[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 18.5.2005

COM(2005) 196 final

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE

A stronger EU-US Partnership and a more open market for the 21st century

EXPLANATORY MEMORANDUM

1. The “EU-US Declaration on Strengthening our Economic Partnership”, agreed at the 2004 EU-US Summit, called upon transatlantic partners to develop a forward-looking strategy to enhance the economic relationship between the US and the EU. The Declaration invited stakeholders from both sides of the Atlantic to assess the bilateral economic relationship and explore means to eliminate trade, regulatory and investment obstacles.

2. On the EU side, a public on-line consultation was launched on 30 September 2004. The business community, environmental and consumer organisations, trade unions and other interested groups and individuals were invited to provide their views on the obstacles they face when trading or investing in each other’s markets. Interested parties were also given the opportunity to present their views at two stakeholder conferences organised by the Commission.

3. Following stakeholders’ feedback, the Commission identified areas that should be tackled in cooperation with the US. The initiatives proposed by the Commission form a package designed to boost EU-US trade and investment in three areas:

- regulating for a transatlantic market;

- the knowledge and innovation dynamic;

- smarter, safer borders for swifter trade and investment.

4. With respect to delivery mechanisms, the Commission proposes a mix of binding and non-binding approaches, across sectors, with the aim of giving new impetus and quality to the EU-US economic partnership while reflecting our commitment to promote sustainable development. This would include the conclusion of an ambitious approach to promote more effective regulatory co-operation.

5. The ex-ante evaluation of any subsequent binding commitments would be undertaken in accordance with the Communication on Impact Assessment[1]. Moreover, a Sustainability Impact Assessment would be carried out in conformity with the applicable rules for Commission proposals resulting from this Communication and requiring a mandate from the Council.

6. The Communication also sets out a number of proposals to strengthen the broader political architecture of the transatlantic partnership.

TABLE OF CONTENTS

1. Introduction 4

2. Rationale 4

3. Initiatives to make the transatlantic market work better 6

3.1. Regulating for a transatlantic market 6

3.1.1. Regulatory policy co-operation 6

3.1.2. Investment facilitation 8

3.1.3. Competition policy and enforcement 8

3.1.4. Government procurement 8

3.1.5. Aviation 9

3.1.6. Maritime transport services and maritime affairs 9

3.1.7. Financial markets 9

3.1.8. Free movement of business people 10

3.1.9. Mutual recognition of professional qualifications 10

3.2. The knowledge and innovation dynamic 11

3.2.1. New technologies 11

3.2.1.1. Information and communication technologies (ICT): regulation for innovation 11

3.2.1.2. Space 11

3.2.2. Intellectual property 11

3.2.3. Research and Development 12

3.2.4. Energy 13

3.2.5. Education and vocational training 13

3.3. Smarter, safer borders for swifter trade and investment 13

4. Delivering the economic goals 14

4.1. The policy tool box 14

5. The broader architecture of EU-US relations 16

5.1. The New Transatlantic Agenda (NTA) – an independent assessment 16

5.2. Giving EU-US relations the political profile to match our ambitions 17

6. Conclusions and recommendations 18

1. INTRODUCTION

IN FULFILMENT OF THE “EU-US DECLARATION ON STRENGTHENING OUR ECONOMIC PARTNERSHIP” (HENCEFORTH THE “DROMOLAND DECLARATION”) AGREED AT THE 2004 EU-US SUMMIT, THIS COMMUNICATION SETS OUT A PACKAGE OF PROPOSED INITIATIVES TO BOOST EU-US TRADE AND INVESTMENT. THESE INITIATIVES COVER REGULATORY CO-OPERATION, SERVICES, (INCLUDING AVIATION AND FINANCIAL MARKETS), INVESTMENT, COMPETITION, PUBLIC PROCUREMENT, INNOVATION AND NEW TECHNOLOGIES AND THE TRADE/SECURITY INTERFACE. A framework which commits both partners to put in place the necessary measures to deliver on commitments is proposed, across sectors, with the aim of giving new impetus and quality to the EU-US economic partnership and working towards the creation of a barrier-free transatlantic market. This is designed to provide the respective regulatory authorities with the necessary instruments to promote co-operation and prevent regulatory problems from emerging. Political oversight will be helpful in ensuring that commitments to deliver results are met. The Commission proposes therefore that an Economic Declaration be agreed with the US at the 2005 EU-US Summit to begin working on the above areas. The option of taking forward a number of them via binding agreements should be retained. This Communication also sets out a number of proposals to strengthen the broader political architecture of the transatlantic partnership.

2. RATIONALE

Economic relations are the bedrock of an EU-US relationship whose scope is constantly widening. Their very health has been instrumental in creating the conditions which have allowed transatlantic political relations to flourish over recent decades.

Leaders at the Dromoland EU-US Summit of 2004 agreed to look for cooperative means and best practices to enhance economic growth, job creation and innovation, and called on stakeholders on both sides of the Atlantic to contribute ideas on how to further transatlantic economic integration. They aimed to adopt at the 2005 Summit a forward-looking strategy to enhance the EU-US economic partnership. A three month consultation of EU stakeholders ran until 31 December 2004. Stakeholder responses provide a number of constructive ideas. Most replies focus on the need to eliminate non-tariff barriers, notably matters relating to regulation and trade and security[2]. Stakeholders also identify further progress on the Lisbon Agenda as a prerequisite for the reinvigoration of the transatlantic economic relationship. This Communication sets out proposals for a joint EU-US strategy to strengthen economic integration. It also takes into account options to enhance the political structures underpinning EU-US relations.

