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Addressing Regulatory Trade Barriers in Mega-Regional Trade Agreements

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Mega-Regional Trade Agreements

Abstract

Mega-Regional trade agreements are generating a lot of discussion over the future shape and scope of international trade regimes. The Transatlantic Trade and Investment Partnership (TTIP), the Trans-Pacific Partnership (TPP), and the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU break some new ground with old issues. In particular, regulatory trade barriers have come into focus as an area ripe for cooperation that is predicted to yield great benefits. In this chapter, we examine how these three mega-regionals approach this issue. First, we provide a conceptual framework for understanding regulatory trade barriers, separating them into three core categories: regulatory protectionism, regulatory divergence, and regulatory reform. Next, we examine how regulatory cooperation is envisioned across these mega-regionals, noting, inter alia, where they remain vague on obligations, and where they take innovative steps. Ultimately, the success of regulatory cooperation will depend on how these chapters are implemented in practice. Though they lay a promising groundwork, we remain cautious in predicting how broad an impact they will have.

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Notes

  1. 1.

    Berden et al. (2009), p. xviii.

  2. 2.

    In the EU, this second part of the process continues in the legislative branch, through the European Commission, the European Parliament, and the Council of Ministers, since there are no independent agencies at the EU level. Regulations are then passed down to the member states for implementation. The Commission monitors implementation of the rules, which are enforced by the European Court of Justice.

  3. 3.

    For a review of certain aspects of the 1970s era GATT discussions on technical barriers to trade and standards, which was an early source of thinking about these issues, see Lester (2014).

  4. 4.

    Economist Alan Deardoff defines “protection” as: “Without any adjective, or as ‘import protection’, this refers to restriction of imports by means of tariffs and/or NTBs, and thereby intended to insulate domestic producers from competition with imported goods.” See Deardoff (2016).

  5. 5.

    See WTO, Canada—Certain Measures Affecting the Renewable Energy Generation Sector, Canada—Measures Relating to the Feed-in Tariff Program, Appellate Body Report (6 May 2013) WT/DS412/AB/R, WT/DS426/AB/R.

  6. 6.

    Cases related to alcohol content have played a crucial role in the jurisprudence of both the ECJ and WTO. See, e.g., ECJ, Rewe-Zentral AG v. Bundesmonopolverwaltung für Branntwein (Cassis de Dijon) (20 Feb 1979) Case 120/78; and WTO, Chile—Taxes on Alcoholic Beverages, Appellate Body Report (13 Dec 1999) WT/DS87/AB/R, WT/DS110/AB/R.

  7. 7.

    In an early case, the Appellate Body stated that, “[t]he broad and fundamental purpose of Article III is to avoid protectionism in the application of internal tax and regulatory measures.” See WTO, Japan—Taxes on Alcoholic Beverages, Appellate Body Report (4 Oct 1996) WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, 16.

  8. 8.

    See Hudec (1998).

  9. 9.

    The Appellate Body first set out this test in US—Clove Cigarettes. See WTO, United States—Measures Affecting the Production and Sale of Clove Cigarettes, Appellate Body Report (4 April 2012) WT/DS406/AB/R, paras. 174–175, 181–182.

  10. 10.

    WTO, European Communities—Measures Prohibiting the Importation and Marking of Seal Products, Appellate Body Report (25 Nov 2013) WT/DS400/AB/R, WT/DS401/AB/R, paras. 5.97–130.

  11. 11.

    Alemanno (2014), p. 19.

  12. 12.

    The White House, President Barack Obama, Executive Order Promoting International Regulatory Cooperation. 1 May 2012. http://www.whitehouse.gov/the-press-office/2012/05/01/executive-order-promoting-international-regulatory-cooperation. Accessed 13 July 2016. The Order states in part:

    The regulatory approaches taken by foreign governments may differ from those taken by U.S. regulatory agencies to address similar issues. In some cases, the differences between the regulatory approaches of U.S. agencies and those of their foreign counterparts might not be necessary and might impair the ability of American businesses to export and compete internationally. In meeting shared challenges involving health, safety, labor, security, environmental, and other issues, international regulatory cooperation can identify approaches that are at least as protective as those that are or would be adopted in the absence of such cooperation. International regulatory cooperation can also reduce, eliminate, or prevent unnecessary differences in regulatory requirements.

    As Cass Sunstein, the administrator of the Office of Information and Regulatory Affairs at the time, explained:

    In an interdependent global economy, diverse regulations can cause trouble for companies doing business across national boundaries. Unnecessary differences in countries’ regulatory requirements can cost money, compromising economic growth and job creation. […] Recognizing this, President Obama’s Jobs Council has called for U.S. agencies to better align U.S. regulations with those of our major trading partners.

    see Sunstein (2012).

