Transatlantic Regulatory Cooperation: Background and Analysis
Transatlantic Regulatory Cooperation:
Background and Analysis
October 22, 2008
Raymond J. Ahearn
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Transatlantic Regulatory Cooperation: Background and
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 policy 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
complying 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, 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. This report will be updated as events warrant.
In troduction ......................................................1
U.S. - EU Regulatory Barriers........................................2
Rationale for Transatlantic Regulatory Cooperation.......................4
U.S. - EU Differences in Regulatory Approaches........................8
Values and Public Preferences....................................9
Transparency and Rule-Making..................................10
Institutional Capacity to Undertake Reforms........................10
Forms of Transatlantic Regulatory Cooperation.........................11
Information Exchanges and Dialogues............................12
Mutual Recognition Agreements.................................13
Harmonization/ Agreement on Regulatory Standards.................14
Results of Past Initiatives at Regulatory Cooperation.....................15
Highlights of Past Initiatives....................................15
Obstacles and Options for More Extensive Cooperation...............19
The Transatlantic Economic Council..................................20
Role of Congress.................................................23
Appendix A: Congressional Hearings on Transatlantic Regulatory
Appendix B: U.S.- EU Regulatory Cooperation by Sector, U.S. Regulatory
Agency, and Committee Oversight...............................27
Transatlantic Regulatory Cooperation:
Background and Analysis
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 an even tighter
and more integrated marketplace from developing. 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.U.S.-EUEU 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 reducing3
regulatory barriers to trade. 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
1 For background on the European Union, see CRS Report RS21372, The European Union:
Questions and Answers, by Kristin Archick.
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.
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
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 States, as well as increase the role
that legislators on both sides of the Atlantic play in the process.
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 analyses 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
4 For background on the 2007 U.S.-EU Summit and the TEC, see
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
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.
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 has 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
5 Daniel C. Esty, “Regulatory Competition in Focus,” Journal of International Economic
Law (2000), pp. 215-217.
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
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.
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
Rationale for Transatlantic Regulatory Cooperation
Efforts to enhance TRC draw on both economic and political justifications and
are generally 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
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
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
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].
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
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 Just as internal regulatory divergences can
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/r de/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 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
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
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 its 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
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
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
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 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
percent 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
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 -ar guments
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
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.
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_and
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.
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 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.
Over the last 50 years, the political cycle of regulatory policy stringency and
expansion in the EU and the US have not moved together. In the process, many
important European and American regulations have diverged.23
21 Trans Atlantic Consumer Dialogue, “Position Paper and Resolution on Horizontal
Regulatory Initiatives in EU-U.S. Regulatory Cooperation,” February 2007. Available at
[ ht t p: / / www.t acd.or g/ cgi -bi n/ db.cgi ?page=vi ew&conf i g=admi n/ docs.cf g&i d=322] .
22 Reinhard Quick, op. cit., p. 401.
23 David Vogel, op. cit., p. 14.
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 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
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 are 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 US has not. It also explains, in part, the relative lack of
political controversy in the US surrounding the introduction of biotechnology
compared to the more negative response to this technology in Europe.27
The U.S. and EU also operate two different systems of risk management. As in
the case of GMOs, the US. system is relatively science-based and has strong support
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 economy.
26 Jackie Calmes, “Both Sides of the Aisle See More Regulation,” New York Times, October
27 David Vogel, op. cit., p. 6.
of farmers, industry, and governments. On the European side, the public tends to
favor a more cautious approach, including the establishment of specialized
procedures to regulate GM foods and crops in terms of the process by which they are
made. 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
charact eri s t i cs.28
Transparency and Rule-Making
The U.S. 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
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 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. That EU regulatory processes still are not always transparent
is being addressed through the Guidelines of US-EU Regulatory Cooperation.29
Recognizing that the U.S. 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
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
28 Gregory C. Shaffer and Mark A. Pollack, op. cit., p. 221.
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,thst
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 U.S. 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
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 can
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
cat egori es. 33
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.
33 Alan O. Sykes, “Regulatory Competition or Regulatory Harmonisation? A Silly
Question?,” Journal of International Economic Law (2000), pp. 257-264.
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
Information Exchanges and Dialogues
The most basic form of regulatory cooperation involves the establishment of a
working group or dialogues 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
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
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 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
Since 2004 the annual US-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
34 Reinhard Quick, “Regulatory Cooperation,” op. cit., p. 402.
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 U.S. 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 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
35 Testimony of Stuart Eizenstat, European-American Business Council, Hearing on U.S.-EU
Cooperation on Regulatory Affairs, Subcommittee on European Affairs of the Committeethst
on Foreign Relations, U.S. Senate, 108 Congress, 1 session, October 16, 2003, p. 29.
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.
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
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.
development of similar or comparable legislation that facilitates mutual recognition,
much less resistance perhaps could be expected.40
Results of Past Initiatives at Regulatory
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 an varied. 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 U.S. 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
!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
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
!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.
!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
!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
!The 2005 EU-US Summit produced a second Roadmap for EU-U.S.
Regulatory Cooperation and Transparency and expanded the list to
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.
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
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.
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 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
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.
42 Maria Green Cowles, “Calming the Waters: The Rebirth of the Transatlantic Business
Dialogue,” p. 278.
