Transatlantic Market Integration, Business and Regulation: Building on the WTO

Written by | Wednesday, September 23rd, 2015

Bernard Hoekman and Petros C. Mavroidis (Swedish Institute for European Policy Studies)

The purpose of the EU-U.S. negotiations on the Transatlantic Trade and Investment Partnership (TTIP) and the recently finalized EU-Canada Comprehensive Economic and Trade Agreement (CETA) is a broader integration of the transatlantic markets. This should be achieved by the removal of the outstanding tariffs and similar political measures discriminating against domestic providers of goods and services and by mitigating the negative consequences of the differences between the regulatory regimes and norms on both sides of the Atlantic.
Many third countries, which do not have free trade agreements or preferential access to the EU and U.S. markets, are concerned that they will have to face tougher competition from EU and U.S.-based companies in their home markets. The estimates, however, imply that the impact of these agreements on the lowest-income countries would be minimal as EU and U.S. producers have moved most of their lower-quality production requiring low-skilled labor abroad.
A much bigger problem occurs in the mitigating of the negative effects of non-tariff measures, which often directly discriminate against foreign producers, and the non-discriminatory domestic regulations, which lead to the additional cost for the companies engaged in the transatlantic trade. There are also doubts how effective the TTIP and CETA can be to address this issue. Everything therefore depends mostly on the effectiveness of the regulatory cooperation. It will be necessary to implement institutions and procedures, which will support the mutual exchange of information and build trust via regular communication between countries and authorities that implement regulations and enforce them.
It is a political challenge for the U.S., the EU and Canada. If the convergence of the legal regulations is successful, all companies – regardless of the location of their headquarters – will benefit. For the third countries, it will be key only whether the U.S. and the EU will be willing to apply the mechanisms of the transatlantic cooperation on those countries, which have introduced appropriate regulatory mechanisms and norms. The necessary condition will, however, be that the concerned jurisdictions pursue comparable goals and employed trustworthy procedures implemented by trustworthy institutions.

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