Emergency Committee For American Trade - Publications

ECAT 2008 AGENDA

SECTION IV.2: EUROPEAN UNION

U.S.-European Union (EU) economic relations are substantial and complex. With over $1.5 trillion in two-way trade and investment built upon longstanding economic and political linkages, the United States and the EU are close trading partners and have established several fora to further cement and improve that relationship, including through the Positive Economic Agenda launched in 2002, the U.S.-EU Regulatory Cooperation Roadmap launched in 2005, the Transatlantic Business Dialogue (TBD) and, most recently, the Transatlantic Economic Council launched in April 2007. Nevertheless, several high-profile bilateral disputes continue, from aircraft to genetically modified organisms.

While the United States and EU share significant common objectives in a host of negotiating areas in the Doha Development Agenda (DDA) negotiations of the World Trade Organization (WTO), the United States and EU continue to have differences, particularly on the ambition sought in agricultural liberalization. ECAT strongly supports efforts by the United States and the EU to strengthen their economic relationship through bilateral dialogues and increased work to promote regulatory cooperation, resolution of ongoing trade disputes, and forward movement on mutually supportive trade initiatives in 2008.

EU Integration Efforts

On January 1, 2007, Bulgaria and Romania joined the EU, increasing to 27 the EU’s membership: Austria, Belgium, Bulgaria Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. Since enlarging in 2004 with 10 countries and in 2007, the EU has expanded from 370 million to approximately 450 million consumers.

The addition of these countries culminated a multi-year formal process of negotiation on more than 30 broad issues, including the economy, finance, politics and trade. After intense negotiations, the EU Foreign Ministers decided to permit membership talks with Turkey and Croatia to proceed. Turkey’s membership, however, still poses many political and substantive issues, including issues of corruption and human rights. It appears unlikely that Turkey’s accession will be accomplished any time soon.

The EU’s enlargement represents both challenges and opportunities for U.S. farmers, manufacturers, service providers and their workers. As a result of their new agreement with the EU, several of the acceding countries will modify their commitments in a variety of international agreements. For the United States, specifically, the changes will have significant impacts on a variety of sectors. In agriculture, for example, the EU’s expansion of its ban on U.S. imports of poultry, beef raised with growth hormones, and genetically modified organisms and of other agricultural and sanitary and phytosanitary measures to the 12 acceding countries could result in a significant reduction of export opportunities for U.S. farmers. Other issues include increases in tariffs by acceding countries and increases in services barriers.

The United States, the European Union and eight of the acceding countries also negotiated new provisions so that existing bilateral investment treaties (BITs) with acceding countries could be retained, but conform to EU policies and international commitments. While some advances were made, the United States also agreed to restrict certain provisions in these BITs in a manner that reduces market access in the acceding countries.

European Monetary Union and the Euro

Pursuant to the terms of the Maastricht Treaty of 1992, 11 of the 15 EU member countries participating in the European Monetary Union (EMU) adopted a single currency, the euro, on January 1, 2000: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. On January 1, 2001, Greece joined the so-called Euro Zone. On January 1, 2002, Euro currency replaced cash transactions in national currencies. U.S. companies should benefit from the creation of the euro, as it is expected to reduce currency volatility and the need for intra-European currency exchange, thereby lowering transaction costs and facilitating cross-border trade. It should also enable U.S. firms to expand their business in the EU by allowing them to price their products on a euro-basis, rather than on a country-by-country currency basis.

Other Preferential Trade Arrangements

The EU also maintains and continues to negotiate preferential trade arrangements. Its primary agreements are:

The European Economic Area (with Norway, Iceland and Liechtenstein);
Association agreements with the countries of central and eastern Europe;
Agreements with the Mediterranean countries;
The Cotonu Agreement (successor to the Lomé Conventions) with the ACP (African, Caribbean and Pacific) countries to provide duty-free access to many products from the ACP countries. (The EU hopes to conclude new FTA agreements with these countries); and
The Economic Partnership Agreement with the Caribbean and Dominican Republic that entered into force on January 1, 2008.