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
[ ht t p: / / www.f or dschool .umi c h.edu/ news/ e ve nt s_det a i l s / r eg_coop_and_comp_08/ ] .
44 Maria Green Cowles, “Calming the Waters: The Rebirth of the Transatlantic Business
Dialogue,” p. 280.
7. In February 2004, the US 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
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
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
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.
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
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 U.S. to file a
legal complaint with the WTO.52
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
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
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.
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.
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
54 Kalypso Nicolaidais and Rebecca Steffenson, p. 145.
entity by German Chancellor Angela Merkel, 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. Currently,
the co-chairs are Daniel Price, Assistant to the President for International Economic
Affairs, and Guenter Verheugen, Vice President of the European Commission.
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
TRC’s 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
55 At the second TEC meeting held May 13, 2008, the U.S. delegation included Agriculture
Secretary Ed Schafer, Labor Secretary Elaine Chao, U.S. Trade Representative Susan
Schwab, Deputy Treasury Secretary Robert Kimmitt, Food and Drug Administration
Commissioner Andrew von Eschenbach, Securities and Exchange Commissioner Paul
Atkins, Assistant to the President for International Economic Affairs Daniel Price,
Administrator of the Office of Information and Regulatory Affairs Susan Dudley, and other
senior Administration economic officials. The EU delegation, led by Guenter Verheugen,
Vice-President of the European Commission, included Commissioners for Trade, the
Internal Market, Kuneva, and Kovacs, as well as other senior Commission economic
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
[ h t t p : / / www.whi t e house.go v/ r e l eases/ 2007/ 04/ 20070430-4.ht ml ] .
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
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 and case-by-case examination of specific
projects called for by the Roadmap for Regulatory Cooperation.57
The initial meeting of the TRC was held November 9, 2007, in Washington and
a second meeting was held May 13, 2008, in Brussels. Both 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 scant progress made in settling these disputes highlighted the limited
capacity of the TRC to break new ground in the area of dispute settlement.
Composed of cabinet-level officials from both sides, the TRC is a transatlantic inter-
governmental entity that skirts the “normal” channels for affecting policy changes in
both the U.S. and EU. As a transatlantic entity or coalition, the TRC 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 TRC 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
57 The Regulatory Cooperation Roadmap provides a framework of dialogues in 15 different
sectors, including pharmaceuticals, telecommunications equipment, food safety, and auto
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].
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 TEC must also gain a realistic
understanding of what kinds of regulatory cooperation are politically feasible.61
Role of Congress
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
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.62 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.63
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
61 David Vogel, p. 14.
62 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.
63 Congressman Henry Waxman, Hearing before the House Subcommittee on Oversight and
Investigations of the Committee on Commerce, “Imported Drugs: U.S.-EU Mutualth
Recognition Agreement on Drug Prescriptions,” 105 Congress, 2nd session, October 2,
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 (PL 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.64
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 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
64 Charan Devereaux, Robert Z. Lawrence, and Michael D. Watkins, “The U.S.-EU Mutual
Recognition Agreements,” p. 339.
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.
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 pro-active role for Congress would likely enhance the political basis of
support for transatlantic regulatory cooperation, it is no means certain that there a
consensus in favor of developing the necessary mechanisms and mandate to move
in this direction.
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,
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.
Appendix B: U.S.- EU Regulatory Cooperation by
Sector, U.S. Regulatory Agency, and Committee
SectoraU.S. regulatory agencybCommitteesc
PharmaceuticalsFood and DrugHouse: Energy and
Senate: Health, Education,
Labor, and Pensions and
Commerce Science and
Automobile SafetyNational Highway TrafficHouse: Energy and
Information andDepartment of Commerce,House: Energy and
CommunicationsNational Institute ofCommerce;
Standards in RegulationsStandards and TechnologySenate: Commerce,
CosmeticsFDAHouse: Energy and
Senate: Health, Education,
Labor, and Pensions
Consumer Product SafetyConsumer Product SafetyHouse: Energy and
Consumer ProtectionFederal TradeHouse: Energy and
Enforcement CooperationCommission (FTC)Commerce, and Judiciary;
Unfair CommercialFTCHouse: Energy and
Practices Commerce, and Judiciary;
Nutritional Labeling FDAHouse: Energy and
Senate: Heath, Education,
Labor and Pensions, and
SectoraU.S. regulatory agencybCommitteesc
Food SafetyFDAHouse: Energy and
Marine EquipmentU.S. Coast GuardHouse: Transportation and
Eco-DesignEnvironmental ProtectionHouse: Energy and
Agency (EPA);Commerce and Science;
Department of EnergySenate: Energy and
Office of Efficiency andNatural Resources
ChemicalsEnvironmental ProtectionHouse: Energy and
Senate: Environment and
Energy EfficiencyEPA and Department ofHouse: Energy and
Senate: Energy and
Medical DevicesFDAHouse: Energy and
Telecommunications andFederal CommunicationsHouse: Energy and
Radio communicationsCommission and Commerce ;
EquipmentDepartment of Commerce,Senate: Commerce,
National Institute ofScience, and
Standards and TechnologyTransportation
a. These sectors are identified in the 2005 Roadmap for Regulatory Cooperation.
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.