Communication from the Commission to the Council, the European Parliament and the Economic and Social Committee - The New Transatlantic Marketplace
Date: 1998-03-11
Institutions: European Commission
Subjects: EU relations, United States, economic relations, trade agreement (EU), trade policy

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 11.03.1998 
COM(1998) 125 final 

COMMUNICATION FROM THE COMMISSION 

TO THE COUNCIL, THE EUROPEAN PARLIAMENT 
AND THE ECONOMIC AND SOCIAL COMMITTEE 

THE NEW TRANSATLANTIC MARKETPLACE 

TABLE OF CONTENTS 

A.  RATIONALE 

1. 

2. 

3. 

INTRODUCTION 

THE POLITICAL DIMENSION 

THE ECONOMIC BENEFITS 

B.  TRADE POLICY  CONSIDERATIONS 

4. 

5. 

6. 

RELATIONSHIP WITH THE MULTILATERAL SYSTEM 

WTO COMPATIBILITY 

RELATIONS WITH THIRD COUNTRIES 

C.  ENVIRONMENT 

7. 

ENVIRONMENTAL  CONSIDERATIONS 

D.  COMPONENTS OF THE NTMA 

8. 

9. 

FREEING TRADE IN GOODS OF TECHNICAL BARRIERS 

TARIFF ELIMINATION 

10. 

SERVICES 

11.  GOVERNMENT PROCUREMENT 

12. 

INTELLECTUAL PROPERTY 

13. 

INVESTMENT 

14.  OTHER POSSIBLE COMPONENTS 

E.  OTHER ASPECTS OF THE INITIATIVE 

15. 

IMPLICATIONS FOR EU COMMON POLICIES 

16. 

INSTITUTIONAL  ASPECTS 

F.  CONCLUSION 

ANNEX: KEY ECONOMIC FIGURES 

1 

3 

5 

6 

7 

8 

10 

11 

15 

16 

19 

20 

22 

23 

25 

27 

27 

28 

COMMUNICATION  FROM THE  COMMISSION 

TO THE COUNCIL, THE EUROPEAN PARLIAMENT AND THE 
ECONOMIC AND SOCIAL  COMMITTEE 

THE NEW TRANSATLANTIC  MARKETPLACE 

A. 

RATIONALE 

1. 

INTRODUCTION 

The economic relationship between the EU and the US is of vital importance to both. 
In  1996 two  way  trade  in  goods  and  services  amounted  to  more  than  355  bn  ECUs. 
The EU and the US account for  around  19% of each other's total trade in goods.  It is 
estimated  that  high  technology  products  account  for  20% of the two-way  trade  flow. 
In  1995  EU-US trade in services accounted  for  over 38% of total bilateral trade. The 
EU is by far  the biggest  investor  in the US accounting  for  59% of total  foreign  direct 
investment  (FDI)  by  1996. At  the  same  time  44%  of  US  FDI  is  in  the  EU.  Further 
details are in the Annex. 

Through  progressive  rounds  of  multilateral  negotiations,  and  bilaterally  since  the 
adoption of the New Transatlantic Agenda (NTA) in  1995, we have achieved progress 
in  lowering  remaining  barriers  to  trade  and  investment.  But,  as  the  Commission's 
annual reports on United States Barriers to Trade and Investment  illustrate,  significant 
obstacles remain. 

The main reason  is that the regulatory  framework  for  EU-US  trade and  investment  in 
goods and services has not kept pace with new market developments.  While tariffs  on 
industrial  products  have  been  substantially  reduced,  "peak"  tariffs  remain  in  some 
sensitive  sectors.  These  are  particularly  numerous  on  the  US  side.  But  the  main 
problem  is  non-tariff  barriers.  These  gain  increasing  significance  with  the  growing 
importance  of  EU-US  trade  in  sophisticated  manufactured  goods  and  in  services,  as 
well  as  growing  foreign  direct  investment.  These  areas  of  activity  are  subject  to  a 
range of domestic regulations  and standards, reflecting  among other things  legitimate 
social concerns about protection of public health and safety  or the environment. 

The  EU  and  US  business  communities  have  frequently  identified  these  regulatory 
issues  as  their  main  concern.  Since  the  rules  often  diverge  widely  they  can  act  as 
hidden  barriers.  They  increase  costs  for  European  and  American  consumers  and 
business.  They  also  lead  to  delays  in  exploiting  new  economic  and  technological 
opportunities, and can hinder the creation of competitive jobs.  They therefore  impede 
economic  advance.  In  short,  these  are now  among  the  most  serious  issues  affecting 
Transatlantic trade and investment. 

In  addition,  there  has  recently  been  an  increase  in  the  number  of  difficult  trade 
disputes between the EU and the US.  Many of the recent problems are different  from 

traditional trade disputes in that they have their roots in the sort of problems  described 
above.  Despite our great efforts  we have not so far been able to establish  an  effective 
mechanism to prevent them.  As a result, they require a substantial  investment  of time 
and effort,  damage European and US economic interests and have a disproportionately 
large negative political impact. 

The question we  should  address  is whether we can do more, and more  effectively,  to 
facilitate  EU/US trade in goods and services  and at the same time to  avoid or resolve 
these problems, while  ensuring  that  our high  level  of protection  of public  health  and 
the environment is maintained and can be further  developed autonomously.  Under the 
NTA  we  have  made  some  progress  through  a  modest  'step-by-step'  approach  to 
resolving  individual  problems  and promoting  liberalisation  in particular  sectors.  But 
the protracted negotiation leading to the  1997 Mutual Recognition Agreement  showed 
that this approach is slow and can produce only limited results. 

For this reason the Commission  has given  careful  thought  to whether we  should  now 
pursue a new, more comprehensive  and ambitious approach to making a reality of the 
New  Transatlantic  Marketplace  (NTM), which has from  the start been  one of the  key 
objectives of the NTA. 

Any such proposal should meet all the following  requirements: 

i) 
ii) 

iii) 

iv) 

v) 
vi) 

vii) 

viii) 

ix) 

it should address the real barriers to EU-US trade and investment; 
it should bring economic benefit  to the EU and the US commensurate with the 
effort  involved; 
it  should  not  damage,  and  should  indeed  promote  our objectives  in the  future 
multilateral negotiations  within the WTO, to which we are committed; 
it  should  not  lead  to  the  creation  of  new  trade  obstacles  to  third  countries  or 
reduce their access to EU and US markets.  Nor should it  weaken their support 
for multilateral  liberalisation; 
it should be ambitious, capture political interest, but be technically achievable; 
it  should  be  consistent  with  and  should  not jeopardise  the  agreed  multilateral 
rules of the WTO and other international  fora (e.g. OECD, WIPO etc.); 
it  should  serve  to  enhance  the  broader  political  relationship  between  the  EU 
and the US; 
it  should  benefit  consumers  and  should  preserve  our  high  level  of  protection 
for health, safety,  consumers or the environment; 
it should not impede the further  development of the Community acquis. 

Any  proposal  in  this  area  should  serve  to  stimulate  further  multilateral  liberalisation 
through  deeper  liberalisation  and  a  firmer  set  of  rules  at  the  bilateral  level,  which 
could  later be extended  to other partners. Bilateral  liberalisation  should  also  focus  on 
those impediments in EU and US trade where the multilateral  route cannot offer  early 
and effective  solutions. 

Having  considered  all  these  factors,  the  Commission  proposes  that  a  negotiation 
should  be  launched  for  a  New  Transatlantic  Marketplace  Agreement  (NTMA)  to 
achieve the following  objectives: 

d 

i) 

ii) 

iii) 

iv) 

a  widespread  removal  of  technical  barriers  to  trade  in  goods  through  an 
extensive process of mutual recognition  and/or harmonisation, promoting both 
consumer and business interests; 
a  political  commitment  to  eliminate  by  2010  all  industrial  tariffs  on  a  MFN 
basis,  through  multilateral  negotiations, provided  that  a critical  mass  of  other 
trading partners do the same; 
a  free  trade  area  in  services,  bearing  in  mind  the  criteria  and  requirements 
established by the Council; 
liberalisation  beyond  multilateral  or  plurilateral  agreements  in  the  areas  of 
government procurement, intellectual property and investment. 

The individual elements of this proposal are considered in detail in section D. 

We  should  also  pursue  strengthened  bilateral  co-operation  in  areas  such  as:  trade 
facilitation,  customs  procedure  simplification,  SME  partnerships,  sustainable 
development  and  the  environment  (taking  into  account  ongoing  bilateral  and 
multilateral  initiatives). 
In  certain  of  these  areas  (e.g.  customs,  competition  and 
science  and  technology)  existing  agreements  already provide  a framework for  such  a 
cooperation.  The NTM  Agreement  will be pursued  within the broader  framework  of 
the New Transatlantic Agenda.  The NTA Action Plan will continue to be pursued. 

A number of general methodological conditions should be clearly established.  Before 
a negotiation  begins, there should  be a clear understanding  with the United  States  on 
which  areas  are covered  and which  are  excluded.  In  conducting  the negotiation,  the 
EU  would  give  due  consideration  to  factors  affecting  competition,  including  state 
aids.  It  should  be  clear  from  the  start  that  an  Agreement  should  be  binding  on  the 
federal  states.  Nor  should  it  weaken  existing  EU  agreements  with  other  third 
countries. 

The initiative  should take the form  of a single comprehensive  agreement.  This might 
seem  to  be  harder  to  achieve  than  the  present  step-by-step  approach  in  terms  of 
negotiation  and  ratification.  On  the  other  hand,  it  would  have  the  considerable 
advantage  of  giving  greater  certainty  of  the 
implementation  of  the  agreed 
commitments,  including  where  necessary,  through  domestic  legislative  changes. 
Perhaps .more  important,  the  dynamic  which  multi-issue,  multi-sector  negotiations 
engender  should  make  it  possible  to  address  some  entrenched  and  long-standing 
barriers which at present appear intractable in isolation. 

This is not a proposal to create an internal market with the US, but it would  allow the 
EU to take advantage of the unique experience we have gained from  the completion of 
the  Internal  Market  and  to  adapt  some of the principles  underlying  it to  the  different 
EU-US context. 

2. 

