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09 September 2014
A regulatory race to the bottom: fact or fiction?
''We have seen the video clip and do neither approve of its content or its style. The allegation that regulatory coherence will trigger a race to the bottom is simply false.’’
This was the response to our latest TTIP video by a trade spokeswoman from the Commission, as reported by EurActiv on August 28 and again today. It seems that this instalment has particularly irked EU trade officials, who have more recently stepped up their assertiveness in reacting to any dissenting opinion on the benefits of the deal.
A Commission attack on the grounds of ‘style’ is at the very least humorous. A lecture on taste from the organisation that brought us this style catastrophe should be taken with a grain of salt. As for any falsehoods in terms of content, we’re glad to confirm that there won’t literally be a giant cigar-smoking fat cat roaming the streets of Europe as a result of TTIP.
However, if we are hoping to separate facts from fiction, let us look at the other content issue at hand; whether or not regulatory coherence could put downward pressure on regulation. The official communications around this issue is that standards and regulation will not be undermined by TTIP. The Commission, US negotiators and those gunning for a comprehensive deal purport that it could even raise standards. Lord Livingston, the new UK trade minister told the Financial Times this week that: “This is not about reducing standards. This is about creating a single very high standard.”
Few with in-depth knowledge of this issue believe it is credible that standards could be raised to a ‘single very high standard’ on both sides of the Atlantic. The simple reason is, neither the US or EU are willing to force a sector to take up more regulatory requirements under such an agreement, as it would impact the profits of those companies. The aim of TTIP after all is to remove the restrictions that come in the form of standards or regulation, which industry believes are dispensable, especially if it is cost effective to do so. Consumer or other stakeholder groups on the other hand might deem them essential.
As an example, the ongoing controversy over the standard of US meat and its inclusion in the deal will not end with the US banning the use of growth hormones in beef, ractopamine in pork, or the process of washing chicken in chlorine baths. We won't see the US rushing to raise their standards to a level Europe can accept. To the contrary, the only realistic outcomes for Europe are to either accept these products as they are, or to remain strong in the face of intense US lobbying and refuse to negotiate on such items. The latter has been the commendable stance of the Commission to date. It will be interesting to see whether they can retain this position in the face of give and take negotiations. After all, they have they have their own battles to win too.
Although there is a lack of evidence indicating that standards will be raised, there has been a lot that shows that TTIP will exert pressure on standards to be lowered. As part of ‘regulatory coherence’, negotiators hope that different approaches to standards across both jurisdictions can be ironed out. They can do this in a number of ways. Either through regulatory convergence (changing regulations and standards to match the other) or mutual recognition (accepting that the other standard is equal to their own). A study detailed to the AGRI Committee in the European Parliament last week noted that there is ‘a risk with regulatory convergence, as well as mutual recognition, that the TTIP could align common standards with the lower level ones’ (p62).
In cases where the two regions operate in wholly different ways, such as the regulatory regimes for the chemical and pharmaceutical industries, the authors warn that:
‘..such convergence runs the risk of weakening, if not eliminating, a conception of consumer and environmental protection that was adopted by a long and complex but a fully democratic process when the REACH directive was passed by both the European Parliament and the Council.’
Yet at the same time, regulatory convergence will prove to be a highly contentious issue and is not an easy to deliver in certain sectors. The planned continous regulatory oversight envisioned in a 'living agreement' may be able to incrementally move sectors toward convergence, leading many to believe that TTIP will fundamentally alter the way our systems work. Though convergence would align standards to the lower ones, even without it, the pressure on standards is intensified by market access alone if standards are mutually recognised:
'...without an effort to harmonise regulations, producers faced with different regulations would sell their products on a single market. This is a particular source of worry for EU producers. They fear they would have to compete while facing not only higher energy costs and higher labour standards, but also more regulatory constraints.' (p59)
Hence, the 'race to the bottom' on regulations comes from two fronts acting as as Catch 22: regulatory convergence risks lowering standards to the lowest available, but failing that, market access for cheaper goods produced at a lower standard will put internal pressure on regulations to be reduced in order for businesses to be able to compete with foreign imports.
This report is not the first (nor will it be the last) to highlight the genuine concerns that regulatory coherence raises. Taken as part of a package that includes convergence, mutual recognition of standards, as well as the investor-state dispute settlement, TTIP copper-fastens multinational corporations ability to challenge and put downward pressure on regulatory systems in other jurisdictions. It is not a coincidence therefore that industry support has been so unwavering.
Nor is it by chance that it has set off alarm bells with such a wide variety of civil society organisations in Europe and the US. Environmentalists concerned about fracking, climate change and the environment, to organisations concerned about food safety, standards on chemicals and pharmaceuticals, consumer groups on issues like labelling, health advocates on access to affordable medicines and the threat to public services, unions on employment rights. The list goes on.
The Commission’s words of comfort do little to ease worries when the evidence points in one direction and one direction only. Of course there could be positive effects of a different sort of TTIP as were outlined by John Hilary on this website last week. We would welcome a reimagining of the deal that places citizens and the environment at its heart.
The pursuit of regulatory coherence is focused on reducing, not increasing, the level of regulatory commitments businesses on both sides of the Atlantic must abide by. That requires vigilance on behalf of policymakers and the public. The argument that this could be good for jobs and growth says nothing of the financial and societal impact of eliminating or watering-down many of our most hard-won standards. The Commission's impact assessment report has not taken those adverse consequences into account. What is 'false' about this debate is that the burden of proof should only be on us. Or perhaps we should put it like this:
'The allegation that regulatory coherence will trigger a race to the top is simply false. They have not produced the evidence, and so we can neither approve of its content or its style.'