacd.org/cgi-bin/db.cgi?page=view&config=admin/
docs.cfg&id=322.
22 Reinhard Quick, op. cit., p. 401.
23 David Vogel, op. cit., p. 14.
24 Ibid., p. 7.
25 At the same time, in 1980s and throughout much of the 1990s, much of U.S. policy was driven by efforts to reduce
the costs of protective regulations on American companies and, thus, improve the performance of the American
(continued...)
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labeling of genetically modified (GM) foods and seeds are far more stringent than those adopted
by the United States. Recently approved legislation on chemicals (Registration, Evaluation, and
Authorization of Chemicals or REACH) has made European standards for the approval of both
existing and new chemicals much more demanding than in the U.S. The EU has also moved more
aggressively than the United States to impose restrictions on greenhouse gas emissions.
However, in the aftermath of rising concerns about the safety of imported products and the
financial crisis caused by the proliferation of sub-prime mortgages, support for more aggressive
regulatory actions is rising in the United States. If the pendulum in the United States swings back
towards increased regulation, this may narrow some of the current transatlantic regulatory
divergences.26
Values and Public Preferences
Some transatlantic regulatory differences reflect different public preferences and values. For
example, many European consumers tend to prefer “naturally produced” foods, while many
American consumers are more accepting of products produced by advanced forms of agricultural
production. This difference helps to explain, in part, why Europe has imposed restrictions on the
use of growth hormones for both beef and dairy cows, while the U.S. has not. It also explains, in
part, the relative lack of political controversy in the U.S. surrounding the introduction of
biotechnology compared to the more negative response to this technology in Europe.27
The United States and EU also operate two different systems of risk management. As in the case
of GMOs, the U.S. system is relatively science-based and prefers to regulate once significant
problems have been identified. This approach has strong support of farmers, industry, and
government officials. On the European side, the public tends to favor a more cautious approach,
preferring to regulate out of precaution before a problem has occurred. The food safety scandals
of the 1990s increased the resolve of EU member governments to put in place ever more strict
regulation for the pre-approval, traceability and labeling of all GMOs, independent of their
individual safety characteristics.28
Transparency and Rule-Making
The United States and EU provide for very different degrees of public participation in rule-
making. In the United States, Congress passes laws, but generally grants broad authority to the
administrative or regulatory agencies to implement those laws through regulations. On occasion,
Congress also provides specific direction to these agencies.
Regulations proposed by U.S. administering agencies are subject to considerable public input due
in large part to the requirements of the U.S. Administrative Procedures Act (APA), the Freedom
of Information Act, and the Government in the Sunshine Act, which permit public scrutiny of
regulatory activity. A myriad of laws, executive orders, and bulletins ensure that transparency
(...continued)
economy.
26 Jackie Calmes, “Both Sides of the Aisle See More Regulation,” New York Times, October 14, 2008, p. 1.
27 David Vogel, op. cit., p. 6.
28 Gregory C. Shaffer and Mark A. Pollack, op. cit., p. 221.
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remains part of the regulatory process. Federal agencies are required to publish in the Federal
Register, not just the proposed rule, but the supporting justification for the rule and the entire
analytic justification behind it.
EU directives (which serve the same function as U.S. regulations) tend to be developed by the
European Commission without as much input from either the public, business or elected officials.
The European Parliament, however, has to approve or pass the directives (legislation) proposed
by the Commission. While the EU has a number of “better regulation” procedures and guidelines,
it has no effective equivalent to the APA.29
Recognizing that the United States and EU have become each other’s most important stakeholder,
both sides may have an interest in ensuring that the other will have the opportunity, method, and
forum for participating constructively in each other’s regulatory process.
Institutional Capacity to Undertake Reforms
There also major differences in institutional capacities to undertake regulatory reforms. The EU’s
institutional framework is well suited to making regulatory changes. In broad terms, the EU has
developed as a regulatory state with the European Commission taking a leading role in
coordinating European wide regulatory policies in pursuit of building a Single Market. The
Commission has ample authority to coordinate cooperation on transatlantic regulatory issues. The
regulatory culture within the EU internal market is considered “trade friendly” because EU and
national regulators operate with dual missions to promote free trade within the internal market
while ensuring public safety. But enforcement is usually left to member states, which often results
in a different levels of enforcement and different treatment of European and U.S. companies.30
In general, U.S. regulatory agencies have the mandate and funding to focus on domestic
regulatory issues and they enjoy a fair amount of independence on policy and implementation
matters. However, the United States lacks a clear-cut institutional mechanism to coordinate
cooperative efforts. And neither the Commerce Department nor the Office of U.S. Trade
Representative (USTR), the lead agencies for U.S. undertakings in the realm of transatlantic
regulatory cooperation, have authority to overhaul domestic regulatory policymaking. While
Commerce and USTR may bring the heads of U.S. regulatory agencies to the negotiating table,
the regulatory agencies are not usually funded nor mandated to engage in TRC activities.31
An added structural complication on the U.S. side is the role that states play in regulating
activities, particularly professional services. Insurance, banking, private pension fund
management, and professional services such as engineering and architecture are all subject to
state regulation (and some sectors exclusively).32
29 Testimony of Gerard Depayre, Deputy Head of Delegation, European Commission to the United States, “U.S.-EU
Cooperation on Regulatory Affairs,” Hearing Before the Subcommittee on European Affairs of the Committee on
Foreign Relations, U.S. Senate, 108th Congress, 1st session, October 16, 2003, p. 20.
30 Kalypso Nicolaidis and Rebecca Steffenson, “Managed Mutual Recognition in the Transatlantic Marketplace,” in
The Future of Transatlantic Economic Relations, p. 147.