THE POLITICAL  DIMENSION 

The proposal is more than a trade policy initiative.  It is also an important initiative  for 
the  EU's broader  policy  towards  the  United  States,  and  should  be  considered  in  that 

light.  Since the end of the Cold War we have taken a number of steps to restructure 
and  refocus  the  EU's  links  with  the  US,  which  remains  our  most  important  and 
complex  external  relationship,  and  to  reinforce  US  support  for  European  stability. 
Another key objective is to deter the American tendency towards unilateralism, which 
has  included  the  adoption  of  unacceptable  extraterritorial  legislation  such  as  the 
Helms-Burton and d'Amato Acts.  We should continue firmly to oppose action of this 
sort.  An early comprehensive  settlement of our differences  arising from the Helms-
Burton  and  D'Amato  Acts,  based  on  the  April  1997  Understanding,  remains 
necessary. 

The New Transatlantic Agenda of 1995 established a habit and pattern of co-operation 
and joint action between our administrations at all levels and on many issues.  It has 
been  invaluable  in this regard,  and has  enabled  us to  achieve  a number  of tangible 
results  including the Mutual Recognition  Agreement  of  1997 and other agreements. 
However, the NTA as it now stands has not been able to engage the highest level of 
political  attention  on both  sides  of  the Atlantic,  and  is  not  sufficiently  dynamic  to 
deliver  major  political  and  economic  results,  although  it  has  delivered  useful  ones. 
The time  is ripe to  consider  whether  a more  ambitious, comprehensive  approach  is 
required. 

The proposal to create a New Transatlantic Marketplace reducing barriers to trade and 
investment  was  an  integral  part  of  the NTA, but  has  not  yet  been  developed  in  a 
coherent  manner.  This  initiative  takes  up  that  challenge,  building  on  the  steady 
development of the EU's relationship with the US and on the dramatic growth of our 
economic  relations,  notably  in  services  and  investment.  It  is  designed  to  use  an 
economic  instrument  to  give  a  much  broader  impetus  to  the  overall  political 
relationship;  to  produce  important  economic  benefits;  and  to  provide  a  new 
mechanism and stronger incentives to prevent and resolve disputes between us. 

The  timing  for  such  an  initiative  is  good.  The  European  Union  has  established  a 
leading role in international trade policy.  Our economy is set to grow strongly.  We 
stand on the threshold of the Single Currency, and we have behind us the experience 
gained from building the Internal Market.  The broader international  context  is also 
favourable: Europe at present is a strong and stable partner for the United States. 

At the same time, this initiative has benefits  going beyond the bilateral political and 
economic relationship with the United  States.  For reasons discussed below (section 
4),  it  will  promote  achievement  of  our  objectives  in  future  multilateral  trade 
negotiations. 

It  also  gives  the  EU  an  opportunity  to  pursue  proactively  our  own  clear  policy 
objectives  in promoting  the interests  of European  citizens  and  advancing  important 
values of European  society.  It should be pursued  in a manner which preserves and 
further  enhances  our  high  standards  of  consumer  protection,  health  and  safety.  It 
should not  affect  internal  EU policy making on the provision of  services  of general 
economic  interest,  as recognised  in  the relevant  EC Directives  and  the  Amsterdam 
Treaty. The macroeconomic  growth predicted  (see section 3) would bring potential 
for significant job creation in the EU.  In ways such as these, the NTMA will enable 

us to respond to some of the uncertainties arising from global economic liberalisation. 
It  would  also  lay  the basis  for  better  and  more  effective  EU-US  dialogue  and  co 
operation  on  issues  like  sustainable  development  and  environmental  protection, 
including at the multilateral level. 

3. 

THE ECONOMIC BENEFITS 

Macroeconomic  studies,  including  studies  carried  out  at  the  request  of  the 
Commission,  suggest  that  the  removal  of  existing  tariff  and  non-tariff  barriers  to 
Transatlantic  trade  in  industrial  goods  and  in  services  would  have positive  macro-
economic effects  for both partners.  For the EU, it could add some  125 billion ECU 
(over  1%)  to  annual national  income, broadly  commensurate with the effects  of the 
Uruguay Round.  Another 25 billion ECU annually would be added if the initiative 
achieved a wide multilateral elimination of industrial tariffs.  At the micro-economic 
level,  it  would  mean  greater  economies  of  scale,  reduced  costs  for  producers  and 
consumers and less uncertainty for EU and US  firms. 

A bilateral elimination, on a preferential basis, of all industrial tariffs between the EU 
and the US  is not part of this proposal.  The average level of tariffs prevailing in both 
economies  is  already  low, though  major  gains remain to be made  in  sectors  where 
'peak'  or significant  tariffs  remain.  These gains will be well worth having, but much 
greater gains will accrue from the elimination of industrial tariff barriers on an MFN 
basis involving a broad range of other countries, on the model of the ITA agreement. 
This  would  have  the  added  advantage  of  addressing  the  recent  difficulties  which 
European firms have experienced in key mid-income country markets. 

trade, 

litigation,  greater 

Still larger benefits  accrue once non-tariff barriers are addressed, as a result of many 
factors,  including  increased  efficiency,  larger  scale  economies  (for  instance  when, 
through  the  mutual  recognition  or  harmonisation  of  technical  requirements, 
production  lines  can  be  unified),  more  transparent  procedures,  lower  costs  of 
complying  with  different  standards,  better  intellectual  property  protection,  less 
investment  and  procurement 
intellectual  property 
opportunities  (the last estimated  at 35-40 bn USD).  In some sectors, benefits  to be 
gained by Small and Medium-sized  Enterprises (SMEs) are likely to outweigh those 
expected  by  large  companies,  with  significant  employment  benefits.  Overall,  the 
realisation  of  a  freer  Transatlantic  Marketplace  will  improve  the  conditions  and 
opportunities  for  business  on both  sides of the Atlantic with  a beneficial  economic 
impact  on  industry,  consumers  and  the  EU  and  US  economies  as  a  whole.  The 
economic  aspects  of  the  proposal  will  be  the  subject  of  further  examination  in 
accordance with the requirements established by the Council.  The Commission will 
now  proceed  to  produce  the  requisite  more  detailed  impact  studies  as  a  further 
contribution to discussion in the Council of these proposals, and indeed their  further 
elaboration. 

B. 

4. 

TRADE POLICY CONSIDERATIONS 

RELATIONSHIP WITH THE MULTILATERAL SYSTEM 

Further  liberalisation  in  the  form  of  comprehensive  multilateral  negotiations 
conducted  within  the  framework  of  the  WTO  remains  the  central  trade  policy 
objective  of  the  EU.  The proposed  NTMA  is  carefully  designed  to  promote  this 
objective, whilst in itself delivering major economic and political benefits  for the two 
partners.  The underlying principle is that each part of the NTMA should encourage 
and facilitate broader international liberalisation. 

The proposed tariff initiative is explicitly and exclusively multilateral; the EU and the 
US will make a joint  commitment  that, in future  multilateral negotiations, they will 
eliminate all industrial tariffs by 2010 if a critical mass of trading partners (understood 
in terms of volume of trade and/or numbers of countries)  do the same.  A bilateral 
preferential deal is thus ruled out. 

In the area of technical barriers to trade, the multilateral rules recognise the possibility 
of bilateral recognition of equivalence of the parties' certification  systems.  This is an 
area of trade where full mutual trust in a partner's capacity to fully protect high levels 
of  product  safety  is  of  paramount  importance,  to  maintain  common  protection 
unaffected  by trade rules.  For this reason, the prospects for multilateral progress in 
the  foreseeable  future  are  limited.  Nevertheless, more rapid  progress  can be  made 
between  two major  economies  with  similar  degrees  of  economic  and  technological 
development  as  well  as  similar  public  policy  objectives.  Rather  than  becoming 
obstacles to other partners, common standards will provide easier market access to the 
two largest trading entities in the world. 

In  services, the intention  of the NTMA is to promote both  a successful  and WTO-
compatible bilateral arrangement but also to enable the EU to prepare the ground for 
successful multilateral negotiations in services, due to start in the year 2000. 

There are several ways in which a NTMA in services could support the multilateral 
approach: 
•  The  demonstration  effect  that  differing  regulatory  approaches  can  indeed  be 
bridged  between  major  trading  partners,  and  therefore  are  politically  and 
technically capable of being bridged more widely. 

•  The incentive effect  whereby EU and US enjoyment  of a liberalised  preferential 
area  for  services  will  attract  strong  interest  from  other  trading  partners  for 
participation  in  the  process  (thereby  offering  a  stepping  stone  towards  wider 
liberalisation of various regulatory barriers among trading partners).  Our ultimate 
objective would be that the liberalisation achieved in the NTM would be matched 
multilaterally. 

•  The creation of models for future WTO rule-making, for example by moving  from 
hybrid to negative listing, i.e. everything is liberalised unless subject to a specific 
exemption in a schedule. 

•  The  exploration  of  ways  in  which  partly  or  completely  excluded  areas  in  the 
current  GATS  could  be  tackled  bilaterally  and  therefore  opened  up  on  a 
multilateral basis. 

These  effects  outweigh  any possible  concern  that  a bilateral  initiative  could  weaken 
support for further  liberalisation in GATS.  On the contrary, the NTMA should  enable 
us to go further  and faster than we would otherwise have been able to in achieving EU 
objectives in these negotiations. 

More generally, and in the areas of government procurement, intellectual property and 
investment  in  particular,  the  NTMA  approach  should  be'both  to  pursue  full 
compatibility  with  multilateral  rules  and  -  at  the  same  time  - to  seek  "better"  rules 
and/or  "deeper"  liberalisation with respect to the existing WTO framework as well as 
in  new  areas  not  yet  fully  covered  by  it,  so  as to  serve  as  a  model  for  future  WTO 
rule-making.  Such  a  policy  stance  would  emphasise  the  leading  role  of  the 
Transatlantic  partners  in underpinning  and further  developing  the multilateral  trading 
system. In each area the "best practice" in terms of liberalisation  should be sought, so 
as  to  achieve  not  only  the  largest  economic  benefits  bilaterally  but  also  a 
demonstration effect  vis-à-vis other trading partners. 

5. 

WTO COMPATIBILITY 

The  NTMA  described  in  this  Communication  would  be  fully  WTO-compatible.  In 
the  tariff  area  the  initiative  is  fully  compatible  since  it  is  foreseen  on  a MFN  basis. 
The  MFN  principle  applies  in  general  also  in  the  area  of  technical  requirements. 
WTO  Members  are  not  entitled  to  maintain  differing  technical  specifications  for 
products  originating  from  different  countries,  nor  to  require  different  procedures  of 
conformity  assessment.  This latter requirement implies that where a country does not 
regulate safety  of a product  at all, or where it is satisfied  with a suppliers'  declaration 
of  conformity  ,  it  has  to  extend  this  treatment  to  all  WTO  Member  countries. 
However, two areas for bilateral  (non-MFN based) co-operation  exist and the NTMA 
will make full use of them. 

