Daily Report for Executives™

Reproduced with permission from Daily Report for Executives, 141 DER B-1, 7/23/14, 07/23/2014. Copyright 姝
2014 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com

I n t e r n a t i o n a l Tr a d e

The Transatlantic Trade and Investment Partnership that U.S. and European Union negotiators are currently discussing would, among other things, promote greater collaboration
between regulators on both sides of the Atlantic. Author Reeve T. Bull, attorney adviser with
the Administrative Conference of the United States, says that concerns that the pact would
undercut regulatory protections in the U.S. and the EU are overblown.
Far from creating a regulatory ‘‘race to the bottom,’’ he argues that TTIP may offer the
best hope for the U.S. and the EU to promote a coherent regulatory agenda that will serve
as a model for developed and developing nations alike.

Far From Eroding Regulatory Protections,
TTIP’s Cooperative Regime Could Bolster Sound Regulation
BY REEVE T. BULL
overnment officials from the U.S. and European
Union are currently negotiating a free trade agreement, the Transatlantic Trade and Investment
Partnership, that, among other things, would promote

G

Reeve T. Bull is an Attorney Adviser with the
Administrative Conference of the United
States (ACUS). He will serve as co-chair of the
ABA Administrative Law and Regulatory
Practice Section’s Committee on International
Trade and Customs in the coming year.
Mr. Bull leads ACUS efforts on international
regulatory cooperation, and he acted as the
Staff Attorney for ACUS Recommendation
2011-6 on International Regulatory Cooperation, which served as an inspiration for Executive Order 13,609. Mr. Bull also recently travelled to Brussels through the EU Visitors
Programme, where he met with high-ranking
EU officials on various issues related to
international trade and the TTIP. The opinions
expressed in this article are solely those of
the author and do not represent the views of
any institution with which he is affiliated.

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greater collaboration between regulators on both sides
of the Atlantic. Critics have argued that this agreement
will erode regulatory protections in the U.S. and EU by
providing additional avenues for corporations and other
regulated entities to influence regulatory policymaking.
This article responds to these concerns and contends
that international regulatory cooperation not only
promises increased gross domestic product but also
provides a unique opportunity for preserving and even
strengthening sensible regulatory protections. Far from
creating a regulatory ‘‘race to the bottom,’’ the Transatlantic Trade and Investment Partnership may offer the
best hope for the U.S. and EU to promote a coherent
regulatory agenda that will serve as a model for developed and developing nations alike.

An Upsurge of Provincialism. On May 25, 2014, in several member states of the EU, prominent Euroskeptics
and other far right-wing parties exceeded already
heightened expectations by capturing a significant
share of the vote for members of the European Parliament. Nigel Farage’s U.K. Independence Party won an
astounding 27 percent of the vote in Britain (the first
time in over one hundred years that a party other than
the Tories or Labour led a nationwide vote), while Marine Le Pen’s National Front racked up 25 percent of
the vote in France. The extent to which such anomalous
returns reflect a fundamental shift in the sentiments of

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the European electorate remains an open question, but
the results undoubtedly demonstrate a high level of
public dudgeon concerning the model of European integration at the core of the EU.
In some sense, the nativist backlash illustrated by the
EU election returns is not terribly surprising: nations
have a tendency to focus inward in trying economic
times and to retract from international commitments
that many see as favoring foreigners at the expense of
longtime citizens. Nevertheless, this upsurge of provincialism comes at an especially inopportune time, for the
European Union is currently in negotiations with the
U.S. to conclude a free-trade agreement, dubbed the
Transatlantic Trade and Investment Partnership
(‘‘TTIP’’), which would create the largest free-trade bloc
in the world (accounting for roughly half of global
GDP). The potential benefits of TTIP are substantial.
Economists have estimated that a modestly successful
agreement would add up to 0.5 percent to GDP in both
the U.S. and Europe. An EU-U.S. free trade agreement
would also encourage other nations either to join the
TTIP framework or pursue a separate trade deal, promoting free trade more broadly. Finally, given that it
largely focuses on achieving enhanced regulatory convergence (in addition to the traditional goal of reducing
tariffs and other trade barriers), the TTIP has the potential to promote closer integration of the largely balkanized regulatory regimes prevailing today.