31 Maria Green Cowles, “Calming the Waters: The Rebirth of the Transatlantic Business Dialogue,” in The Future of
Transatlantic Economic Relations, p. 285.
32 Kalypso Nicolaidis and Rebecca Steffenson, p. 152.
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Forms of Transatlantic Regulatory Cooperation
Regulatory cooperation is an elastic concept that subsumes a broad range of activities. At one end
of the spectrum, these activities may include simple discussions and sharing of information
between regulators—most often on prospective regulations. At the other end of the spectrum,
these activities may involve attempts at harmonizing regulatory approaches through acceptance of
common principles and standards. In between are activities that involve varying degrees of
intrusion into the autonomy of regulators. One such category is agreements that recognize each
other’s standards or certification procedures. These agreements are known as MRAs or mutual
recognition agreements. The line between each category can be arbitrary and vague, and there are
other activities associated with regulatory cooperation that may not fall neatly into one of the
above categories.33
To date, most efforts at transatlantic regulatory cooperation have been associated with
information exchanges and dialogues. Considerable efforts have also been made at negotiating
MRAs for a range of goods, as well as other attempts to recognize the adequacy of each others
standards in specific areas such as data privacy and accounting. Little has been undertaken in
regard to harmonization of standards. What follows is a short elaboration of activities that apply
to each of these regulatory activities.
Information Exchanges and Dialogues
The most basic form of regulatory cooperation involves the establishment of a working group or
dialogue for an exchange of information. The group, which may be comprised of technical
experts or regulators from different jurisdictions, may meet on an ad hoc and informal basis or
may be more structured. A primary objective of these consultations may be to better understand
technical differences in standards or regulations and to consult with each other prior to new
regulations becoming effective.
Making an effort to work with or consult with each other prior to new regulations becoming
effective is viewed as one way to minimize unnecessary regulatory barriers. The exchange of
people and information is also expected to build trust and confidence, with the hope of making
for more informed and coordinated regulations and may eventually lead to agreement on what
constitutes best regulatory practice.
While an exchange of views and a discussion of different issues will not necessarily bring about a
meeting of the minds in the technical assessment of a certain field of regulation, it is a necessary
first step if convergence is to take place. Where there is no attempt at dialogue, efforts to restrain
unilateral legislative actions that could create new regulatory barriers are unlikely to be
successful.34
In the transatlantic context, a number of U.S. regulatory agencies (e.g. the Securities and
Exchange Commission, the Food and Drug Administration, the National Highway Traffic
Administration, and the Occupational Safety and Health Administration) have engaged in these
33 Alan O. Sykes, “Regulatory Competition or Regulatory Harmonisation? A Silly Question?,” Journal of International
Economic Law (2000), pp. 257-264.
34 Reinhard Quick, “Regulatory Cooperation,” op. cit., p. 402.
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kinds of information exchanges and non-binding dialogues with their European counterparts over
the past decade. These exchanges were encouraged by the Guidelines on Regulatory Cooperation
and Transparency which the United States and EU negotiated as part of the 1998 Transatlantic
Economic Partnership (TEP). The guidelines were intended to enhance cooperation between EU
and US regulators in the development of technical regulations and specifically referred to regular
consultation, exchange of data and information, as well as informing one another at an early stage
on planned new regulation.
Since 2004, the annual U.S.-EU summits have reinforced efforts at regulatory cooperation. A
Roadmap for Regulatory Cooperation provides a framework of specific activities in 15 different
sectors (e.g. pharmaceuticals, telecommunications equipment, food safety, and auto safety).
Subsequent summits have prescribed cooperation for “lighthouse projects” in the fields of
intellectual property rights, secure trade, financial markets, innovation and technology, as well as
the elimination of obstacles to investment. In addition, a High Level Regulatory Cooperation
Forum, comprised of regulators from both sides, was established to find common ground on
horizontal issues such as risk assessment, cost-benefit analysis and impact analysis when
promulgating regulations.
Mutual Recognition Agreements
A stronger form of cooperation involves MRAs. This cooperation entails an agreement by
regulators to accept products or services from another jurisdiction under specified conditions, so
that actors complying with the regulations of one jurisdiction will be considered to be in
compliance with the rules in another jurisdiction. These kind of agreements can focus on the
mutual recognition of conformity assessment certifications or the alignment of relevant standards.
Under full recognition of standards, companies, for example, could sell pharmaceuticals in the
United States after meeting European standards without first obtaining FDA approval. An
agreement on conformity assessment procedures is a smaller step, requiring domestic regulators
to accept the competency of their foreign counterparts to conduct product testing, inspection, or
certification. The basic premise behind this kind of MRA is that products could be tested once
and considered to have been tested in both markets.35
In 1998, the United States and EU completed an MRA for testing and certification requirements
covering multiple sectors, including telecommunications and information technology equipment,
pharmaceuticals, electronics, electromagnetic compatibility, sports boats and medical devices.
The MRA did not provide for mutual recognition of product standards, but it identified
certification bodies in the exporting country that could assess the conformity of a range of traded
goods with standards of the destination country. The MRAs, thus, introduced competition
between assessors or certification bodies.
Competition among certification entities was familiar in Europe, where private firms had long
provided certification, but was new in the United States where government agencies had
dominated the process. As a result, while some U.S. officials believed that the MRAs would lead
35 Testimony of Stuart Eizenstat, European-American Business Council, Hearing on U.S.-EU Cooperation on
Regulatory Affairs, Subcommittee on European Affairs of the Committee on Foreign Relations, U.S. Senate, 108th
Congress, 1st session, October 16, 2003, p. 29.