First, mutual recognition.  Where WTO Members require an independent  verification 
of  a product,  or  mandate  a government  agency  to  verify  compliance,  Members  may 
bilaterally  recognise  the  competence  of  their  respective  certification  bodies.  The 
WTO/TBT  agreement  explicitly  recognises  this  right,  while  requiring  "positive 
consideration"  to  recognise  other  Members  that  could  demonstrate  equivalent 
competence.  Second,  harmonisation.  All  Members  are  free  to  determine  the 
specifications  that products must meet, within certain general rules.  Nothing prevents 
two countries from harmonising such specifications, provided that these are applied to 
other Members in a non-discriminatory manner. 

In the  area  of services  the NTMA  will  comply  with  the  GATS  requirements,  which 
are  similar  to  those  established  under  Article  XXIV  of  GATT.  Article  V  (Economic 
Integration)  of  GATS  sets  forth  several  conditions  which  would  need  to  be  met,  in 
particular:  substantial  sectoral  coverage  (in  terms  of  a number  of  sectors, volume  of 

trade  affected  and  modes  of  supply);  no  increase  in  the  overall  level  of  barriers  to 
trade in services originating in other GATS Members within the respective sector; and 
the  elimination  of  substantially  all  discrimination  (through  the  elimination  of  all 
existing  discriminatory  measures  and/or 
the  prohibition  of  new  or  more 
discriminatory  measures).  The  "substantial  coverage"  condition  requires  that,  in 
principle, all service sectors  are adequately covered  (although there is some scope  for 
interpretation  as to whether this includes  sectors not presently  covered  in the GATS, 
such  as  air  transport  and  maritime  transport,  or  where  appropriate  MFN  exemptions 
have been  listed).  The  'substantial  coverage'  condition  also  requires  that  provisions 
on  investment  (commercial  presence  mode  of  supply)  and  also  on  the  supply  of 
services  implying  the  temporary  movement  of  certain  categories  of physical  persons 
(including key personnel) be included as well. 

As  for  mutual  recognition  in the services  area,  article  VII  of  the  GATS  specifically 
provides  for  the  conclusion  of  agreements  for  the  mutual  recognition  of  education, 
qualifications  or  ability  to  provide  services.  Furthermore,  the  Annex  on  Financial 
Services  allows  mutual  recognition  of  prudential  measures, 
the 
establishment  and provision  of  financial  services.  The  scope  for  removing  technical 
and legislative barriers to trade could be examined for several services sectors, such as 
regulations  governing  bank  branches,  securities  regulations  and  the  licensing  of 
professionals.  Article VII  requirements  (and  a  similar  requirement  in  the  Annex  on 
Financial  Services)  to  give  adequate  opportunity  for  similar  agreements  with  other 
countries would, however, need to be observed. 

facilitating 

With regard to government procurement, WTO rules are to be found  in the plurilateral 
Government  Procurement  Agreement  (the  GPA).  The  question  of  MFN  treatment 
should be considered within the specific  context of the GPA agreement which, on the 
one  hand,  imposes  an  MFN  treatment  between  contracting  parties  and  on  the  other 
hand,  allows  contracting  parties  to  limit  this  by  inserting  "General  Notes"  in 
Appendix  1  to  the  Agreement  which  reintroduce  bilateral  relations  based  on 
reciprocity  between  two  or more parties. Whilst  an NTMA  initiative  in  procurement 
would  not  encounter  WTO  compatibility  problems,  commitments  undertaken  by 
either party  might,  in  some  cases, involve  extending  EU-US  bilateral  concessions  to 
EEA partners and, depending on the areas involved, to other GPA contracting parties. 

In  the  intellectual  property  area,  for  the  NTMA  to  be  WTO  compatible,  any 
modifications  to  domestic  legislation  would  have to be  applied  by  the two  Parties  in 
compliance  with  the national  treatment  and  MFN  provisions  contained  in  the  TRIPs 
Agreement. 

In  the  investment  area,  other  than  in  services  (see  above),  there  are  no  WTO 
obligations affecting  this proposal. 

6. 

RELA TIONS WITH THIRD COUNTRIES 

The  NTMA  will  not  involve  the  creation  of  any  new  barriers  with  the  rest  of  the 
world.  Moreover,  it  is  designed  to  encourage  and  facilitate  wider  multilateral 

liberalisation,  and  the  elements  of  the  Agreement  which  provide  for  bilateral 
liberalisation  would not necessarily remain exclusive to the EU and the US. It is  also 
designed  to  permit  extension  to  those  third  countries  who  are  willing  and  able  to 
match the commitments.  While the impact  on third  countries, including  in  particular 
countries preparing for accession to the EU,  is a factor to be borne constantly in mind 
during  negotiation,  overall  there  is  likely  to  be  a  net  positive  and  dynamic  effect, 
which  can be  illustrated  for  each NTMA  component,  referring  to  different  groups  of 
third countries. 

Tariff  liberalisation 

On tariffs, the conditional commitment to reduce industrial tariffs  to zero would be on 
a  strictly  MFN basis, to be realised  only by  2010. The NTMA  as  such will  thus  not 
have any effects  on third countries in this area. However, once such a multilateral  step 
would  be  taken,  there  will  be  a  net  positive  effect  on  third  countries.  Those  third 
countries  which  will  join  such  a  conditional  EU-US  offer  and  undertake  similar 
commitments  will  provide  the  necessary  'critical  mass'  to  turn  the  elimination  of 
industrial tariffs  into a reality. They will gain enhanced access to EU and US markets, 
and to each others' markets. At the same time they will open their own markets to EU 
and  US  industrial  products, which  would  be  a  clear  sign  of  their  economic  advance 
and  the completion  of  a global process of reduction  of industrial tariffs,  which  began 
in fact with the first Round after the creation of GATT in 1947. 

Those  third  countries  which  are not  in  a position  to  submit  such  commitments,  and 
this  is  likely  in practice  to  be  the  case  exclusively  for  the  least  developed  countries, 
would benefit  from  greatly  enhanced market  access at zero tariffs  not  only to EU and 
US  markets  but  also  to  neighbouring  mid-income  developing  countries  which 
undertook  similar  MFN  tariff  elimination  commitments,  without  having  to  give  up 
their national tariff  protection. 

These  effects  should  be  considered  alongside  the  reduction  of  preferential  market 
access  currently  enjoyed  by  ACP  countries  under  the  Lomé  Convention,  and  any 
increase  of  competition  in  the  Community  market.  The  EU  and  US  should  also 
reaffirm  their  commitment  to  ensure  that  less  developed  countries  secure  a  share  in 
the  growth  in  international  trade  commensurate  with  the  needs  of  their  economic 
development,  with  a  view  to  their  smooth  and  gradual  integration  into  the  world 
economy, as well as their commitment to address trade and development  issues in the 
WTO.  Further  economic  analysis,  to  be  conducted  before  firm  commitments  are 
made  in  WTO  multilateral  negotiations,  should  cover  the  impact  of  the  proposed 
elimination  of  industrial  tariffs  on  the  less  developed  countries,  including  the 
consequences  of  increased  competition,  the  extent  to  which  they  will  have  to  open 
their  own  markets,  and  the  extent  to which  they  will  enjoy  increased  access  in  other 
markets. 

Free trade area in services 

On services, as indicated  above, the NTMA would  fully  meet  GATS rules  and would 
be  designed  to  be  widened  to  the  maximum  extent  possible  into  multilateral 

/V 

liberalisation.  The  dynamics  of  the  transatlantic  services  market  should  render  it 
attractive  to join  the  more  ambitious  NTMA  services  commitments  on  a  reciprocal 
basis  by  countries  who  were  in  the  past  rather  reluctant  to  join  in  multilateral 
liberalisation  initiatives.  There  will  be  every  reason  for  third  countries  to  seek  to 
match  the  NTMA  bilateral  liberalisation  commitments  because  the  EU  and  the  US 
would in return bind their matched offers  in the liberalisation package emerging from 
the GATS  2000 talks.  The NTMA would  not, in respect  of any Member  outside  the 
agreement, raise the overall  level of barriers to trade in services within the  respective 
sectors  or  sub-sectors  compared  to  the  level  applicable  prior  to  such  an  agreement 
(GATS Article V(4)).  Furthermore, third country services suppliers can benefit  as, in 
accordance with GATS Art.V(6), a company incorporated  and engaged  in  substantive 
business operations in the EU or US would be entitled to benefit from an EU-US FTA 
in services regardless of the ownership of its capital. 

Technical barriers to trade 

As regards the area of technical barriers, the EU is free under the WTO-TBT  code to 
conclude  mutual  recognition  agreements  and  to  accept  technical  regulations  of  other 
countries  as equivalent.  The  impact  on third  countries  varies  according  to the  degree 
of regulatory  convergence which has been agreed with other countries. The  countries 
most concerned are those which either apply the acquis communautaire of the Internal 
Market  (e.g. Turkey, ÈFTA Members of the European Economic Area) or those who 
are committed to introduce Internal Market rules as part of the pre-accession  strategy 
for  candidate  countries  (CEECs,  Cyprus).  These  countries  should  benefit  most  from 
the NTMA  since  their products  would  be produced  according  to those  EU  standards 
which would in future  be recognised  as being equivalent by the US or be  harmonised 
in  the  transatlantic  marketplace.  Other  third  countries  could  eventually  join  the 
NTMA mechanism  covering technical barriers, provided  these countries were willing 
and  able  to  undertake  the  same  comprehensive  regulatory  commitments.  This 
challenge  would  be  particularly  relevant  for  other  major  trading  partners,  who 
maintain hitherto substantial regulatory trade barriers. 

C. 

ENVIRONMENT 

7. 

ENVIRONMENTAL  CONSIDERA TIONS 

All  commitments  under  the  NTMA  should  be  implemented  consistent  with  health, 
safety  and  environmental  objectives  and  should  aim  at  ensuring  a  high  level  of 
protection.  This  is  a  fundamental  legal  and  political  requirement  which  results 
directly  from  the  provisions  of  the  EC  Treaty.  Regulatory  convergence  in  areas 
relating  to  health,  safety  and  the  environment  should  therefore  be  based  on  a  high 
level of protection  and  should in no way lower of hamper the further  development  of 
the acquis in this area. 