The EU and the US share the largest bilateral trade and investment relationship in the world. In 2003 the overall volume of EU-US trade in goods and services totalled some €600 billion. While trade-related disputes may grab headlines, the reality is that they affect under 2% of this volume. An increasingly marked feature of EU-US economic relations is the huge flows of Foreign Direct Investment (FDI) in both directions. By 2003, these flows had amounted to €1.4 trillion in total stocks of two-way investment (€766 billion of EU FDI in the US, and around €640 billion of US FDI in Europe). As many as 14 million jobs in the EU and the US depend on transatlantic commercial ties. Competitiveness should be further enhanced by reducing the cost of business inputs, promoting the regulatory co-operation on the international stage, promoting intellectual property rights, and working to open third country markets.

Despite the scale of bilateral economic ties, many elements continue to impinge on trade and investment[3]. An improved regulatory framework has an important role to play in strengthening these ties and increasing trade opportunities. Firstly, the costs of regulatory impediments in many areas remain considerable. Incremental progress on these impediments could result in big sectoral gains for business and the consumer. Secondly, we need to underpin the foundations of growth and innovation by making better progress towards the development and integration of our knowledge-based economies. Thirdly, both the EU and the US are confronted with serious internal and external economic challenges. The US has high budget and trade deficits; the EU must address its disappointing growth rates. Finally, both the EU and the US must face up to ever sharper competitive pressures from strongly growing economies such as China and India.

The EU has responded to these challenges via the renewed Lisbon Strategy, which foresees closer integration and a fresh drive for international regulatory and administrative convergence[4], maintaining the long-standing goal of sustainable development. Deepening the EU-US economic partnership thus serves the broad objective of boosting jobs and growth and promoting innovation, while simultaneously stimulating trade and investment. A number of these issues relate to sustainable development in all its dimensions (i.e. environmental, social and economic aspects). Sustainable development should therefore have a prominent place in the EU-US economic partnership.

Concluding the WTO Doha Development Agenda is the overriding priority for sustainable global growth. The EU and the US are working together to this end. An EU-US Free Trade Agreement (FTA) would risk undermining this multilateral priority. The WTO is the right forum for talks about tariff reductions. Bilateral economic initiatives between the EU and the US should be complementary to the WTO process and address the main obstacles, which are essentially regulatory in nature. An EU-US FTA would not address this core difficulty in EU-US economic relations.

Although macroeconomic issues of common interest to the EU and the US are discussed in various multilateral fora, a bilateral exchange of views on such issues could help to develop a shared analysis. This would strengthen the overall EU-US partnership and facilitate consensus-building on macroeconomic issues in the multilateral fora.

3. INITIATIVES TO MAKE THE TRANSATLANTIC MARKET WORK BETTER

3.1. Regulating for a transatlantic market

3.1.1. Regulatory policy co-operation

As the transatlantic economy has grown, it has become increasingly clear that it is no longer possible to satisfy demands for fairer competition and a high level of consumer and environmental protection without a broadening of regulatory horizons. This realisation has led to more frequent and intensive contacts between EU and US regulators, including competition authorities. Such contacts are important because regulation in a vacuum can cause economic distortions and even harm. However, democratic legitimacy and accountability demand that regulatory autonomy and the highest standards of health, safety, environmental and consumer protection be maintained.

It is widely acknowledged that the transatlantic market – by and large – functions smoothly. The sheer size of daily movements in terms of goods trade and capital flows is evidence of this. But in some areas reinforced dialogue and co-operation, in particular prior to regulating, is needed to avoid divergences in approach between the EU and the US which may increase costs and inhibit growth potential while no longer serving consumers, business, or other interested parties well.

While there have been important successes in EU-US regulatory co-operation, problems remain. The challenge is to find a mode of regulatory co-operation which instils in regulators the recognition that while their primary focus must remain their domestic constituencies, they are now also joint stewards and regulators of a transatlantic market.

Recent efforts to improve co-operation between regulators include the EU-US Guidelines on Regulatory Cooperation and Transparency, drawn up in 2002. A more systematic approach was developed in the June 2004 Roadmap for EU-US Regulatory Cooperation. These voluntary instruments cover industrial products. They represent a step forward, resulting in co-operation in several sectors, generally increasing awareness of the need to reinforce EU-US regulatory co-operation, and getting positive attention from stakeholders. However, these instruments still suffer from a lack of visibility. Their effective implementation often depends on prioritisation of available resources or the nature of regulatory mandates and authorisations. The degree of commitment amongst regulatory authorities to co-operate is therefore variable.

Experience thus shows that the highest level of political support is called for, as well as an agenda-setting mechanism to identify those areas where more progress should be made, and to develop appropriate objectives and priorities on a regular basis. Experience with the existing regulatory dialogues, covering a variety of areas, also shows that a “one size fits all” model cannot be applied, and that flexibility is required as some dialogues already function well. Building on the experience gained so far, the EU and the US should now take an ambitious qualitative step to reinforce regulatory co-operation. In doing so, a sector-by-sector approach should be maintained and the full potential of a tool box ranging from information exchange and confidence-building to binding approaches requiring legislative changes, should be applied as appropriate.

