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UNCLAS USEU BRUSSELS 000859 
 
SENSITIVE 
 
SIPDIS 
 
White House for NSC/Price, Herrmann 
White House for OMB for OIRA/Dudley, Mancini 
USTR for USTR Schwab, EUR 
HHS for FAO/von Eschenbach 
Pass SEC for Commissioner Atkins 
 
E.O. 12958:  N/A 
TAGS: ECON ETRD EIND EINV EFIN EAGR ENRG
ECIN, EUN 
SUBJECT: Second Meeting of the U.S.-EU Transatlantic 
Economic Council, May 13, 2008, Brussels 
 
Ref: USEU (scene-setter) 
 
¶1. Summary:  The May 13 U.S.-EU Transatlantic 
Economic Council: 
 
-- discussed in a principals-only lunch policy 
issues related to Russia and protectionism (reported 
septel); 
 
-- agreed that EU Commission would follow through on 
its November 2007 commitment to remove a major 
impediment to EU imports of U.S. poultry, with the 
EU Commission proposing legislation to allow the 
U.S. meat cleaning process, explicitly acknowledging 
the absence of a scientific basis for a continued 
ban and committing to work actively to get the 
proposal adopted; 
 
-- acknowledged a Commission administrative fix to 
problems importers of U.S. cosmetics could face when 
implementation of the EUQs new chemicals legislation 
REACH begins June 1 while agreeing the Commission 
would take steps to provide transparency, greater 
legal certainty, and non-discrimination in 
implementation of REACH ; 
 
-- accepted a Department of Labor offer to publish a 
Request for Information on the subject of suppliers 
declaration of conformity  for low-risk electrical 
equipment; 
 
-- issued a joint statement on Open Investment ; 
 
-- welcomed steps to avoid unnecessary divergences 
in our approaches to regulation, improve 
consideration of international trade and investment 
impacts of our regulation, enhance import safety 
through better sharing of confidential information, 
and improve our approaches to risk assessment; and 
 
-- discussed recent steps to further transatlantic 
capital markets integration, including through steps 
to grant equivalence to one anotherQs accounting 
standards, achieve mutual recognition of our 
comparable securities regimes, and address 
structural and other potential problems in our 
insurance markets. 
 
End Summary 
 
¶2. The U.S.-EU Transatlantic Economic Council met 
in Brussels on May 13, 2008.  The U.S. side was co- 
chaired by Assistant to the President for 
International Economic Policy Dan Price, and 
included Secretary of Agriculture Ed Schafer, 
Secretary of Labor Elaine Chao, United States Trade 
Representative Susan Schwab, Treasury Deputy 
Secretary Robert Kimmitt, State Department Under 
Secretary for Economic Affairs Reuben Jeffery III, 
Commissioner of Food and Drugs Andrew von 
Eschenbach, SEC Commissioner Paul Atkins, Special 
Envoy to the European Union C. Boyden Gray and OMB 
Office of Information and Regulatory Affairs 
Administrator Susan Dudley.  EU Commission Vice 
President Guenter Verheugen co-chaired on the 
European Union (EU) side, accompanied by Trade 
Commissioner Peter Mandelson, internal Market 
Commissioner Charlie McCreevy, Consumer Safety 
Commissioner Meglena Kuneva, and Taxation and 
Customs Commissioner Laszlo Kovacs. 
 
¶3. The Council addressed a wide range of subjects, 
including : 
 
-Russia and combating protectionist sentiments (in a 
principals-only lunch, reported separately); 
-steps to reduce unnecessary regulatory divergences 
between the U.S. and EU, improve the sharing of 
information relating to import safety, take better 
account of the trade and investment impacts of 
domestic regulation and improve risk analysis; 
-specific sectoral regulatory problems and issues 
such as the EU ban on the import of U.S. poultry 
meat processed using chlorinated pathogen reduction 
treatments, the U.S. requirement for independent 
third party certification that certain electrical 
equipment is safe for the workplace and the effect 
of the EUQs chemicals regulation on imports, 
especially of cosmetics; 
-measures being taking to integrate transatlantic 
capital markets, including in the areas of 
accounting, securities and insurance ; 
-the need for open investment policies; and 
-next steps for the Council. 
 