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to cheaper and more rapid certification, others were concerned about its implications for product
safety.36
The MRAs did not result in any kind of binding legal agreement between the United States and
the EU. Rather they were accomplished through an exchange of letters between the heads of the
relevant regulatory agencies. To be implemented successfully, MRAs require that regulators on
both sides of the Atlantic have confidence that the other side will not try to attract more business
by being deliberately lax. Similarly, regulators need to recognize that each other’s safety
standards and inspection requirements are basically equivalent.37
Harmonization/Agreement on Regulatory Standards
The strongest form of regulatory cooperation involves harmonization or agreement on the same
standards or rules applied across jurisdictions. This could extend not only to regulatory targets
(e.g., the permissible level of a particular pollutant in each jurisdiction or reserve requirements
among banks), but also to the manner by which regulators ensure compliance with their
regulations.
In the transatlantic context, few precedents exist for acceptance or adoption of similar or identical
standards. While there have been numerous political declarations calling for regulatory
convergence and harmonization, few changes have been enacted in each side’s existing laws that
would move their regulatory regimes in this direction. The transatlantic market, of course, is not a
single market with common institutions pushing for further economic integration. But various
stakeholders, frustrated by the slow progress in transatlantic regulatory cooperation, have made
proposals that could push the two sides in the direction of adopting a new institutional
architecture, such as a binding regulatory cooperation agreement.38
Those who see a binding treaty or regulatory cooperation agreement as necessary institutional
architecture to achieve a transatlantic single market point to EU integration as a model. In moving
towards the completion of a Single European Market, the Commission issued a white paper that
listed the pieces of legislation requiring harmonization, and simultaneously identified the
institutional mechanisms to achieve specified ends.39
U.S. public support for such an approach could depend on whether the goal of such a treaty or
legal agreement was the development of identical legislation or comparable legislation. If the goal
was identical legislation, much resistance to this kind of deeper integration could be expected
from a number of quarters. This is particularly true from stakeholders who view movement in this
direction as leading to a loss of regulatory autonomy for U.S. authorities. If the goal was the
36 Charan Devereaux, Robert Z. Lawrence, and Michael D. Watkins, “The U.S.-EU Mutual Recognition Agreements,”
in Case Studies in US Trade Negotiations, in Making the Rules, Vol. 1, Institute for International Economics, 2006, p.
304.
37 Stuart Eisenstadt, op. cit., p. 24.
38 The U.S. Chamber of Commerce, for example, has proposed an Agreement on Regulatory Cooperation (ARC), a
legally binding regulatory cooperation agreement that would oblige both sides to operate under a common set of
regulatory principles and core beliefs. The ARC would require regulators to assess the cost impact of forthcoming
regulations on transatlantic commerce, adopt other’s best practices where possible, and utilize a similar methodology to
assess costs and benefits of proposed regulations. See Chamber of Commerce of the United States, Correspondence to
U.S. Office of Management and Budget and to the Secretariat General, European Commission, February 8, 2008.
39 Reinhard Quick, “Regulatory Cooperation,” p. 401.
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development of similar or comparable legislation that facilitates mutual recognition, much less
resistance perhaps could be expected.40
Results of Past Initiatives at Regulatory Cooperation
The United States and EU have pursued a variety of policy initiatives and new mechanisms over
the past 15 years to reduce or eliminate regulatory barriers. The results have been mixed. A
number of these initiatives have been successful in some regulatory areas, while transatlantic
regulatory cooperation has not made material differences for businesses or consumers in some
other sectors. Assuming it is concluded that stronger regulatory cooperation is desirable, an
assessment of past efforts could be useful.
Highlights of Past Initiatives
Beginning in 1990 with the Transatlantic Declaration, regular U.S.-EU summits were initiated to
reinvigorate and upgrade the bilateral relationship. Attended by the U.S. President, the President
of the European Commission, and the President of the European Council, the summits were
intended to bring high-level focus to cooperative activities. Successive summits have led to a
number of agreements relating to transatlantic regulatory cooperation:
• At the 1995 summit in Madrid, the United States and EU formally adopted the
New Transatlantic Agenda (NTA) in an effort to provide a new foundation for the
partnership. The NTA was accompanied by a detailed action plan. In addition, the
NTA set up a comprehensive and regular government-to-government dialogue, as
well as four dialogues between stakeholders on both sides of the Atlantic. These
included the Transatlantic Business Dialogue (TABD), the Transatlantic Labor
Dialogue (TALD), the Transatlantic Environmental Dialogue (TAED) and the
Transatlantic Consumer Dialogue (TACD).
• Pursuant to the NTA, the two sides focused particular attention on problems
posed by divergent standards and certification systems. In addition to promoting
the convergence in regulatory systems, efforts were undertaken to negotiate
MRAs covering several sectors. In 1998, MRAs affecting sectors such as
electrical equipment, pharmaceutical products, telecommunications and
information technology equipment were reached.
• At the 1998 summit in London, the Transatlantic Economic Partnership (TEP)
was created to improve bilateral economic and trade relations and to help create a
more open world trading system. The TEP established deadlines for particular
actions within the areas of regulatory cooperation, mutual recognition, and
consumer product safety.
• At the Bonn Summit in June 1999, a Joint Statement on Early Warning and
Problem Prevention Mechanisms was adopted. The warning system was designed
to identify regulations, preferably still in draft form, that might contribute to non-
tariff barriers to trade.
40 Ibid.
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• At the 2000 U.S.-EU Summit in Lisbon, the Consultative Forum on
Biotechnology was established to improve communication and understanding on
the various concerns involved in biotechnology.
