Sunday, 29 April 2018

United States Trade Representative Estimate Report on Foreign Trade Barriers 2018

Sources:
Press release
Full report 2018
Representative's website

This blog entry summarises and prejudicially analyses the United States Trade Representative ("USTR") Estimate Report of Foreign Trade Barriers 2018 ("Report").

Summary structure of the Report

The whole Report is 504 pages long, of which the chapter relating to the EU is 47 pages.  The 47 pages contain 70 headings and ~28,339 words.

The key headings of the 47 EU-related pages amount to a summary contents.  The key headings are:

  • technical barriers to trade (sanitary & phytosanitary barriers)
  • market access (tariffs, agriculture, non-agriculture)
  • intellectual property rights
  • services barriers (telecoms, television, legal, accounting, retailing)
  • investment barriers
  • government procurement
  • subsidies (Airbus)
  • customs administration
  • barriers to digital trade (data localisation, interactive computer services, aggregation services, geo-blocking, cross-border contract rules).
In the PDF document, I highlighted 206 key phrases, each representing a statement critical of EU's position and conduct.  I had hoped to use the 206 key phrases to measure the position of the US in some way.

Key themes from the Report re the European Union - American perspective

Sadly, it turned out to be impossible to categorise the 206 key phrases to count and to summarise them, because to have done so would remove so much context that the numeric summary would be meaningless.

The best I can do is to raise my overview to some stratospheric level, where only sweeping generalisations are possible, none of which bear any useful detail to the issue at hand.

The key themes from the Report about the EU appear to be the following:

  • the web of regulations under the umbrella of the EU is opaque, inefficient, multi-faceted and fragmented.  Too many barriers are implemented by EU Member States, and some of those barriers breach even the EU's domestic law;
  • the EU does not always adhere to WTO rules or principles;
  • the EU fails to consult relevant stakeholders in some cases, or deploys a consultation method designed to frustrate consultation, or to make participation for a selection of stakeholders impossible;
  • the EU uses its own standards instead of international standards (a "not invented here" mentality);
  • the EU seeks to re-define the concept of an international standard to anything that excludes American participation (in the UK, we'd call this institutionalised racism).
  • the effect of regulations is to create prohibitive compliance costs, which become irrecoverable overhead costs to the American exporter into the EEA;
  • the EU engages in obfuscation;
  • the EU peddles an ideology that public sector bodies should not compete amongst eachother;
  • asymmetry: the EU expects its standards to be respected abroad, but does not respect non-EU standards.

Specific examples

The whole 47 pages are example after example!  Here are some key ones.

The REACH regulations

Pages 158-159 (my emphasis):
The United States agrees on the importance of regulating chemicals to ensure public safety. The United States is concerned, however, that REACH appears to impose requirements that are either more onerous for foreign producers than EU producers or simply unnecessary. For example, [American] stakeholders have raised concerns that they must provide data as part of the registration process under REACH that is irrelevant to health and environmental concerns. Additionally, there appears to be inconsistent and insufficiently transparent application of REACH by Member States. The United States and many other WTO Members have raised concerns regarding various aspects of REACH at nearly every WTO TBT Committee meeting for years. WTO Members have emphasized the need for greater transparency in the development and implementation of REACH requirements and frequently cite the need for further information and clarification, as well as problems producers have in understanding and complying with REACH’s extensive registration and safety data information requirements. 
The United States and stakeholders also have concerns about a lack of transparency associated with the Community Rolling Action Plan (CoRAP). CoRAP is part of the REACH substance evaluation process and is updated every March. Its purpose is to allow Member States and the European Chemicals Authority (ECHA) to prioritize substances they suspect of being hazardous to human health or the environment. Depending on the outcome of the evaluation, a substance evaluated under CoRAP may be considered for classification as a substance of very high concern and become subject to authorization and restriction procedures. It is also possible that after evaluation, a substance will be found to pose no such risk. ECHA has established criteria for selecting substances for placement on the list. These criteria address concerns about hazard, exposure, and tonnage. Member States are encouraged, but not obliged, to use the ECHA criteria. ECHA published the most recent CoRAP list on March 21, 2017. It contains 115 substances, which either have been evaluated or will be evaluated through 2019. CoRAP preliminary reports should be made available to interested U.S. companies, even if they have not yet registered the particular substance, but the reports are currently made available only to registrants. The EU should undertake greater transparency concerning the CoRAP process, including publication of CoRAP preliminary reports, which would both facilitate the EU’s objectives and help reduce costs and address U.S. stakeholders’ concerns. 

