Regulatory Convergence, the TTIP and why this agreement, like the dodo, is never going to fly


Kathleen Garnett

This week EU and US negotiators are meeting in New York to hammer out the Regulatory Chapter of the TTIP. Alongside the proposed Chapter on Investor State Dispute Settlement, Regulatory Co-operation is the second most controversial aspect of the proposed trade agreement.

From an EU perspective the Regulatory Co-operation Chapter of the TTIP, if approved, could be the tipping point that convinces an already sceptical European population the EU is no longer acting in their interests but in the interests of shady US conglomerates. Whether true or false no elected politician in Europe – neither in national parliaments nor in the European Parliament – is going to take that risk and vote for the final TTIP. For that reason alone (regardless of how much money is spent on expensive PR agencies and professional communicators trying to convince the European population otherwise) the increasing consensus in Brussels is that the TTIP, like the dodo, is never going to fly.

The EU and trade

Just to remind advocates of the TTIP the EU is no stranger to trade and trade agreements. The very foundations of the EU are built on trade. The single market is a beast driven by Europe’s need and desire to trade across the entire continent and not be restricted by old-fashioned, in most cases artificially contrived, borders. Across the European continent tariff rates have been eliminated; technical barriers tamed; common standards approved.

As for trade with third countries the EU has negotiated hundreds if not thousands of trade agreements with third non-EU countries since it was founded in 1957. The Trans Atlantic Trade and Investment Agreement, however, is a completely different animal to what has gone before. Past trade agreements were devoted to lowering tariffs.

Focus has now shifted to reducing the so-called “technical” barriers to trade. Technical barriers to trade can stifle commerce just as effectively – if not more so – than the imposition of trade tariffs. The EU succeeded in eliminating technical barriers to trade following the seminal Cassis de Dijon case which established the principle of mutual recognition. It is this very principle that TTIP advocates would like to apply to trans-Atlantic trade.

Whilst is may sound inoffensive and eminently sensible to recognise each others sets of standards – a policy which to recall has worked wonders for EU trade – the fact remains that US standards are regulated differently to and are quite distinct from many EU standards particularly in the highly sensitive food, agriculture and environmental sectors.

Regulating risk

To pretend that the EU and US regulate risk in the same way is simply not true. On highly sensitive matters relating to food, agriculture and the environment the two big trading blocs have opted to follow completely different paths. Take fracking by way of example. When the oil industry in the US wanted to frack it pretty much dug a hole and began fracking. Few regulatory questions asked. It was only after civic interest groups began to complain that some regulations were imposed. Compare and contrast this to the EU’s approach to fracking. Fifteen years after fracking took off in the US national governments in Europe and decision-makers in the EU are still dithering over whether fracking should be permitted. European governments are acutely aware of the impact fracking could have on the environment and on subsequent voter opinion. Should fracking ever be given the go ahead in Europe you can be sure it will come with hundreds of regulations to protect water supply, local flora and fauna, noise pollution, air pollution and soil pollution. Permits will only be granted following a rigorous environmental impact assessment.

The EU and the US, for better or for worse, follow different paths on many sensitive issues.

Future Regulation?

Perhaps of even greater concern than existing regulations are how future regulations will be shaped should the Regulatory Chapter of the TTIP be approved. Many ordinary Europeans already complain that the current European system is an unapproachable, unfathomable maze of complexities. How much further removed from decision making will ordinary European citizens feel if the proposed Regulatory Co-operation Body ever sees the light of day? Europeans do not fear big government. European do not view their elected representatives with suspicion. They fear unaccountability, intransparency and powerful monopolies far more than “big” government. Corporations, unlike elected politicians, have a habit of becoming bigger and more entrenched with the passing of time. Politicians, after all, can and are replaced at elections but what about US regulators? How can they be replaced? Why, Europeans are beginning to ask themselves, should US regulators have any say in the way Europe shapes its regulations?

Europeans are becoming increasingly convinced that the TTIP and the Regulatory Co-operation Chapter ticks all of their bête noirs namely unaccountability, intransparency and powerful monopolies; none more so than the proposed Regulatory Co-operation Body.

Whilst initial reaction in Europe to the proposed TTIP was one of cautious approval increasingly that view is beginning to change. Many are now of the opinion that unlike the trade winds of the past that brought goods and prosperity to the shores of Europe this new, alien TTIP is an ill-wind that is going to weaken not strengthen standards. Rather than encouraging greater democratic participation in the decision making process this more modern interpretation of what a trade agreement is and should be is going to blast decision making to some distant, hazy and out of reach horizon. Decision making on matters of concern to Europeans will be bobbing merrily somewhere in the mid-Atlantic at a point where the super-rich on expensive yachts can hob-nob with ease but where civic interest groups on limited budgets will never reach.

Internal trade between the Member States has succeeded so spectacularly precisely because the founders of the EU – Monet, Schuman and Spaak – had the vision to set up institutions capable of regulating the market for trade between the very different nations that make up the European Union. The institutions, a well respected body of law and established legal principles are what give the EU legitimacy – but only just. Last year’s low voter turn out to the Parliamentary elections and the rapid rise in home-grown protest parties are indicative of a growing trend within Europe that some voters neither care for nor are convinced by the institutions that have been designed to regulate the European market.

All of which rather begs the question that if the very legitimacy of the EU is being questioned like never before in its fifty year history and challenged precisely for its remoteness to the ordinary European voter how much further removed will European citizens feel when being told that a new body – the Regulatory Co-operation Body – will determine what is deemed safe and what not for circulation on the European market? Were this to happen the perception amongst an increasing majority in Europe is that the concerns and voices of ordinary consumers will be but a faint echo of what they are today. Juncker was appointed at a time when the European Parliament saw an unprecedented rise in anti-EU sentiment. How much more despised will the EU become if it allows the TTIP to go through as it currently stands?

Does the EU really want to risk its increasingly fragile legitimacy on the TTIP? Would it not be wiser to pull the plug on this much derided and much criticised agreement, take it back to the drawing-board and re-shape it with a less political and far more practical agenda? There are still many, many benefits to signing a tighter, more robust trade agreement between the EU and the US. Would it not be better to view the TTIP as a failed proto-type and to start again with lessons learned? Both the US and the EU are eager to increase the prosperity of their citizens. History tells us that trade boosts prosperity. A complex, more political union without the necessary institutions in place to give it legitimacy, on the other hand, is a far, far more ambitious project. Such a project benefits neither the US nor the EU nor is it what is required at this point in time.

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