• At the May 2002 summit in Washington, the two sides reached agreements on
Guidelines for Regulatory Cooperation and Transparency. These sought to take
the idea of an early warning system a step further by encouraging U.S. and EU
regulatory agencies to consult on a voluntary basis, sharing work plans that
identify areas of anticipated regulatory action for the coming year and offering
opportunities for reaction before regulations are finalized.41
• Moving towards a more systematic cooperative approach, a Roadmap for EU-
U.S. Regulatory Cooperation and Transparency was developed in June 2004. It
listed 10 specific projects for regulatory discussion and also expanded the
approach to horizontal initiatives.
• The 2005 EU-U.S. Summit produced a second Roadmap for EU-U.S. Regulatory
Cooperation and Transparency and expanded the list to 15 sector-specific
projects. It also established two new dialogues. One was between the European
Commission and Office of Management and Budget on transparency and
methodologies for impact and risk assessment, in order to improve understanding
of each other’s regulatory systems. A second, a High-Level Regulatory
Cooperation Forum, was tasked to develop a joint regulatory work plan based on
mutual best practices. Its members include senior U.S. and European
Commission officials, academics, business executives, and other officials.
Accomplishments
Among the accomplishments are the following.
1. Most observers would agree that new mechanisms for dialogue and information exchange have
improved mutual understanding and day-to-day working relationships among economic
regulators in a wide range of sectors; Arguably, cooperation is now far deeper, broader, more
decentralized and routine than it had been before in areas such as pharmaceuticals, medical
devices, financial services and marine equipment.
2. The NTA process and related efforts at regulatory cooperation fostered closer relationships
among many stakeholders, including business people representing the major corporations
investing in both Europe and the United States. In particular, the TABD, representing a
transatlantic coalition of big businesses on both sides of the Atlantic, developed into an “effective
framework for enhanced cooperation between the transatlantic business community and the
governments of the European Union and the United States.”42
3. The NTA and subsequent summits enhanced on-going efforts to increase the compatibility of
U.S. and EU approaches to competition policy. According to one observer, much convergence in
41 The Atlantic Council of the United States, Risk and Reward: U.S.-EU Regulatory Cooperation on Food Safety and
the Environment, Policy Paper, November 2002, p. 7.
42 Maria Green Cowles, “Calming the Waters: The Rebirth of the Transatlantic Business Dialogue,” p. 278.
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substantive standards has been achieved voluntarily through the exchange of ideas and
institutional learning processes.43
4. MRAs (discussed previously) covering over $50 billion in trade were implemented in three
sectors, leading to significant cost savings for U.S. businesses; several of the agreements provided
for U.S. and EU testing facilities to recognize each other’s standards over time, thus allowing
firms to have products tested only once on either side of the Atlantic. The Commerce Department
estimated that the agreement would save U.S. industries more than $1 billion in testing and
certification costs.44
5. The 2002 Guidelines for Regulatory Cooperation promoted a number of procedural steps that
most likely have facilitated a more effective dialogue. These steps included arrangements to
permit sharing of non-public information between regulators. The Roadmap for Regulatory
Cooperation now provides a framework for consultations and dialogue in fifteen different sectors
(e.g. pharmaceuticals, telecommunications equipment, food safety and auto safety) with a focus
on prospective regulations and reducing regulatory barriers.
6. The U.S.-EU Safe Harbor Agreement was implemented in 2002. This agreement provided an
innovative mechanism whereby U.S. firms could be certified as meeting the EU’s more
demanding data privacy requirements for exporting personal data.
7. In February 2004, the U.S. and EU signed an MRA on marine safety equipment covering $150
million to $200 million annually in two-way trade.45
8. The U.S.-EU High Level Regulatory Cooperation Forum, established in 2005, has focused on
methodologies for generating good regulatory practices. To the extent both sides are able to
develop a methodological framework that ensures the comparability of regulatory reviews, with
an emphasis on risk assessments, cost/benefit analysis, and trade and investment impacts,
unilateral legislative initiatives and the creation of new regulatory barriers can be curtailed.
9. By 2006 the Financial Markets Regulatory Dialogue had reported some progress on
recognizing each others’ financial standards in specific areas.46 In particular, progress has been
made on gaining the mutual acceptance by 2009 of the equilevance of accounting standards—that
is the U.S. Generally Accepted Accounting Principles (GAAP) and International Financial
Reporting Standards (IFRS). This will make it easier for European companies to raise capital in
the United States and for U.S. companies to raise capital in Europe.47
43 Robert Anderson, “Competition (Antitrust) Policy: What Balance of Cooperation and Regulation in the Transatlantic
Sphere?,” German Marshall Fund Academic Policy Research Conference, May 8-9, 2008, Ford School, University of
Michigan, p. 5. Available at http://www.fordschool.umich.edu/news/events_details/reg_coop_and_comp_08/.
44 Maria Green Cowles, “Calming the Waters: The Rebirth of the Transatlantic Business Dialogue,” p. 280.
45 Charon Devereaux, Robert Z. Lawrence, and Michael D. Watkins, “The U.S.-EU Mutual Recognition Agreements,”
p. 348.
46 Elliott Posner, “Market Power without a Single Market: The New Transatlantic Relations in Financial Services,” In
The Future of Transatlantic Economic Relations: Continuity Amid Discord, July 2005.
47 Andreas Noelke, Johan Wolfgang Goethe Universitat, “Transatlantic Regulatory Cooperation on Accounting
Standards: A ‘Varieties of Capitalism’ Perspective,” German Marshall Fund Academic Policy Research Conference,
May 8-9, 2008, Ford School, University of Michigan. Available at http://fordschool.umich.edu/news/events_details_/
reg_cop_and_comp_08/.
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Disappointments
Specific disappointments include the following.