To ensure the possibility  for the parties to maintain, establish and implement  effective 
domestic  policies  and  measures  to  ensure  a  high  level  of  health,  safety  and 
environmental  protection,  the  Agreement  should  include  a  specific  safeguard 

^7 

mechanism  for certain measures in these areas which would otherwise be  inconsistent 
with  the  Agreement.  This  safeguard  mechanism  could  take  the  form  of  a  general 
exception  clause  following  the  precedent  of  GATT  Article  XX  and  GATS  Article 
XIV. 

The  environmental  dimension  needs  to  be  taken  into  account  throughout  the 
negotiating  process.  Bearing  in  mind  the  recommendations  of  the  OECD  made  in 
1993, it could  also be appropriate to review the environmental  impact of the NTMA, 
allowing  parties  to  identify  potential  environmental  effects  and  to  devise  effective 
policy responses. 

It  should  also  be  noted  that  the  lack  of  US  participation  in  several  multilateral 
agreements  (for  example the biodiversity convention,  and  the Basle Convention  and 
the  Kyoto  Protocol  under 
the  Climate  Change  Convention)  can  distort 
competitiveness  and  causes  substantial  asymmetry  between  EU  and US  international 
obligations  in the field of  environment.  Full US participation  in these  conventions  is 
therefore  highly desirable. 

D. 

COMPONENTS OF THE NTMA 

8. 

FREEING  TRADE IN  GOODS OF TECHNICAL BARRIERS 

Technical barriers still hamper Transatlantic  trade 

Differences  of  law,  procedure  and  practice  on  both  sides  of  the  Atlantic  at  present 
cause many technical barriers to the free movement of goods. 

Barriers typically arise from a divergence in obligations concerning: 

• 
• 

• 

information  and labelling of goods; 
technical  specifications  or  performance  requirements  relating  to  goods  and  their 
packaging; 
specifications  concerning  tests  and  test  procedures  with  which  goods  must 
comply; 
any declarations or certificates  that have to be provided; 
accreditation of bodies entitled to carry out tests or issue certificates; and 

• 
• 
•  marking of goods to indicate their conformity  with requirements. 

Technical  specifications  agreed  by  standards  bodies,  or  arising  de facto  from  the 
practices  of major  market  players, are also  a potential  source  of trade barriers, where 
voluntary compliance with them brings marketing advantages. 

Such  divergence,  whether  it  arises  at  the  regulatory  or  other  levels,  may  reflect 
different  positions as regards the desirable level of security, the means used to achieve 
that  level,  and  the  method  chosen  to  demonstrate  conformity  with  the  requirements. 
Nevertheless,  there  is no  unavoidable  reason  why  such  legitimate  differences  should 
act as barriers to trade. 

What should an NTMA achieve in this respect 

The key to barrier-free  trade is to achieve a climate of public confidence  in the safety 
and security of products placed on the market, on either side of the Atlantic.  Where 
the EU and the US share similar concerns and aims regarding the protection of public 
health, safety, consumers and the environment, this should be achievable. The NTMA 
should  work towards this goal by developing  a framework for  convergence  of law, 
procedure and practice involving the various legislative and regulatory bodies, as well 
as for the application of the principle of mutual recognition. 

To  this  end,  and  taking  due  account  of  the  need  to  preserve  our  high  level  of 
protection for health, safety, consumers and the environment,  the NTMA should aim 
to  create conditions in which goods legally marketed in the territory of one party can, 
as far  as possible, move across the Atlantic  and be marketed  in the territory  of the 
other without facing further formalities or duplicate requirements. 

The  regulatory  structures  of  the  parties  are  the  guarantee  of  the  integrity  of  their 
domestic markets. Without them, those markets could not be maintained.  Therefore 
the NTMA cannot avoid facing the issue of convergence. Yet the prize is great enough 
to justify the effort  involved. 

It is essential to ensure that the NTMA is implemented in a way consistent with the 
fundamental  requirements  concerning protection  of human,  animal  and plant  life  or 
health  and the environment  laid down in the EC Treaty.  To this end,  all measures 
under the NTMA aimed at removing technical barriers to trade in goods relating to 
these areas should  at least maintain our existing high level of protection..  It should 
furthermore be recognised that both the EU and the US maintain all the rights, granted 
to them under the WTO SPS-Agreement, including to establish a level of sanitary and 
phytosanitary  protection  which  is higher  than  the  level  resulting from international 
health  standards.  There  should  be  provision  for  the  possibility  to  take  specific 
safeguard measures when necessary. 

How can these objectives be pursued 

An appropriate combination of convergence of law, procedure and practice and of the 
application  of 
the  principle  of  mutual  recognition  (which,  moreover,  are 
complementary  and  not  mutually  exclusive)  will  have  to  be  found  for  different 
categories of goods. The aim of an NTMA should be to seek the most ambitious and 
trade liberalising such combination, while meeting the requirements in sensitive areas 
set out in the previous paragraph.  The EU should also be able to develop further  its 
levels of protection in these areas, while taking into account the differences  that may 
exist in regulatory approaches and traditions. 

Convergence of law, procedure and practice is the key to ensuring that similar public 
policy  concerns  are  not  pursued  through  radically  different  and  sometimes 
incompatible  means, thus  giving rise to  avoidable  and undesirable barriers to trade. 
Convergence can be achieved  in different  ways, and notably through regulatory co 
operation and through harmonisation. 

Jlk 

To  the  extent  that  those  public  policy  concerns  are  already  being  pursued  through 
different  means on the two sides of the Atlantic, there is room for acceptance of such 
alternative means to achieve them, insofar as the levels of protection which are to be 
achieved  are  equivalent.  This  can  be  achieved  through  different  techniques  or  a 
combination  of them,  such as mutual recognition  of technical  requirements; mutual 
recognition  of  conformity  assessments;  or  resort  to  a  supplier's  declaration  of 
conformity. 

The public confidence needed to guarantee success to the NTMA means that  effective 
implementation  of commitments  on both sides will be crucial* This will require co 
operation between regulatory authorities at the appropriate level, covering such issues 
as  consultation  and  administrative  co-operation,  a  commitment  to  implement  the 
necessary legislation and an effective dispute settlement system. 

In which sectors/products can this be pursued 

The parties will need to identify early in the negotiating process a sufficient  number of 
candidate sectors/products to produce eventually a balanced and mutually interesting 
result. In order to be credible to the business community, there would also need to be 
an early and sufficient  reduction of any unnecessary or duplicate regulatory burden on 
business,  through  a  critical  mass  of  concrete  commitments.  Longer-term  actions 
would be developed on the basis of these. 

The search  for  convergence  and mutual recognition  can be pursued  as  a priority  in 
those  industrial  sectors/products  where  there  is  an  important  existing  interest  to 
Transatlantic industry, such as télécoms, chemical products and motor vehicles. In a 
number of these sectors, work is already under way in international fora,  such as the 
International  Telecommunications  Union  for  télécoms  equipment,  the  International 
Conference  for  Harmonisation  for  medicinal  products,  or  the  UN-ECE  for  motor 
vehicles  and  tyres.  Effective  implementation  on  international  standards  is  another 
way  forward  towards  a  higher  level  of  convergence.  Whereas  the  necessary 
arrangements are in place in Europe, the use of international standards is  insufficient 
in the US.  In  still  other  areas there may be  scope  for  building  on  existing  mutual 
recognition of tests and certificates, and upgrading the level of agreement to a higher 
level of liberalisation. 

A number of agriculture-related  issues which fall  outside the WTO agreement could 
be dealt with in the context of the NTMA.  In this respect, the soon to be adopted EU-
US  Veterinary  Equivalency  Agreement  offers  the  most  suitable  framework  to 
intensify  and  deepen  mutual  efforts  to  arrive  at  more  convergence  in  the  area  of 
veterinary issues while at the same time maintaining each sides' high level of health 
protection.  Extending the scope of the Veterinary Agreement to cover questions like 
animal welfare, phytosanitary  issues or other questions relevant in the trade of  food 
could be foreseen. 

The field of biotechnology  is highly  sensitive.  This should not  discourage us from 
addressing  it  under  the  NTM.  Systems  for  facilitating  the  exchange  of  scientific 

siC 

information relating to such products would be a first step to build confidence  and to 
promote the greatest possible common approach between the EU and US. 

9. 

TARIFF ELIMINATION 

Tariff barriers remain an obstacle both to Transatlantic trade and to trade between the 
EU and its other trading partners. 

For  industrial  tariffs,  although  the  average  level  of  industrial  tariffs  in  OECD 
economies  is low, a variety of tariff  peaks remain. The most  effective  way to remove 
these tariffs  is on a multilateral basis.  However, it has often been necessary in the past 
for  a number  of WTO members to show leadership within  the multilateral  system  by 
offering  to reduce their tariffs  on an MFN basis if  the largest possible critical mass of 
others  follow  suit,  so  as  to  minimise  the  risk  of  free  riding  and  maximise  the 
liberalising  effect  and  the  economic  benefits  for  the  EU.  This  happened  during  the 
Uruguay  Round, where  there were  a number  of Quad  initiatives  for  tariff  reductions, 
and on the Information  Technology Agreement  (ITA).  The NTM would build on that 
approach  by  offering  a  conditional  political  commitment  to  work  toward  the 
elimination, by 2010, of all industrial tariffs on a MFN basis.  The two Parties  could 
agree to  go to  zero provided  a critical mass of trading partners joins.  This  condition 
would  need  to be  spelled  out,  either  in terms  of broad  geographical  coverage  or  as a 
percentage of world trade (as was done in the IT A).  The commitment would only turn 
into an actual tariff  elimination if a critical mass of countries in addition to the EU and 
US  were  prepared  to  make  those  reductions.  However,  the  prize  of  zero  industrial 
tariffs  would be an attractive reason for trying to achieve that critical mass. 

Such  an  initiative  would  play  directly  into  comprehensive  tariff  negotiations  during 
It  will  serve  our  joint  interests  in  achieving 
the  next  global  WTO  negotiations. 
meaningful  tariff  reductions  from  third  parties  within  a  set  timeframe.  This  is  in 
addition to the benefits  of removing remaining tariffs  between the EU and US. 

Fish  and  fish  products  are  not  industrial  products  in  the  strict  sense.  While  these 
products  are not excluded from the NTMA in principle, the specificity  and  sensitivity 
of the fisheries sector may require a selective approach and the current Council  debate 
on the Commission  Communication  on the Future of the Market in Fisheries  Products 
in the European Union1 will have to be taken into account. 