¶4. The TEC issued a Progress Report to the Summit, 
including as an annex a Joint Statement on Open 
Investment.  It also received two reports from the 
High-Level Regulatory Cooperation Forum:  one on the 
analysis of trade and investment impacts of 
regulation, and one on our respective approaches to 
import safety, particularly our approaches to 
information sharing. 
 
¶5. The co-chairs also met with a small group of EU 
parliamentarians.  The co-chairs and the U.S. 
delegation then met with the TEC Advisory Group 
(consisting of the U.S. and European co-chairs of 
the Transatlantic Legislators Dialogue, the 
Transatlantic Business Dialogue and the 
Transatlantic Consumer Dialogue); these meetings, as 
well as the TEC co-chairs post-session debrief of 
the Advisory Group, are reported separately. 
 
¶I. Review of TEC Achievements 
 
¶6. Commissioner Verheugen opened the first plenary 
session commenting that the stakeholders session was 
a strong indicator that the TEC project would surely 
be successful as it already had a strong and visible 
impact on transatlantic economic relations.  Both 
Price and Verheugen highlighted the significant 
concrete accomplishments TEC already has under its 
belt.  Price emphasized the strategic importance of 
the crucial relationship, and the need to ensure 
sustainability of the TEC to continue to build on 
this relationship, identifying short, medium and 
long term goals.  He affirmed our obligation to get 
it right amongst usQ so that we can get it right 
with others.  He pointed to common commitments 
already made, including horizontal regulatory 
cooperation to bring regulatory processes in line, 
science-based approaches to regulation, improved 
transparency and more rigorous impact assessments. 
Price pointed to three areas where there has been 
concrete action beyond simply agreeing to roadmaps: 
1)  IPR enforcement highlighting Operation 
Infrastructure, the joint customs border operation 
in which at least 360,000 integrated circuits with 
40 different faked marks were seized in the last 
months of 2007 2) E-Accessibility where the European 
Commission has invited NIST and GSA to join their 
experts group on developing standards while the USG 
has invited Commission experts to join discussion on 
reassessment of U.S. regulations; and 3) further 
enhanced cooperation on medicinal products whereby, 
based on the joint administrative simplification 
goals, there will be several specific initiatives 
related to inspections, including joint inspections. 
 
¶7. Verheugen reminded the group of the TECQs long- 
term vision of removing obstacles to achieve the 
transatlantic economyQs full potential, ensuring our 
continued competitiveness.  He asserted that the 
TECQs political guidance gets things moving even 
on a nasty issue like poultry.  TEC 
accomplishments include a Federal Communications 
Commission commitment to begin a rulemaking on 
allowing use of suppliers declaration of conformity 
for products it regulates; a joint roadmap on patent 
harmonization; Food and Drug Administration/DG 
Enterprise cooperation on administrative 
simplification (including enhanced inspection 
cooperation), collaboration on biomarker development 
and validation, parallel scientific advice and other 
regulatory cooperation initiatives for veterinary 
medicines that should reduce costs of pharmaceutical 
R&D and get new medicines to market sooner; car 
safety cooperation including cooperation at the 
UNECE to establish new global technical 
regulations(GTRs), including adoption of two recent 
GTRs; biofuels standards cooperation; FDA/DG 
Enterprise agreement to facilitate and support a 
more routine and formal process by which the EU, US, 
Canadian, and Japanese alternative testing 
validation organizations can work more cooperatively 
to address validation priorities, methodologies, and 
processes.  In addition, FDA/DG Enterprise have 
agreed to work together bilaterally on the 
regulatory acceptance with respect to cosmetics of 
validated animal tests.  Both of these initiatives 
should assure public health protection and help 
mitigate possible interruptions to trade that may be 
caused by the upcoming EU ban on animal testing for 
cosmetics.  Verheugen said this progress was going 
too slow to address the looming crisis, and asked 
why scientists cannot agree.  (Comment:  This 
reference was to the disingenuous assessment that if 
not for the intransigence of the U.S. scientists, 
the EU requirement to move to non-animal testing of 
cosmetics would be possible by the 11 March 2009 
deadline set in EU legislation.  Alternative methods 
to determine certain safety requirements have not 
yet been validated or accepted in both the EU and 
the U.S. as the science has not yet caught up to 
this EU statutorily-imposed deadline. End comment) 
 