The EU currently has approximately 30 bilateral or regional free trade agreements and special customs agreements. It is currently negotiating preferential trade agreements with MERCOSUR, several Gulf States, South Korea and other countries. -+In April 2007, the EU adopted mandates for a new generation of trade agreements with India, Korea and the Association of South East Asian Nations (ASEAN). Many of these agreements are not comprehensive, often excluding agriculture and, therefore, appear to violate the WTO’s rules on acceptable regional trade agreements, which require that substantially all trade be covered to qualify for an exemption from most-favored nation (MFN) requirements. Nonetheless, they create a competitive advantage by lowering or eliminating tariffs and other barriers that firms from non-FTA partners still face.

U.S.-EU Trade and Economic Relations

U.S. goods exports to the expanded EU equaled $246.4 billion in 2007, up from $154.8 billion in 2003. Imports from the expanded EU totaled $353.3 billion in 2007, up from $254.2 in 2003. Investment flows between the United States and EU are also quite substantial, exceeding $2.3 trillion in 2006 (based on the most recent available data).

While there has been much focus in recent years on bilateral U.S.-EU disputes, the substantial trade and investment relationship, as well as common views on many issues, have resulted in renewed efforts to develop a more positive economic relationship. Those efforts, as well as areas of dispute between the United States and EU, are discussed below.

Transatlantic Economic Council and Other Cooperative Activities

On April 30, 2007, the United States and EU agreed to the “Framework for Advancing Transatlantic Economic Integration” to reaffirm a multi-year program to foster cooperation and reduce regulatory barriers. The Framework established the Transatlantic Economic Council (TEC) to oversee the Framework and accelerate its work where possible.

The Framework identified “Lighthouse Priority Projects” in the following five areas:

Intellectual Property Rights to promote greater enforcement and harmonization;
Secure trade to develop common and accepted standards to maximize security, safety and facilitation of international trade;
Financial Markets to ensure mutual recognition of the U.S. Generally Accepted Accounting Principles and the International Financial Reporting Standards by both jurisdictions by 2009 or sooner;
Innovation and Technology to promote specific innovation efforts in health-related, biobased, genomics and nanotechology areas; and
Investment to establish a regular dialogue to address obstacles to investment.

The United States and EU held the first TEC meeting in November 2007, which made progress and provided paths forward in a number of areas. Efforts on ongoing in each of these areas to produce tangible results and progress by the next U.S.-EU Summit in 2008 and to establish processes for this cooperative work to continue.

The Framework and TEC expand upon numerous earlier efforts of the United States and EU to promote greater cooperation and address regulatory barriers, including:

the “U.S.-EU Declaration on Strengthening Our Economic Partnership” announced at the 2004 U.S.-EU Summit.
the Positive Economic Agenda, announced at the May 2002 U.S.-EU Summit, in which the United States and EU sought to increase cooperative efforts on financial services, regulatory cooperation, electronic procurement and customs, regulation of organic foods, and sanitary and phytosanitary measures.
the Trans-Atlantic Economic Partnership (TEP), launched at the May 1998 U.S.-EU Summit, in which the United States and EU committed to work together to increase trade and avoid disputes on a number of issues, including technical barriers to trade, agriculture, intellectual property, government procurement, services, electronic commerce, environment, and labor. The United States and the EU also agreed to involve citizens more fully in the TEP process. The TEP also serves as a vehicle for consideration and implementation of recommendations from the Trans-Atlantic Business Dialogue.

Regulatory Cooperation

Recognizing the importance of improving regulatory cooperation and dialogue, the United States and EU have been engaged in a multi-year process to enhance consultations, transparency and cooperation on regulatory matters. In the 1998 TEP, the United States and the EU agreed to seek mutual recognition agreements (MRA) to reduce duplicative product testing, while respecting domestic health, safety, and environmental standards. In 2002, the United States and EU developed “Guidelines on Regulatory Cooperation and Transparency” to improve cooperation between regulators and promote transparency in the creation and modification of regulatory measures.

