Transatlantic Trade & Investment Partnership

Tuesday 23rd October 2013, The most dramatic gains from the transatlantic trade negotiations are expected to come from the removal of non-tariff barriers and a greater degree of regulatory coherence between the EU and the US.  Some economists have estimated that existing non-tariff measures in many instances are comparable to tariffs of much more than 20 %.  But what does regulatory coherence really mean? Does it mean that one side or the other, or both, will have to de-regulate or scrap regulations or adjust to a lowest comment denominator?   The answer is no.

The EU and the US broadly regulate with the same goals: to protect health, safety and the environment for their populations.   Both sides share high ambitions for this protection, yet may often go about it in different ways.  If the EU and US can agree that their goals are the same and that both their avenues of regulation provide the same result in many areas, then trade should not have to be subject to costly additional tests or documentation to ensure that they are safe or in compliance when crossing the Atlantic.

The benefits of such an approach is particularly apparent in the automotive sector where divergent regulations and tests for parts such as windshield wipers and seat belts, to name just two, increase costs significantly for trade. UK automotive exports are thus expected to increase by between 15 and 26 % with a successful TTIP.

There should be no doubt that arriving at such an approach will be an easy task; the EU and the US have been attempting for a number of years to simplify trade through regulatory cooperation with only marginal improvements. Yet the political will that underpins the TTIP negotiations should herald new room for progress.

Greater coherence can also be achieved by agreeing on how to label products and to recognize each other’s labels as signifying the same thing.  Such an agreement was reached between the EU and the US already in the Spring of 2012 on labeling of organic food.

In some cases it may be useful to pursue harmonization of standards – i.e. apply the same standards in both markets, but that will only likely occur where that is feasible and meaningful.  Some degree of divergence is inevitable given countries’ different priorities.  However, new regulations are continuously under development.  A commitment in the Agreement to cooperate on formulating new regulations and to take into account the impact on transatlantic trade would certainly provide a mechanism to reduce regulatory divergence.   The creation of a framework for such cooperation as the EU Trade Commissioner suggested recently could reduce regulatory divergence even further in the future.

The TTIP does not imply less or more regulation, but better regulation.