II. Horizontal Regulatory Cooperation and the High 
Level Regulatory Cooperation Forum (HLRCF): 
 
¶A. Impact Assessment, Transparency and Consultation 
 
¶8. EU Commission Deputy Secretary General Alexander 
Italianer and OMB/OIRA Administrator Susan Dudley 
summarized the accomplishments of the meeting of the 
High Level Regulatory Cooperation Forum (HLRCF) that 
took place on 25 April.  The Secretariat General and 
OMB completed a joint report on including trade and 
investment impacts in regulatory analyses that both 
opened to comment.  Italianer explained that 
although there were few comments, those who did 
comment (including the U.S. Chamber of Commerce and 
BusinessEurope) represented the major players in 
transatlantic trade and investment.  At the HLRCF 
stakeholders discussion, both the USG and the 
European Commission broadly outlined how 
transparency and public participation are handled 
under our respective systems.  Administrator Dudley 
added that, in the future, OMB would likely ask U.S. 
agencies to identify which regulations might have 
trade and investment impacts or might otherwise be 
of use to our trading partners. 
 
¶B.  Risk Assessments 
 
¶9. Dudley explained the conviction both sides have 
that we need a sound risk-based pathway to 
regulation.  Sharing of data and analysis will help 
build a broader consensus on risk assessments, 
limiting but not excluding regulatory divergence at 
the risk management stage. Dudley referred to the 
trilateral (EU-US-Canada) government-only workshop 
on risk assessment, management and communication in 
July, whose conclusions will be reported at the fall 
TEC.  Conclusions from this session would be folded 
into the broader international conference hosted by 
DG SANCO in November in Brussels. 
 
¶10. Dan Price asked EU participants how they 
QsquaredQ risk assessment with their variant of the 
precautionary principle.  SANCO Director General 
Robert Madelin underscored that scientists 
understand uncertainty and that the precautionary 
principle had nothing to do with risk assessment and 
everything to do with risk management. He stated 
that the objective was not zero risk, and not to 
default to prohibition, but he recognized the 
political challenge of risk managers to avoid 
distortion of the precautionary principle.  Price 
felt that the risk assessment conference would help 
to dispel the caricature of U.S. and EU positions, 
allowing us to focus on our agreed goals of science- 
based approaches to prevent new barriers from 
arising. 
 
¶11. SEC Commissioner Paul Atkins pointed out SECQs 
statutory requirement to use cost/benefit analysis 
when formulating new regulations.  Without it, their 
regulations could, and likely would, be overturned 
in court.  FDA Commissioner von Eschenbach hoped the 
U.S. and EU regulators would also emphasize benefits 
of regulated technology/activity when doing 
cost/benefit analysis and risk assessments. 
Highlighting benefits, for example for 
nanotechnology, is crucial when communicating risks. 
 
¶12. USTR Schwab suggested that such risk discussions 
would go a long way towards precluding prolonged and 
intractable bilateral disputes by Qmanaging issues 
at the front end.  Emphasizing the need to use 
sound science and objective criteria, Schwab warned 
that any abuse in the U.S. and the EU would be 
copied and worsened in third countries creating 
bigger non-tariff barriers. 
 
