Move to cut the cost of trade

Date: 26/10/1995

By Fiona McHugh

INDUSTRY and political leaders from both sides of the Atlantic are to meet next month to find ways of reducing the cost of doing business between the European Union and the US.

At a major conference, the first of its kind, scheduled to take place in Seville on 10 and 11 November, policy-makers will ask businessmen to point the way to trouble-free trade and increased global competitiveness.

Initial soundings distilled in working papers to be circulated today (26 October) show that business leaders consider complicated and bureaucratic paper work, and not tariffs, to be the greatest obstacle to transatlantic trade.

Over half of the top EU and US companies which responded to a preparatory questionnaire put the dismantling of administrative hurdles to business at the top of their governments' 'to do' list.

“We were quite surprised by the response. It seems that difficult testing and certification procedures cause more problems for businesses than high tariffs do,” said one European Commission official.

Industry experts, calling for a single procedure to be introduced, say getting products to pass separate quality inspections in the US and the EU consumes both time and money.

“If you test a product in Europe and then decide to sell it in the US, you have to go through the whole testing procedure again. That costs a lot of money and can take anything up to three years to be completed,” said the official.

“It is especially damaging for small companies. If you are exporting 500,000 Volkswagens, you can probably afford to wait. But if you are trying to sell 500 small products, it will not be worth your while.”

But US regulatory agencies, such as the Food and Drug Agency and the Environmental Protection Agency, are unlikely to agree to any hand over of power or control to their European counterparts.

“They are willing to let the EU carry out tests, but have no intention of allowing anyone but themselves to certify products,” says Hanns Glatz, head of Daimler Benz' EU affairs office.

Differences are also likely to emerge over the scope of any mutual recognition agreement which might result from the transatlantic business dialogue.

European policy-makers are keen to have an umbrella agreement allowing the Union to grant market-entry permits which would be valid in the US for all products, but American officials are insisting on a sector-by-sector approach.

“It will be virtually impossible to move to mutual recognition straight away. But even if we can agree on a gradual approach which introduces harmonised tests for new products, we will have achieved something important,” says Glatz.

Discussions are also likely to centre on access to public procurement contracts, with European businesses pressing for an end to the US controversial 'Buy-America' policy. That gives preference to US companies vying with non-US firms for public works' contracts.

“Public procurement will be high on the EU's laundry list,” says the Commission official.

Winning access to US research and development (R&D) programmes will be another top priority for EU industry leaders who contend they are effectively barred from most such programmes under the current system. Officials say that in theory, European companies can participate in R&D programmes, but in reality the procedure is so complicated that most are discouraged.

The Americans, for their part, are likely to push for speedier liberalisation of Europe's utilities and telecoms markets.

Tariffs, though less of a problem since the conclusion of the 1994 General Agreement on Trade and Tariffs, have not slipped off industry's agenda.

Business leaders are expected to insist that peak tariffs be abolished in the near future. They will also discuss how to promote international investment and cooperation with third countries.

The dialogue comes just before an EU/US summit planned for early December when US President Bill Clinton, Commission President Jacques Santer and Spanish Prime Minister Felipe Gonzalez will assess its conclusions.

Next month's dialogue is set against the back-drop of intensified political relations between the two sides over recent months and represents a shaky first step towards the creation of a transatlantic free-trade zone.

“This is an opportunity to warm the temperature of relations between two of the world's largest trading areas. It is not a problem-solving machine, rather an event which will allow us to decide by consensus on the best way forward,” explains William Seddon-Brown Chairman of the EU Committee of the American Chamber of Commerce in Belgium.

The conference is the brain-child of US Secretary for Commerce Ron Brown and signals a new readiness on behalf of politicians to listen rather than dictate to industry leaders.

“This is a bit of a leap in the dark. We asked them to tell us what their priorities were, which means of course that we run the risk of being told we should change direction. But that is the point. It is an exciting experiment because we do not know what the outcome will be,” explained an EU official.