At the 2004 Summit, the United States and EU issued the “Roadmap for U.S.-EU Regulatory Cooperation and Transparency” to:

continue efforts on ongoing cooperation on standards relating to pharmaceuticals, automotive safety, information and communication technology, cosmetics, consumer product safety, and nutritional labeling;
initiate new cooperative efforts, including a U.S. Food and Drug Administration (FDA)-EU Directorate-General for Health and Consumer Protection (SANCO) regulatory dialogue, as well regulatory dialogues between other U.S.-EU regulatory agencies;
initiate new regulatory discussions on chemicals; and
consider potential horizontal initiatives through dialogues on regulatory polices of mutual interest, such as transparency, public consultation, and impact analyses, as well as dialogue, joint regulatory workshops and regulatory exchanges.

The United States and EU also welcomed a joint report from their officials participating in the ongoing Financial Markets Regulatory Dialogue, launched in 2002. The Dialogue seeks to foster a more efficient and transparent transatlantic capital market and to permit U.S. and EU regulators to work cooperatively on a host of issues from corporate governance to financial-market regulation.

At the U.S.-EU Summit in June 2005, the United States and EU agreed to the “2005 Roadmap for U.S.-EU Regulatory Cooperation and Transparency” which reviewed progress under the prior year’s roadmap and established further areas for cooperation, including to:

establish a dialogue between the Office of Management and Budget (OMB) and its European Commission counterparts to discuss general regulatory policies and practices, and
promote exchanges of U.S. and European regulatory experts in specific areas/projects of mutual interest.
Particular areas of existing and proposed sectoral cooperation identified in the 2005 Roadmap included:
pharmaceuticals
automobiles
cosmetics
food safety
marine equipment

At the U.S.-EU Summit in June 2006, the United States and EU agreed to continue the 2005 Summit Economic Initiative by cooperating in the areas of regulation, innovation and technology policy, competitive financial markets, energy, and enhanced trade, travel and security. The leaders also emphasized the need for improved protection of intellectual property rights, through enhanced enforcement and expanded technical assistance, and greater cooperation on energy-security issues.

At the U.S.-EU Summit in April 2007, the United States and EU agreed to take specific steps to reduce barriers in particular areas, including:

Reinforce and expand the ongoing high-level dialogue on regulatory matters between the U.S. Office of Management and Budget (OMB) and the European Commission Secretariat General;
Encourage further cooperation in the areas of agriculture, sanitary and phyto-sanitary measures, and food safety;
Promote the application of the 2002 U.S.-EU Guidelines for Regulatory Cooperation and Transparency for specific sectoral pilot projects;
Collaborate on cosmetics regulations;
Establish a more productive bilateral collaboration on medical devices;
Address common concerns in the automotive sector, including on road safety and fuel economy;
Expand cooperation on a number of OECD activities; and
Initiate an exchange on conformity-assessment procedures for the safety of electrical equipment.

Work is ongoing in each of these areas to improve areas of regulatory cooperation and consistency and, if actively continued, may produce a significant reduction in regulatory barriers and improve transparency on both sides of the Atlantic.

Agricultural Issues

Agricultural issues remain a major source of contention between the United States and EU. The agricultural issues involve many of the issues already discussed in sections II.1 (WTO) and III.10 (Addressing Concerns About Trade and Investment Liberalization), including the EU’s resistance to ambitious market liberalization as part of the WTO Doha negotiations, the EU’s ban on imports of genetically modified organisms, and the EU’s continuing failure to implement the WTO’s ruling in the beef-hormone dispute.

In addition, the United States has several other concerns regarding EU agricultural policies and rules, including the:

EU’s ban of U.S. poultry products (since 1997), despite the 1999 U.S.-EU Veterinary Equivalence Agreement. In 2003, the United States gained EU approval for the use of alternative antimicrobial treatments, but the EU has continued to press for additional requirements, including the so-called integrated production control system. At the November 2007 meeting of the TEC, the EU committed to resolve this issue before the next U.S.-EU Summit in 2008.
EU’s increase of the effective duty rate on U.S. exports of whey protein isolate (accounting for approximately 25 percent of U.S. dairy exports to the EU).
EU’s 2004 proposed new tariffs on bananas, resulting from the longstanding U.S.-EU banana dispute, which represents a substantial increase in the tariff to certain suppliers.

