Systemic Implications of Transatlantic Regulatory Cooperation and Competition

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1 World Scientific Studies in J J International J Vlv Economics Systemic Implications of Transatlantic Regulatory Cooperation and Competition Simon J Evenett University of St Gallen, Switzerland Robert M Stern University of Michigan, USA World Scientific NEW JERSEY LONDON SINGAPORE BEIJING SHANGHAI HONG KONG TAIPEI CHENNAI

2 Contents Preface xiii Chapter 1. Condemned to Cooperate? 1 1. Introduction 1 2. Economic Interdependence, Transatlantic Cooperation, and Multilateralism From economic interdependence to the Merkel Initiative Economic interdependence and the case for transatlantic cooperation The impact of transatlantic initiatives on the multilateral trading system, and vice versa Transatlantic cooperation and cosmopolitan regulation Contributions to this Volume Concluding Remarks 19 References 21 Chapter 2. The Banking Crisis: Causes, Consequences and Remedies The Basics of Banking The Efficient Market Paradigm Are Financial Markets Efficient? Bubbles and crashes are endemic in financial markets The mirage of self-regulation of financial markets 33

3 vi Contents 4. Unintended Consequences of Regulation On Causes and Triggers The Reaction of the Authorities Short-term Solutions Long-term Solutions: A Return to Narrow Banking Conclusion 45 References 46 Chapter 3. The Political Economy of Transatlantic Regulatory Cooperation and Competition: A (Unofficial) View from Europe Introduction The New Transatlantic Economic Partnership: Hype or Hope? New EU and a New World Prospects for the New Transatlantic Agenda Conclusion. 60 References 61 Chapter 4. How Hard and Soft Law Interact in International Regulatory Governance: Alternatives, Complements and Antagonists Introduction The Canonical Literature on International Hard and Soft Law: Their Attributes as Alternatives and their Interaction as Complements Definitions of hard and soft law Advantages and disadvantages of hard and soft law as alternatives Hard and soft law interaction as complements Theorizing International Hard and Soft Law Interaction: Power, Distributive Conflict and Regime Complexes The EU, the US, and power in international regulatory governance The challenge of distributive conflict 87

4 Contents vii 3.3. The challenge of fragmented regime conflicts Hard and Soft Law Interaction as Antagonists Hypotheses as to the Interaction of Hard and Soft Law Instruments Ill 6. Conclusions 120 References 122 Chapter 5. EU-US Regulatory Cooperation and Developing Country Trade Trade Policies Market Access Non-tariff Measures Other sources of trade costs Services policies Reducing Regulatory Differences and Associated Cost Differentials Trade costs vs. border barriers: Gravity simulations Services Policy Implications Concluding Remarks 161 References. 161 Chapter 6. Transatlantic Trade, the Automotive Sector: The Role of Regulation in a Global Industry, Where We Have Been and Where We Need to go, How Far Can EU-US Cooperation go Toward Achieving Regulatory Harmonization? Globalization Regulating a Global Industry Example of Disparity Surrogates for Humans in Crash Testing, Comparison of US and EU Safety Regulations US-EU Market Competition and Manufacturer Cooperation 175

5 viii Contents 6. EU-US Cooperation The Transatlantic Business Dialogue Transatlantic automotive industry conference on international regulatory harmonization International Harmonized Research Activities Industry petitions for functional equivalence determinations Agreement Administered by WP Agreement accomplishments and lessons learned Discussion of Several GTR Efforts, Successes and Unsuccessful Outcomes to Date Lighting installation GTR Controls and displays GTR Pedestrian protection GTR Electronic stability control (ESC) GTR Summary of Global Technical Regulation Experience An Additional Initiative: A Competitive Automotive Regulatory System for the 21st Century Conclusion and Recommendations to Help Achieve Vision for the Future 192 Chapter 7. Systemic Implications of Deeper Transatlantic Convergence in Competition/Antitrust Policy Introduction The Differing Historical Origins and Orientations of Competition Policy in the US and the EU, and the Process of Convergence Thus Far The United States, The European Union Recent indications of convergence: The adoption of more economics-based approaches in the EU.. 210

6 Contents ix 2.4. Possible Indications of Further Convergence: Antitrust Policy in the Obama Administration The Need for Cooperation in Principle, and the Cooperation Arrangements that Have Been Implemented Thus Far in the Transatlantic Context Rationales for cooperation in the competition policy field Existing transatlantic cooperation arrangements The 1991 US-EU Competition Cooperation Agreement The 1998 US-EU Positive Comity Agreement The Administrative Arrangement on Attendance (AAA) The set of best practices on cooperation in merger cases Use and effectiveness of the above arrangements Are Current/Future Policy Conflicts Manageable Through Voluntary Cooperation/Convergence Alone? and What About the World Beyond the Transatlantic Zone? Examples of US-EU policy clashes to date The Boeing/McDonnel Douglas merger The GE/Honeywell merger The Microsoft cases The broader global context Summary observations Concluding Remarks 234 References 235 Chapter 8. Transatlantic Regulatory Cooperation on Chemicals An Idealist's Dream? Introduction 241

7 x Contents 1.1. Some figures concerning transatlantic trade and investment in chemicals The Chemical Industry's Input to Regulatory Cooperation: The Race against REACH within a Declining and Re-emerging TABD Industry's input to TABD Governments'Responses to the New TABD New Industry Initiatives Towards Harmonization Regulatory cooperation on chemicals in the context of the Transatlantic Economic Council The Transatlantic Summit of 2007 and the Transatlantic Economic Council: The re-emergence of a political will to co-operate REACH and cosmetics: A new transatlantic trade war? Registration of existing substances REACH and animal tests The Globally Harmonized System Harmonization of classification and labeling of chemicals? Cooperation on chemicals within the OECD Conclusions: How to Achieve a Barrier Free Transatlantic Market 281 Chapter 9. Transatlantic Regulatory Cooperation on / Accounting Standards: A 'Varieties of Capitalism' Perspective The Puzzle: Successful Transatlantic Regulatory Cooperation on Accounting Standards Convergence in Substantial Terms: A Variety of Capitalism Perspective on Accounting Standards Convergence in Institutional Terms: From National Representation to the Rule of Experts 296

8 Contents xi 4. The Politics of Transatlantic Convergence on a US Regulatory Model The Broader Picture: Towards Global Convergence on the Liberal Regulatory Model? Conclusion 308 References 308 Chapter 10. Transatlantic Regulatory Competition and Cooperation in Pharmaceuticals _ Introduction Regulatory Differences in the United States and European Union Snapshot of the US and EU industries , Competitive structure and challenges Comparative regulatory systems Drug approvals Pricing regulations Intellectual property rights (IPRs) Evolution of Regulatory Cooperation Bilateral regulatory cooperation Trilateral cooperation: The ICH Intra-EU coordination Cooperation in intellectual property rights A Concluding Assessment 336 References 337

Article 1 General principles and objectives

Article 1 General principles and objectives NOTE: The EU reserves the right to make subsequent modifications to this text and to complement it at a later stage, by modifying, supplementing or withdrawing all, or any part, at any time. The relationship