¶13. Verheugen pointed out how the conversation in 
the room did not reflect that this is a very hot 
issue.  He wondered how the precautionary principle 
impacts (EU) legislation practically, suggesting 
that it would be a topic for future discussion. 
Italianer noted that we have different priorities 
and societal preferences, and that the precautionary 
principle could lead risk managers to preclude 
taking any risk.  Dudley commented about the risks 
of action and inaction, pointing out that an overly 
precautionary approach could create serious 
opportunity costs or prevent society from enjoying 
crucial benefits in areas such as nanotechnology and 
biotechnology. 
 
¶14. Verheugen felt efforts to create consistent 
methodologies and risk assessment benchmarks would 
be crucial.  Taking a step further, Verheugen 
believed that U.S. and EU policymakers looking at 
equivalent risk assessments should also be able to 
Qfind a common approach to deal with the issue at 
hand.  Von Eschenbach added that regulatory agencies 
often wait for science to come to them.  His hope 
was that aligning our regulatory processes ahead of 
scientific developments, for example in 
nanotechnology, could make sure our approaches were 
more integrated. 
 
¶C.  Import Safety 
 
¶15. Dudley explained that the joint paper on 
strengthening transatlantic cooperation on import 
safety was almost complete.  (Comment:  the report 
was completed on Thursday, May 15th and released to 
the public on the ECQs website shortly thereafter. 
End comment)  The report has recommendations in 
several product areas:  motor vehicles, 
pharmaceuticals, cosmetics, toys, electrical 
equipment for consumer use, food and customs 
procedures.  One key challenge highlighted in the 
report was the importance of confidentiality among 
regulators, especially with respect to the 
protection of confidential business information. 
The U.S. import safety working group would be 
providing a report on its efforts. 
 
¶16. EU Consumer Safety Commissioner Meglena Kuneva 
stressed the importance of information sharing, 
stating her conviction that once U.S. legislation is 
adopted expanding Consumer Product Safety Commission 
(CPSC) authorities for external communication, 
information sharing would be easier.  Kuneva 
implored the USG, specifically CPSC, to gain a more 
thorough understanding of their rapid alert system 
(RAPEX), to better understand the type of safety 
information that could be shared.  (This was in 
reference to a comment made during Commissioner 
NordQs last Brussels visit that the RAPEX system did 
not contain much information useful for CPSC.) She 
assured all that Commission efforts to improve 
safety would not affect open trade policy.  Kuneva 
reminded the group that she invited Chinese Minister 
Li and Commissioner Nord to Brussels in November for 
a trilateral meeting to Qproperly communicate 
priorities. 
 
¶17. Price asked what precludes our regulators from 
sharing information, for instance on product 
recalls.  Dudley stated that even where cooperation 
is already mature and deep, such as in 
pharmaceuticals and cosmetics, improvements can be 
made.  She pointed out that EU and Member States 
need to set up mechanisms to ensure that 
confidentiality is adequately protected across their 
network.  Some U.S. agencies lack statutory 
authority to engage in more extensive information 
exchange, for example CPSC.  Commissioner von 
Eschenbach said FDA was looking beyond its borders, 
and that even if barriers existed to external 
outreach, political will could overcome those 
barriers and impediments. 
 
¶18. Agriculture Secretary Schafer provided examples 
of where international cooperation in international 
organizations was complementary and at other times 
counterproductive.  At the international standards 
setting body for food safety (aka CODEX), U.S. and 
the EU agreed on aflatoxin presence levels in tree 
nuts.  However, the EU was also using CODEX to 
export its non-science-based, non-food-safety based 
policies on food labeling by recommending that CODEX 
focus on specific standards for biotech food 
labeling instead of sticking with the perfectly 
acceptable existing CODEX language.  He asserted 
that TEC could help spur actions for bilateral 
opportunities.  Here he pointed to EU legislation on 
equivalence of meat standards.  The EUQs 17 
exporting member states represent only 4% of US meat 
imports, but 50 percent of U.S. foreign inspection 
funds.  Given the generally uniform EU food safety 
system, and more consistent EU audit results, this 
could allow the USDA to work on an EU-wide basis, 
greatly reducing resource costs. 
 
