The regulatory cooperation in TTIP: European and Amercian perspecitives

by Beatrice Perinelli


TTIP stands for “Transatlantic Trade and Investment Partnership“, a proposed treaty between the EU and the USA which aims to influence trade rules between the two economic powers. Its overall objectives are to create new jobs, relaunch both economies and reduce prices for consumers. These goals can be achieved through the removal of trade barriers but mainly through the joint work of the regulatory authorities involved in order to align health and safety standards, open markets to foreign investment and facilitate mutual participation in public procurement. The regulatory cooperation within the TTIP would serve to standardize rules allowing a reduction of these costs without incurring any lowering of quality standards.

European public opinion concerning the treaty is strongly split. On the one hand there are those in opposition who believe that its approval will result firstly in a decrease in European commercial quality standards, the fruit of decades of policies aimed at building a single market, which is highly competitive by any global measure; and secondly and most importantly they believe that it will create a democratic deficit in decision-making. On the other hand, those who argue that the partnership, by expanding the boundaries of the European market, constitutes the only way out of the economic stagnation which the continent has been going through for many years.

My work aims to reconcile these rival positions, starting from the declarations of intent that have been made so far in order to fully understand what are the real implications of the agreement once it has been signed.

Chemicals are those substances of natural origin or produced by industrial processes and used in numerous activities (pharmaceutical, automotive, food, electronics). Their economic importance at European level is impressive: the European chemical industries produce 31% of worldwide turnover, and it is estimated that in Europe alone may be marketed 30 thousand different substances.

An important turning point came with the approval of Regulation (EC) No. 1907/2006 concerning the Registration, Authorisation and Restriction of Chemicals (REACH) and the creation of European Agency for Chemicals Agency (ECHA) which plays a role of technical and scientific coordination of activities under the REACH and organizes a bank data to collect and manage the data provided by the industry through the registration of substances.

REACH requires the registration of all substances produced or imported into the Community in major quantities of one tonne per year and consists of the presentation by the manufacturers or importers of files containing data on substances in order to be able to control the risks related to human health and the environment by adopting appropriate risk management measures and, in the absence of available data, in the execution of experimental tests to characterize the relevant chemical, toxicological and environmental risks.

The authorization procedure is one of the major legislative changes introduced by REACH. And it’s dedicated to the extremely worrying “substances” (Substances of Very High Concern – SVHC); therefore, the placing on the market or use of a substance contained in Annex XIV, on its own or as a component of a mixture or article, necessarily requires authorization.

When a substance poses an unacceptable risk to health or the environment despite existing measures it can be undertaken action at Community level. ECHA, at the request of the Commission or a Member State prepares a dossier for restrictions. For substances subject to authorization, the agency can also propose restrictions if the use of that substance in articles poses a risk not adequately controlled.

Even in the American market chemical companies play a prominent economic role with more than 70,000 substances produced by more than 10,000 factories for a turnover of 769 billion dollars a year. For such an important economic development does not result in a corresponding evolution taking into account that the legislation TSCA (Toxic Substances Control Act) dates back to 1976 and that the US is a common law legal system there was only has judicial, administrative and practical adaptation.

The Toxic Substances Control Act of 1976 mandated the EPA (US Environmental Protection Agency) to protect consumers against damage to health or the environment by regulating the production and sale of chemical products. This act has given, therefore, to the government the power to exercise direct control over which types of substances could be used and which not. The types of chemicals regulated by the law fall into two broad categories: the existing chemicals and new chemicals. This provides the fundamental task for the EPA to compile, update and publish a list containing information of each chemical that is produced or processed in the United States, list called “TSCA” Section 8 of the Toxic Substances Control Act (TSCA) that now it contains about 85,000 chemicals.

As part of EPA’s commitment to strengthen the management of chemicals and to increase the information on chemical substances, the Agency shall provide access to the inventory online.

Learned the economic importance of the chemical industry both for Europe and for the United States it should be mentioned that the negotiations for the Transatlantic Partnership have paid little attention to this sector of the market and have focused too much on the differences between the two systems.

It is not present to date a detailed comparative study of human health, environment and consumers levels of protection in the field of chemical substances of the two transatlantic partners.

The resolution of the European Parliament in July 2015 which contains the proposal of the “TTIP” text on the subject of chemicals simply aims to improve collaboration between the regulators and the exchange of information between the two economic powers, without there being a real intent to establish a regulatory cooperation. It must take into account that, already today, there is trade in chemicals between the two partners, but the duplication of costs for the registration and risk assessment, it is definitely a barrier to free trade. In reality, therefore, the TTIP can be an appropriate instrument for promoting the reduction of these costs and an improvement of the existing regulations, through the development of better regulatory principles because if it is true that THE TSCA does not contain a detailed regulation of the disclosure requirements and assessment of the risk of harm, REACH is excessively static and produces too many costs and too rigid bureaucracy.

Several are the solutions proposed by the doctrine to obtain a convergence of the adjustment systems. One way could be that of the “optional asymmetric recognition” Under such a system, a regulated party would be given the option to opt-into the regulatory system for a chemical that is perceived by the TTIP negotiating parties as more stringent, such as REACH.

Thereby, the costs of duplicative regulatory processes in the second country could be avoided.

For example, an industry decides to sell a pesticide in the US already recognized and authorized under REACH in Europe. Of course if the industry opts to be subject to the rules of REACH although more stringent, automatically avoids award costs according to European regulations TSCA his having applied also in the American market. Such asymmetric system will be more effective when the duplication costs of adjustment are higher while the marginal costs of implementing more stringent regulations are lower.

Another possibility would be to set up a panel of experts with the task of preparing assessments and data on the actual performance of the two systems of regulation and possible compatibility to try to equate where possible the registration procedures, authorization and restriction.

It is true that the differences between the EU and USA in the chemical sector regulation are considerable and that the harmonization could lead to a weakening of the European system, which definitely looks more “severe” but TTIP seems the only real way for an alignment of rules in a sector of the market so fundamental.