1. Enthusiasm for mutual recognition as a regulatory strategy faded when three of the six
agreements failed to become operational by established deadlines.48 In the view of some analysts,
these MRAs were never implemented due to the U.S. reluctance to recognize the equivalency of
European certifiers. In the pharmaceutical and medical device sectors, for example, the FDA had
continuing doubts about the capability of some EU member states to oversee high pharmaceutical
standards in laboratories. In the electrical equipment sector, OSHA refused to cede its right to
designate which laboratories in Europe could evaluate and certify new electrical products for sale
in the United States.49 A related obstacle on the European side was the EU inclination to regulate
at the European level, only to leave enforcement to Member States, which often results in
different levels of enforcement and different treatment of European and U.S. companies.50
2. Irrespective of annual summits, the TEP, by some accounts, went into hibernation from 1998 to
2004. Despite the many recommendations and political declarations issued during this time
period, there were few material accomplishments.51
3. Pieces of legislation adopted unilaterally by both sides in 2002 served to put a break on
regulatory cooperation by violating the 2002 Guidelines on Regulatory Cooperation and the
“Early Warning System.” On the one side, the EU imposed its views on how to regulate
chemicals by adopting legislation known as REACH, which affected the testing and approval of
chemicals, without much input from U.S. stakeholders. On the other side, the United States
adopted legislation (Sarbanes-Oxley), which reformed public accounting standards, without
taking into account EU views. Both pieces of legislation created considerable difficulties for
transatlantic businesses, from companies attempting to raise capital to firms that manufacture
everyday goods.
4. Despite extensive efforts at cooperation for nearly two decades, the transatlantic regulatory
divide remains large in the area of chemicals. The two sides still maintain fundamentally different
regulations on issues such as hormones, genetically modified organisms (GMOs), cosmetics, and
the registration and restriction of chemical substances. U.S. and EU regulators continue to operate
with starkly different regulatory philosophies and styles. And the record of transatlantic
regulatory cooperation in this sphere has been highly contentious, prompting the United States to
file a legal complaint with the WTO.52
48 Kalypso Nicolaidis and Rebecca Steffenson, “Managed Mutual Recognition in the Transatlantic Marketplace,” p.
148.
49 Gregory Shaffer, “Managing U.S.-EU Trade Relations Through Mutual Recognition and Safe Harbor Agreements:
‘New’ and ‘Global’ Approaches to Transatlantic Economic Governance?”, 9 Columbia Journal of European Law, 29-
77 (Fall 2002), p. 43.
50 Stuart Eizenstad, op. cit. p. 26.
51 Reinhardt Quick, “Regulatory Cooperation,” p. 399.
52 Reinhardt Quick, “Transatlantic Regulatory Cooperation on Chemicals—An Idealist’s Dream?,” German Marshall
Fund Academic Policy Research Conference, May 8-9, 2008, Ford School, University of Michigan. Available at
http://fordschool.umch.edu/nes/events_details/reg_coop_and_comp_08/.
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5. There has been lack of material progress in many other sectors, such as autos, and
pharmaceuticals. Moreover, past TRC initiatives have tended to be fragmented, poorly
coordinated, and lacking in political accountability for success and failure.53
Obstacles and Options for More Extensive Cooperation
In evaluating the history of past initiatives, a number of observers have pointed to several key
obstacles to more effective regulatory cooperation. High on this list are the independence of
regulatory agencies involved, the lack of committed resources for transatlantic regulatory
collaboration, and the sheer complexity of the undertaking. To promote more effective TRC by
overcoming these obstacles, three policy options are often put forth: (1) attracting high-level
political support for TRC; (2) increasing dramatically the involvement of legislators on both sides
in the process; and (3) developing an institutional architecture that can prioritize the problems and
challenges that need to be addressed.
Regulatory cooperation, particularly mutual recognition, requires domestic regulators to accept
the competency of their foreign counterparts to conduct product testing. A key obstacle, however,
is that regulators remain accountable to domestic legislators for the product standards that are
applied both to domestic and foreign products. As a result, regulators on both sides of the Atlantic
are generally reluctant to transfer authority to a foreign body, and the MRA negotiations
demonstrated that some regulatory bodies are more reluctant than others.54
Based on the premise that enhanced regulatory cooperation, particularly through mutual
recognition, will never happen if matters are left to individual regulatory agencies, high-level
political pressure is commonly prescribed. Such pressure, either from the White House, the
Congress, or both, may be employed to convince regulators to adopt reforms that result in a
reduction of barriers between the United States and EU and/or to make greater efforts to
accommodate transatlantic interests when promulgating new regulations.
Successful regulatory cooperation also requires resources for the necessary meetings and
dialogues to take place. At least on the U.S. side, the regulatory agencies have no dedicated
budgets to support these activities. Accordingly, some stakeholders, such as the U.S. Chamber of
Commerce, have proposed that Congress consider the creation of specifically funded mandates to
enable U.S. agencies better participate in these transatlantic dialogues.
The scope of the transatlantic regulatory agenda is also extremely broad and technical.
Encompassing most regulatory agencies, ranging from the Food and Drug Administration (FDA)
and the Consumer Product Safety Commission (CPSC) to the National Highway Traffic Safety
Administration (NHTSA) and the Environmental Protection Agency (EPA), and diverse sectors,
ranging from pharmaceuticals and cosmetics to telecommunications and marine safety, the status
of the agenda at any one time is not easy to ascertain. To move issues forward that are by their
nature abstract and technical, some observers have called for creation of a institution that is
capable of setting priorities and deciding on which issues are ripe for resolution with the help of
higher-level political intervention.
53 Testimony of Kathryn Hauser, U.S. Executive Director of the Transatlantic Business Dialogue, House Committee on
Financial Services, “The U.S.-EU Economic Relationship: What Comes Next?,” June 16, 2005, p. 9.
