Why TTIP is stuck in the muck
Politico | 16 January 2016
Why TTIP is stuck in the muck
by Rod Hunter
Rod Hunter is a senior vice president at Pharmaceutical Research and Manufacturers of America. He practiced law in Brussels for more than a decade and served as senior director for international economics at the White House’s National Security Council under President George W. Bush.
Negotiations over the Transatlantic Trade and Investment Partnership (TTIP) have bogged down in a number of thorny issues, such as whether poultry can be washed with chlorine solution before being sold. That scrum is especially significant because it’s emblematic of a larger issue that might hamstring negotiations indefinitely: differing regulatory approaches that stem from fundamental constitutional differences.
Traditionally, people think trade negotiations are primarily aimed at cutting tariffs and similar border barriers, but such transatlantic hurdles are already very low. What is unique — and so challenging — about the transatlantic negotiations is that the key to success lies in ironing out clashing regulations produced by two sophisticated, but different, legal systems. These differences can’t be papered over, as they have been at the heart of the most vexing transatlantic trade disputes — hormone beef, biotech crops, and now poultry treatments — and concern the lion’s share of the potential benefits of TTIP.
A basic difference between the United States and the European Union is the relationship between legislative and executive authority. The founding fathers of the U.S. designed the government with “separate and distinct” executive and legislative authorities based on the belief that competition between powers was the best way to constrain an overweening government and preserve individual liberty. “Ambition must be made to counteract ambition,” James Madison wrote in the Federalist Papers.
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Today, Congress is responsible for major political choices, with executive officials generally confined to implementing details while following strict due process and transparency rules. Agencies publish proposed rules and take public comments on how the rules comply with statutory mandates. Most importantly, interested parties may challenge in court rules they believe are inconsistent with Congress’ mandates or otherwise unjustified. Regulators and their supporters may complain about the hassle, but there’s nothing like the hangman’s noose of a court challenge to focus the mind of regulators on staying true to legislative instructions.
The European Union, a creature of member state governments, has never had the same qualms about government-by-expert. First, many European parliamentary governments lack Madisonian institutional jealousy. In countries with parliamentary systems, legislative and executive powers are effectively conjoined. Whoever has the majority in parliament controls the executive. National legislatures often delegate to the executive’s experts largely unfettered powers.
To unlock the potential of TTIP, this basic problem in the EU regulatory process needs to be addressed.
Second, the EU and national governments have long used obscure forms of delegated rule-making to displace national measures as part of the political project of “ever closer union.” Inspired by one-time cognac merchant and EU founding father Jean Monnet, they have pursued “integration by stealth,” through which European and national experts harmonize standards and common market rules with little public oversight. The trappings of democracy in the form of the European Parliament were grafted on later, while the EU rule-making process remains at heart executive-run and with limited judicial supervision.
The EU now relies principally on the Commission adopting delegated and implementing measures, often under a procedure traditionally called “comitology.” The EU passes basic legislation that assigns the drafting of detailed rules to government experts. Commission officials prepare the technical measures, which are then haggled over by national officials with all the Realpolitik of foreign affairs.
In contrast to the U.S., the EU places tight limits on when private parties may challenge executive rule-makings before the courts. There is effectively no requirement for general rules to be based on sound science and cost-benefit analyses, nor are there binding rules on transparency and public participation.
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The dispute over poultry washing illuminates the U.S.-EU divide. The U.S. administration used Congressional legislation and scientific analysis to develop rules to allow poultry meat to be washed with antimicrobial solutions that prevent bacterial contamination. Interested parties were permitted to comment on proposed rules and challenge the final measures.
In the EU, the Commission also developed scientifically sound rules that would have allowed some antimicrobial treatments, and thus have allowed U.S. poultry imports to resume. But national officials blocked the proposal. There was no obligation to take public comment, and virtually no opportunity for interested parties to challenge the decision. Not surprisingly, American farmers suspect the ban has more to do with protecting European chicken farmers than consumers.
This politicized regulatory approach also enables activists to conjure up imaginary demons. Even sensible politicians like Chancellor Merkel have had to take untenable positions in order to navigate the hyperventilated politics surrounding TTIP. “There will be no imports of Chlorhünchen [chlorine chicken] from America,” Merkel declared last year. “It’s something that I’ve prevented for years, and I will continue to prevent it.”
To unlock the potential of TTIP, this basic problem in the EU regulatory process needs to be addressed. The EU should expand transparency and public participation and, critically, liberalize rules allowing interested parties — whether businesses or activist groups — to challenge executive rules.
National officials won’t like losing the ability to micro-manage outcomes. But more accountable procedures would ensure greater reliance on science while reducing the scope for conflict with trading partners.
Without resolving these differences, TTIP is going to be difficult to negotiate and even more difficult to implement. As challenging as the accord may be, it’s worth the effort. Reforms embedded in an agreement would be an economic boon at a time of stagnation. The agreement would reinforce high-quality regulatory standards and set a model to emerging markets building their own regulatory systems. Not least, the U.S. and the EU would demonstrate that their common trade agenda can move forward, setting a liberalization example for the world.