The various Euroskeptic and far-right parties in the
EU may make common cause with left-wing
parties and civil society organizations that have
criticized TTIP on the grounds that it would erode
the ability of sovereign nations to regulate in
the interest of their citizens.

As of yet, the various Euroskeptic and far-right parties generally have not articulated a position on TTIP.
On the one hand, they presumably would appreciate the
enhanced economic competitiveness such an agreement would provide; on the other hand, the focus on international integration is squarely inconsistent with the
largely nationalist message at the core of their governing philosophies. If such parties ultimately oppose
TTIP, though, they may make common cause with leftwing parties and civil society organizations that have
criticized the agreement on the grounds that it would
erode the ability of sovereign nations to regulate in the
interest of their citizens. Progressives’ uneasiness with
free trade agreements has already led Democrats in the
U.S. Congress to delay consideration of trade promotion authority, and any alliance between the Euroskeptical right and the pro-regulatory left in Europe would
run the risk of derailing the agreement entirely.

Three Criticisms. In this light, it is worthwhile to examine some of the more salient critiques of free trade
agreements generally and of the TTIP in particular. In
order to enable candid discussions among the negotiators, the precise details of the contemplated agreement
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are largely kept private. Nevertheless, the general goals
of the negotiations, as well as the overarching objections of the primary opponents, have been aired publicly.
This short article seeks to respond to three of the
most prominent criticisms of the TTIP:
1) that it will create a regulatory ‘‘race to the bottom’’
featuring progressively weakened regulations in the EU
and U.S.;
2) that it will open new avenues for multinational corporations to challenge EU and U.S. regulations; and
3) that it will stifle regulators’ efforts to enact precautionary regulations in the absence of conclusive proof
that a particular activity poses a hazard. Joseph Stiglitz
cleanly encapsulated these concerns in a recent New
York Times article criticizing free trade agreements as
a boon to the global elite won at the expense of the
broader public:
Trade agreements’ new boosters euphemistically
claim that they are simply after regulatory harmonization, a clean-sounding phrase that implies an innocent
plan to promote efficiency. One could, of course, get
regulatory harmonization by strengthening regulations
to the highest standards everywhere. But when corporations call for harmonization, what they really mean is
a race to the bottom.1
Given the fact that the TTIP is one of the first major
agreements to address regulatory disparities in addition
to traditional trade barriers, these are not trivial concerns, and they merit careful scrutiny. Nevertheless, for
the reasons explored below, these objections are somewhat overwrought in certain areas and can be adequately addressed by a carefully crafted agreement in
others. EU and U.S. government officials ought not to
allow these speculative risks to sink an agreement that
offers enormous benefits for EU and U.S. regulators,
businesses, and the general public.

Understanding the TTIP
In recent years, the U.S. has entered into a number of
free trade agreements. Many of these have been bilateral treaties between the U.S. and key trading partners,
such as South Korea, Colombia, and Australia. Others,
most notably the North American Free Trade Agreement (‘‘NAFTA’’), include a bloc of countries forming a
free trade zone. Traditionally, these agreements have
focused on eliminating tariffs between the U.S. and its
trading partners, thereby facilitating free trade across
international boundaries. Given the widespread success
of such trade agreements and broader international
commitments such as those associated with the World
Trade Organization, tariffs are already very low by historical standards. In that light, though nations should
strive to achieve further reductions in tariff rates, the
additional payoffs from doing so are increasingly small.
Consequently, trade advocates have recently turned
1
Joseph E. Stiglitz, On the Wrong Side of Globalization,
N.Y. TIMES, Mar. 15, 2014; see also Letter from Various Civil
Society Organizations to Ambassador Michael Froman, U.S.
Trade Representative, and Commissioner Karel de Gucht, EU
Commissioner for Trade (July 10, 2014), available at http://
www.citizen.org/documents/7-10-14-letter-TAFTA-andchemicals.pdf (opposing inclusion of provisions on chemicals
in TTIP insofar as doing so would allegedly precipitate a regulatory ‘‘race to the bottom’’).