A reinforced approach should comprise:

- enhanced upstream co-operation, including the following key elements:

- timely exchange of the annual work programmes of the Commission and US regulators,

- a “regulators’ hotline” to be used where one party requests to be consulted on new regulatory initiatives being planned by the other which have the potential to affect its important interests,

- identification of sectors where co-operation has the greatest chance of delivering increased economic benefits,

- consultation in international standard-setting bodies at the development stage of new standards or policy initiatives,

- encouragement of proportionate assessments of the economic, social and environmental impacts beyond the borders of the respective parties,

- exchange and development of best practice in terms of risk analysis regarding the protection of consumers and the environment, taking into account the precautionary principle,

- additional measures to promote improved understanding of each other’s regulatory practices and more effective and consistent application of regulatory approaches and tools. This would include exchange of best general regulatory practice, addressing for example transparency provisions and public consultation;

- recognition of equivalence where regulations and standards, while different, provide equivalent levels of protection and quality;

- development of common standards, where appropriate.

3.1.2. Investment facilitation

Despite the importance of investment flows in EU-US economic relations, there remain anomalous ownership restrictions on the US side which go beyond the minimum necessary for security reasons. In the aviation sector, eliminating foreign ownership restrictions on both sides of the Atlantic would give carriers better access to international capital, which in turn would contribute to worldwide operations, growth, competitive effectiveness and the promotion of competition and consumer benefits. More generally, EU companies are also concerned that screening and notification procedures involving the Committee on Foreign Investments in the US (CFIUS) include disproportionate oversight and corporate governance requirements, as well as screening of sensitive personnel. The EU should seek abolition by the US of remaining ownership restrictions, to be replaced by simplified, reasonable and proportionate notification requirements, if necessary through binding provisions.

An additional issue is to promote the progress of tort reform in the US – a matter of acute interest for European investors for whom dubious claims for damages constitute a major element of uncertainty in the US investment environment.

3.1.3. Competition policy and enforcement

As the EU and US economies have become ever more intertwined, mergers and acquisitions on one side of the Atlantic have increasingly had competition policy consequences for the other jurisdiction. The European Commission and the US competition authorities co-operate intensively under the 1991 and 1998 agreements, co-ordinating enforcement activities and exchanging non-confidential information. In particular as international cartels subject to joint investigation are concerned, the lack of a framework permitting exchange of confidential information can hinder effective co-operation. The EU and the US should explore ways to overcome the obstacles to such information exchanges.

3.1.4. Government procurement

Opening up of procurement markets between the US and the EU would increase Europe’s competitiveness and create new opportunities for EU businesses (including for Small and Medium Size Enterprises - SMEs). Although the WTO Government Procurement Agreement (GPA) substantially increases procurement opportunities for the two sides, the US has always been resistant to improving the situation. “Buy America”, Small Business Act and State level preferences all figure high on the list of market access impediments cited by EU companies.

To remedy the situation, relations with the US in the field of government procurement should be dealt with on a reciprocal and “GPA-plus” basis. Flanking measures to improve mutual access to tendering opportunities, including enhancing the use of electronic procurement on both sides, should also be elaborated building on previous work.

In addition, the EU and the US should reinforce their co-ordination and co-operation with a view to fostering progress in plurilateral and multilateral negotiations on government procurement: review of the GPA (text and coverage), expansion of GPA membership and negotiation of a multilateral agreement on government procurement in services under the GATS.

3.1.5. Aviation

Negotiations on a comprehensive EU-US air services agreement provide us with a great opportunity to give concrete effect to closer transatlantic relations. Aviation services are currently confined within a regulatory framework which reflects the political and technological landscape of the 1940s. New business opportunities would be opened up for US and EU airlines and enormous economic benefits could be unlocked by an agreement (consumer benefits of at least $5 billion a year, over 17 million extra passengers a year, new employment on both sides of the Atlantic). A comprehensive EU-US agreement would create a sound economic and legal basis for transatlantic air services. The time is ripe to continue negotiations, focussing on the significant gains for the broader transatlantic economy. Negotiations should proceed on the basis of the draft agreement which was tabled in June 2004. Progress should be made on a number of key elements within the agreement: regulatory co-operation (notably on security, state aids and competition matters) and traffic rights. The key issue of ownership and control rules for US airlines is under consideration by the US administration.

3.1.6. Maritime transport services and maritime affairs

Maritime transport is an important facilitator of world and transatlantic trade. Seaborne trade carries 90% of all international trade (by volume), and several segments – like container trade – are showing sustained double-digit annual growth rates. The EU and the US have maritime industries which are of significant economic importance in their own right and vital for international trade. Restrictive policies risk holding back economic progress and expansion of global trade. There is a need to address the regulatory framework for the maritime sector, in particular in the field of security measures, where co-operation should be developed.

The European Commission has started the process of designing an all-embracing Maritime Policy, while the US administration adopted in December 2004 an Ocean Action plan in response to the report of the US Commission on Ocean Policy of September 2004. Cooperation in this field could be further strengthened and should include issues such as international ocean governance and the Law of the Sea, data exchange, research, maritime security and environmental protection, and the economic use of the ocean and its resources in a sustainable manner.