¶19. Verheugen agreed on TEC prospects in this area, 
and suggested they consider food safety for the next 
meeting.  Verheugen pointed to the impacts of the 
EUQs improved market surveillance efforts resulting 
in sharp increases in import bans and recalls. 
 
¶20. Price asked for clarification on EUQs 
information sharing limitations related to 
reciprocity requirements.  (Note: At the HLRCF, 
SANCO Deputy Director General Paola Testori 
indicated that the EU could not and would not share 
with the U.S. information on safety if they were not 
getting what they considered Qreciprocal 
information from the U.S.  The conversation was 
largely related to a misunderstanding of OSHAQs 
responsibilities, but also related to CPSC statutory 
limitations.)  SANCO Director General Madelin 
indicated that the European Commission has more 
discretion to share information than the U.S.  He 
hinted that information would not be shared if not 
considered reciprocal.  At the same time, he stated 
that safety information held by one side when it is 
known that products are also imported by the other 
side should be shared to avoid incident.   He stated 
that in his experience, when agencies trust each 
other, issues get on the radar screen sooner. 
Madelin mentioned that, in other cases, they could 
not be confident that silence means nothing is 
going on.  (Madelin was referring to an incident in 
which a U.S. technology company reported minute 
traces of an unapproved biotech corn event in a 
small amount of seed.  There were no safety concerns 
related to the incident and no corn is shipped to 
the EU.  Despite this, the USG shared the 
information with the EU shortly before the 
information went public, at the same time it shared 
the information with major corn importers such as 
Japan.  SANCO had, however, learned of the event 
from the company earlier, some two months after it 
was reported to U.S. authorities, which is why he is 
concerned that it could be difficult to report to 
the European Parliament that silence from the U.S. 
side means there are no problems.) 
 
¶21. Commenting on MadelinQs statement, Deputy FDA 
Commissioner Murray Lumpkin reminded the group that 
FDA (like its EU counterparts) is prohibited by 
statute from sharing trade secrets; however, FDA and 
its EU counterparts, under executed confidentiality 
agreements, have been sharing other non-public 
information (commercial confidential, investigative, 
pre-decisional, etc) for many years.  In addition, 
on the matter of information that has significant 
public health implication, he stated that even in 
the case when FDA is not sure if the product is 
marketed in Europe, FDA notifies its European 
counterparts anyway just to be sure. 
 
¶22. Kuneva asserted that, in addition, we do not 
sufficiently share third party information.  She 
touted the EUQs four-year young RAPEX system as a 
well-built enforcement tool, complaining that US 
officials preferred to go to Member States. 
(Comment:  Despite her reference to improved 
statistics on reporting into the RAPEX system, there 
is inconsistent use of this tool throughout the EU, 
thus requiring communication with Member States to 
get a fuller picture. End comment) 
 
¶23. Referring to MadelinQs hints that some in the 
U.S. were not sufficiently sharing, Dan Price asked 
him to name names.  During a side conversation at 
the end of the session, Madelin told Price about the 
biotech product incident. 
 
¶24. Speaking more generally on the third party 
issue, OMBQs Dudley reported that in the April 
meeting between OMB and Commission, DG Enterprise 
Director General Zourek suggested when analyzing 
standards both sides should first look to see what 
international regulations and standards are in 
place.  Deputy Secretary General Italianer suggested 
both sides needed to discuss standards.  He 
indicated that the EU has done away with EU 
standards for autos and instead uses 
international/UN standards.  FDAQs von Eschenbach 
stated that the US has begun to bring China and 
India into the international discussions on 
harmonization of technical requirements for 
registration of pharmaceuticals (ICH) and medical 
devices (GHTF). 
 