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their attention to so-called non-tariff barriers to trade.
One major such barrier is the persistence of disparities
in trading partners’ regulatory systems.
Of course, some level of regulatory divergence between differing nations is both inevitable and desirable:
one would not expect countries with different cultures,
histories, and political dynamics to respond to regulatory problems in precisely the same way. For instance,
European nations have, as a general matter, chosen a
more aggressive approach to combating climate change
than has the U.S., and this reflects a legitimate determination by both sides concerning the amount of resources they are willing to dedicate based on the current evidence concerning environmental risk. At the
same time, in a number of areas, EU and U.S. regulators have very similar goals but go about achieving
those ends in very different ways. For instance, the
rates of fatalities and injuries in automobile accidents
are roughly the same in both the U.S. and Europe, yet
regulators on both sides require rather diverse batteries
of tests for new vehicles. Regulators simply have not coordinated policies with their overseas counterparts, as
an historical matter, and this has resulted in a number
of unnecessary regulatory differences.
TTIP aims to remove these unnecessary divergences
without undermining the ability of sovereign states to
select the regulatory policies that they deem appropriate (even if the policies implemented diverge from
those of trading partners). This can take a variety of
forms. In some (likely rare) instances, one regulatory
approach may clearly prove to be optimal, and the EU
and U.S. might harmonize their regulations to adopt
that approach. Much more frequently, harmonization
efforts might prove impracticable in light of the sunk
costs associated with an existing regulatory regime, but
both sides might implement mutual recognition agreements providing that compliance with U.S. regulations
is equivalent to compliance with those of the EU (and
vice versa), thereby eliminating unnecessary duplication. In still other instances, regulators on both sides
might recognize tests, inspections, and clinical trials
performed by their counterparts, and regulators should
share information with one another in order to avoid
wasteful replication of effort (and minimize the required amount of animal testing).

Preventing a Regulator y ‘Race to the
Bottom’
At the turn of the previous century, various States of
the Union attempted to enact child labor laws and other
protections designed to shield the labor force and consumer public from the depredations of largely unregulated industry. In addition to facing a hostile Supreme
Court (which took a very narrow reading of Congress’s
ability to regulate commerce), such efforts often faltered in light of the classical public goods problem: any
individual state had scant incentive to act unilaterally,
for doing so would place it at a competitive disadvantage and drive industry away to states offering a laxer
regulatory climate. The Court eventually loosened its
limitations on Congress’s authority to regulate the
economy, and Congress proceeded to enact a raft of
public welfare legislation over the ensuing decades, resolving the collective action dilemma and building the
modern federal regulatory state.
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Nevertheless, in the international context, the same
stark economic calculus that once thwarted state-level
regulatory efforts prevails: the ‘‘first mover’’ in any
given regulatory arena risks driving its domestic corporations overseas. In so doing, it not only inflicts damage
upon its own economy but also potentially fails to curtail the activity it sought to regulate, since affected corporations (especially large businesses) may find it preferable to move their operations elsewhere. Traditionally, such ‘‘forum shopping’’ for the optimal regulatory
climate has been relatively rare in the international context (the cost of moving to a new country generally
greatly exceeds that of moving to a new city or province
within any given nation), but it has likely become increasingly viable as the cost of conducting international
business has precipitously declined in recent decades.
To critics of the TTIP, efforts to promote greater convergence between U.S. and EU regulations accelerate
this regulatory ‘‘race to the bottom’’: businesses on both
sides of the Atlantic will lobby in favor of harmonizing
regulations to the lowest levels currently prevailing in
either the U.S. or EU. For instance, European banks
might advocate for watering down the financial regulatory reforms enacted by Dodd-Frank, and U.S. manufacturers might lobby for weakening strict environmental protection standards in the EU.

In the regulation-friendly EU-U.S. context, neither
side faces a strong temptation to ‘‘harmonize
downward’’ to the other’s level of protection.

