The Obama Administration Seeks Input From Companies on U.S.-European Regulatory Compatibility Leading Up to International Trade Negotiations

Kelley Drye Client Advisory

Last week, the governments of the United States and the European Union (EU) convened in Washington as part of the U.S.-EU High Level Working Group on Jobs and Growth (HLWG) to discuss how to deepen transatlantic economic ties—including possibly negotiating a U.S.-EU free trade agreement.  The HLWG is due to issue a joint report by the end of the year that will form the basis of any negotiations.  Each government is currently engaged in domestic consultative processes to determine overall negotiating positions and goals, as well as what sectors or products they should focus on.  There are still significant differences on controversial issues like geographical indications (GIs, products that have geographic locations in their names), air and maritime transportation, state-owned enterprises (SOEs), cross-border data flows, agriculture, sanitary and phytosanitary measures, government procurement, whether the goal should be regulatory cooperation” (treating similar regulations as being equivalent to one another) or regulatory harmonization” (converging upon a single U.S.-EU regulation on a particular matter), and whether any commitments made in a trade agreement would apply to U.S. state governments.

To this end, on September 28, 2012, the Office of the United States Trade Representative (USTR) published in the Federal Register a request for comments from the public on how to promote greater transatlantic regulatory compatibility generally and in particular economic sectors.  Thus, now is the time for U.S. manufacturers, importers, exporters, and companies doing business in Europe or competing with European companies in the United States to submit comments to USTR on regulatory differences in the EU and United States, and any challenges, concerns, opportunities, or proposed solutions related to such regulations or enhanced regulatory compatibility.  Written comments should be submitted no later than October 31, 2012.

How Could This Affect My Company?

Currently, for any given regulatory area, many U.S. manufacturers, importers, exporters, and companies doing business in Europe have to follow at least two sets of regulations that require two sets of applications, certifications, permits or licenses based on two sets of technical standards or tests, that are issued by two sets of government agencies.  Enhanced regulatory compatibility—whether it is regulatory cooperation or regulatory harmonization—will help enable businesses that operate or compete on both sides of the Atlantic to reduce excessive regulatory costs, unjustified regulatory differences, and unnecessary red tape, which will in turn lead to mutually beneficial trade, investment and job creation.  As any U.S.-EU agreement would cover the world’s two largest consumer markets and over 40 percent of the global GDP, regulatory compatibility could also create the critical mass needed in certain regulatory areas for the new U.S-EU standard to become the global standard” to which all other countries and companies would aspire.  This is particularly true with regard to regulations affecting new and innovative growth markets and technologies.  Thus, the potential benefits reach far beyond the borders of the United States and European Union.

In addition to the elimination of the above-mentioned non-tariff barriers, a high-quality U.S.-EU free trade agreement could also be critical to your business in several ways—some beneficial and some adverse.  Benefits can include new market access through eliminating the remaining tariffs on U.S. exports to the EU, as well as added foreign investment protections in key and emerging markets abroad, particularly in Eastern Europe.  On the other hand, a U.S.-EU free trade agreement will result in eliminating the remaining tariffs on EU imports into the United States and thus increased competition for sensitive domestic products and services.

Please contact Paul Rosenthal or Kathleen Cannon if you would like to submit comments on U.S.-EU regulatory cooperation, or if you have any questions or concerns about the how the U.S.-EU trade negotiations may be advantageous or adverse to your business.   We would be happy to provide you with a customized analysis and monitor developments affecting your interests.

For more information about this advisory please contact:

Paul Rosenthal
(202) 342-8485

Kathleen Cannon
(202) 342-8590