¶D.  Regulatory Burdens 
 
¶25. Treasury D/S Kimmitt asked for an update on EU 
efforts to reduce regulations, although this was not 
on the formal agenda.  Commissioner Verheugen 
described the program as part of the CommissionQs 
Better Regulation efforts.  He indicated that 
fulfilling reporting requirements of various kinds 
cost 3.5% of EU GDP and for SMEQs the cost of 
complying can be as high as 10% of turnover.  More 
than 100 reporting requirements stem from the 
Company Law alone.  Seventeen Member States have 
started screening administrative procedures and the 
Commission is now measuring the costs of complying. 
The ten actions they have taken this year saved 1.9 
billion Euro.  Unfortunately it is not a net savings 
because in the meantime the EU is proposing other 
legislation.  The Commissioner offered to share any 
of the details of the program with the US side. 
 
III.  Removing Barriers to Transatlantic Trade 
 
¶26. The third major part of the TEC agenda was a 
discussion of steps either side is taking to remove 
barriers to transatlantic trade in key areas.  In 
summary, on the question of suppliersQ declaration 
of conformity, Secretary Chao indicated the 
Department of Labor would publish a new Request for 
Information in the Federal Register.  On poultry, by 
the end of May the Commission will table a proposal 
to amend two pieces of EU legislation to allow the 
import of poultry meat processed using pathogen 
reduction treatments (PRTs), as well as the use of 
PRTs in the EU for processing poultry meat for 
consumption in the EU.   (Comment:  EU law already 
allows the use of PRTs in the processing of poultry 
meat for export.  End comment.)  On REACH, the 
Commission asserted its pragmatic approach to the 
cosmetics problem would avoid immediate trade 
disruption.  Verheugen agreed a legislative change 
was needed to provide legal certainty to  industry, 
but could not commit to Commission support for such 
a legislative fix at this time as he cannot yet 
guarantee that all Commissioners would support this. 
 
¶A. Suppliers Declaration of Conformity (SDOC) 
 
¶27. Verheugen indicated the issue had been on the 
table since the first TEC meeting, and he was happy 
to note that OSHA is willing to review its 
requirement that certain electrical equipment be 
tested and certified under the NRTL (Nationally 
Recognized Testing Laboratories) system even where 
suppliers are willing to provide their own 
certifications.  He hoped the request for 
information (RFI) would be open soon and without a 
pre-judged outcome. 
 
¶28. Dan Price confirmed the U.S. understands this 
issue is a high priority for the EU; the U.S. 
government has given the issue a lot of attention. 
Secretary Chao then reviewed the many meetings Labor 
has had with the Commission and with other 
stakeholders on SDOC and confirmed the plans to 
release an RFI.  She then outlined some of the 
strengths of the NRTL system including the fact that 
it is open to laboratories from all countries, it 
relies on the private sector not a government 
bureaucracy and it has proven effective in 
delivering safety in the workplace.  In considering 
SDOC, Secretary Chao mentioned her concern about the 
budget impact that establishing a post market 
surveillance program would require and indicated 
several aspects could require legislative changes. 
She also wanted to better understand how EU Member 
States implemented SDOC as there appear to be 
different approaches in different countries.  She 
emphasized that its process is open and that 
regulatory decisions are based on the best data, not 
the volume of submissions.  Finally, she offered to 
talk to the Commission about other trade 
facilitation issues besides SDOC.  Verheugen ended 
the discussion by expressing hope that OSHA would 
continue the process that has started. 
 
¶B.  Pathogen reduction treatments (PRT) for poultry 
 
¶29. Price emphasized that (despite complaints of 
some about the attention paid to PRTs in the TEC), 
the issue had not received undue but appropriate 
attention.  There is no substantive basis for what 
is an effective ban on the import of U.S. poultry 
meat; further, the EU had earlier agreed to lift the 
ban.  He thanked Verheugen for his efforts to move 
this issue.  He also distributed copies of a 
Financial Times article (published May 12 on page 4) 
on EU use of PRTs. 
 