Regarding  agriculture  a WTO process  is already  under way  in  Geneva  (Analysis  and 
Information  Exchange,  A.I.E.)  to  prepare  the  resumption  of  negotiations  on 
agriculture  which  are  scheduled  to  start  at  the  end  of  1999.  The  negotiations  will 
shape  future  trade  in  agriculture.  As the  WTO  Agreement  on  Agriculture  is  already 
fairly  comprehensive,  covering  internal  support,  subsidisation  and  market  access 
(including  tariffs),  and  future  negotiations  can be  expected to  at  least  mirror  such  an 
approach,  a parallel process in an NTM context would not be helpful.  Furthermore, it 
must  also be borne in mind  that not only  are there  fundamental  structural  differences 
between  agriculture  in  the  US  and  the  EU;  domestic  policies  of  the  two  parties  are 
also  radically  different.  Complete  free  trade  would  therefore  be  difficult,  if  not 
impossible,  to  imagine,  without  a  degree  of  prior  harmonisation  of  our  respective 

See COM(97)719 final,  16.12.1997. 

I. 
-R 

policies,  which  is  likely  to  be  unacceptable  to  either  side  This  is  why  agricultural 
tariffs  and subsidies cannot be included in the NTM negotiation. 

10. 

SERVICES 

A Free Trade Area (FTA) for  services would be an ambitious  liberalisation  initiative. 
It would  need  to  meet  GATS  rules, covering  "substantially"  all  services  sectors  (as 
defined  in  the  GATS)  including  sectors  such  as  telecommunications,  financial 
services,  business  and  professional  services  and  transport.  We  should  aim  at  the 
elimination  of all restrictions  to the right of establishment,  either  immediately  or,  for 
the most  difficult  areas, over  a transitional  period.  As regards  cross-border  services, 
the  objective  should  be  to  establish  clear  obligations  to  liberalise  such  trade.  The 
services  element  of  the  NTMA  would  combine  two  main  approaches  to  achieve 
effective  liberalisation: 

•  Liberalisation  of market  access on the basis of host country control:  Substantially 
all  restrictions  to  market  access  and  to  national  treatment  should  be  eliminated 
within  a  certain  period,  for  all  the  covered  sectors.  For  some  highly  regulated 
sectors  progress  may  be  particularly  difficult  on  cross  border  services  and  the 
NTMA would concentrate on the right of establishment  of a commercial presence. 
The  agreement  would  in  principle  apply  to  all  modes  of  delivery  (including  in 
particular cross-border services and consumption abroad). 

•  Elimination  of  regulatory  obstacles  on  the  basis  of  mutual  recognition:  Taking 
into  account  the  importance  of  non-discriminatory  regulatory  barriers  in  certain 
sectors  and  also  for  certain  cross-border  transactions,  the  agreement  would 
envisage 
regulations  and  other 
requirements. 

the  mutual  recognition  of  qualifications, 

i) Elimination  of restrictions to market access and to national treatment 

An NTMA would  aim at eliminating remaining  restrictions  on national treatment  and 
market  access  (both  through  establishment  in  the  form  of  subsidiaries,  branches,  or 
representative  offices;  cross-border  provision  of  services;  and  purchase/consumption 
of  services  abroad)  scheduled  by both partners  in  GATS. It would  be based  -  unlike 
the  Internal  Market,  and  with  the  exception  of  cases  where  mutual  recognition  for 
regulations  is  achieved  -  on  the  application  of  host  country  rules  and  host  country 
control.  As  regards  the US, it  should  bind  both  the  Federation  as well  as the  States, 
and should offer  a degree of market access similar to that offered  by the EU. It would 
result in benefits  for EU industry in the US, such as: 

a.  New  public procurement  possibilities,  in particular  for  the highly  competitive  EU 
construction  services sector, and equal access for the subsidiaries of EU companies 
to public funded  research programmes in the US. 

b.  More  opportunities  to  provide  on  a  cross-border  basis  banking,  securities  and 
certain  insurance  services  (such  as  large  industrial  risks)  into  the  US,  and  a 
substantial relaxation of current rules that prevent EU financial  conglomerates from 

4 

establishing,  for  instance,  banking  and  insurance  operations  in  the  US.  The  EU 
and US should continue to support IOSCO. 

c.  Greater  certainty of access to the US maritime transport  services  sector, where  the 
EU industry has a strong position.  Other objectives would include the phase out of 
the  different  obligations  for  US  Government-owned  or  financed  cargoes  to  be 
carried  on  US-flag  commercial  vessels,  and  other  restrictions,  but  it  must  be 
recognised that these are sensitive issues. 

d.  Elimination  of nationality  restrictions  and non-transparent  licensing  procedures  at 
State level  for professional  services, and in particular  for certain legal  and medical 
services, as well as other restrictions regarding a number of business  services  such 
as personnel placement services; 

e.  Ensuring  non-discriminatory  access  of  European  operators  to  provide  satellite-
based 
telecommunications  services  in  the  US,  including  satellite  personal 
communications  services  (S-PCS)  and  one-way  satellite  transmission  services. 
Elimination  of 
in  US 
restrictions 
telecommunications  services (limitation to 20 % of direct  foreign  shareholding  for 
radio  licenses)  and  coverage  of postal  services, without  undermining  internal  EU 
policy making on services of general economic interest. 

to  direct  ownership 

remaining 

the 

f.  Access  to  the  energy  services  sectors  through  opening  the  possibility  for  the 
establishment  and  acquisition  of  companies,  mainly  in  the  areas  of  transmission 
and  distribution  of  gas  and  electricity,  including  facilities  supplying  ancillary 
services, and in the context of recently adopted EU directives. 

g.  Elimination  of  remaining  restrictions  in  other  sectors  such  as  quality  services 

(testing, inspection and certification)  and environmental services. 

For  the  majority  of  sectors  effectively  "covered  by  the  GATS,  this  should  pose  no 
particular  problem.  A  wide  sectoral  coverage  and  a  high  degree  of  liberalisation 
should  contribute  to  the  achievement  of  an  overall  balance  and  to  increase  the 
attractiveness  of  such  a  deal.  However,  it  must  be  recognised  that  some  areas  are 
particularly  sensitive.  In the audio visual  sector, the exception which the EU  secured 
in  the  Uruguay  Round,  by  combining  MFN  exemptions  and  the  absence  of 
commitments  on national  treatment  and market  access in the GATS  agreement,  must 
be fully preserved and therefore  excluded from the NTMA negotiations. 

The NTMA will not  impact  on the current  aviation  discussions  (June  1996 Mandate) 
aimed at establishing a common aviation area and which will develop in parallel. This 
involves  substantial  expansion  of  the  air  transport  services  open  to  airlines  of  both 
sides.  It  covers  market  access  in  a  wide  sense,  through  the  conclusion  of  an  open 
market  agreement  ensuring  equal  access to  each  other's  market  and  inter alia  lifting 
US restrictions to foreign  ownership of US carriers. 

An NTMA could also provide a useful  opportunity to improve some of the features  of 
GATS.  For  instance,  the  adoption  of  a  negative  listing  system  (everything  is 
liberalisation 
liberalised  except  for  what  is  listed)  as  a  method  of  securing 
commitments  as  well  as  increased  transparency;  and,  possibly,  the  introduction  of 

W 

generic  rules  for  investment  and  the  movement  of  people  (in  particular  service 
providers,  intra-company  transferees,  business  visitors  and  key  personnel).  The 
NTMA could also break new ground by including in the liberalisation process sectors 
which are so far  excluded from the GATS basic rules (maritime transport) or which 
have not been subject  to much attention in the past (e.g. energy services), for which 
liberalisation in the EU is recent. 

In  addition,  the  national  treatment  provisions  should  fully  apply  to  the  public 
procurement of services, which are provided either on a cross-border basis or on the 
basis  of  a  local  establishment:  at  present,  Article  XIII  of  GATS  excludes  the 
application of the national treatment and most favoured nation provisions to the public 
procurement of services.  This is an area where the EU has already opened its market 
on  a  generally  non-discriminatory  basis,  and  where  considerable  new  business 
opportunities  could  be  created  for  EU  service  suppliers  because  of  the  present 
existence of significant  US discriminatory laws and practices based on different  Buy 
America provisions. 

ii)  Mutual recognition of regulations 

The  agreement  should make use of the opportunities  provided  for  by the  GATS to 
conclude  agreements  for  the  mutual  recognition  of  qualifications,  licenses,  or 
regulations  and  other  requirements  concerning  the  provision  of  services  in  certain 
sectors.  In many services sectors, it is domestic regulation that now constitutes the 
main barrier  to  foreign  businesses  or  individuals.  The  sectors  that  lend  themselves 
most  to  MRAs  are  professional  services,  educational  and  training  services,  and 
financial services. 

In  the  few  areas  where  they  have  been  concluded  so  far,  MRAs  in  the  field  of 
qualifications  have  been  carried  out  between  professional  bodies  responsible  for 
governing the different  regulated professions.  The situation in the EU, with at least 
fifteen  authorities responsible for governing each profession,  and the US, where often 
every  state  has  its  own  authorities,  means  that  mutual  recognition  in  any  of  the 
professional  areas is complex.  For instance, recent negotiations between the UK and 
US  accountancy  bodies  have  proved  difficult  because 
there  are  many  authorities 
seeking recognition  in each other's  territory.  The  splintered  responsibilities  in this 
sector might make it ripe for the two transatlantic partners to try to set up a  framework 
of  binding  rules  within  which  the  responsible  authorities  (including  professional 
bodies)  could  achieve  mutual  recognition.  Taking  into  account  the  differences  in 
education and training between and within both the EC and the US, a model which is 
close  to  the  EC's  General  System  of  mutual  recognition  of  qualifications  would 
provide flexibility  to require aptitude tests or adaptation periods in case where there 
are  substantial  regulatory  differences.  A  network  of  administrative  cooperation, 
applicable to  all regulated professions  covered by the agreement,  could  oversee the 
functioning  of the system and help solve problems. The WTO Guidelines for Mutual 
Recognition  Agreements  or Arrangements  in the Accountancy  Sector could  also be 
used as a model. 