In March 2003, the EU launched an internal review of whether U.S. government support, pursuant to the 2002 farm bill, to oilseed producers violates WTO subsidy disciplines.

Aircraft Issues

Aircraft subsidies continue to distort international trade in large commercial aircraft and remain a significant issue in the U.S.-EU relationship, particularly given ongoing massive European subsidies for the development of every Airbus aircraft model since 1969. Airbus – a partnership of the French-German-Spanish European Aeronautic, Defense, and Space Company (EADS) – is now the largest commercial aerospace company in the world based on deliveries of airplanes. In 2003, Airbus delivered for the first time in history more commercial aircraft than The Boeing Company and continued to do so through 2006. In 2007, Boeing sold 1413 aircraft; Airbus sold 1341. Airbus is and has been for many years, a mature company, with a full product line; it does not require, nor deserve, government subsidies.

Since Airbus’ 1967 inception, the French, German, Spanish and U.K. governments have provided direct subsidies to their respective Airbus-member companies to develop, produce and market Airbus commercial aircraft. Airbus member governments and their taxpayers have borne a large portion of the development costs for all Airbus aircraft models and provided other forms of support, including equity infusions, debt forgiveness and debt rollovers. In its submission to the WTO in March 2007, the United States Trade Representative estimated that the resulting benefit to Airbus from launch aid at well over $100 billion. This massive infusion of governmental financial support has facilitated Airbus’ substantial increase in market share, from 33 percent in 1999 to just over 5 0 percent in 200 7. The governments continue to provide marketing assistance by putting political and economic pressure on airlines considering commercial aircraft purchases.

Despite these advances at Airbus, EU countries continue to subsidize the company. For instance, Airbus’ sponsoring governments provided more than $3.7 billion in launch aid for the 800-passenger A380, plus $1.7 billion in infrastructure improvements, another $800 million in preferential loans, and millions more to cover A380’s extensive cost overruns. This aid totals more than $6 billion just for the super-jumbo aircraft. In addition, in 2005, Airbus received binding commitments from those same governments for nearly $2 billion more in launch aid for the company’s new A350 aircraft to compete directly with Boeing’s highly successful 787 and 777 programs.

In addition, the EU's aeronautics research programs are driven by a policy intended to enhance the international competitiveness of the European civil aeronautics industry. The EU’s Vision 2020 program calls for funding of more than $100 billion over the next 20 years in an effort to “win global leadership for European aeronautics.” As the French Prime Minister stated in March of 2000: “We will give Airbus the means to win the battle against Boeing.” Through these research programs, the EC and many of the Airbus member governments have provided additional funding worth billions of dollars to support Airbus aircraft development. EU government support to Airbus raises serious concerns about the EU Member States’ adherence to their bilateral and multilateral obligations, including the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement).

After months of informal discussions with the EC to address the market-distorting subsidies granted to Airbus, the United States requested WTO consultations with the EU on October 6, 2004. Following the EU’s failure to commit to halt subsidies, the United States requested the WTO establish a litigation panel on May 31, 2005, noting European launch aid for the A380 and earlier aircraft, along with other government support to Airbus, all of which are actionable subsidies under the WTO Subsidies Agreement. In its WTO brief, the United States also alleged, among other things, that the subsidies provided to develop the A380, A330-200, and A340-500/600 aircraft programs are a prohibited export subsidy under the WTO Subsidies Agreement. The EU also filed a request for the establishment of a WTO panel, alleging that subsidies are provided to Boeing via research and development and procurement contracts from the National Aeronautics and Space Administration and the Department of Defense. Two WTO panels were established to hear the separate allegations: United States vs. European Commission and European Commission vs. United States. Both WTO have held hearings and are prepared to issue their Interim Decisions sometime this summer. Final Decisions are anticipated two-to-three months after the Interim Decisions.

The United States has clearly stated its commitment to resolve this issue either through negotiations or WTO dispute settlement.