54 Kalypso Nicolaidais and Rebecca Steffenson, p. 145.
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The Transatlantic Economic Council
Predicated on the notion that past initiatives failed to make significant progress in enhancing
regulatory progress, the Transatlantic Economic Council (TEC) was established in April 2007 at
the U.S.-EU Summit as a key component of the Framework for Advancing Transatlantic
Economic Integration. Created as a new entity by German Chancellor Angela Merkel (then EU
Council President), European Commission President Barroso, and President Bush, the TEC is
designed to provide minister-level political guidance for implementation of a work program as
outlined by the Framework to foster regulatory cooperation and to reduce or eliminate regulatory
burdens to trade. The Summit leaders also created an advisory group to the TEC and invited the
U.S. Congress, along with the European Parliament, to accept a new, more substantive role in
transatlantic regulatory cooperation by becoming part of an advisory group. In short, the TEC and
the Framework are designed to deal with some of the suggested shortcomings (described above)
of previous transatlantic regulatory initiatives: lack of high level political leadership and not
enough involvement of legislators and other stakeholders in the regulatory process.
The TEC consists of two co-chairs (ministerial-level appointees with cabinet rank) from each
side, as well as a number of EU Commissioners and U.S. Cabinet Members for the broad-ranging
policy areas covered in the Framework. Permanent members of the TEC include the Secretaries
of the Treasury and Commerce and the U.S. Trade Representative and the European
Commissioners for External Relations, for Trade and Internal Market and Services. In addition,
other U.S. Cabinet Members and European Commissioners may participate when the agenda
covers issues falling under their jurisdiction.55
Given that the two TEC leaders are cabinet-level appointees, the TEC was expected to have the
kind of high-level political support that previous efforts at economic integration may have lacked.
Such clout, it is argued, may be needed to persuade domestic regulators to yield some of their
authorities or to better cooperate with their counterparts across the Atlantic in harmonizing
regulatory approaches.56
TEC efforts to foster cooperation and reduce regulatory barriers focus on two main types of
issues: (1) differences in regulatory processes and approaches; and (2) sectoral or bilateral
barriers and disputes. The goal in the first issue area is to find ways to reduce barriers to
transatlantic economic integration posed by new regulations and or prevent them from happening.
The primary avenue for accomplishing this objective entails efforts to reform, harmonize or
converge regulatory processes, both through the development of comparable methodologies to
assess risk and do cost-benefit analysis and intensified interactions among regulators. How
regulations are developed and applied can have a large impact on the how companies do business
not only in the transatlantic marketplace, but in third markets as well.
The goal in the second issue area is to reduce barriers to transatlantic integration caused by
regulations in specific sectors. This is to be accomplished by intensified sector-by-sector
cooperation, including the promotion of the 2002 U.S.-EU Guidelines for Regulatory Cooperation
55 To chair the TEC, the Obama Administration appointed Michael Froman, Deputy National Security Advisor for
International Economic Affairs, National Economic Council.
56 For more information on the TEC, see Section IV in the U.S.-EU Framework for Advancing Transatlantic Economic
Integration, April 2007, available at http://www.whitehouse.gov/releases/2007/04/20070430-4.html.
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and case-by-case examination of specific projects called for by the Roadmap for Regulatory
Cooperation.57
Four meetings of the TEC have been held to date, the last taking place in October 2009. The first
two meetings appeared to stumble over efforts to resolve disputes involving sales of poultry,
cosmetics, and electrical equipment. The U.S. side, in particular, expressed displeasure and
concern about the pace of changes in EU regulations that would allow the importation of poultry
meat using pathogen reduction treatments, as well as concerns that the implementation of the
EU’s REACH regulation not cause trade in cosmetics and personal care products to be disrupted.
On the other hand, the EU expressed concerns that OSHA regulations are continuing to make it
unduly difficult for EU electrical and electronic equipment producers to gain certification in the
U.S. market. The third TEC meeting convened in October 2008 as the global financial crisis
began to have a significant impact on the transatlantic economy. At the fourth meeting last
October, both sides committed to working more closely on energy-related issues, services trade,
financial regulatory compensation, and intellectual property rights. The TEC also agreed to set its
next meeting for March 2010 and to develop plans to address issues such as innovation, labeling,
and nanotechnology at that session.
The agenda for the next meeting may be a tacit recognition of the limited capacity of the TEC to
break new ground in the area of dispute settlement. Composed of cabinet-level officials from both
sides, the TEC is a transatlantic inter-governmental entity that skirts the “normal” channels for
affecting policy changes in both the United States and EU. As a transatlantic entity or coalition,
the TEC may have difficulty matching the power of domestic constituencies that plead for trade
protection or support regulations that tilt the playing field in one direction or another. Nor may
the TEC be well-positioned to change the domestic dynamics of who supports any particular
regulatory regime.58 That is to say that domestic coalitions (in both the United States and Europe),
acting in support of regulatory competition, may have more success in challenging other domestic
interests that support the status quo than a transatlantic coalition.59
While changing existing regulations and resolving disputes is a formidable challenge, the TEC’s
efforts to foster regulatory cooperation and reduce regulatory barriers may prove more fruitful as
it focuses on differences in regulatory processes and approaches. By focusing on the development
of comparable methodologies to assess risk and do cost-benefit analysis, the TEC can try to
reduce barriers to transatlantic integration posed by new regulations or prevent them from
happening. How regulations are developed and applied—whether they pertain to product safety,
environmental protection, securities trading, or customs procedures—can have a large impact on
how companies do business in the transatlantic marketplace.
