Table Of ContentSystemic Implications of
Transatlantic Regulatory
Cooperation and
Competition
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World Scientific Studies in International Economics
(ISSN: 1793-3641)
Series Editor Robert M. Stern, University of Michigan, USA
Editorial Board Vinod K. Aggarwal, University of California-Berkeley, USA
Alan Deardorff, University of Michigan, USA
Paul DeGrauwe, Katholieke Universiteit Leuven, Belgium
Barry Eichengreen, University of California-Berkeley, USA
Mitsuhiro Fukao, Keio University, Tokyo, Japan
Robert L. Howse, University of Michigan, USA
Keith E. Maskus, University of Colorado, USA
Arvind Panagariya, Columbia University, USA
Published*
Vol. 7 Fostering Monetary and Financial Cooperation in East Asia
edited by Duck-Koo Chung (North East Asia Research Foundation, South Korea)
& Barry Eichengreen (University of California, Berkeley, USA)
Vol. 8 Challenges of Economic Development in the Middle East and North Africa Region
by Julia C Devlin (University of Virginia, USA)
Vol. 9 Globalization and International Trade Policies
by Robert M Stern (University of Michigan, USA)
Vol. 10 The First Credit Market Turnoil of the 21st Century: Implications for Public Policy
edited by Doughlas D Evanoff (Federal Reserve Bank of Chicago, USA,
Philipp Hartmann (European Central Bank, Germany) &
George G Kaufman (Loyola University, USA)
Vol. 11 Free Trade Agreements in the Asia Pacific
edited by Christopher Findlay (University of Adelaide, Australia) &
Shujiro Urata (Waseda University, Japan)
Vol. 12 The Japanese Economy in Retrospect, Volume I and Volume II
Selected Papers by Gary R. Saxonhouse
by Robert M Stern (University of Michigan, USA), Gavin Wright (Stanford
University, USA) & Hugh Patrick (Columbia University, USA)
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edited by Asli Demirgüç-Kunt (The World Bank, USA),
Douglas D Evanoff (Federal Reserve Bank of Chicago, USA) &
George G Kaufman (Loyola University of Chicago, USA)
Vol. 15 Systemic Implications of Transatlantic Regulatory Cooperation and Competition
edited by Simon J Evenett (University of St Gallen, Switzerland) &
Robert M Stern (University of Michigan, USA)
*The complete list of the published volumes in the series, can also be found at
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Sandhya - Systemic Implications.pmd 2 3/9/2011, 1:58 PM
15
World Scientific
Studies in
International
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
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British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library.
SYSTEMIC IMPLICATIONS OF TRANSATLANTIC REGULATORY
COOPERATION AND COMPETITION
World Scientific Studies in International Economics — Vol. 15
Copyright © 2011 by World Scientific Publishing Co. Pte. Ltd.
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ISBN-10 981-283-848-1
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Printed in Singapore.
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Contents
Preface xiii
Chapter 1. Condemned to Cooperate? 1
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Economic Interdependence, Transatlantic Cooperation,
and Multilateralism . . . . . . . . . . . . . . . . . . . . . 3
2.1. From economic interdependence to the Merkel
Initiative . . . . . . . . . . . . . . . . . . . . . . . 3
2.2. Economic interdependence and the case
for transatlantic cooperation . . . . . . . . . . . . . 8
2.3. The impact of transatlantic initiatives on the
multilateral trading system, and vice versa . . . . . 11
2.4. Transatlantic cooperation and cosmopolitan
regulation . . . . . . . . . . . . . . . . . . . . . . 15
3. Contributions to this Volume . . . . . . . . . . . . . . . 17
4. Concluding Remarks . . . . . . . . . . . . . . . . . . . . 19
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Chapter 2. The Banking Crisis: Causes, Consequences
and Remedies 23
1. The Basics of Banking . . . . . . . . . . . . . . . . . . . 23
2. The Efficient Market Paradigm . . . . . . . . . . . . . . 25
3. Are Financial Markets Efficient? . . . . . . . . . . . . . . 27
3.1. Bubbles and crashes are endemic in financial
markets . . . . . . . . . . . . . . . . . . . . . . . . 27
3.2. The mirage of self-regulation of financial
markets . . . . . . . . . . . . . . . . . . . . . . . . 33
v
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vi Contents
4. Unintended Consequences of Regulation . . . . . . . . . 35
5. On Causes and Triggers . . . . . . . . . . . . . . . . . . 39
6. The Reaction of the Authorities . . . . . . . . . . . . . . 40
7. Short-term Solutions . . . . . . . . . . . . . . . . . . . . 41
8. Long-term Solutions: A Return to Narrow Banking . . . 42
9. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . 45
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Chapter 3. The Political Economy of Transatlantic
Regulatory Cooperation and Competition:
A (Unofficial) View from Europe 47
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . 47
2. The New Transatlantic Economic Partnership: Hype
or Hope? . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3. New EU and a New World . . . . . . . . . . . . . . . . 52
4. Prospects for the New Transatlantic Agenda . . . . . . . 55
5. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . 60
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Chapter 4. How Hard and Soft Law Interact in
International Regulatory Governance:
Alternatives, Complements and Antagonists 63
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . 63
2. The Canonical Literature on International Hard and
Soft Law: Their Attributes as Alternatives and their
Interaction as Complements . . . . . . . . . . . . . . . . 67
2.1. Definitions of hard and soft law . . . . . . . . . . . 68