  13. 13.

    Egan (2001), p. 62.

  14. 14.

    Government of Canada (2014).

  15. 15.

    The US also has a similar arrangement with Canada, which went into effect in 2011.

  16. 16.

    USDA, US−EU Equivalency Arrangement (15 Feb 2012). https://www.ams.usda.gov/services/organic-certification/international-trade/European%20Union. Accessed 13 July 2016.

  17. 17.

    Transatlantic Consumer Dialogue (2001).

  18. 18.

    It is important to note that when referring to the theoretical concept of mutual recognition, the EU’s application is unique. The EU’s mutual recognition principle allows for the free movement of goods and services in the single market despite technical or preferential differences, so long as there are no health or environmental concerns. The EU model for mutual recognition relies more on good faith than an actual written agreement; it also works specifically in the EU because disputes can be taken to the European Court of Justice. The origins of this approach in the EU date back to the Cassis de Dijon decision: ECJ, Rewe-Zentral AG v. Bundesmonopolverwaltung für Branntwein (Cassis de Dijon) (20 Feb 1979) Case 120/78.

  19. 19.

    Transatlantic Consumer Dialogue (2001).

  20. 20.

    Alemanno (2014), p. 31.

  21. 21.

    Takacs (2013), p. 82.

  22. 22.

    Decision No. 1999/78/EC of the Council of 22 June 1998 on the conclusion of an Agreement on Mutual Recognition between the European Community and the United States of America, OJ 1999 L 31/1, as amended by Decision No. 2002/803/EC of the Council of 8 October 2002, OJ 2002 L 278/22.

  23. 23.

    Takacs (2013), p. 83.

  24. 24.

    Shaffer (2002), pp. 69–73.

  25. 25.

    Article 4 SPS Agreement provides:

    1. Members shall accept the sanitary or phytosanitary measures of other Members as equivalent, even if these measures differ from their own or from those used by other Members trading in the same product, if the exporting Member objectively demonstrates to the importing Member that its measures achieve the importing Member’s appropriate level of sanitary or phytosanitary protection. For this purpose, reasonable access shall be given, upon request, to the importing Member for inspection, testing and other relevant procedures.

    2. Members shall, upon request, enter into consultations with the aim of achieving bilateral and multilateral agreements on recognition of the equivalence of specified sanitary or phytosanitary measures.

  26. 26.

    This provision was discussed briefly in the US—Poultry (China) case, but has not been extensively litigated in WTO dispute settlement. See WTO, United States—Certain Measures Affecting Imports of Poultry from China, Panel Report (29 Sept 2010) WT/DS392/R, paras. 7.132–7.139. In addition, the SPS Committee has issued a Decision on the Implementation of Article 4. See WTO, Committee on Sanitary and Phytosanitary Measures, Decision on the Implementation of Article 4 of the Agreement on the Application of Sanitary and Phytosanitary Measures, Revision, 23 July 2004, G/SPS/19/Rev.2.

  27. 27.

    See, e.g., Articles 2.4 and 2.6 of the TBT Agreement, Article 3 of the SPS Agreement.

  28. 28.

    Weidenbaum (1997).

  29. 29.

    Office of the United States Trade Representative (2013b).

  30. 30.

    Inside US Trade (2013a); see also Office of the United States Trade Representative (2013a).

  31. 31.

    In the TPP, the US objectives include: “Commitments to promote greater transparency, participation, and accountability in the development of regulations and other government decisions, including by […] providing opportunities for stakeholder comment on measures before they are adopted and finalized.” See Office of the United States Trade Representative (2015).

  32. 32.

    Office of the United States Trade Representative, TPP, Regulatory Coherence (5 Nov 2015). https://medium.com/the-trans-pacific-partnership/regulatory-coherence-6672076f307a#.1mb7d8mvl. Accessed 20 Oct 2016. Article 25.4.1 states:

    The Parties recognise that regulatory coherence can be facilitated through domestic mechanisms that increase interagency consultation and coordination associated with processes for developing regulatory measures. Accordingly, each Party shall endeavour to ensure that it has processes or mechanisms to facilitate the effective interagency coordination and review of proposed covered regulatory measures. Each Party should consider establishing and maintaining a national or central coordinating body for this purpose. [emphasis added]

  33. 33.

    See, e.g., WTO, United States—Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Appellate Body Report (16 May 2012) WT/DS381/AB/R, para. 315:

    we consider that the question of whether a technical regulation “fulfils” an objective is concerned with the degree of contribution that the technical regulation makes toward the achievement of the legitimate objective.