¶30. Verheugen agreed the attention to the issue was 
appropriate.  He expressed regret that the 
Commissioner in charge of the issue [Comment: 
Probably referring to DG Environment Commissioner 
Dimas, but note that Commissioners Vassiliou and 
Fisher-Boel, who also have a role and were not 
present] was not at the TEC meeting and committed 
that the Commission would adopt a proposal to amend 
the two relevant pieces of legislation (Food Hygiene 
and Marketing Regulations) before the end of the 
month; these proposals will be with the Council and 
Parliament before the Summit.  He noted that the 
scientific studies indicate no health concerns from 
the use of PRTs, and that there are no known 
environmental concerns related to use of PRTs in the 
EU.  That said, he commented -- as he had done in 
the stakeholders meeting -- that it made no sense to 
him to ban imported chicken because of possible 
concerns about environmental impacts in Europe, 
especially when European producers used PRTs for 
exported poultry meat. 
 
¶31. Verheugen expressed confidence the Council would 
support the changes.  The European Parliament was 
less certain but based on the discussions earlier in 
the day with the European members of the 
Transatlantic Legislators Dialogue and a motion 
passed by Parliament on the transatlantic economic 
relationship, he believed the two largest political 
blocks in Parliament supported the changes.  He 
ended his opening remarks by pointing out this issue 
would not have moved without the TEC. 
 
¶32. Price commented that it was inconceivable that 
there would be an environmental risk in the EU from 
US use of PRTs.  Ambassador Schwab thanked Verheugen 
but stressed that, after 12 years, real success 
would only result from actually selling poultry in 
the market, thus we look forward to the next step in 
the process.  Ambassador Schwab asked what assurance 
the U.S. had that the proposal would not be blocked 
by the Member States, what strategy the Commission 
had for overcoming such obstacles, and what role the 
Slovenian presidency would be playing in the Council 
to remove this problem. 
 
¶33. Price then directly asked Slovene Minister of 
Economy Vizjak whether the Presidency would support 
the proposed changes in Council and whether poultry 
would be flowing by the next TEC meeting.  The 
Slovenian representative indicated Slovenia supports 
the changes and would try to play a major role in 
the discussions but since the discussions had not 
yet started they could not speculate where other 
member states were on the issue.  Verheugen stressed 
that Member State positions would be decided at the 
highest levels, not by agriculture ministers.  He 
suggested the US not put too much public pressure on 
the EU now as it could be counterproductive.  In 
terms of timing Verheugen said the solution could 
possibly be in place by the next TEC meeting and 
there was a high chance it would be resolved (i.e., 
chicken trade would commence) by the end of the year 
and this administration. 
 
¶34. At the end of the discussion a representative of 
the French Ministry of Economics stated that the 
Financial Times article was not accurate: France 
banned PRT use in 1997 and has not used them for 
exports since 2005. 
 
¶C.  REACH/Cosmetics 
 
¶35. The U.S. delegation then raised concerns with 
the EUQs new Regulation on the Review, Evaluation 
and Authorization of Chemicals (REACH).  Price 
mentioned two sets of issues: first, the June 1 
deadline affecting U.S. personal care products 
(including cosmetics) exports; second, broader and 
more long-term concerns with the REACH regulation 
itself. 
 
