Explaining Regulatory Policy Divergence
The extent to which transatlantic regulatory policy divergence has increased during the last two decades presents a puzzle. When compared to the rest of the world, Europe and the United States have much in common. The United States and the fifteen member states of the EU (as of 2003) are affluent democracies with sophisticated public bureaucracies, substantial scientific capacities, and strong civic cultures. Their regulatory officials have access to much of the same scientific expertise and there is extensive communication among policy makers, scientists, business managers, nongovernment organizations (NGOs), and citizens. Thanks to the spread of global media, many Americans and Europeans are well informed of policy developments on the other side of the Atlantic.
Moreover, their economies have become increasingly interdependent. “The transatlantic trade and investment relationship has become a super highway.”1 Bilateral trade in goods between the EU and the United States totaled $563 billion in 2007; each is the other’s second most important trading partner. European investments in the United States total $1.5 trillion, and American firms have investments of approximately $1.7 trillion in the EU.2
The result is a staggering degree of interdependence between the two econo-
mies, not least because the fabled US and European multinationals are now so
thoroughly intertwined by mergers and cross-fertilization. Something close to
a quarter of all US-EU “trade” simply consists of transactions within firms with
investments on the other side of the Atlantic.3
Divergent risk regulations between the United States and the EU add to the costs of transatlantic commerce and also raise the costs of international trade as some countries adopt European standards and others, American ones. Improving regulatory cooperation and coordination has
1 Matthew Baldwin, John Peterson, and Bruce Stokes, “Trade and Economic Relations,” in Europe, America, Bush: Transatlantic Relations in the Twenty-First Century, ed. John Peterson and Mark Pollack (London: Routledge, 2003), 29.
2EU Focus, December 2010.
3 Quoted in Baldwin et al., “Trade and Economic Relations,” 31.