3.1.7. Financial markets

Access to capital is the wellspring of investment and innovation. Already, the EU and US financial markets are highly integrated, reflecting significant cross-investment and capital flows. Yet there is a need for further integration. True integration of the EU and US financial markets has the potential to lower trading costs on both sides of the Atlantic by 60%, with a consequent 50% increase in trading volumes and a 9% decline in the cost of equity capital. Conversely, divergence between regulations, or regulatory “spillover” from one jurisdiction to the other have considerable economic knock-on effects. In some areas, such as the US insurance sector, traditional market barriers still exist.

The EU and the US are convinced of the need to increase convergence and acceptance of functional equivalence in key areas such as accounting and audit standards, capital adequacy requirements for banks, and framework conditions for banking and other financial markets, notably financial conglomerates. The Financial Markets Regulatory Dialogue (FMRD) between various players on both sides of the Atlantic has dealt successfully with several key issues, such as some implementation aspects of the Sarbanes-Oxley Act, the possibility for EU companies to deregister from US exchanges, and the need for convergence of accounting standards. Political agreement on the latter has now been reached. In the near future, recognition of International Accounting Standards (IAS) for European issuers in the US should be obtained; discussions should start on mutual recognition of insurance of commercial risks and – in the reinsurance sector – solutions to remove collateral requirements for EU reinsurers doing business in the US should be found. On broader issues such as approaches to corporate governance, the European Commission and its US counterparts should continue to encourage broad-based dialogue in the context of the Transatlantic Corporate Governance Dialogue (TCGD).

3.1.8. Free movement of people

Nationals of certain EU Member States wanting to make visits to the US are not even eligible for visa waiver arrangements. The EU will aim to ensure that the present US short term visa waiver arrangements are extended to all EU Member States.

On the business side, investment and trade by affiliates are becoming the drivers of the transatlantic economy. Freedom of movement of personnel between the EU and the US for extended stays is essential. The possibility of a travel initiative for a special status of “trusted persons” should be examined to facilitate movement of international travellers while bearing in mind security procedures.

3.1.9. Mutual recognition of professional qualifications

The lack of recognition of equivalence of professional qualifications forms a barrier to the movement of professionals, and a brake on competition in the services sector. However, attempts to negotiate mutual recognition agreements (MRAs) in this domain have failed to make progress owing to the disproportionate effort required, notably to overcome issues of state jurisdiction in the US. In this context, negotiations should primarily be focussed on sectors where economic interest or need has been substantiated by suppliers and/or users of professional services.

In the field of architectural services, professional organisations on both sides of the Atlantic have shown a specific interest in the negotiation of a Mutual Recognition Agreement (MRA), and are far advanced in their discussions towards this end. The Council has agreed a mandate for the negotiation of MRAs in this field, which would allow the Commission to negotiate with the US such demand-driven MRAs. In this regard, the US should be encouraged to give political backing to the results of inter-professional discussions, with a view to paving the way for a binding MRA between authorities competent for the negotiation of international agreements.

3.2. The knowledge and innovation dynamic

3.2.1. New technologies

3.2.1.1. Information and communication technologies (ICT): regulation for innovation

Regulators on both sides of the Atlantic are grappling with the challenge of a fast evolving digital economy and the convergence of telecommunications, computing and broadcasting technologies. Stakeholders on both sides of the Atlantic are concerned about the obstacles that may result from divergent regulatory environments. The European Commission and the US already discuss key issues in the framework of the EU-US Information Society dialogue, but more intensive upstream co-ordination would help further to prevent unjustified divergences and foster the development of innovative technologies on both sides of the Atlantic.

There is plenty of scope to work on common opportunities and threats in the development of ICT. The EU and the US should encourage the widespread deployment of key technologies such as broadband, radio frequency identification devices and other innovative technologies which could contribute to promoting transatlantic innovation and growth. At the same time, they should seek to prevent abuses which reduce the potential of these technologies for all users, for example by co-operating to cut down spam and contribute to the fight against additional threats such as “spyware” and other forms of “malware”.

3.2.1.2. Space

Partly because of export controls, the US retains leadership in niche areas such as certain satellite components. But as the agreement on Galileo has demonstrated, discussions can now take place on a peer-to-peer basis, looking at identifying mutual interests and creating a favourable environment for co-operation in space science and commercial applications in this potential high-tech growth area.

The EU and the US should create a structured dialogue covering two crucial aspects. Firstly, to promote co-operation in key areas such as earth observation, satellite navigation (Galileo, GPS), electronic communication, space science and exploration, and support to developing countries for space-related activities. Secondly, in parallel, to address remaining regulatory barriers to the creation of a properly functioning transatlantic market for the space industry. Key issues here would be to remove unnecessary controls under the US International Trade in Arms Regulations (ITAR), and to liberalise the international launcher market.

3.2.2. Intellectual property

Protecting intellectual property rights to promote innovation, employment, competition is a fundamental economic objective shared by both the EU and the US. There is a need both to fight rampant counterfeiting and piracy and to mitigate costly differences in the way in which intellectual property is protected on either side of the Atlantic.

Building on the redoubled commitment shown by the EU with its 2004 Enforcement Directive, the EU and the US should enhance co-operation on intellectual property enforcement issues, starting by checking that their own house is in order, and moving on to address IP issues in selected third countries, especially through joint efforts to combat piracy and counterfeiting. More broadly, substantive legal issues should continue to be addressed, such as patents (examining creative ways to reduce the gap between “first to invent” and “first to file”) and protection of broadcasters linked to new technologies. An intensified dialogue needs to be backed up by willingness on the US side to implement IPR-related WTO rulings, and support for full participation of the European Community in WIPO Committees where the Community has competence. There is also a need to ensure that IP rights in digital media develop in a way that preserves the traditional commitment to a balance between the interests of content owners and consumers.