In some cases, the TEC value may be able to help resolve differences in views among agencies
that are blocking regulatory progress and try to ensure that transatlantic impacts and integration
are taken into account when legislation and regulations are being drafted.60 To be effective, the
57 The Regulatory Cooperation Roadmap provides a framework of dialogues in 15 different sectors, including
pharmaceuticals, telecommunications equipment, food safety, and auto safety.
58 For example, at the November 2007 TEC meeting, the EU side agreed to come up with a definitive solution to the
dispute, but lacked the clout to overcome opposition in Europe to lifting the ban.
59 Richard Salt, German Marshall Fund Blog, “If All Politics is Global, How Should You Argue for a Transatlantic
Marketplace?,” http://blog.gmfus.org/2007/05/03.
60 The United States Mission to the European Union, “U.S.’s Price Discusses Transatlantic Economic Council’s
Successes, Future,” April 30, 2008. http://useu.usmission.gov/Dossiers/Regulation/April30_Price_TEC.asp.
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TEC must also gain a realistic understanding of what kinds of regulatory cooperation are
politically feasible.61
Role of Congress62
Since it began nearly two decades ago, transatlantic regulatory cooperation has been for the most
part a wholly run undertaking between the executive branches and independent regulatory
agencies on both sides of the Atlantic. By and large, TRC exchanges and dialogues have been
confined to regulators and officials of the executive branches on both sides of the Atlantic. The
Guidelines on Regulatory Cooperation and Transparency, in fact, do not apply to Congress or the
European Parliament.
The role of Congress in transatlantic regulatory cooperation in the past has been limited mostly to
oversight hearings (see Appendix A for a listing) and the introduction of a few resolutions.63 But
Congress has on occasion taken actions that have both thwarted and facilitated regulatory
cooperation. For example, on the one hand, some Members of Congress became concerned in the
late 1990s that the MRAs the administration was negotiating could harm consumers and
undermine health and safety standards. As Representative Henry Waxman (D-CA) put it, “there is
no question that international agreements of this kind can enhance the efficiency of commerce,
but it is equally clear that they can potentially depress American health and safety standards.”
According to one observer, such concerns made some U.S. regulators reluctant to participate in
the MRA negotiations.64
On the other hand, Congress also passed legislation directing the FDA to support efforts of the
Department of Commerce and USTR to implement MRAs. In the Food and Drug Administration
Modernization Act of 1997 (P.L. 105-115), a bill to speed the FDA approval process for new
drugs and medical devices, a provision directed the FDA to support the efforts of Commerce and
the Office of the U.S. Trade Representative to implement MRAs. According to the same observer,
inclusion of the MRA language in the legislation was an important step toward finishing the
agreement.65
These examples highlight a larger and more pivotal role Congress could play in regulatory
cooperation if it chose to become more involved. To the extent that an overwhelming domestic
orientation of regulatory agencies is a problem in moving TRC initiatives forward, Congress has
the power through both the authorization and appropriations process to mandate that U.S.
regulators cooperate. Congress can also ensure that the U.S. agencies involved in regulatory
61 David Vogel, p. 14.
62 For additional information, CRS Report RL34735, Transatlantic Regulatory Cooperation: A Possible Role for
Congress, by Raymond J. Ahearn and Vincent Morelli.
63 In December 2006, the Senate passed a resolution (S.Res. 632) calling for the completion of the Transatlantic Market
by 2015. The resolution also called for a jointly funded, cooperatively led study of existing barriers to transatlantic
trade and investment, including sector-by-sector estimates of the costs and benefits of removing such obstacles and a
timetable for their removal.
64 Congressman Henry Waxman, Hearing before the House Subcommittee on Oversight and Investigations of the
Committee on Commerce, “Imported Drugs: U.S.-EU Mutual Recognition Agreement on Drug Prescriptions,” 105th
Congress, 2nd session, October 2, 1998, p. 4.
65 Charan Devereaux, Robert Z. Lawrence, and Michael D. Watkins, “The U.S.-EU Mutual Recognition Agreements,”
p. 339.
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cooperation have the necessary budgetary and organizational resources to get the job done.
Conversely, if Congress views transatlantic initiatives as moving too far in the direction of trade
expansion at the expense of safety and health concerns or other priorities, Congress can make it
difficult for U.S. agencies to continue on that course of action.
Beyond providing guidance to U.S. regulatory agencies on TRC initiatives, Congress also could
play a bigger role in preventing new legislation from causing new transatlantic regulatory
barriers. Currently, taking the transatlantic impact (trade and investment effects) into account is
not considered in any structured or formal fashion during the legislative process. Yet, political
declarations from past U.S.-EU summits backed by the transatlantic business community, have
urged a more institutionalized process for making Congress more aware of the potential impact of
new legislation on transatlantic trade.
How this could be done is the subject of considerable speculation. One of the factors that has to
be considered is the wide range of congressional committees that have primary jurisdiction over
issues that are high on the agenda of TRC. As shown in Appendix B, many different authorizing
committees have primary jurisdiction over some of the main regulatory agencies involved in TRC
activities. On the House side, the Energy and Commerce, Transportation, Judiciary, and
Agriculture Committees all have important oversight roles. Counterpart committees on the Senate
side include Commerce, Science, and Transportation, Health Education, Labor, and Pensions,
Energy and Natural Resources, Environment and Public Works, and Agriculture. Notably absent
from this list are the committees charged with overall responsibility for oversight of transatlantic
relations, the Senate Foreign Relations and the House Foreign Affairs Committees, and the
committees that have primary jurisdiction over trade and investment issues, Senate Finance and
the House Ways and Means.