Any effort to achieve greater regulatory convergence
must remain sensitive to the risk of progressive erosion
of regulatory protections, but this concern undoubtedly
carries somewhat less weight in the EU-U.S. context,
given that American and European regulations are
among the strongest in the world, such that neither side
faces a strong temptation to ‘‘harmonize downward’’ to
the other’s level of protection. Further, both the U.S.
and EU governments have been quite explicit in disclaiming any interest in relaxing prevailing regulations,
even where EU regulations are stronger than their U.S.
counterparts and vice versa.
Indeed, from the outset, the proponents of TTIP have
downplayed efforts to ‘‘harmonize’’ regulations and
have instead primarily sought to negotiate mutual recognition agreements, which would allow each side to
maintain existing regulations and simply acknowledge
where different systems produce equivalent results
(e.g., U.S. and EU automobile testing yield very similar
levels of safety in traffic accidents). Executive Order
13,609, the highest-level commitment to international
regulatory cooperation to date, avers that such cooperation can ‘‘identify approaches that are at least as protective as those that are or would be adopted in the absence of such cooperation’’ (emphasis added).
ACUS Recommendation 2011-6, which inspired the
executive order, urges agencies to pursue international
regulatory cooperation efforts ‘‘when appropriate to
further the agencies’ missions or to promote trade and
competitiveness when doing so does not detract from
their missions’’ (emphasis added). In short, the AdminBNA

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istration has telegraphed its intention to preserve the
existing levels of regulatory protection, and one can
reasonably assume that the TTIP negotiators will remain faithful to that principle.
Of course, such vague, largely hortatory commitments to the regulatory status quo may fall by the wayside in the heat of a closely contested negotiation, especially insofar as U.S. and EU businesses strongly pressure negotiators to adopt positions favorable to their
economic interests. Furthermore, the TTIP envisions an
ongoing process by which regulators on both sides of
the Atlantic will continue to seek opportunities for regulatory convergence.
Nevertheless, the pro-regulatory position does not
lack champions. First, the relevant U.S. agencies and
EU directorates-general are intimately involved in the
negotiations, and they will presumably advocate on behalf of their regulations. Second, in many instances
wherein EU regulations are stronger than their U.S.
counterparts (or vice versa), the prevailing state of affairs is backed strongly by civil society groups and the
general public. For instance, European organizations
have been quite vocal in demanding that TTIP negotiators avoid any concessions that would weaken stringent
environmental and labor protection standards. Third,
business interests do not speak with one voice: large
corporations often favor stronger regulations insofar as
they can easily pass along costs to consumers, creating
a competitive advantage vis-à-vis smaller companies.
Fourth, though negotiators on both sides have distanced themselves from any effort to weaken regulations, neither side has disavowed regulatory cooperation efforts that may actually strengthen regulations in
one trading partner or the other.

TTIP could put both the EU and U.S. in a more
favorable position to urge China and other major
trading partners to enact sound regulations.