3.2.3. Research and Development

Recognition of the important role to be played by research and development activities in boosting competitiveness and economic growth lies at the heart of the renewal of the Lisbon Agenda. Equally, the EU has recognised for some time the contribution that can be made to the realisation of a knowledge-driven EU economy by opening up activities under the successive Framework Programmes to researchers and research institutions from third countries. Several activities have been undertaken under the EU-US Science and Technology Agreement since 1998[5] with ongoing collaborative projects with participation of US companies and research institutes in such areas as industrial materials, fuel cells, intelligent manufacturing systems, biotechnology[6] and aspects of climate change. Collaboration should be strengthened in these and other areas under the forthcoming 7th Framework Programme for research and development.

The EU and the US should continue to work together to identify priority areas of research collaboration with in order to:

- generate transatlantic economic growth, develop new transatlantic markets (e.g. hydrogen fuel cell technologies and nanotechnology), and find solutions to common regulatory challenges;

- promote a secure economic environment, notably by collaborating with the US on areas relevant to civil security. This includes both the domains identified in the Commission’s Preparatory Action (COM(2004) 72 final) on security research (such as protecting against chemical and biological terrorist threats and enhancing crisis management), as well as, in the area of ICT, the technological areas of security and dependability of complex networked systems and information infrastructures of the Information Society Technologies (IST) programme.

3.2.4. Energy

Given the context of recent high and volatile oil prices and the need to address the issue of climate change, the EU and the US should work more closely together to strengthen policy dialogues on energy efficiency and renewable energy issues, as well as by developing clean technologies (e.g. carbon capture and storage and other low carbon technologies).

3.2.5. Education and vocational training

The EU and the US should continue to work together to renew and reinforce the current agreement on Higher Education and Vocational Training which expires at the end of 2005, aiming to enhance people-to-people exchanges and develop policy-oriented measures on issues such as quality and compatibility of education and training systems, access to lifelong learning for all, and opening up education and training systems to the world. The potential to promote research as well as exchanges of university teachers, researchers and students in areas which contribute to the deepening of EU-US economic relations should be examined.

3.3. Smarter, safer borders for swifter trade and investment

The aftermath of 11 September 2001 saw new security measures imposed by governments around the world. Stakeholders on both sides of the Atlantic stressed the tangible impact these measures have had on international trade. The challenge is to strike a balance between heightened security requirements and the continuation of open and secure trade and passenger transport. Smoother trade and more effective security are not contradictory. Trade facilitation measures aimed at guaranteeing a level playing field and speeding up processing for compliant economic operators can also ensure appropriate levels of control.

Building on the good work already done in the context of the EU-US agreement on enhanced customs co-operation in the area of transport security, the EU and the US should enhance dialogue, based on the principles of reciprocity and mutual recognition.

Particular attention should be given to:

- supporting the overall objectives laid down by the European Community-US agreement on enhanced customs co-operation in the area of transport security: (i) full reciprocity and mutual recognition of security standards, risk assessment, control measures and results, and industry partnership programmes, and (ii) co-operating on measures like the single window concept, single point of access and e-customs that will be introduced in Community customs legislation;

- exchanging best practice and co-operating on the implementation in the EU of the concept of “authorised economic operator” (AEO). The aim should be to go beyond mere compatibility of the AEO concept with the US Customs-Trade Partnership Against Terrorism (C-TPAT) programme by inviting the US to upgrade its concept so that it is fully equivalent in scope to that of the EU and achieving mutual recognition and reciprocity of both programmes;

- agreeing with the US side to avoid duplications of controls which arise from the application of parallel sets of – sometimes contradictory – existing standards. Emphasis should instead be put on mutual recognition and reciprocity. With regard to customs controls, the overall objectives of mutual recognition and reciprocity of control standards and control measures should be actively pursued;

- focusing discussions with the US on implementing the “Public Health, Security and Bioterrorism Preparedness and Response Act” to ensure the minimum impact on trade;

- giving fresh impetus to the development of global security standards, notably by promoting the security standards agreed between the European Community and the US through the World Customs Organisation (WCO), the International Civil Aviation Organisation (ICAO) and the International Maritime Organisation (IMO). A current example is the development in the WCO forum of a draft framework of standards for security and facilitation of global trade, which will be adopted by the Customs Co-operation Council at the end of June 2005 and will subsequently be implemented by WCO members;

- another area where the EU and the US share common concerns relates to the fight against corporate and financial fraud, money laundering, financing of terrorism, tax fraud and tax avoidance, corruption and other financial and corporate malpractices. The EU and the US should therefore encourage their partners to adopt the highest standards of transparency, exchange of information and cooperation among competent authorities.

Once the Community is able to become a full member of the WCO according to the application it first made in 2000, it will be in a better position to contribute to achieving worldwide progress on security issues. The support of the US for this application would be of great importance in this regard.

4. DELIVERING THE ECONOMIC GOALS

Stakeholders consulted by the EU emphasised that past EU economic initiatives with the US had often failed to gather the political attention necessary for them to be sustained long enough to deliver worthwhile results.