  34. 34.

    For example, Article 5.1 SPS Agreement states:

    Members shall ensure that their sanitary or phytosanitary measures are based on an assessment, as appropriate to the circumstances, of the risks to human, animal or plant life or health, taking into account risk assessment techniques developed by the relevant international organizations.

  35. 35.

    World Trade Organization (2013):

    The principles include openness and accountability, good coordination at home between government agencies and stakeholders, analysis and evaluation of regulatory options based on evidence, and international cooperation among governments.

    See also World Trade Organization (2014).

  36. 36.

    WTO, Committee on Technical Barriers to Trade, Good Regulatory Practice (GRP): Voluntary Mechanisms and Related Principles, Proposal by the Chairman (27 Oct 2014) JOB/TBT/119.

  37. 37.

    US−EU High Level Working Group on Jobs and Growth (2013).

  38. 38.

    The White House, President Barack Obama (2013a).

  39. 39.

    The White House, President Barack Obama (2013b):

    As I announced at the State of the Union address, we’re also going to be launching an effort to lock in a EU−U.S. trade deal as well. And already, Europe is our largest trading partner—the EU as a whole—and we think that we can expand that even further. And some of this has to do with us being able to break down some existing barriers across the Atlantic to U.S. products and services, but some of it also has to do with smoothing out differences in regulatory approaches, just trade frictions that arise that are unnecessary that carries over from earlier periods.

  40. 40.

    See Barker and Workman (2013), p. 3.

  41. 41.

    Barker and Workman (2013), p. 4.

  42. 42.

    OECD (2013).

  43. 43.

    Berden et al. (2009), p. xviii. These figures have also been cited in the popular press; see also Ignatius (2012).

  44. 44.

    Egan (2001), p. 256.

  45. 45.

    See Decision No. 1999/78/EC of the Council of 22 June 1998 on the conclusion of an Agreement on Mutual Recognition between the European Community and the United States of America, OJ 1999 L 31/1.

  46. 46.

    The White House, Office of Management and Budget, United States−European Union High-Level Regulatory Cooperation Forum. http://www.whitehouse.gov/omb/oira_irc_europe. Accessed 23 Aug 2016.

  47. 47.

    Under the category of “regulatory issues and non-tariff barriers”, this document recommends that the two sides should seek to negotiate, inter alia: (1) “SPS-plus” rules, (2) “TBT-plus” rules, (3) cross-cutting disciplines on regulatory coherence and transparency for the development and implementation of efficient, cost-effective, and (4) more compatible regulations for goods and services, and provisions or annexes containing additional commitments or steps aimed at promoting regulatory compatibility in specific, mutually agreed goods and services sectors. See US−EU High Level Working Group on Jobs and Growth (2013).

  48. 48.

    TBT Agreement.

  49. 49.

    SPS Agreement.

  50. 50.

    US−EU High Level Working Group on Jobs and Growth (2013), 4. The HLWG thus recommends that the two sides should seek to negotiate:

    An ambitious “SPS-plus” chapter, including establishing an on-going mechanism for improved dialogue and cooperation on addressing bilateral sanitary and phytosanitary (SPS) issues. The chapter will seek to build upon the key principles of the World Trade Organization (WTO) SPS Agreement, including the requirements that each side’s SPS measures be based on science and on international standards or scientific risk assessments, applied only to the extent necessary to protect human, animal, or plant life or health, and developed in a transparent manner, without undue delay.

    And:

    An ambitious “TBT-plus” chapter, building on horizontal disciplines in the WTO Agreement on Technical Barriers to Trade (TBT), including establishing an ongoing mechanism for improved dialogue and cooperation for addressing bilateral TBT issues. The objectives of the chapter would be to yield greater openness, transparency, and convergence in regulatory approaches and requirements and related standards-development processes, as well as, inter alia, to reduce redundant and burdensome testing and certification requirements, promote confidence in our respective conformity assessment bodies, and enhance cooperation on conformity assessment and standardization issues globally.

  51. 51.

    In 2012, several important decisions were issued by the WTO’s Appellate Body that interpreted and applied core provisions of the TBT Agreement. See WTO, United States—Measures Affecting the Production and Sale of Clove Cigarettes, Appellate Body Report (4 Apr 2012) WT/DS406/AB/R; WTO, United States—Certain Country of Origin Labelling (COOL) Requirements, Appellate Body Report (29 June 2012) WT/DS384/AB/R, WT/DS386/AB/R; WTO, United States—Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Appellate Body Report (16 May 2012) WT/DS381/AB/R.

  52. 52.