Furthermore, by creating a free trade bloc among nations with comparatively stringent regulatory protections, both the EU and U.S. would be in a more favorable position to urge China and other major trading
partners to enact similar regulations. In short, it is simplistic to assume that international regulatory cooperation is necessarily a one-way ratchet that will produce
weakened regulations in every case.
Ultimately, both past practice and the underlying dynamics of the situation suggest that concerns about a
‘‘race to the bottom’’ are overblown. It is, of course, entirely appropriate for civil society organizations to advocate in favor of the regulatory status quo, but opposing the entire enterprise on the assumption that it will
necessarily precipitate a downward spiral that ravages
hard-fought progressive victories of the past century
both sacrifices the significant economic benefits an
agreement would produce and eliminates opportunities
for cooperative exchanges that might actually
strengthen the level of regulations prevailing worldwide.
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The Impact of Empowering Regulator y
Opponents
Though international regulatory cooperation need
not precipitate a ‘‘race to the bottom’’ in theory, it may
nevertheless have that effect in practice. A major goal
of the TTIP negotiations is promoting enhanced stakeholder input and regulatory accountability in both the
U.S. and EU, and reducing the barriers to citizen participation in agency decisionmaking may ultimately favor corporate interests at the expense of consumers,
disadvantaged groups, and the public at large. Indeed,
the U.S. regulatory process is already quite open to citizen participation, with no limits on who may participate
in notice-and-comment rulemaking and relatively liberal standing limitations on challenging agency actions
in court, and industry has proven far more effective at
exploiting these levers of influence.
U.S. companies have sought a more prominent role
in European policymaking, hoping to penetrate the
rather insular process by which the EU Commission
consults with certain stakeholder groups while preparing a draft regulation or directive, and European companies hope to erect a more formal mechanism for influencing U.S. agencies prior to the notice-andcomment process. In addition, many preexisting free
trade agreements include so-called investor-state dispute settlement (‘‘ISDS’’) provisions, which allow companies to challenge the actions of sovereign nations
deemed to derogate from the terms of the agreement in
an international arbitral forum. In this light, some have
contended that TTIP threatens to concentrate power in
the hands of multinational corporations while further
eroding the ability of already beleaguered regulatory
authorities to act in the public interest.
Nevertheless, such a lugubrious perspective ignores
the substantial benefits that derive from enhanced opportunities for public input. Even if one adopts the most
pessimistic outlook and assumes that TTIP will create
new avenues for large corporations to influence agency
decisionmaking while foreclosing participation by small
and medium enterprises, civil society groups, and the
general public, it is not entirely clear that such a development exacerbates the existing state of affairs. As previously suggested, industry groups already dominate
the notice-and-comment process in the U.S. and the
stakeholder consultation process in the EU. Increasing
opportunities for foreign firms to influence domestic
agencies will expand the universe of special interests
seeking to ‘‘capture’’ government decisionmakers, but
it will not necessarily render the agency any more susceptible to corporate persuasion.

Expanding the number of factions vying for
influence may actually diminish their cumulative
power insofar as one faction offsets another and it
becomes increasingly challenging for diverse
groups to collude.
Indeed, as James Madison recognized in Federalist
No. 10, and as Daron Acemoglu and others have re-

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cently articulated in the context of international economic development, expanding the number of factions
vying for influence may actually diminish their cumulative power insofar as one faction offsets another and it
becomes increasingly challenging for diverse groups to
collude. To illustrate, imagine that the National Highway Traffic Safety Administration (‘‘NHTSA’’) proposes a new rule imposing higher fuel efficiency standards upon automobile manufacturers to curtail carbon
emissions. The ‘‘Big Three’’ U.S. automobile manufacturers would likely oppose such a rule, since they have
traditionally built relatively large cars with poor fuel
economy, and they may lobby the NHTSA to abandon
such a rule and, if it ultimately finalizes the proposal,
challenge the rule in court. Now imagine that, postTTIP, European automobile manufacturers enjoy an expanded opportunity to influence U.S. agencies. Since
European manufacturers have traditionally built
smaller vehicles with superior fuel economy, they may
strongly support the rule and furnish information to the
NHTSA bolstering its argument for the stronger standards. In short, as more companies enter the participatory process, ‘‘industry’’ becomes less monolithic and
more balkanized, including numerous groups with
highly disparate interests.