In the view of the Commission, leaders at the 2005 Summit should direct negotiators to explore all means to achieve a qualitative step forward in EU-US economic relations. There should be a redoubling of high level political commitment, including confirmation by the EU-US Summit of the overall goal of working towards a barrier-free transatlantic market.

4.1. The policy tool box

The means with which the economic initiatives identified above can be taken forward should include:

- setting up a high level Regulatory Co-operation Forum, including the top level sectoral regulators from both sides, meeting before EU-US Summits, and submitting to Summit Leaders an annual Roadmap with appropriate objectives and priorities for the future. In its work, the Forum should take account of and further develop the seven key elements of enhanced upstream regulatory co-operation set out in section 3.1.1, discuss general regulatory policies, steer and provide additional momentum to existing and future regulatory dialogues, and review progress in implementing the Roadmap. The Forum should seek input from stakeholders;

- fostering a dialogue between legislators on both sides on the priorities for regulatory co-operation, as an important external dimension of their domestic regulatory reform processes, in order to overcome internal obstacles to regulatory co-operation, including authorisations and resource problems;

- co-operation, where appropriate, on addressing challenges in third countries , or on advancing bilateral proposals in international fora ;

- binding sectoral agreements , for example:

- to advance a number of economic issues raised in section 3.1., including investment facilitation, government procurement, aviation, maritime transport services, and mutual recognition of professional qualifications, or

- where voluntary regulatory co-operation is not a sufficient tool in a specific sector, notably where progress is not otherwise achievable or where existing Memoranda of Understanding between regulators have proved insufficient to ensure progress. Such agreements should be supported by the establishment of appropriate mandates and the allocation of the appropriate resources, with adequate safeguards to ensure that they are domestically and internationally enforceable. These sectoral agreements, entered into on the initiative of regulators, would not prejudice regulatory autonomy;

- taking into account developments with regard to regulatory co-operation, consideration should be given to a binding horizontal approach in areas of Community competence, covering the seven key elements of enhanced upstream co-operation set out in section 3.1.1. This would make binding only the obligation to co-operate and consult in these areas. It would not prejudice regulatory autonomy by specifying binding outcomes or common methodologies.

The option of creating a business-consumer-government Joint Task Force, drawing on the combined resources of the Transatlantic Business and Consumer Dialogues, should also be examined.

5. THE BROADER ARCHITECTURE OF EU-US RELATIONS

Looking at the framework for EU-US economic relations inevitably raises the related question of political structures[7].

5.1. The New Transatlantic Agenda (NTA) – an independent assessment

The NTA was established in 1995. With its tenth anniversary in mind, the European Commission contracted out an independent report[8] to evaluate how far its stated goals have been met and propose options for the future.

The report shows that the record of EU-US cooperation in the decade since 1995 has generally been good. Many of the NTA’s most important goals, for example those relating to Central and Eastern Europe and the Balkans, have been substantially achieved. The NTA has made exchanges between the EU and the US more intensive, systematic and productive. Regular dialogue has been established between interlocutors who previously interacted little. The NTA has, often in line with expanded EU competences, generally proven flexible enough to incorporate new issues such as homeland security and counter-terrorism. There has also been increasing cooperation on foreign policy issues.

The report views the record of EU-US economic policy relations, however, as mixed, citing poor implementation of economic agreements and the need to implicate key legislative and regulatory actors on both sides. It concludes that the EU-US economic policy agenda needs to be relaunched.

The report also concludes that the EU-US dialogue has suffered from a lack of political engagement at the highest political and official levels, and that the EU itself is poorly understood in Washington. In addition, the report discovered a widespread perception of defects in the NTA. Firstly, many lamented that a lack of political commitment limited its capacity to contain major problems. Secondly, they regretted its low public profile and its image as a technocratic exercise. Thirdly, they complained of too much process, out of proportion to actual output, its tendency to become overloaded with issues, and failure to prioritise key strategic questions. Finally, they felt that a lack of transparency led to a low sense of involvement on the part of the EU’s Member States, and that there was a failure to involve legislators and allow them input into its exchanges.

The report recognises that some stakeholders have made the argument that an over-arching EU-US Partnership Agreement is necessary in order to ensure progress. This would have the advantage of putting relations with the US on a firm contractual basis for the first time. In political circles on either side of the Atlantic, however, the report revealed little support for such an agreement. It also warned of the danger of raising expectations beyond what is politically achievable.

Finally, the report concludes that the NTA should be made into a more inclusive, overarching framework and greater political commitment mobilised.

5.2. Giving EU-US relations the political profile to match our ambitions

The Commission believes there is a need to raise the political profile of EU-US relations and make them more strategic and effective in order to realise our shared vision of a more democratic, peaceful and prosperous international order. The time is right. The recent visits to Brussels by the US President and Secretary of State showed that the US also sees an interest in closer cooperation.

One outcome might be a renewed transatlantic declaration emphasising common values and developing priorities for joint action, based on the recognition that the EU and the US have a high degree of economic interdependence and wish to tackle common global and regional challenges[9]. This may raise the political profile of the EU-US dialogue in line with the emergence of the EU as an international actor, not least due to reform of its foreign policy institutions.

In addition, fresh attempts need to be made to involve legislators more directly in EU-US exchanges, in order to redress the lack of understanding on the EU side of the role played by the US Congress and on the US side of that played by the European Parliament. Re-engineering the legislative dialogue should become part of a wider effort to try and make the EU-US relationship a more bottom-up process.

