Tuesday, 27 May 2008

Threat to US-EU relations by Transatlantic Economic Council

The Transatlantic Economic Council (TEC) was created in April 2007 at the EU-US Summit in Washington to foster transatlantic economic integration. It aims to achieve better regulation, barrier-free and secure trade, protection of intellectual property rights, and integration of financial markets although it is doubtful that it will be able to achieve such objectives. On 13 May, the TEC met for the second time. According to the US Chamber of Commerce and BusinessEurope, if all the outstanding regulatory barriers could be resolved by the TEC, that could add €6.5 billion ($10bn) to the transatlantic economic relationship in saved costs and potential market growth. The transatlantic business community are hoping that the TEC will begin to manage the bilateral tensions between the US and EU. American businessmen are particularly concerned about regulatory barriers in the cosmetics and poultry sectors. The EU’s ban on the marketing of cosmetics ingredients that were tested on animals will enter into force in March 2009 and it is becoming quite difficult for the US to meet that deadline. Moreover, the US cosmetics firms have been objecting to the EU’s REACH chemicals regulation deadline on June 2008, for registering certain chemicals used in cosmetics made outside the EU. The US believes that the deadline is almost impossible to be meet which will lead to millions of dollars in lost sales as product formulas will be prevented from being sold within the EU. The main concern of this industry is that its products would be classified as new substances therefore they must be registered with the European Chemicals Agency by 1 June 2008 however they are not entitled to the extended registration deadlines that some European companies are. Furthermore, the EU has been also calling to recognise the US accounting system since it has became too expensive for one company to settle its accounts in accordance with the other system. US business has also called for a lifting of the EU’s 11 years ban on importing US chickens that are washed in chlorine. Under the EU rules, poultry meat must be washed in water of drinking quality. According to the European Food Safety Authority there are no risks from treating poultry meat with chlorinated water yet Mariann Fischer Boel, the Agriculture Commissioner, believes that such move will upset EU farmers as importers would be allowed to meet lower standards. In the meantime, according to the Financial Times, “European poultry producers are using a chlorine-washing process on exported chicken, while the same cleaning method in the US has led to a de facto ban on American sales in the EU.” On the other hand, the US is urged to scrap its low-voltage procedure approval for electrical products which requires products to be tested in independent laboratories which, according to BusinessEurope, leads to €77 million a year in lost sales opportunities. On poultry, the Commission has promised that it will work with the Member States and the European Parliament to find an agreement on this issue, before the next TEC meeting, scheduled to take place in the autumn 2008. The Commission has also guaranteed US officials that it will “take concrete action” to make sure that trade in cosmetics is not disrupted by the REACH regulation. The Commission has said that will propose “a positive decision” on the equivalence of US accounting standards to EU rules in the course of 2008. It seems that the progress made on the TEC agenda consists only of promises. According to the joint statement “Neither side, for example, is completely satisfied that its concerns are yet being fully addressed in the TEC process.” It remains to be seen if the European Commission will be able to honour its commitments. Nevertheless, it seems that the TECs credibility is already at stake. Soon transatlantic businesses will realise that TEC will achieve nothing in removing barriers to transatlantic trade.

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