Financial Services – Solvency II

ECAT is also following closely the EU Solvency II regime, which is one of several reforms undertaken under the EU Financial Services Action Plan. In July 2007, the EU Commission adopted a proposal for a Directive on the Taking Up and Pursuit of the Business of Insurance and Reinsurance (the so-called Solvency II Directive) that will recast all existing insurance and reinsurance directives (except the Directive for Motor Vehicle Insurance) into one directive with a new prudential regime.

One area of concern is U.S. access to the benefits of Solvency II in the form of lower cost of capital to insurers, which depends upon mutual recognition of the equivalency of insurance supervisory systems. On the U.S. side, there is concern that under Solvency II assets in a jurisdiction where supervision is not deemed equivalent may not be taken into account for diversification benefits and other solvency assessment purposes. The denial of these benefits would negatively affect an insurer’s competitiveness in the EU and perhaps globally.

ECAT supports the active involvement of the United States at senior levels through the Transatlantic Economic Council and the Financial Markets Regulatory Dialogue to promote regulatory cooperation, as well as supporting proposals for a joint forum where U.S. and EU stakeholders would be able to fully present their concerns and work toward a mutually acceptable solution.

Other WTO Dispute Settlement Cases

With regard to dispute settlement, the United States and the EU have widely resorted to the WTO’s system. In 2006, two key issues were resolved, the Continued Dumping and Subsidy Offset Act (as discussed in section III.2) and the grandfather provisions of the American Jobs Act (as discussed in section III.9). Nevertheless, a number of high-profile and significant cases continue, involving agricultural products, aircraft, trade remedy rules, and U.S. international tax rules. In addition to these disputes, the United States and EU are also involved in the following primary disputes:

U.S. Challenge to EU Customs Administration

On January 13, 2005, the United States requested WTO consultations with the EU over the inconsistent application of its customs system and its failure to provide a central administrative review and appeals process. Australia, Japan Brazil, Argentina, Chinese Taipei and India joined the United States in consultations. In June 2006, the Panel reached its decision, finding that the EU had violated tariff classification obligations in several areas, but had not violated its obligations with respect to other tariff classification issues or the customs valuation and customs procedures.

EU Challenge to Section 110(5) of the Copyright Act

On January 26, 1999, the EU requested consultations on a 1998 amendment to the Copyright Act, which permits certain retail establishments to play radio music without paying royalties to songwriters or music publishers. In a report adopted on July 27, 2000, a WTO panel found that this provision violated U.S. WTO commitments, and the United States informed the DSB that it would comply with the ruling. An arbitration panel determined that the United States had 12 months, until July 27, 2001, to implement this decision. Congress has not yet acted upon legislation to modify this provision. In November 2001, arbitrators determined that the value of benefits lost to the EU equaled $1.1 million.

After several years of negotiations, the United States and EU notified the WTO on June 23, 2003, that a temporary arrangement had been reached, pursuant to which the United States would make a lump-sum payment of $3.3 million to the EU.

EU Challenge to Section 211 of the Omnibus Appropriations Act

On July 8, 1999, the EU requested consultations on section 211 of the Omnibus Appropriations Act of 1999 (the so-called Cuba trademark provision), which, the EU alleges, prevents the registration or enforcement of rights of certain trademarks confiscated under Cuban law. In its August 2001 decision, the WTO panel established to hear this case ruled largely in favor of the United States, except for a finding that the measure was inconsistent with Article 42 of the TRIPS Agreement because it limits effective access to and availability of civil judicial procedures. The EU appealed the decision to the Appellate Body, which reversed the panel’s one finding of inconsistency and agreed with the panel that WTO members are entitled to determine trademark and trade name ownership criteria. The Appellate Body found, however, that the measure was inconsistent with the national treatment and most-favored-nation obligations under the TRIPS Agreement and the Paris Convention for the Protection of Industrial Property. The United States and EU have pushed back the deadline for U.S. compliance with the decision to December 31, 2004. The United States and EU extended this period through June 30, 2005. No further action has been taken in this case.