In the financial services sector examples where mutual recognition of regulations and 

possibly  home  country  supervisory  control  (probably  combined  with  additional 
market  access  elements)  could  be  explored  and  form  a balanced  package  for  both 
sides could be: 

a.  The  conditions  for  the  operation  of  branches.  A  greater  convergence  of 
regulations  and  strengthening  of  co-operation  and  exchange  of  information 
between  EU  and  US  regulators  and  supervisors  and  could  enable  the 
establishment  of  bank  branches  without  endowment  capital  requirements  or 
lending or other operational  limits based on the branch capital.  The agreement 
could include the ability to operate branches in more States (in particular, the so-
called inter-State de novo branching).  Similar facilities could be provided for in 
the  insurance  and  securities  areas,  where  there  are  particular  difficulties  in 
establishing branches in the US.  The EC's financial  services directives - as well 
as Article 59.2 of the Treaty of Rome- contain  specific  provisions  allowing  for 
negotiations  leading  to  granting  third  country branches  the freedom to  provide 
cross-border services within the EU; 

b.  The mutual recognition of mutual funds  for cross-border marketing between the 
US  and  the  EU  -  a  long-standing  EU request from the  EU  asset  management 
industry, as well as the mutual recognition of prospectuses in particular in cases 
of public offers of securities and for the listing of securities in a stock exchange; 

c.  The exemption from the application of detailed US regulations and jurisdiction to 

trade in securities by US residents in non-US securities markets; 

d.  An  additional  relaxation  of  rules  restricting  EU  financial  conglomerates from 
having banking and non-banking financial subsidiaries in the US, for instance to 
avoid cases where the affiliation  under a single holding company of a  bank and 
an insurance company may lead to compulsory divestment of either the banking 
or the insurance operations in the US; 

e.  Further regulatory cooperation on payment systems with a view of establishing a 

transatlantic payment instrument. 

f.  There  is  scope  for  strengthening  the  process  of  co-operation  and  exchange  of 
the 

instance  regarding 

information  between  supervisory  authorities,  for 
consolidated supervision of financial groups 

11. 

GOVERNMENT PROCUREMENT 

Procurement  accounts  for  between  10 and  15% of  combined  GDP  and  any  serious 
effort  to  create  an  NTMA  should  therefore  address  this  sector.  The  inclusion  of 
government procurement in the NTMA should result in the extension of full national 
treatment between the parties. 

The NTMA provides an opportunity to completely liberalise the two respective public 
procurement  markets  in  a way  which  is  fully  consistent  with  WTO  rules,  without 
creating new trade obstacles to third countries. The NTMA should go beyond what is 

li 

laid  down  in  the  Government  Procurement  Agreement  (GPA)  in  order  to  extend 
market access. It should not be necessary to impose common detailed procedural rules 
as existing national rules provide  for  the necessary  levels of transparency  and legal 
recourse in procurement once extended to the other party. 

For the EU, at "above threshold"2 levels, this would not present specific difficulties  as 
the market is already open. At "below threshold" levels, it would suffice  for the EU to 
commit  itself  to  an  exchange  of  national  treatment  and  a  guarantee  of  fair  and 
transparent treatment of all suppliers and service providers from both parties. For the 
US,  it would require, de jure, disapplying all federal "Buy American" preferences  for 
EU goods, and extending exemptions for SMEs and minority enterprises to cover EU 
companies. 

Access  to  US  electronic  procurement  systems  (by  which  a  large  majority  of  SME 
preferences in particular are operated) and the application of preferences at sub-federal 
level would also need to be addressed. In addition, the question of the interpretation of 
the  application  of  the  security  exception  in  defence-related  procurement  could  be 
addressed to ensure an even-handed approach. 

In particular, the NTMA should address the following: 

a.  eliminating  exceptions  from  national  treatment  in  areas,  already  covered  by 
commitments  under  the WTO Agreement  on Government  Procurement  and  the 
EC-US agreement of 1995.3 

b.  completing geographic and entity coverage.4 
c.  elimination of existing sanctions.5 

12. 

INTELLECTUAL PROPERTY 

In the area of patents, the US is the only country in the world which continues to use 
the anachronistic first-to-invent system. The rest of the world follows the  first-to-file 
approach.  It  is  obvious  that  a  system  which  relies  on the  uncertain  moment  of the 
invention is extremely demanding in terms of evidence for all inventive activities and 
creates  the  potential  for  extensive  and  highly  costly  litigation.  Furthermore,  the 
coexistence  of  different  systems  leads  to  interface  problems.  The  issue  has  been 
discussed for many years. Its importance is highlighted by the fact that it has  figured 
for years on top of the TABD agenda and that the TABD has recommended a change 

2 The  EC Directives  apply  to procurement  contracts  which  have  a value  higher  than  the  threshold  set 
out in the Directives.  Below threshold procurement is regulated by member states. 
3  US  exemptions  include  a  number  of  Buy  American  and  related  requirements,  local  preferences 
applied at both federal  and sub-federal  level, and small and minority set-asides. The US also maintains 
a cargo preference  - an obligation to use US flag  vessels when importing  certain products procured by 
US. 
4 At present only 39 out of 50 States and 5 out of 24 large cities are covered. 
5 In May  1993, US imposed sanctions on the EC under Title VII for  discriminating  against US telecom 
equipment  businesses.  EC  imposed  equivalent  countermeasures.  Both  remain  in  force  and  are 
counterproductive  to Transatlantic business. 

to  adopt  the  first-to-file  approach  in  the US. No progress  has been  achieved  up to 
now. 

As recommended by the TABD, measures should be taken to significantly  reduce the 
high costs of obtaining and enforcing patents. The problem of high litigation costs is 
of a general nature in the US, but turns out to be particularly burdensome in the area 
of patents, mainly because of extensive pre-trial  discovery procedures  and, to some 
extent,  the trial  of patent  cases before  a jury.  Alternative ways of  settling  disputes 
should be examined, without changing the system as such. An estimate or study on 
litigation costs should be carried out, since it is difficult  at present to quantify  costs in 
absolute figures in the absence of systematic, reliable and mutually agreed statistics. 
Based  on the  results  of  such  a  study,  the  objective  should  subsequently  consist  of 
progressively reducing the costs. 

Today, if an inventor applies for a patent at the European Patent Office  (EPO) and the 
US Patent  and Trademark  Office  (USPTO), such patent  applications  concerning the 
same invention are completely examined by both offices. This implies that full search 
reports  to find out  the relevant  state of the  art  are made twice, with  the  associated 
costs  for  the  applicants.  Discussions  have  already  been  initiated  among  the  offices 
concerned  to  improve  the  exchange  of  information  on  technical  matters  related  to 
patents. Contacts  should be intensified  to reach  some degree of  acceptance  or even 
mutual recognition of parts of the patent procedures, such as search reports. 

A number of shortcomings exist in the area of government use without the consent of 
the rightholder, which,  in  practice,  is  similar  to  compulsory  licences.  While  some 
issues were  already  addressed  in the Uruguay  Round,  others  are  still  waiting  for  a 
satisfactory  solution.  The  aim  should  be  to  proceed  as  for  any  other  compulsory 
licence. A full patent search should be carried out and the patent holder be  informed 
prior to any government use, except in cases of national emergency. Such use should 
only  be permitted  after  efforts  by  the  government  to  obtain  authorisation from the 
rightholder on  reasonable  commercial  terms  have  not  been  successful,  within  a 
reasonable period of time. 

The  limitations  of the  internet  domain  name system are giving rise to  legal  battles 
involving national right holders  sharing the same trademark.  Companies  are rapidly 
becoming  aware  of  the  great  value  of  easily  memorable  internet  domain  names. 
Trademarks  are territorial, yet names registered  under  the domain name  system  are 
both unique and international. In this context, trademark holders should be provided 
with the same rights and dispute settlement mechanisms as they have in the physical 
world. Questions of competent jurisdiction should also be addressed. 

In  the  area  of  geographical  indications,  it  would  be  desirable  either  to  eliminate 
altogether or, at least, to reduce the number of indications, which US producers can 
continue to use under the grandfather/generic use provisions of TRIPs (Article 24 par. 
4  and  6), such  as,  for  example,  Vermouth,  Chablis,  Champagne,  Chianti,  Porto  or 
Sherry.  This  would  contribute  to  considerably  improving  the  situation  of  EC 
rightholders.  Bilateral negotiations are underway, but progress is extremely slow. 

The  legal protection of databases  requiring  substantial  investment  is  currently  the 
subject  of  multilateral  negotiations  in  WIPO.  The  Berne  Convention  and  TRIPs 
provide  copyright  protection  for  creative  databases,  but  not  as  regards  databases 
which are not « original » in the copyright sense. The EU and the US should continue 
their  bilateral  dialogue  in  order  to  agree  on  a  common  approach  to  the  WIPO 
negotiations, securing a mutually acceptable outcome at the multilateral  level  as the 
ultimate  goal. Community  legislation  already offers  a higher  level  of protection.6 It 
also provides  for  the possibility  of  concluding  bilateral  agreements  on  a reciprocal 
basis with  countries  offering  a comparable protection  to  EU database makers.7 The 
fulfilment  of this condition by the US through the adoption of legislation by Congress 
would  lay  down  the  basis  for  the  conclusion  of  a  bilateral  agreement,  securing  a 
higher level of protection for EU database makers in the US. 

There is scope to improve the protection of textile and clothing designs. The objective 
should consist of reviewing existing unsatisfactory procedures to ensure a higher level 
of protection through easy, cheap and short procedures. So far, designs are protected 
by  copyright  law, offering  an easy access to protection, but making  litigation  more 
difficult.  Design  patents  grant  better  protection,  but  are  less  attractive  from  an 
economic point of view, since they imply considerable costs and are time-consuming. 
The  details  for  a  concrete  proposal  still  have  to  be  elaborated,  depending  on  the 
precise definition of interests by EU industry. 

On artists ' resale rights (droit  de suite) the Community  should  continue its regular 
contacts  with  the  US  Administration  with  a  view  to  reinforcing  this  right  in  the 
multilateral framework of  WIPO.  Following  the  future  adoption  of  a  Community 
Directive harmonising the artists' resale right, the adoption by the US of an equivalent 
system  would  further  the  establishment  of  free  trade  in  relation  to  the  twentieth 
century art market. 

Finally,  taking  into  account  the  sensitivity  of  the  subject  matter  concerned,  any 
broadening  of  the  scope  of  possible  negotiation  in  the  area  of  intellectual  and 
industrial property rights would require further  reflection. 

13. 