Empowering SMEs, NGOs, Individuals. Though even the
worst-case scenario may represent an improvement
over the status quo (by expanding and diversifying the
participating corporations), the TTIP negotiators need
not and should not resign themselves to this state of affairs. In this light, the TTIP discussions should consider
mechanisms for integrating small and medium enterprises, civil society groups, and everyday citizens into
the decisionmaking process. In the U.S., this might entail agencies’ specifically reaching out to underrepresented groups for input prior to preparing a notice of
proposed rulemaking.
In a lamentably underexploited process referred to as
negotiated rulemaking, agencies do precisely this, convening a small committee that includes a balanced representation of all relevant interest groups and tasking
this committee with negotiating the text of a proposed
rule. Though negotiated rulemaking itself may not
prove feasible in most cases, agencies could apply similar principles to run-of-the-mill rulemakings, striving to
ensure that each affected interest group has an opportunity to furnish input.
The EU Commission nominally utilizes a similar process for gathering input on proposed regulations and directives, but it tends to be dominated by large European
corporations and major civil society groups (such as
unions), shutting out less favored groups and foreign
interests. By promoting reforms designed to expand
and diversify stakeholder input, TTIP would not only
achieve greater international collaboration but also
combat the industry capture that has come to characterize regulation in the U.S. and EU.
Managing the ISDS Process. If expanded public participation in agency decisionmaking represents an opportunity for quelling industry capture, ISDS clauses
seem to advance it by their very nature. Under these
provisions, a company aggrieved by a host government’s actions can bring a challenge before an international arbitration panel, which will determine if the government violated the terms of the trade agreement. If
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vide appropriate compensation, providing an incentive
for it to adhere scrupulously to the agreement in the initial instance and to amend the offending regulation(s) if
it loses such a challenge.
Notwithstanding the unseemliness of multinational
corporations’ suing sovereign nations, it is worth noting
that ISDS provisions merely represent one possible approach to ensuring that nations honor their international commitments (which are otherwise largely unenforceable, given the absence of any supra-national executive power or judiciary). In this light, they call to
mind the ‘‘private attorneys general’’ phenomenon in
the U.S., whereby the government empowers everyday
citizens to bring private suits to enforce laws deemed
especially critical to the public interest. Thus, objections to ISDS provisions are purely procedural in nature: they challenge not the underlying substance of
any agreement reached but rather the mechanism chosen for enforcing it.
Ultimately, the determination of whether to include
any sort of ISDS provision in the TTIP should be mindful of the benefits of enhanced enforcement and the
costs of subjecting regulations to industry challenges.
On the one hand, empowering private citizens to challenge regulatory actions deemed to violate a trade
agreement will create a strong incentive for governmental compliance with the agreement in the initial instance. U.S. laws relying on the ‘‘private attorneys general’’ model such as the Racketeer Influenced and Corrupt Organizations Act are undoubtedly more
vigorously enforced than they would be if the Department of Justice were the sole enforcement body. On the
other hand, permitting industry groups to challenge
regulatory actions can thwart governmental efforts to
advance the public good, as evidenced by the ossification emerging from the rather vigorous regimen of judicial review practiced in the U.S.

The primary focus of pro-regulation advocates
should be on ensuring that the substantive
provisions of TTIP preserve regulators’ right to act
aggressively to promote the public welfare.

In making this determination, it is worthwhile to note
that ISDS provisions in the North American Free Trade
Agreement have led to relatively few challenges, and
the U.S. government has prevailed in all such suits to
which it has been a party and the tribunal has issued a
final ruling. Nevertheless, the number of multinational
corporations in the EU greatly exceeds the combined
total in Canada and Mexico, and such challenges to
U.S. laws would undoubtedly become increasingly common. Furthermore, the EU might be especially susceptible to challenges from U.S. firms, given that EU regulations are much stronger than their American counterparts in a number of important areas.
In any event, regardless of whether the TTIP ultimately integrates an ISDS clause, the primary focus of
advocates of robust regulation should be on ensuring
that the substantive provisions of the agreement preserve regulators’ right to act aggressively to promote
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the public welfare, not on attempting to maintain regulators’ flexibility to circumvent the final terms of the
agreement by providing relatively innocuous enforcement mechanisms.

The Future of the ‘Precautionary Principle’
As early as the late 19th century, Woodrow Wilson
and the other early proponents of public administration
sought to harness the power of the natural and social
sciences in service of governmental policymaking. By
devolving powers to administrative agencies staffed by
apolitical, highly educated experts, governments sought
to protect against both the vagaries of nature and the
depredations of corporations intent upon maximizing
profit at the expense of the public welfare. Though an
increased emphasis upon scientific evidence helped to
rationalize the regulatory process in both the U.S. and
EU, referring to modern regulation as ‘‘science-based’’
is a gross oversimplification, obscuring the subjective,
policy-based decisions that undergird the process. In
most instances, regulators cannot await absolutely conclusive evidence prior to regulating.
Hence, especially in Europe, many regulations reflect
some version of the so-called ‘‘precautionary principle’’: absent compelling evidence that a particular activity is safe, governments should proscribe or strictly
limit it until additional evidence can be uncovered. Yet
even if regulators possess relatively conclusive scientific evidence of the risks posed by a particular activity,
the societal costs associated with regulating it may not
justify the benefits derived from doing so. Thus, particularly in the U.S., agencies often attempt to quantify
the monetary benefits and costs associated with a proposed regulation and determine if the former outweigh
the latter prior to acting.