REACH

In October 2003, the European Commission approved its proposed new chemical regulation, the so-called REACH (Registration, Evaluation, and Authorization of Chemicals) regulation to require the registration, testing, risk assessment and reporting of information on chemicals to a central agency. A revised version of this regulation was adopted at the end of 2006. REACH entered into force on June 1, 2007.

REACH will require extensive testing of virtually all chemicals manufactured, sold or used in the EU. Depending upon the volume of chemicals sold, the cost of doing this testing can range from a low of 50,000 Euros to in excess of 300,000 Euros per chemical. Especially with respect to small-volume chemicals there is a risk manufacturers will elect to withdraw the chemical rather than enter the process. This could have significant implications for the downstream users, as withdrawal is likely to require the re-design of the product, which often requires significant manufacturing changes.

REACH also includes specific provisions requiring the authorization of high-risk chemicals. The term “authorization” in this context means the manufacturers and users must obtain use-specific exemptions from a total ban or phase-out of the chemical. The selection of the chemicals for inclusion in the authorization process is based on the inherent hazard of the chemicals, rather than on risk in use. Again, there is concern there will be significant pressure to find substitute chemicals, either by regulation or by the market place, which will force significant process and production-method changes by downstream users.

In addition, REACH requires that substances listed on a so-called candidate list that are to be released (intentionally or unintentionally) from articles, including imported articles, may have to be registered or notified to the European Chemical Agency (ECHA). The candidate list does not exist yet. It will be drawn up by the Agency that will take up its work on June 1, 2007. The list will grow over the time.

In November 2005, the European Parliament approved a modified version of the REACH proposal, after which the European Council approved a further modified version in December 2005. On December 15, 2005, the EU governments reached a political agreement on the final components of REACH and REACH entered into force on June 1, 2007. The main elements that were modified and included in the final regulation are:

Registration: The package agreed:

Reduced to some extent registration requirements for low-volume substances, requiring the submission of data only for low-volume substances identified as high risk, although some 12,000 substances may be considered in the high-risk category.
Required registrants of the same substance to share data, with limited exceptions to this requirement.
Exempted from registration types of substances, including cement clinker, minerals and waste.
Aligned registration deadlines (three to nine years) for imported substances in other products.

Evaluation. The package agreed strengthened the role of the new chemicals agency (ECHA) for evaluation. The agency will be established in Helsinki, Finland, and is expected to be operational in 2008.

Authorization. The package agreed to encourages, but does not require, substitution of safer products for dangerous substances, and authorizations will be reviewed on a case-by-case basis. Companies seeking authorization for dangerous substances will have to establish that the risks are controlled and provide an analysis of alternatives.

ECHA, the administering authority for REACH, has issued a number of guidance documents since the entry into force of REACH.

The U.S. government, U.S. industry and other countries have expressed serious concerns that the REACH proposal would represent a substantial barrier to trade and the development of new chemicals and to a wide variety of downstream industries, which incorporate such chemicals into their final products. In particular, U.S. industry is very concerned that:

Certain aspects of REACH legislation and implementation may discriminate against or otherwise impede foreign suppliers.
Registration requirements will be costly and may even force smaller producers out of the market, with a serious impact on downstream products.
Registration requirements are not set forth in a manner that will adequately protect business-confidential information.
Authorization requirements will require substantial, costly and time-consuming modifications to product development, adversely impacting EU consumers, without necessarily producing safer products.
Authorization requirements will significantly delay introduction of products in the EU, harming EU consumers without necessarily producing safer products.
REACH Implementation Project (RIP) 3.8 would go beyond the purpose of the REACH legislation.

Corporate Accounting Standards

On July 30, 2002, the United States enacted the Sarbanes-Oxley Act of 2002 (Pub. L. 107-204) that seeks to improve corporate accounting standards and disclosure of information. In particular, the legislation establishes an accounting oversight board to: (1) oversee the audit of public companies that are subject to the securities laws; (2) establish audit-report standards and rules; and (3) inspect, investigate, and enforce compliance on the part of registered public-accounting firms, their associated persons, and certified public accountants. The legislation also directed the Securities and Exchange Commission (SEC) to promulgate regulations requiring corporate certifications of financial reports and requiring enhanced disclosure of financial information. This legislation applies to U.S. and foreign accounting firms that prepare or furnish an audit report with respect to any issuer in the United States.