INVESTMENT 

On  investment  it  is  important  to  maintain  an  ambitious  approach  to  develop  a 
Multilateral  Agreement  on  Investment  (MAI)  whose  key  features  are  MFN  and 
national  treatment.  This  agreement  would  cover  market  access  and  protection  for 
investment in both goods and services, as well as for financial assets.  As things stand, 
it would not provide, for preferential "treatment" within free trade areas (as mentioned 
earlier the interface  between a FTA in services and the MAI would thus need to be 
explored).  At the end of that negotiating process,  an evaluation  should be made of 
what has been achieved and of what more might be done with the US. 

6 EU database  makers  are  guaranteed  a sui generis protection  under Article  7 of Directive  96/9/EC  of 
11 March  1996 which had to be implemented by  1  January  1998. 
7 See Article  11 par. 3 in conjunction  with recital 56 of the Directive. 

u 

For example, this might include: 

a.  a strong investor-to-state  and state-to-state dispute settlement procedure, which is 

the backbone of every bilateral investment treaty. 

b.  improved national treatment (e.g. in-state treatment and access to publicly  funded 

research and development programmes). 

c.  the so-called new issues (such as temporary entry, stay and work of investors and 
key  personnel,  senior  management  and  boards  of  directors,  employment 
requirements, performance  requirements, privatisations, investment incentives and 
corporate practices). 

14.  OTHER POSSIBLE COMPONENTS 

i) 

Trade and labour 

The adoption of core labour standards throughout the world is a shared priority.  As a 
minimum, the EU and US should implement fully the existing ILO conventions in our 
respective  legal  systems.  In  addition  as  part  of  the  NTM  there  should  be  further 
dialogue  between  our  social  partners  and  greater  co-ordination  with  a  view  to 
adopting a common position in discussions on these issues in all multilateral fora. 

ii) 

SMEs and Enterprise Policy 

In  the  context  of  the New  Transatlantic  Marketplace  we  should  promote  mutually 
beneficial  partnership  activities based on practical initiatives with emphasis in fields 
such  as 
to  risk  capital,  enhance 
entrepreneurship,  access  to  innovation  and  training  and  benefiting  from  trade 
liberalisation opportunities. 

improving  business  environment,  access 

iii) 

Electronic Commerce 

The  NTMA  should  pay  particular  attention  to  the  liberalisation  of  cross-border 
services when they are provided by electronic means.  International trade in electronic 
commerce raises a number of questions that, to some extent, go beyond those which 
in the past  have been  given more relevance  in the  context  of  "traditional" trade  in 
services.  Traditionally, liberalisation of services has put great emphasis on the market 
access  of  economic  operators  and  on  national  treatment.  Electronic  commerce 
requires to go a step further  and to place the emphasis on the need for free circulation 
of services. 

Electronic  commerce  may  in  many  instances  not  only  consist  in  the  provision  of 
services across borders but also in the simultaneous provisions of such services to a 
number  of different  countries.  Thus, the  electronic  provision  of  one  single  service 
will have to comply with a multitude of national regulatory standards.  As a result, we 
can expect that the major trade obstacles that electronic commerce will face are those 
resulting from regulatory divergences and from legal uncertainty.  These obstacles are 

not  'per  se'  discriminatory  and  therefore  the problems  they  create  may not just  be 
solved by the application of the national treatment obligation. 

If the NTMA is to effectively  liberalise services provided electronically, it will have 
to  consider  (beyond  the opportunities  already provided  by  the  GATS) the need  for 
mutual recognition of regulatory standards and, in certain cases, for harmonisation of 
legislation.  In  addition,  the  NTMA  would  have  to  consider  ways  to  improve  the 
transparency and legal predictability of the rules applicable to electronic commerce. 

There is a need to extend discussion on the different  aspects of electronic commerce 
to all regions of the world and in a multilateral  context, in order to co-ordinate and 
strengthen  the  activities  of  the  various  international  fora  and  to  involve  as  many 
countries as possible as well as the private sector. The Commission recently proposed 
the creation of an 'International Charter on Global Communications'.8 

iv) 

Data Protection 

In  the  Joint  EU-US  statement  on Electronic  Commerce  of  5 December  1997, both 
sides  have  recognised  that  the  effective  protection  of  privacy  with  regard  to  the 
processing of personal data on global information networks needs to be ensured. 

In the EU the privacy  of individual  as regards the processing  of their personal data 
and  the  free  flow  of  such  data  is  secured  by  the  Data  Protection  Directive.  The 
Directive requires inter alia that Member States shall only allow personal data to be 
transferred  to  third  countries  where its  adequate protection  is  ensured.  In  order to 
avoid existing differences  in levels of protections causing disruption to the free flow 
of  personal  data,  it  would  be  desirable  to  agree  to  substantive  provision  as  to  the 
nature of guarantees necessary to secure an adequate level of protection. 

v) 

Competition 

With  regard  to  the  possible  inclusion  of  competition  policy  in  the  NTMA,  a 
distinction must be made between anti-trust and state aid. 

On anti-trust, EU and US have successfully  developed co-operation in the  framework 
of the bilateral agreement on competition policy of  1991.  In  1998, this bilateral co 
operation  will  be  strengthened  by  the  conclusion  of  the  EU-US  agreement  on  the 
application  of positive  comity  in the  enforcement  of  competition  law.  EU-US  co 
operation  on anti-trust  matters will be  further  developed  at  its  own pace  and  on its 
own merits, outside the scope of the NTMA. 

Regarding state aid, the US has no control and authorisation procedures similar to the 
ones provided  for  by Articles  92-94 EU Treaty.  The  Commission  should  examine 
before the NTMA negotiation whether there is a need to negotiate disciplines on state 
aid as an element in avoiding distortions of competition. 

8  Communication  from  the  Commission  of 4 February  1998 on  'Globalisation  and  the  Information 
Society - The Need for Strengthened International Co-ordination', COM 98(50)  final. 

?£ 

vi) 

Taxation 

Given the growing influence  of preferential  tax regimes on the location of capital, the 
EU and US  should  address the issue of harmful  tax competition.  EU Ministers  have 
given a strong  signal of determination  to tackle this, both within the EU and  beyond, 
in the  agreement  of  1 December  1997.  This includes  in particular  a code of  conduct 
on business taxation  and action to ensure a minimum  of effective  taxation of  savings 
income.  In both cases Member  States have undertaken  to promote the  establishment 
of equivalent measures in third countries. 

E. 

OTHER ASPECTS OF THE INITIATIVE 

15. 

IMPLICATIONS  FOR EU  COMMON POLICIES 

As  regards  the  Common  Commercial  Policy  the  NTMA  does  not  envisage  the 
preferential  removal  of  tariffs.  It  could  instead  result  in  the  total  elimination  on  a 
MFN  basis  of  industrial  tariffs,  if  sufficient  reciprocity  from  third  countries  were 
forthcoming.  The NTMA is aimed at reducing costs for businesses, facilitating  trade, 
increasing market opportunities and improving economic efficiency.  In this respect it 
is  fully  consistent  with  the  general  goals  of  the  EU Industry  Policy  as  contained  in 
Art.  130 of the EC Treaty. 

In  the  area  of  trade  in goods,  the  main  policy  concerned  is  the Internal  Market,  in 
particular  as regards the free movement  of goods. EU policy  in this  area is based  on 
the  strict  limitation  imposed  by  the  Treaty  in  Articles  30-36/EC  on  the  scope  for 
Member States to restrict the free movement of goods. Such restrictions, as interpreted 
by the case law of the European  Court  of Justice, are confined  to  a list  of  imperative 
requirements (such as public health, safety,  consumer protection and the environment) 
and  are  subject  to  restrictive  conditions  (such  as  proportionality).  Where  Member 
States  impose  technical  requirements  in  accordance  with  these  principles,  free 
movement  of  goods  is  maintained  by  the  mutual  recognition  of  laws,  supported  if 
necessary  by  approximation  of these  laws  at Union  level.  This  means  that  a  product 
legally placed  on the market  of  one Member  State  should be  accepted  on the  market 
of  another,  without  having  to  meet  further  requirements.  There  are  a  number  of 
mechanisms  aimed  at  preventing  the  emergence  of  new  barriers,  such  as  the 
Information  Directive  83/189  and  Council  Decision  3052/95.  In  the  light  of  the 
importance  that  the  EU  attaches  to  the  Internal  Market  and  to  its  progressive 
introduction  in  the  CEECs  (Central  and  Eastern  European  countries),  any  external 
initiative needs to be compatible with those objectives. 

This  is  not  a  proposal  to  extend  the  Internal  Market  to  the  US.  However,  the 
principles  of  convergence  and  of mutual  recognition  of  law, procedure  and  practice, 
set out in this Communication  as the means to reach the Union's  objective  of  freeing 
draw  upon  elements  of  the 
Transatlantic  trade  in  goods  from  technical  barriers 
Internal  Market  approach.  The  process  of  convergence  is  likely  to  require  some 
change in EU law, procedure or practice. The same would obviously  apply on the US 
side. 

2? 

Bilateral convergence  should be pursued  in close connection with wider  international 
co-operation,  in  line  with  long-standing  EU  policy  and  the  recommendations  of  the 
WTO-TBT  (Technical  Barriers  to  Trade)  Agreement.  Insofar  as  the  development  of 
international  standards  would  be  involved,  mainly  in  the  International  Standards 
Organisation  (ISO)  and  the  International  Electrotechnical  Commission  (IEC),  the 
necessary  arrangements  are 
the  European 
standardisation  bodies  CEN  (Comité  Européen  de  Normalisation),  CENELEC 
(European 
(Comité  Européen  de  Normalisation  Electrotechnique)  and  ETSI 
Telecommunications  Standards  Institute).  Overall,  therefore,  the  results  of  agreeing 
international  standards  under 
the  New  Transatlantic  Marketplace  should  be 
manageable within the existing structures. 

their  adoption  by 

in  place 

for 

As far  as mutual recognition  is concerned,  a Mutual Recognition  Agreement  (MRA), 
covering  a number of industrial  sectors, was initialled  between  the EU and the US  in 
1997 and is scheduled to be formally  concluded and implemented  in  1998. This MRA 
only  concerns  mutual  recognition  of  conformity  assessments  and  provides  for  goods 
produced  on one  side of the Atlantic  to be tested  and  certified  there, to the  technical 
requirements  of  the  other  side.  Implementation  and  enforcement  of  this  Agreement 
will  necessitate  close  co-operation  with  the  Member  States'  authorities.  The  legal 
relationship between the MRA and an NTMA will need to be  clarified. 