Terms such as ‘‘precautionary principle’’ largely
serve to obscure rather than clarify comparisons
between the EU and U.S. regulatory regimes.

Unfortunately, terms such as ‘‘precautionary principle’’ largely serve to obscure rather than clarify comparisons between the EU and U.S. regulatory regimes.
As Professor Jonathan Wiener has shown, EU regulations are more ‘‘precautionary’’ than their U.S. counterparts in certain areas (e.g., climate change, genetically
modified foods), but U.S. regulations are more ‘‘precautionary’’ in others (e.g., new drug approval).2 By the
same token, though U.S. agencies rely on cost-benefit
analysis in many areas, they do not do so in others (e.g.,
statutes that prohibit consideration of costs, independent regulatory agencies not subject to the cost-benefit
mandate of Executive Order 12,866), while the EU
Commission considers costs and benefits, among other
things, in its impact analysis for new regulations and directives and its evaluation of existing laws. Any effort to
determine which regulatory regime is more ‘‘science2

Jonathan B. Wiener, Whose Precaution After All? A Comment on the Comparison & Evolution of Risk Regulatory Systems, 13 DUKE J. COMP. & INT’L L. 207, 225–29 (2003).
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based’’ or economically efficient is certain to devolve
into mutual recriminations, with both the U.S. and EU
pointing to countless inefficiencies in each other’s system.

A More Productive Approach. In this light, a more productive approach to international cooperation would focus less on harmonizing the process by which a given
nation’s regulators determine how to respond to a particular threat (i.e., ‘‘risk management’’) and more on
promoting information sharing and cooperation among
regulatory scientists (i.e., ‘‘risk assessment’’). Fortunately, there is no shortage of ‘‘low-hanging fruit’’ in
the risk assessment arena. In numerous instances, U.S.
and EU regulatory scientists conduct separate tests, inspections, clinical trials, and other investigations, unnecessarily replicating effort.
Were regulators on both sides of the Atlantic to mutually recognize previously conducted investigations
and to divide responsibility for future endeavors, they
could eliminate such needless duplication and thereby
husband resources (a significant benefit in a constrained budgetary climate). U.S. and EU regulators
also have traditionally acted separately in inspecting
goods imported from third countries, including many
that may not adhere to the rigorous regulatory standards prevailing in developed nations. U.S., EU, and
Australian drug safety experts recently undertook a
joint initiative that divided responsibility for inspecting
various pharmaceutical plants in China. Such efforts to
divide up regulatory responsibility preserve the exceedingly high standards that prevail in the EU and U.S.
while minimizing the burden on regulators.
By contrast, efforts to bring the European and American risk management regimes into greater congruity
pose a much more significant challenge (and may elude
resolution in the context of the TTIP negotiations). For
instance, Europeans are unlikely to welcome imports of
genetically modified foods from the U.S. anytime soon,
notwithstanding the fact that objections to bioengineering lack any firm basis in science (and are instead
based on some version of the ‘‘precautionary principle,’’
given that such foods also have not been conclusively
proven to be safe in all cases). In short, sovereign nations must retain the right to determine the level of risk
to which to expose their citizens, and TTIP is not intended to undermine that right.
That said, both European and U.S. regulators would
be well served to consider whether risk management regimes that allocate resources to combatting specific
risks that are disproportionate to the severity of the underlying risk are worth defending. As then-Professor
(currently Supreme Court Justice) Stephen Breyer contended in Breaking the Vicious Circle, regulations enacted by U.S. agencies have an extraordinarily wide
range of costs per unit of regulatory benefit produced.
For instance, certain regulations cost roughly $100,000
per premature death averted (an extraordinary bargain), whereas others cost as much as $5.7 trillion per
life saved (roughly one third of U.S. GDP). Though
some might defend the preservation of human life regardless of the cost, it is important to recognize that the
tradeoff is not purely one of dollars and lives, since
money merely represents a medium for allocating societal resources to their most efficient uses.