Currently, the only formal institutional link between Congress and transatlantic regulatory
cooperation is through the Transatlantic Legislators Dialogue (TLD), an inter-parliamentary
exchange between selected Members of the House of Representatives and the European
Parliament. The TLD serves as an advisor to the TEC, but its membership and function have
raised questions concerning how well it can carry out its role as an advisor to the TEC.66
Much of this begs the question whether Congress should be an advisor or a participant in the TRC
process, including the annual U.S.-EU Summits. While a more proactive role for Congress would
likely enhance the political basis of support for transatlantic regulatory cooperation, it is by no
means certain that there is a consensus in favor of developing the necessary mechanisms and
mandate to move in this direction.
66 The TLD as currently structured does not include members of the Senate on the U.S. side. For more information on
the role of the TLD, see pp. 10-16 of CRS Report RL34735, Transatlantic Regulatory Cooperation: A Possible Role
for Congress, by Raymond J. Ahearn and Vincent Morelli.
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Appendix A. Congressional Hearings on
Transatlantic Regulatory Cooperation
House Committee on Commerce. Imported Drugs: U.S.-EU Mutual Recognition Agreement on
Drug Prescriptions. October 2, 1998, 32p.
House Committee on Commerce. The EU Data Protection Directive: Implications for the U.S.
Privacy Debate. March 8, 2001, 48p.
House Committee on Financial Services. The EU’s Financial Services Action Plan and Its
Implications for the American Financial Services Industry. May 22, 2002, 122p.
House Committee on Financial Services. U.S.-EU Regulatory Dialogue and Its Future. May 13,
2004, 106p.
House Committee on Financial Services. U.S.-EU Regulatory Dialogue: The Private Sector
Perspective. June 17, 2004, 79p.
House Committee on Financial Services. U.S.-EU Economic Relationship: What Comes Next?
June 16, 2005, 86p.
House Committee on International Relations. Transatlantic Trade Agenda: Conflict or
Cooperation? September 29, 1999.
House Committee on International Relations. Recognizing the Continued Importance of the
Transatlantic Relationship and Promoting Stronger Relations with Europe by Reaffirming the
Need for a Continued and Meaningful Dialogue Between the U.S. and Europe. October 29, 2003,
16p.
Senate Committee on Foreign Relations. U.S.-EU Cooperation on Regulatory Affairs. October
16, 2003, 55p.
Senate Committee on Foreign Relations. U.S.-EU Regulatory Cooperation on Emerging
Technologies, May 11, 2005, 62p.
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Appendix B. U.S.-EU Regulatory Cooperation by
Sector, U.S. Regulatory Agency, and Committee
Oversight
Sectora
U.S. Regulatory Agencyb Committeesc
Pharmaceuticals
Food and Drug Administration (FDA)
House: Energy and Commerce;
Senate: Health, Education, Labor,
and Pensions and Commerce
Science and Transportation
Automobile Safety
National Highway Traffic Safety
House: Energy and Commerce;
Administration (NHTSA)
Senate: Commerce, Science and
Transportation
Information and
Department of Commerce, National
House: Energy and Commerce;
Communications Standards in
Institute of Standards and Technology
Regulations
(NIST)
Senate: Commerce, Science and
Transportation
Cosmetics
FDA
House: Energy and Commerce;
Senate: Health, Education, Labor,
and Pensions
Consumer Product Safety
Consumer Product Safety Commission
House: Energy and Commerce;
(CPSC)
Senate: Commerce, Science, and
Transportation
Consumer Protection
Federal Trade Commission (FTC)
House: Energy and Commerce, and
Enforcement Cooperation
Judiciary;
Senate: Commerce, Science and
Transportation, and Judiciary
Unfair Commercial Practices
FTC
House: Energy and Commerce, and
Judiciary;
Senate: Commerce, Science, and
Transportation, and Judiciary
Nutritional Labeling
FDA
House: Energy and Commerce, and
Agriculture;
Senate: Heath, Education, Labor and
Pensions, and Agriculture
Food Safety
FDA
House: Energy and Commerce
Agriculture;
Senate: Commerce, Science, and
Transportation, and Agriculture
Marine Equipment
U.S. Coast Guard
House: Transportation and
Infrastructure;
Senate: Commerce, Science, and
Transportation
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Sectora
U.S. Regulatory Agencyb Committeesc
Eco-Design
Environmental Protection Agency (EPA);
House: Energy and Commerce and
Department of Energy Office of Efficiency
Science;
and Renewable Energy
Senate: Energy and Natural
Resources
Chemicals
Environmental Protection Agency
House: Energy and Commerce ;
Senate: Environment and Public
Works
Energy Efficiency
EPA and Department of Energy
House: Energy and Commerce
Senate: Energy and Natural
Resources
Medical Devices
FDA
House: Energy and Commerce;
Senate:
Telecommunications and Radio Federal Communications Commission and
House: Energy and Commerce ;
Communications Equipment
Department of Commerce, National
Institute of Standards and Technology
Senate: Commerce, Science, and
Transportation
Source: CRS.
a. These sectors are identified in the 2005 Roadmap for Regulatory Cooperation, http://www.ustr.gov?
World_Regions/Europe_Middle_East/Europe/US_EU-Regulatory-C.
b. These agencies are also identified in the 2005 Roadmap for Regulatory Cooperation.
c. Depending on the focus of each sectoral initiative, other committees could also have oversight
responsibilities. Regarding appropriations, the appropriations subcommittees would tend to vary as well.
For example, the House and Senate Appropriations subcommittees on agriculture have jurisdiction over
FDA’s appropriations. This arrangement reflects, in part, the agency’s origin within the Department of
Agriculture as the Bureau of Chemistry in 1862.
Author Contact Information
Raymond J. Ahearn
Specialist in International Trade and Finance
rahearn@crs.loc.gov, 7-7629
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