In general terms (and more in particular where more than just  conformity  assessments 
are  concerned)  mutual  recognition  of  law,  procedure  and  practice  will  require  close 
scrutiny of the regulatory  approach  followed  on either side of the Atlantic, taking  full 
account of public policy objectives.  The impact of any differences  of approach in this 
respect  between  the  EU  and  the  US  (for  instance  as  regards  the  use  of  preventive 
requirements, compared with resort to producer's  liability) will need to be considered. 
The  objective  of  this  will  be  to  maintain  public  confidence  that  the  requirements  of 
protection  of  health,  safety,  the  consumer  and  the  environment,  which  are  at  the 
foundation  of the Internal Market, are not impaired. 

In the area of trade in services, the NTMA should  focus firstly on liberalisation  based 
on national treatment  and - unlike in the case of the Internal Market  - the  application 
of  host  country  rules,  and  on  the  elimination  of  restrictions  to  market  access.  This 
will  imply  that  within  the EU,  as of  course within  the US, remaining  restrictions  on 
the right of establishment in any form of commercial presence (subsidiaries, branches, 
representative  offices,  etc.) will have to be  eliminated  in  full  conformity  with  GATS 
rules. 

The  NTMA  would  not  alter  the 
rules  governing  the  functioning  of  the  Internal 
Market,  nor  imply  its  extension  to  the  US.  US  firms  will  benefit  from  the  Internal 
Market  rights  only  once  they  meet  the non-discriminatory  criteria  established  by  the 
EC  directives  (applicable  in  the  same  way  to  EC  companies),  except  in  those  cases 
where  under 
to  mutual  recognition  or 
incorporated  in  Europe,  already 
harmonisation.  Third  countries  companies,  once 
enjoy  the benefits  of the single market.  The general principle that the benefits  of the 

the  NTMA  we  voluntarily  agreed 

n 

internal  market  are  limited  to  institutions  incorporated  in  the  EU  and  subject  to 
harmonised internal market rules would not be altered. 

While US companies wishing to enter the EU market would find it easier, they would 
still need to comply with the rules prevailing in the Internal Market which have to be 
followed  by  every  company  wishing  to  operate  in  the  EU  (and  which  could 
progressively  approximate  in  some  areas  thanks  to  regulatory  co-operation  in  the 
NTMA framework). They would also need to comply with rules applicable in each 
Member State where no harmonised regulations at Community level exist.  The  full 
respect  of  the public  policy  objectives  pursued  by  Internal  Market  regulations  and 
national legislation would therefore be preserved. 

Progress  in the area of Mutual Recognition  (of qualifications,  regulations  and other 
requirements,  supervisory  practices,  etc.)  could  result  in  partially  granting  benefits 
allowed under the Market to US companies and service providers without the need to 
be  subject  to  the  relevant  EU rules, but  with  the  equivalent  US  regulations.  This 
would need to be done in such a way that neither imbalances the Internal Market nor 
distorts conditions of competition.  In exchange, EU companies would get equivalent 
access to the US market. 

This  means  that,  as  the  functioning  of  the  Internal  Market  would  not  be  altered, 
implications for EU common policies would mainly consist of what could flow from 
increased  competition  in the EU market  in the different  services  sectors, and of the 
need to take advantage of increased market access opportunities for EU companies in 
the US. 

16. 

INSTITUTIONAL ASPECTS 

Institutional structure 

In order to ensure the effective realisation of the NTM and its proper functioning, and 
taking  into  account  the  need  to  preserve  the  EU's  internal  procedures,  it  will  be 
necessary to create some new institutional  structures.  What exactly these should be 
will  become  clearer  as  the  negotiation  progresses.  Their  articulation  with  existing 
NTA  structures  and  other  existing  EU-US  arrangements  will  need  to  be  carefully 
considered.  It may be appropriate to establish: 

•  a joint  committee  structure  (either  building  on  existing  structures,  or  adapting 

them) which would oversee the implementation of the Agreement; 

•  a mechanism for the efficient  settlement of disputes; 
•  a consultative body bringing together EU and US parliamentarians. 

Scientific Cooperation 

It may  also be  appropriate  to  establish  a scientific  consultative body,  involving  the 
widest  possible  exchange  of  scientific  knowledge  in  the  regulatory  process,  in 
particular, by bringing together scientists from both sides of the Atlantic. 

»1 

The prevention of disputes 

One aim of the NTM is to prevent trade disputes arising.  The Joint Committee would 
play an important role here.  At a minimum, dispute prevention should be based on: 

•  clarity of the parties'legal obligations under the Agreement; 
•  fostering  public  transparency  and 

support  through  a  structured  dialogue,  or 
separate  dialogues  among  interested  parties  (including  consumers,  labour  and 
business); 

•  reliance  on voluntary  standards  whenever  this  is possible  without  compromising 

public policy concerns; 

•  increased regulatory cooperation through notification  and consultation procedures 
between the parties' public authorities at all appropriate levels when new laws or 
regulations are being considered; 

•  day-to-day  administrative  co-operation  between  enforcement  and  supervisory  or 

monitoring authorities on both sides of the Atlantic. 

Domestic implementation of commitments 

The  benefits  of  the  NTMA  for  EU  and  US  citizens  and  firms  rest  on  effective 
implementation  by  the  parties  in  their  respective  legal  orders  of  the  commitments 
undertaken  in  the  Agreement.  In  turn,  these  domestic  law  obligations  will  be 
enforceable by each party's jurisdiction. 

The resolution of disputes arising under the agreement 

In  the  event  of  disputes  between  the  parties  arising  nevertheless,  in  spite  of  the 
bilateral  and  domestic  mechanisms  described  above, there  would  be  a need  for  an 
effective  bilateral  mechanism  for  resolving  such  disputes.  While  the  precise 
institutional  nature  of  such  a  mechanism  would  inevitably  depend  on  the  kind  of 
obligations it would eventually have to deal with, it should at a minimum: 

•  not foreclose the possibility of a consensus-based resolution of the dispute; 
•  be based on objective elements; 
•  provide legal certainty to the parties (and ultimately to their citizens and firms) as 

to the extent and content of the rights and obligations under the Agreement; 

•  be  carried  out  within  a  reasonably  short  time-span  so  as  to  enhance  such  legal 

certainty; 

•  provide assurances that the outcome will be accepted and enforced by the parties. 

Relationship with WTO dispute settlement 

The  above  mechanism  should  be  structured  in  a way  which  ensures  the  continued 
integrity and effectiveness  of the WTO dispute settlement mechanism.  Nor should it 
in any way curtail the right of the parties to resort to WTO dispute settlement.  The 
exact  relationship  between  the  two  mechanisms  will  depend  largely  (albeit  not 
exclusively) on the relationship between the substantive rights and obligations for the 
parties under the WTO and the NTMA respectively. 

F. 

CONCLUSION 

The Commission requests the Council to proceed to an early in depth discussion of 
this proposal. 

The  Commission  will  submit  draft  negotiating  directives  to the  Council  for  a New 
Transatlantic Marketplace Agreement covering the elements described above. 

"31 

Annex 

KEY ECONOMIC  FIGURES 

From  an  economic  viewpoint,  the  Transatlantic  partners  enjoy  a  high  degree  of 
integration.  The EU and the US are each other's  single largest trading partner  (taking 
goods  and  services  together), and  each other's most  important  source  and  destination 
for  foreign  direct investment  (FDI).  Their economic relationship is characterised by a 
high  degree  of  intra-industry,  intra-firm  trade  and  trade  in  intermediate  products. 
Transatlantic firms are increasingly using new and innovative ways of doing business, 
including by means of electronic commerce. 

In  1996  two  way  trade  in goods  and services  amounted  to  more  than  355 bn  ECUs. 
The EU and the US each account  for  around  19% of each other's total trade in  goods 
which in  1996 amounted to 227 bn ECUs.  The trade relationship is not only  large in 
size,  but  it  is  also  substantially  balanced.  Transatlantic  trade  is  concentrated  in 
It  is  estimated  that  the  latter  products 
sophisticated  high-téchnology  products. 
account for 20% of total EU-US merchandise trade. 

The  area  of  trade  in  services  appears  particularly  dynamic.  Transatlantic  trade  in 
services  figures  show that while in  1985 EU-US bilateral  trade  in services  accounted 
for  32%  of  total  bilateral  trade,  by  1995  this  figure  had  risen  to  over  38%  of  total 
bilateral  trade.  In  1996  the  combined  cross-border  trade  in  services  reached  128  bn 
ECUs.  This  remarkable  increase  still  leaves  considerable  scope  for  trade  growth 
given the fact  that thé services  sector has become the largest  and  fastest  growing part 
of  both  economies.  In  fact,  services  currently  account  for  more  than  66%  of  total 
value  added  in the EU economies  on average, and more than  70% in the US, and  for 
comparable  shares  of  employment. 
In  comparison,  the  share  of  services  in  world 
production  amounts  to  above  50%.  As  a  consequence,  the  EU  and  the  US  are  the 
world leaders in services trade, accounting for 47% of world exports in services. 

The importance of the EU-US  investment relationship is demonstrated by the level  of 
FDI  stocks,  with  each  of  the  two  sides  being  the  other's  largest  investor.  By  1996 
cross investment  stocks between the EU and the US on a historical-cost basis  reached 
720 bn USD, by  far  the  largest  investment  relationship  in the world.  EU  investment 
in  the  US  was  valued  372  bn  USD  and  the  US  investment  position  in  the  EU  was 
estimated to reach 348 bn USD.  The EU therefore  is by far the biggest investor in the 
US accounting for 59% of total FDI stock by  1996.  At the same time 44% of US FDI 
stock  was  located  in  the  EU.  As  with  the  bilateral  trade  relationship,  investment 
stocks  are both balanced  and  substantial.  They  have also been  growing  very  quickly 
over the past few years, doubling between  1989 and  1996.  The service sector plays an 
increasing  role  as  destination  of  FDI,  with  a  yearly  average  share  of  cross  border 
investment  flows  in  services  of  total  FDI  in  the  period  1992-1995  close  to  50%, 
although  the main  beneficiary  of EU  investment  in  the US  is  still the  manufacturing 
sector. 

ISSN 0254-1475 

COM(98)  125 final 

DOCUMENTS 

EN 

06  11  10  09 

Catalogue  number  :  CB-CO-98-173-EN-C 

ISBN  92-78-32309-8 

Office  for Official  Publications of the European Communities 

L-2985 Luxembourg