The macro-issues here are:

  • REACH appears to adopt complexity for the sake of complexity as a barrier to entry to the EEA;
  • compliance with REACH appears to create irrecoverable overhead cost for the sake of irrecoverable overhead cost. This is in itself a second barrier to entry, but is also poisons the entrant if they successfully enter the market, because the entrant now needs a greater sales volume in the EEA market to cover the incremental overheads of having entered the EEA market;
  • public safety is not limited to the EU.  If it's a matter of public safety, then the whole world would benefit from such knowledge.  Yet the EU withholds CoRAP reports only to itself, to hell with public safety outside little Europe.
  • throughout the Report, REACH typifies the basic approach of the EU to anything American.  No matter the minutae of detail, the functional outcome is nearly always the same complaint within the Report.

And, yes, USTR really should have used the acronym "CRAP" instead of "CoRAP"!

Country of Origin Labelling ("COOL")


Page 162:
In addition, some of the measures could favor goods produced in certain countries by selectively eliminating the requirements for processed foods produced in EU Member States, Turkey, or EFTA countries that are part of the European Economic Area.
The key issue here is transparency to a non-EEA country, which boils down to institutionalised racism.

Notwithstanding that the quotation could amount to an American misconception of the EU's position, the quotation implies that the EEA would be prepared to reduce its standards for participants in the EEA, one non-EEA participant of Turkey, but not the non-EEA participant of, say, America.

In the UK, we'd refer to this as "institutionalised racism".

Pharmaceutical products


Page 175:
U.S. pharmaceutical stakeholders have expressed concerns regarding several Member State policies affecting market access for pharmaceutical products, including non-transparent procedures and a lack of meaningful stakeholder input into policies related to pricing and reimbursement, such as therapeutic reference pricing and other price controls. Such policies reportedly create uncertainty and unpredictability for investment in these markets and can undermine incentives to market and innovate further. These policies have been identified in several Member States, including: Austria, Belgium, Cyprus, the Czech Republic, France, Hungary, Italy, Lithuania, Poland, Portugal, Romania, and Slovakia. Additional detail on some of these Member State policies is set out below. Pharmaceutical firms also have expressed concern regarding recent changes to European Medicines Agency (EMA) policy regarding disclosures of clinical trial data, including potential disclosure of confidential commercial information submitted to EMA by pharmaceutical firms seeking marketing authorization. The United States continues to engage with the EU and individual Member States on these matters.
This quotation shows the gulf of difference between the US and EU regarding intellectual property rights.

It also shows inconsistency by the EU regarding matter of public interest (including the safety of drugs used by state-run healthcare systems).  Here, the EU Member States are alleged to want to publish everything, whereas in the example for REACH (above), the safety issues relating to chemicals was some sort of EU secret.

The quotation also presents US interests rather nakedly.  The implication of the second emboldened phrase is obvious and clear: no profits means no investments.  The secondary implication is equally clear: this is a barrier to investment into the EU Member State, but the EU Member State doesn't seem to care.  Here in the EU, we know this to be true: socialised healthcare systems are Ponzi schemes in their own right, and they don't like to be exposed to any sort of change, lest the healthcare system actually improve health outcomes!  Perish the thought!

Intellectual property rights


Page 180:
Additionally, two DSM regulations may negatively affect territorial licensing, including the proposed “Regulation laying down rules on the exercise of copyright and related rights to online transmissions of broadcasting organizations and retransmissions of television and radio programs.” Contractual freedom to license on a territorial basis and respect for international copyright norms are of paramount importance to the audiovisual sector, where the exclusive rights to authorize or prohibit the distribution of creative works through licensing is the basis for recouping substantial upstream production costs, often through pre-sales of exploitation rights. The Portability Regulation (EU) 2017/1128 was formally adopted on June 14, 2017, and will become applicable in all Member States as of April 1, 2018. This legislation seeks to give EU subscribers to online content services the ability to access this content when temporarily present in another Member State.
Here is an example of how the Report reveals too much about US interests.  In so doing, the Report is likely to offend any European reader.

"Territorial licencing" basically means price discrimination, i.e. the selling of exactly the same product in a number of territories, but a different price in each territory and no objective change in cost caused by the territory itself.

Whilst the USTR appears to reflect a view that price discrimination is natural, normal and a good thing, the EU has always considered the practice a form of exploitative racism, to be stamped out at all costs.

British citizens with second homes in Spain and a subscription to Sky TV during the 2000s will know what price discrimination feels like.

Telecoms


Page 183:
The proposed [European Electronic Communications] Code would extend European telecommunications regulations to “over the top” (OTT) Internet services, such as voice, messaging, and other communications applications. Most of the obligations in the Code would apply to “number-based” Internet services that enable communications with mobiles and landlines. These obligations would address requirements relating to access to emergency services, duration of contracts, quality of service, number portability, and switching rules for service bundles. All covered Internet services, including those that do not use public numbering, would be bound by rules on security and integrity of services that govern their risk management strategies and their reporting of security incidents to competent authorities. U.S. suppliers have expressed significant concerns with the proposed expanded scope of EU telecommunications law and have highlighted that Internet services face low barriers to entry by new competitors, while traditional telecommunications services providers enjoy high barriers to new entry and little direct competition, thus justifying asymmetrical regulation. In addition, this extension of NRA authority to Internet services raises concerns given that most traditional telecommunications services suppliers historically serve one or a limited number of Member State markets, whereas most Internet “interpersonal communications services” are available in every Member State, thereby potentially subjecting them to conflicting NRA jurisdiction.
Here is a great example of how the Report serves the needs for Remainers to demand "more Europe, not less."