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Overregulation may actually lead to a net loss of
human life.

Thus, to the extent that resources dedicated to solving one problem might have been allocated to solving
another problem that poses a graver threat to human
life (a phenomenon economists call ‘‘risk-risk
tradeoffs’’), overregulation may actually lead to a net
loss of human life. For example, imagine that a regulation imposes a cost of $100 million per statistical life
saved (an unusually high figure). Some of the $100 million in lost economic activity would have been spent on
frivolous consumer goods and services, but some presumably would have been spent on cancer research, environmental preservation, development of life-saving
drugs, education, and other worthy activities designed
to preserve and enrich human life.
Thus, regulatory cost-benefit analysis should not be
conceived of as an encroachment by the ‘‘dismal science’’ into the noble efforts of civil servants to advance
the public interest. Rather, it should be viewed as an effort to ensure that limited resources are allocated to
their most productive uses. Of course, certain costs and
especially benefits are nearly impossible to quantify
(e.g., how does one calculate the economic benefit of
preserving a tract of old-growth forest?), and it is entirely appropriate to weigh qualitative benefits against
quantitative costs when monetization efforts prove infeasible.

Increased regulator-to-regulator dialogue under
TTIP may serve to enrich the risk management
process on both sides by promoting a broader
perspective on regulatory alternatives.

Unfortunately, neither the U.S. nor the EU has fully
exploited the benefits of regulatory cost-benefit analysis. In the U.S., independent regulatory agencies are not
subject to executive order-based requirements to conduct regulatory cost-benefit analysis (though certain
statutes may require them to do so), and many statutes
explicitly forbid agencies from considering regulatory
costs. In the EU, though cost-benefit analysis informs
the impact analysis process, it is one factor among
many in a holistic calculus, providing an easy avenue
for regulators to justify favored projects by pointing to

DAILY REPORT FOR EXECUTIVES

ISSN 0148-8155

a bevy of factors other than economic efficiency. Since
some European regulations are more economically rational than their counterparts in the U.S., and some
American regulations are more cost-benefit justified
than those in Europe, the increased regulator-toregulator dialogue that results from TTIP may serve to
enrich the risk management process on both sides by
promoting a broader perspective on regulatory alternatives. Nevertheless, democratic societies must retain the
flexibility to allocate resources in whatever manner
they deem fit (including pursuing regulatory activities
for which the monetary costs exceed the benefits), and
TTIP neither proposes to nor ultimately could alter that
dynamic.

Onward and Upward
As the TTIP negotiators hammer out an agreement in
the halls of Brussels and Washington, an equally important battle is raging in the courts of popular opinion.
Sadly, at the moment, TTIP opponents have more effectively arrayed their forces and have largely captured the
public dialogue by trotting out a parade of horribles that
may ensue if the agreement passes. Given that the alleged costs of the agreement are more visceral than the
benefits (ravaging environmental and human health
protections versus creating a fractional increase in annual GDP), the greater publicity accorded to the critics
is not terribly surprising.
Nevertheless, particularly in light of the resounding
success of Euroskeptic and other populist parties in the
EU elections, obtaining public buy-in is increasingly
critical to the agreement’s ultimate success. In that
light, this article has sought to respond to some of the
more salient criticisms and explain why a successful
agreement might actually enhance justifiable regulatory protections rather than undermining them.

The Globalization Imperative. At the end of the day,
however, perhaps the strongest argument in favor of an
agreement is the fact that globalization will proceed
apace regardless of whether EU and U.S. regulators can
come to any formal understanding designed to promote
enhanced regulatory convergence. As China, India, Brazil, and other rising industrial juggernauts become increasingly integrated into the global economy, the U.S.
and EU can either exercise joint leadership in advocating sensible regulatory protections that promote economic growth while preserving human health and the
environment, or they can stand aside as an actual ‘‘race
to the bottom’’ plays out, with businesses increasingly
offshoring production to the developing world to escape
heavy regulatory burdens in developed economies.
In this light, it is not an exaggeration to say that TTIP
represents not a threat to the regulatory state but an unprecedented opportunity to ensure its continued survival in an increasingly flat world.

BNA

7-23-14