The EU, which unsuccessfully sought a blanket exemption for European firms during Congressional consideration of this legislation, is seeking flexibility in the implementation of these rules by the Securities and Exchange Commission, including mutual recognition of oversight procedures, so that EU companies do not have to provide documents to the U.S. oversight board, and exceptions to the requirement that members of a company’s auditing committee be independent from the company they are auditing (because, the EU argues, in some countries, representatives of employee organizations are part of the audit committee). As part of the TEC, the United States and EU have committed to the mutual recognition of each others accounting standards. While the United States has complied with this agreement, the EU has not yet recognized the U.S. standards, Generally Accepted Accounting Principles (GAAP).

Japan, Canada and Australia have similarly objected to what they view as burdensome and overly restrictive requirements and members of U.S. Congress have proposed a number of changes to Sarbanes-Oxley.

Privacy

In 2000, the United States and the EU finalized a data-privacy accord intended to resolve issues over how U.S. companies would be able to comply with the European Commission Directive on Data Privacy, which went into effect in October 1998. The EU Directive prohibits the transfer of personal data to non-EU nations that fail to meet the EU’s “adequacy” standard for privacy protection. U.S. companies can meet the requirements of the EU directive through a number of exceptions, including consent or contractual provisions, or by demonstrating that they provide adequate protection for the data. Given the very burdensome nature of this directive, however, the United States negotiation the 2000 Safe Harbor framework that provides U.S. organizations with a streamlined means of satisfying the EU Directive’s “adequacy” requirement. Information not covered by the Department of Commerce or the Department of Transportation, such as certain information of U.S. financial institutions and telecommunications carriers, is eligible for the Safe Harbor at this time.

While eligible U.S. organizations can use the Safe Harbor to satisfy EU requirements for their data transfers between Europe and the United States, they must still find other mechanisms to meet EU requirements for their data transfers from Europe to other non-EU countries. Unfortunately, given the divergent implementation of the Directive among EU Member States, companies must analyze and satisfy very different standards for transferring data in each EU Member State. To address the problem of international data transfers, several EU data-protection commissioners have begun to work together to advance the use of codes of conduct or “binding corporate rules” to enable EU data transfers. Binding corporate rules may allow companies to establish “adequate safeguards” without the administrative, legal, and organizational complexities of contracts. While these efforts represent a positive step, additional work is necessary for this type of an approach to succeed. In particular, such rules must be drafted to apply to global, not just pan-European data transfers. In addition, such an approach requires the establishment of a streamlined mechanism for obtaining regulatory approval of organization-wide binding corporate rules, rather than separate approvals by the data protection authority in each Member State. An alternative method of compliance with EU privacy rules for transfers to countries that have not received an adequacy finding is the use of contractual provisions. At present, the EU has promulgated model contracts for both controller to controller and controller to processor transfers. More recently the EU has also accepted a set of controller-to-controller clauses developed by international business groups. There is some increased recognition within the EU of the need to harmonize different EU country processes and to develop solutions that address global data flows.

While these developments are somewhat encouraging, the U.S. government and industry are also working together in other fora to devise mechanisms to facilitate the use of global privacy solutions, such as corporate global rules or codes of conduct for companies’ global data transfers. Developing these mechanisms for use on a global basis will enable privacy regimes to reflect realistically the world as it is evolving and afford businesses and consumers the benefits of a globally networked world.

Other Trade Barriers

ECAT companies also remain concerned about existing barriers in the following sectors:

Pharmaceuticals, due to numerous price and other controls that many EU countries place on pharmaceutical products.
Automotive, with the potential ban of fluorinated gases proposed in 2004, that could result in bans on key automotive parts and components, as well as non-automotive products.
Audio visual and broadcast, particularly with the expansion of the EU to 12 additional member states.
Government procurement, with EU and national discriminatory standards remaining in many areas.
Other sectors, where non-transparent and EU-preference standards, rather than performance standards, are being adopted.