The revamped framework for EU-US relations will have to reflect the relevant provisions of the Constitutional Treaty once it has been adopted.

The Commission thus recommends that the following options be explored:

- giving the relationship a strong political injection to build on and improve the current framework;

- focusing EU-US Summits on strategic priority setting and assessing progress on meeting the objectives of previous years;

- negotiating a new Joint Action Plan to implement policy priorities and updating it at the annual EU-US Summit;

- setting up a forum for exchanging views on macroeconomic issues of common interest;

- enhancing the Transatlantic Legislators Dialogue (to consist of representatives of the European Parliament and both Houses of the US Congress), as a first step towards a fully-fledged “Transatlantic Assembly”[10]. This Dialogue would be based on a wider understanding of its remit than is currently the case, including the regulatory questions discussed in section 4.1 above. Elements could include:

- building synergies between TLD and NTA dialogues, using elected representatives with relevant policy specialisations and coordinating meetings,

- urging the European Parliament and US Congress to: (i) launch new, jointly-funded programmes for exchange between legislative staffers, and (ii) create a small, agile TLD secretariat,

- sponsoring an EU study group for members of the US Congress, to be hosted by the Commission’s Delegation in Washington,

- holding legislators summits prior to EU-US Summits;

- promoting dialogue between representatives of the social partners from the EU and the US, including a tripartite conference in the field of industrial relations;

- refreshing the dialogue between EU and US civil societies, academics and other practitioners;

- expanding people-to-people exchanges.

The Commission will also look at launching with Member States a campaign in the US to promote awareness of what the EU is and what it does.

6. CONCLUSIONS AND RECOMMENDATIONS

The initiatives proposed above are intended to form a first coherent package of inputs into the establishment of a joint forward-looking strategy for the enhancement of efforts under the EU-US economic partnership to build a barrier-free market, and to strengthen the broader framework of EU-US relations. At the same time, however, the EU and the US have to recognise, in the spirit which the EU has applied to the renewal of the Lisbon Agenda, that somewhat less than half of the actions proposed in the Transatlantic Economic Partnership of 1998 have actually been implemented. A qualitative leap in co-operation and regular, vigilant priority-setting and monitoring for results at political and senior official level, including a permanent link to the annual Summit, must therefore be preconditions for any new initiatives. Both discipline and realism need to be applied in launching new ideas.

The Commission recommends:

- that it should on the basis of this Communication draw up with the United States, along the lines of the above proposals, a joint strategy for the enhancement of the EU-US economic partnership in the form of a Declaration at the 2005 EU-US Summit. This would:

- establish as precisely as possible objectives and sectors for a qualitative step in the EU-US economic partnership towards a barrier-free market,

- direct competent negotiators on both sides in the respective agreed sectors, to draw up within six months timetabled implementation plans to achieve to the fullest extent possible the objectives set out in this Communication, drawing on the appropriate mix of non-binding and binding approaches;

- exploring in the run-up to the 2005 EU-US Summit the options set out in Section 5 to strengthen the overall framework of EU-US relations, and, if deemed appropriate by both sides, developing a proposal to Leaders in time for the 2006 EU-US Summit.

IMPACT ASSESSMENT FORM

TITLE OF PROPOSAL

Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee: “Strengthening the EU-US Economic Partnership for the 21st Century”

DOCUMENT REFERENCE NUMBER

1. WHAT ARE THE IMPACTS LIKELY TO RESULT FROM THE PROPOSAL?

1.1. Economic impacts

The creation of positive economic impacts lies at the heart of the Commission initiative to enhance the transatlantic economic partnership.

The proposal is likely to spur economic growth within the EU. Reducing barriers on both sides of the Atlantic will lead to more trade, investment and procurement opportunities. Removing these obstacles will contribute to a more efficient production of goods and services in Europe and will entail the benefits of larger scale economies. Moreover, it is possible to achieve mutual recognition or even harmonization of differing standards which represent obstacles to trade today, with a favourable cost effect for companies.

Enhanced cooperation with the US in the field of research and development will make an important contribution to stimulating innovation. In sectors where potential for new transatlantic – or even global – markets exists (e.g. hydrogen fuel cell technologies), joint research will promote the development of new technology. In addition, the work envisaged in the field of intellectual property rights (IPR) has the potential to bring better IPR protection, adding incentives to conduct research with a view to developing innovative products and procedures.

1.2. Environmental impacts

Representatives from environmental organisations were invited to participate in the stakeholder consultation process. However, as the envisaged policy options are still rather broad and would need to be transformed into more specific proposals, concrete concerns regarding potential environmental impacts will have to be addressed at a later stage. At this juncture, however it can be said that impacts on the environment of the proposed communication are likely to be limited and globally positive. The reduction of trade barriers that might result from the EU-US partnership and its subsequent economic growth should promote efficiency gains for the use of natural resources. Possible scale effect, i.e. increased use of resources linked to economic growth, should be less significant and will be mitigated by both Parties which have the capacity and the regulatory framework to manage such impacts.

Moreover, the partnership will promote a better coordination of US and EU trade related policies in areas that are fundamental to protecting the environment and consumer health, for example sanitary and phytosanitary policy, trade and environment.