2.2. Advantages and disadvantages of hard and soft law
as alternatives . . . . . . . . . . . . . . . . . . . . 72
2.3. Hard and soft law interaction as complements . . . 78
3. Theorizing International Hard and Soft Law Interaction:
Power, Distributive Conflict and Regime Complexes . . 82
3.1. The EU, the US, and power in international
regulatory governance . . . . . . . . . . . . . . . . 83
3.2. The challenge of distributive conflict . . . . . . . . 87
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Contents vii
3.3. The challenge of fragmented regime conflicts . . . 93
4. Hard and Soft Law Interaction as Antagonists . . . . . . 96
5. Hypotheses as to the Interaction of Hard and Soft Law
Instruments. . . . . . . . . . . . . . . . . . . . . . . . . 111
6. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . 120
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Chapter 5. EU–US Regulatory Cooperation and
Developing Country Trade 131
1. Trade Policies. . . . . . . . . . . . . . . . . . . . . . . . 134
2. Market Access . . . . . . . . . . . . . . . . . . . . . . . 139
3. Non-tariff Measures . . . . . . . . . . . . . . . . . . . . 141
3.1. Other sources of trade costs . . . . . . . . . . . . . 143
3.2. Services policies . . . . . . . . . . . . . . . . . . . 147
4. Reducing Regulatory Differences and Associated Cost
Differentials . . . . . . . . . . . . . . . . . . . . . . . . 151
4.1. Trade costs vs. border barriers: Gravity simulations 156
4.2. Services . . . . . . . . . . . . . . . . . . . . . . . . 157
5. Policy Implications . . . . . . . . . . . . . . . . . . . . . 158
6. 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? 165
1. Globalization . . . . . . . . . . . . . . . . . . . . . . . . 166
2. Regulating a Global Industry . . . . . . . . . . . . . . . 167
3. Example of Disparity — Surrogates for Humans in
Crash Testing . . . . . . . . . . . . . . . . . . . . . . . . 171
4. Comparison of US and EU Safety Regulations . . . . . 174
5. US–EU Market Competition and Manufacturer
Cooperation . . . . . . . . . . . . . . . . . . . . . . . . 175
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viii Contents
6. EU–US Cooperation — The Transatlantic Business
Dialogue . . . . . . . . . . . . . . . . . . . . . . . . . . 176
6.1. Transatlantic automotive industry conference
on international regulatory harmonization . . . . . 177
7. International Harmonized Research Activities . . . . . . 177
7.1. Industry petitions for functional equivalence
determinations . . . . . . . . . . . . . . . . . . . . 180
8. 1998 Agreement Administered by WP.29 . . . . . . . . . 181
8.1. 1998 Agreement accomplishments
and lessons learned . . . . . . . . . . . . . . . . . 183
9. Discussion of Several GTR Efforts, Successes
and Unsuccessful Outcomes to Date . . . . . . . . . . . 184
9.1. Lighting installation GTR . . . . . . . . . . . . . . 184
9.2. Controls and displays GTR . . . . . . . . . . . . . 185
9.3. Pedestrian protection GTR . . . . . . . . . . . . . 186
9.4. Electronic stability control (ESC) GTR . . . . . . . 187
10. Summary of Global Technical Regulation
Experience . . . . . . . . . . . . . . . . . . . . . . . . . 188
11. An Additional Initiative: A Competitive Automotive
Regulatory System for the 21st Century . . . . . . . . . 190
12. Conclusion and Recommendations to Help Achieve
Vision for the Future . . . . . . . . . . . . . . . . . . . . 192
Chapter 7. Systemic Implications of Deeper Transatlantic
Convergence in Competition/Antitrust
Policy 197
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . 198
2. The Differing Historical Origins and Orientations of
Competition Policy in the US and the EU, and the
Process of Convergence Thus Far . . . . . . . . . . . . . 202
2.1. The United States . . . . . . . . . . . . . . . . . . 203
2.2. The European Union . . . . . . . . . . . . . . . . 207
2.3. Recent indications of convergence: The adoption
of more economics-based approaches in the EU . . 210
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Contents ix
2.4. Possible Indications of Further Convergence:
Antitrust Policy in the Obama Administration . . . 214
3. The Need for Cooperation in Principle, and the
Cooperation Arrangements that Have Been Implemented
Thus Far in the Transatlantic Context . . . . . . . . . . . 216
3.1. Rationales for cooperation in the competition policy
field . . . . . . . . . . . . . . . . . . . . . . . . . . 216
3.2. Existing transatlantic cooperation arrangements . . 220
3.2.1. The 1991 US–EU Competition
Cooperation Agreement . . . . . . . . . . 220
3.2.2. The 1998 US–EU Positive
Comity Agreement . . . . . . . . . . . . . 221
3.2.3. The Administrative Arrangement on
Attendance (AAA) . . . . . . . . . . . . . 221
3.2.4. The set of best practices on cooperation
in merger cases . . . . . . . . . . . . . . . 222
3.3. Use and effectiveness of the above
arrangements . . . . . . . . . . . . . . . . . . . . . 222
4. Are Current/Future Policy Conflicts Manageable
Through Voluntary Cooperation/Convergence
Alone? and What About the World Beyond the
Transatlantic Zone? . . . . . . . . . . . . . . . . . . . . 224
4.1. Examples of US–EU policy clashes to date . . . . . 225
4.1.1. The Boeing/McDonnel Douglas
merger . . . . . . . . . . . . . . . . . . . . 225
4.1.2. The GE/Honeywell merger . . . . . . . . 226
4.1.3. The Microsoft cases . . . . . . . . . . . . . 228
4.2. The broader global context . . . . . . . . . . . . . 230
4.3. Summary observations. . . . . . . . . . . . . . . . 232
5. Concluding Remarks . . . . . . . . . . . . . . . . . . . . 234
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235
Chapter 8. Transatlantic Regulatory Cooperation
on Chemicals — An Idealist’s Dream? 241
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . 241