Of course, Leavers have the correct argument: the EU has had plenty of opportunity over the decades to do something about this, but the EU has chosen to do precisely nothing, to allow the national telecom monopolies to fester.

Oh, just like America allowed its regional telecom monopolies to fester!

Pot, kettle, black...?

Data localisation (data privacy)


I've just completed the internal documentation for GDPR of a private company whose sole exposure to GDPR is its own employees and the employees' names of its corporate customers (business-to-business).  The full documentation is over 53 documents so far (more on the way!).  It is absolutely valueless, time-wasting, typing-for-the-sake-of-typing, a deliberate and gratituous waste of overhead resource.  Thus it is precisely the overhead-creating barrier to entry that the EU wants to erect barriers to entry into the EEA.

Page 198:
The United States remains concerned that the implementation and administration of current and proposed EU law (e.g., the General Data Protection Regulation, or GDPR) create disproportionate barriers to trade, not only for the United States, but for all countries outside of the EU [should be EEA?]. Although the United States has received a determination of partial adequacy from the EU (see discussion of the EU-U.S. Privacy Shield below), there are many other countries, including Japan, Korea, and India, that have expressed interest in obtaining an adequacy determination to facilitate the exchange of data with the EU. Restrictions on the flow of data have a significant effect on the conditions for the cross-border supply of numerous services and for support to the functionality embedded in trade in intelligent goods (i.e., smart devices). The EU has so far found only a handful of countries to provide adequate data protection under EU law, which means that suppliers in the large majority of EU trading partners must rely on other arrangements or criteria to transfer data with suppliers in the EU. Moreover, legal challenges in the EU continue to create uncertainty around the transfer of data for U.S. and other foreign companies. As of the end of 2017, two legal challenges had been filed directly against the Privacy Shield in the EU’s General Court (lower court). The use of standard contract clauses are also under judicial review in Ireland and expected to be referred to the CJEU.
To the typical European ordinary pleb, GDPR represents privacy against the prying eyes of government, especially the American government and its supine corporations (like Facebook).  Ed Snowden's whistleblowing did a huge amount of damage to the US interest in the data theft industry, and with the EU's reaction to that being GDPR, the US continues to rail against the protection of data. Yet the US and its interests appear to be completely unrepentant, while the EU denies any flexibility that might cause more useful innovations to arrive to the market at a faster pace.

So much for the interests of the people.  The stated/implied position of both US and EU is to throw the baby out with the bath water.

Comment

There is soooo much in the Report - and soooo much more that it doesn't say - that it would eons to unbundle, especially for an ordinary, full-time, taxpaying pleb.  So the content of this blog post is curtailed only the really big points.

The trick to reading the Report is to spot the omissions.  By choosing to state what it does, the Report inadvertently reveals more about ulterior vested interests than perhaps would have been wise to reveal to the general public.  Even a red-blooded, true American patriot might shudder at some of the anti-consumer objectives that the Report appears to promote.

The Report thus reveals a substantial zone of agreement between the USTR and the EU: an underlying technocratic, monopolistic cynicism of, and general hostility towards, their own ordinary plebs in their own tin-pot region (and, for good measure, the plebs in the other region, too).  The common position is more "technocratic" than "globalist".

Yet, for all the Report's talk about international standards, and how the Europeans deviate from them for non-scientific reasons, the Report is silent on the non-scientific commercial reasons for European decisions.  Much to its detriment, the Report does not host the possibility that the Europeans might exercise commercial reasons for rejecting intentionally incomplete scientific studies or pseudo-scientific "research".

At the same time, the USTR paints a truly dreadful picture of allegedly corrupt, or unethical, misconduct of the EU, especially its alleged undermining of WTO rules/principles and the insinuation that the EU runs carefully constructed "consultation" processes that actually don't consult properly at all.

Hence why looking for omissions is so important.  The double-standards stink to high heaven: the US is accusing the EU of doing what the US has been doing for years!

Even so, if only half of the Report's accusations are spot-on correct, then the Report is a damning indictment of the EU, specifically its Single Market (the European Economic Area).

Boing!

And this is where the head really hurts.

The Report is ammunition in the hands of both Brexiteer and Remainiac.

The net conclusion is an awful realisation that Western faith in technocratic government is fundamentally misplaced.  Instead of doing the right thing, for the right reason, on the right evidence, at the right time and in the right timescale, governments of the world simply engage in serial, short-term, expedient corruption, with us ordinary plebs continually paying the price for their ego-driven stupidities.

So much for technocratic globalisation making the world a better place for us ordinary plebs.

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