In the event that the proposed policy options would subsequently lead to binding commitments or legislative proposals, a thorough environmental impact assessment would be undertaken in accordance with the Communication on Impact Assessment COM/2002/0276 final.

1.3. Social impacts

To the extent that the reduction of barriers to trade and investment promotes economic growth, the proposal is likely to have a positive impact on employment . As far as wages are concerned, it should be mentioned that fears that increased market openness would place downward pressure on wages are not substantiated in the transatlantic context, given comparable wage levels.

It should be noted that one of the explicit aims of the proposal is to improve transatlantic cooperation on health and safety standards . Increased transparency and improved consumer protection will be to the benefit of European consumers. At the same time, both sides would retain full regulatory autonomy.

There is nothing in the proposals set out in the Communication which could undermine the social model.

1.4. Impacts on third countries and international relations

The impact on third countries will essentially unfold in three areas: (i) joint EU-US efforts in promoting IPR protection, (ii) promotion of global telecommunication standards and introduction of independent telecoms regulators in third countries, (iii) joint EU-US efforts on standard setting in global fora .

The Commission proposal does not affect the EU’s WTO obligations. The initiatives proposed are compatible with and complementary to WTO rules. The WTO TBT code allows the EU to conclude mutual recognition agreements and to accept technical regulations of other countries as equivalent.

2. HOW TO MONITOR AND EVALUATE THE RESULTS AND IMPACTS OF THE PROPOSAL AFTER IMPLEMENTATION?

The Commission recommends the formulation of a joint strategy for the enhancement of the EU-US economic partnership which would direct competent negotiators on both sides in the respective agreed sectors, to draw up as soon as possible implementation plans to achieve to the fullest extent possible the objectives set out in this Communication. It also directs negotiators to start work on a binding Economic Partnership Agreement. Monitoring of implementation would be achieved through the existing and any proposed new dialogue structures.

3. STAKEHOLDER CONSULTATION

3.1. Which interested parties were consulted and what were the results of the consultation?

Following the agenda set out in the 2004 summit declaration, stakeholders in the EU (and the US) were invited to comment on how to improve the economic partnership with the US. Public consultation in the form of a questionnaire was launched on 30 September 2004. The business community, environmental and consumer organizations, trade union and other interested groups and individuals were invited to provide their views on the obstacles they face when trading or investing in each other’s markets as well as on future trade and economic relations between the European Union and the United States.

The questionnaire was provided on the “Your Voice in Europe” Internet site and was open until 31 December 2004. It received about 100 serious and constructive contributions. Inputs came from a broad range of interested parties. Contributions of stakeholders who gave their consent were published on the Internet.

Interested parties also had the opportunity to present their views at stakeholders’ conferences in Brussels on 22 October 2004 and 7 March 2005.

3.2. Compliance with minimum standards for consultation

The Commission ensured that relevant parties had an opportunity to express their opinions on the question of how to foster the transatlantic economic partnership. By inviting all interested parties to participate in two conferences and to complete a comprehensive questionnaire, the Commission guaranteed that all interests were sufficiently taken into account in the consultation process. It also ensured that generous deadlines provided stakeholders with adequate time to formulate their answers. Finally, by making the relevant information public, the publication and feedback requirements of the Commission were met.

[1] COM(2002) 276.

[2] See http://europa.eu.int/comm/external_relations/us/consultation/results/index.htm for stakeholders’ contributions.

[3] European Commission Report on US Barriers to Trade and Investment, 2004 - see http://trade-info.cec.eu.int/doclib/docs/2005/march/tradoc_121929.pdf.

[4] The Commission’s Communication to the European Council of 2.2.2005, “Working together for growth and jobs – A new start for the Lisbon Strategy” states under the headline “Growth and jobs: the global dimension” (page 19): “ There should be a fresh drive for regulatory and administrative convergence at the international level, in particular in transatlantic trade relations. Ensuring that standards converge as widely as possible at the international level – whether this is with our major trading partners such as the USA or with rapidly growing markets in Asia such as China, India and with other countries in the EU neighbourhood – holds out the potential for significant cost reductions and productivity growth. The Commission will actively pursue this agenda.” - COM(2005) 24.

[5] The existence of Euratom agreements of 1996 (fission) and 2001 (fusion) should also be recalled here.

[6] Based on the work of the European Commission-US Task Force on Biotechnology Research, established in 1990 as a bilateral consultative mechanism.

[7] These currently consist of the 1990 Transatlantic Declaration and the 1995 New Transatlantic Agenda.

[8] “Review of the Framework for Relations between the European Union and the United States – An independent study”, report by an academic team led by Professor John Peterson, submitted on 18 April 2005.

[9] A similar idea was proposed by President John F. Kennedy in his speech in Philadelphia on 4 July 1962: “… the United States will be ready for a Declaration of Interdependence, … we will be prepared to discuss with a united Europe the ways and means of forming a concrete Atlantic partnership, a mutually beneficial partnership between the new union now emerging in Europe and the old American Union founded here 175 years ago. All this will not be completed in a year, but let the world know it is our goal.”

[10] In this regard, the European Parliament resolution on transatlantic relations of 13 January 2005 stated that the Parliament “Considers that the Transatlantic Legislators Dialogue should be fully activated, that an early warning system should immediately be put in place between the two sides, and that the existing interparliamentary exchange should be gradually transformed into a de facto ‘Transatlantic Assembly’.”