    The GM food case remained on the dispute settlement body (DSB) agenda as of September 2014. See WTO, DSB Minutes of Meeting (21 Nov 2014) WT/DSB/M/350. In the Hormones case, the US and EU reached a temporary solution, but the underlying issues have not been resolved. See Office of the United States Trade Representative (2009).

  53. 53.

    US−EU High Level Working Group on Jobs and Growth (2013), 4.

  54. 54.

    US−EU High Level Working Group on Jobs and Growth (2013), 4.

  55. 55.

    Office of the United States Trade Representative (2013a).

  56. 56.

    Inside US Trade (2013a):

    Froman implicitly criticized the European Commission’s system of issuing preliminary general papers based in advance of issuing proposed rules, and seeking comments on those papers rather than the detailed rules themselves.

  57. 57.

    De Gucht (2013).

  58. 58.

    De Gucht (2013). For more details on this proposal, see Inside US Trade (2013b), noting that the Council “would involve senior-level officials from regulatory agencies, as well as the Commission’s Secretariat General and the U.S. Office for Information and Regulatory Affairs.”

  59. 59.

    Inside US Trade (2014a).

  60. 60.

    Inside US Trade (2014b).

  61. 61.

    The TPP negotiating partners are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam.

  62. 62.

    Petri and Plummer (2012).

  63. 63.

    Brandt (2013). See also Pilling and Donnan (2013).

  64. 64.

    The most recent example of this is the OECD’s “Recommendation of the Council on Regulatory Policy and Governance”, see OECD (2012). This report offers a revision of previous guidance on regulatory policy released by the OECD in 1995 and again in 2005.

  65. 65.

    Barbee and Lester (2014).

  66. 66.

    Comprehensive Economic Trade Agreement (CETA). http://trade.ec.europa.eu/doclib/docs/2016/february/tradoc_154329.pdf. Accessed 31 Aug 2016.

  67. 67.

    Canada stands to benefit more in relative terms than the EU from the deal with 8.5% of Canadian merchandise exports going to the EU (second largest only after the U.S.) and 10.7% of its imports (third largest source) coming from the EU. In comparison, Canada only makes up less than 1% of EU merchandise imports and exports. Though it is important to note that both will substantively benefit from the high degree of investment liberalization. See World Trade Organization Statistics Database (2015).

  68. 68.

    Annex 8-F of the CETA, (Declaration by Canada on the Investment Canada Act).

  69. 69.

    See Robertson (2014), pp. 113–136.

  70. 70.

    See CETA, Protocol on the Mutual Acceptance of the Results of Conformity Assessment.

  71. 71.

    CETA, Protocol on the Mutual Acceptance of the Results of Conformity Assessment, Annex I, lists the covered products. This list includes the following products:

    Electrical and electronic equipment, including electrical installations and appliances, and related components; Radio and telecommunications terminal equipment; Electromagnetic compatibility (EMC) Toys; Construction products; Machinery, including parts, components, including safety components, interchangeable equipment, and assemblies of machines; Measuring instruments; Hot-water boilers, including related appliances; Equipment, machines, apparatus, devices, control components, protection systems, safety devices, controlling devices and regulating devices, and related instrumentation and prevention and detection systems for use in potentially explosive atmospheres (ATEX equipment); Equipment for use outdoors as it relates to noise emission in the environment; Recreational craft, including their components.

    The following from Annex 2 will also be under consideration for inclusion after 3 years of entry into force of the Agreement

    a) Medical devices including accessories; b) Pressure equipment, including vessels, piping, accessories and assemblies; c) Appliances burning gaseous fuels, including related fittings; d) Personal protective equipment; e) Rail systems, subsystems and interoperability constituents; f) Equipment placed on board of a ship.

  72. 72.

    European Commission (2016).

  73. 73.

    Article 21.2(4) CETA.

  74. 74.

    The “Role and Composition of the Regulatory Cooperation Forum” is detailed in Article 21.6 CETA.

  75. 75.

    For more on this, see Lester and Barbee (2013).

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Authors and Affiliations

  1. Cato Institute, Washington, DC, USA

    Simon Lester

  2. Department of Government, Georgetown University, Washington, DC, USA

    Inu Manak

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  1. Simon Lester
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Correspondence to Simon Lester or Inu Manak .

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  1. Faculty of Law, University of Augsburg, Augsburg, Germany

    Thilo Rensmann

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Lester, S., Manak, I. (2017). Addressing Regulatory Trade Barriers in Mega-Regional Trade Agreements. In: Rensmann, T. (eds) Mega-Regional Trade Agreements. Springer, Cham. https://doi.org/10.1007/978-3-319-56663-4_14

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