“Open Skies” Bilateral Agreements

Since the 1940s, air service between countries has been regulated by governments. It is one of the few remaining industries in the world where government regulators have the ability to dictate routes, numbers of seats, and, in some cases, price. In 1995, however, the United States established the United States International Air Transportation Policy Statement in support of the aviation interests of the U.S. airline industry and as guidance for U.S. negotiators of air-service agreements. Since that time, the U.S. government has negotiated more than seventy-five “Open Skies” agreements with a growing number of countries around the world. It is critical to the growth of the global aviation and aerospace industries that deregulation of air service continue.

Open skies agreements among European countries have been in place for years and have fostered the development of many types of multinational airline alliances. Both broad-based strategic alliances and less integrated code-share alliances have changed the structure of the airline industry over the past 10 years. These alliances have been generating new pressures on the remaining restrictive bilateral agreements in the region.

Expanded air service to additional city-pairs through Open Skies Agreements with the United States, so-called greater point-to-point service, provides economic benefits to the traveling public and an increase in tax revenues to the government. As well, indirect jobs associated with air service are also enhanced.

Specifically, existing Open Skies Agreements are producing enormous benefits for consumers, including making available better quality, lower-priced, more competitive service for millions of passengers in thousands of international city-pair markets. As an integral part of a tourism industry that contributes more than $900 billion per year to the U.S. economy alone and sustains some 11 million jobs in the United States, the airline industry is critical to economic growth around the world. The following are key examples of the benefits associated with Open Skies Agreements reached with European countries alone:

Open Skies Agreements between the United States and other countries have provided the airlines the operating flexibility necessary to improve and expand services in an efficient matter. For instance, passenger traffic in the transatlantic market increased by 16.6 percent in the period 1993—the date of the first Open Skies Agreement reached by the U.S. and the Netherlands—through 1995; and by 30.5 percent in the period 1997 through 1999, when the positive effects of many of the 11 Open Skies Agreements reached by the U.S. with European governments were felt. (Source: 2000 U.S. Department of Transportation Report, “International Aviation Developments: Transatlantic Deregulation.”)
Open Skies Agreements have also provided the pricing flexibility needed to develop complete pricing strategies and to market them effectively. New flexibility for airlines to respond to marketplace demands has led to downward pressures on price, both due to increased supply and increased competitiveness. For airlines in countries with an Open Skies Agreement with the United States, transatlantic airfares were reduced by an average of 20 percent during the period from 1996 to 1999. Airfare reductions for airlines in countries where there are no Open Skies Agreement with the United States only averaged 10 percent for that same period.

ECAT welcomes the Open Skies agreement reached in 2007 between the United States and the European Union and signed that entered into force in March 2008. An additional 25 million passengers are expected to travel between the U.S. and Europe over the next five years as a result of expanded service.

ECAT Position: ECAT supports efforts by the United States and the EU to strengthen their economic relationship, including through regulatory cooperation activities, and addressing ongoing trade disputes that have undermined the historically close U.S.-EU relationship. In 2008, ECAT also urges the Administration to strengthen its efforts to address U.S. concerns on various policies and other initiatives that undermine or have the potential to undermine access by U.S. companies into the EU or U.S. competitiveness globally, including with respect to agriculture, European aircraft subsidies, ECAT supports efforts by the United States and the EU to strengthen their economic relationship, including through regulatory cooperation activities and addressing ongoing trade disputes that have undermined the historically close U.S.-EU relationship. In 2008, ECAT also urges the Administration to strengthen its efforts to address U.S. concerns on various policies and other initiatives that undermine or have the potential to undermine access by U.S. companies into the EU or U.S. competitiveness globally, including with respect to agriculture, European aircraft subsidies, the EU’s chemical regulation (Registration, Evaluation, and Authorization of Chemicals regulation (REACH)), and privacy. ECAT welcomes the substantial expansion of air service between the United States and the EU that will result from the U.S.-EU Open Skies Agreement.