¶36. Price believed the cosmetics problem was 
unintended but that a legislative fix was necessary. 
Ambassador Schwab stated that REACH is an example of 
regulation that would have benefited from closer 
bilateral dialogue.  She pointed to significant and 
growing concerns being voiced about various aspects 
of REACH including the list of candidate substances 
requiring further evaluation and authorization that 
could act as a Qblack listQ that creates a chilling 
effect and could promote substitution to untested 
chemicals, and the QOnly RepresentativeQ (OR) 
provisions that put US suppliers at a disadvantage 
over their EU counterparts since non-EU suppliers 
must use an intermediary to register and may have to 
divulge proprietary information to competitors.  She 
stated that impacts from REACH implementation are 
broader than these few issues; implementing REACH 
will be a nightmare.  The estimated cost for 
registering and testing a single substance is 
$100,000 and there are 400 substances in a single 
perfume.  On cosmetics, EU ingredients for export 
were grandfathered from the June 1 deadline and 
receive a phase-in period; US ingredients were not 
which raises national treatment concerns.  More than 
$2 billion in trade could be impacted by this 
discriminatory treatment.  She predicted there will 
be other REACH issues in the future and said that 
how we resolve will be an example for the TEC. 
 
¶37. Verheugen responded that probably no one fully 
understood REACH, including himself.  The final 
legislation was a complex compromise between all 
three bodiesQthe Commission, the Parliament and the 
Council.  Trade offs during the legislative process 
led to some unintended consequences.  No one wanted 
discrimination; no one was aware that EU ingredients 
had previous chemical registration (EINECs) numbers 
but US ingredients did not. 
 
¶38. Unfortunately, according to the Commission Legal 
Services, this aspect of REACH cannot be changed by 
a simple written procedure (corrigendum) as this 
would be a substantive rather than technical change 
to the legislation.  However, the Commission wanted 
to resolve the problem and is working out a 
pragmatic solution with the European Chemicals 
Agency (ECHA), essentially allowing suppliers of 
imported cosmetics and their ingredients to submit 
partial files on June 1 and then have a longer 
period of time to complete these.  This should 
ensure there is no risk that trade would be 
disrupted.  [ Comment:  ECHA has not yet opined on 
whether this is feasible.] 
 
¶39. On the other REACH issues, Verheugen said the 
candidate list and OR provisions were not 
discriminatory.  The candidate list would be done in 
the most transparent way possible and the actual 
authorization list would not come until much later, 
perhaps only after 15 years.  (Comment:  Verheugen 
seems to have missed the point.  The fact that the 
authorization list will not come until much later is 
precisely the problem.  Inclusion of a substance on 
the candidate list means that it is in a sort of 
limbo.  Consumers may well refrain from using the 
substance for fear that it eventually will be 
prohibited.  They may well resort to substitutes 
with unproven track records.  This is what is meant 
by a black list effect.  End comment.)  He suggested 
technical people on both sides get together to 
discuss the other issues. 
 
¶40. Price responded that we need to finalize our 
understanding of the path forward.  He summarized 
the Commission would propose an amendment to give 
the companies legal certainty on the cosmetics 
issue.  Verheugen stressed he would try, but could 
not give that assurance because REACH is a shared 
responsibility and Environment Commissioner Dimas is 
against such a change.  Price noted that it was 
unfortunate that two Commissioners with issues 
before the TEC did not attend.  (Comment:  Price was 
referring to Dimas and Fischer Boel, who also did 
not attend.  End comment.) 
 
IV.  Capital Markets Integration 
 
¶41. (SBU) Charlie McCreevy, Commissioner for 
Internal Market and Services, began the discussion 
of joint progress in capital market liberalization. 
McCreevy lauded the excellent cooperation between 
Treasury and the SEC with his Directorate General 
for Internal Market and Services (DGMARKT) through 
the five-year old Financial Markets Regulatory 
Dialogue (FMRD), which predates the TEC.  He said 
the FMRD had made great strides in cooperation, 
which were unthinkable five years ago.  McCreevy 
underscored how the U.S. and EU economies have 
become inextricably linked, accounting for 80 
percent of global capital market flows. 
 
¶42. He stressed how current financial turmoil has 
heightened the importance of transatlantic 
cooperation, and that increased integration enhances 
financial market resilience.  In addition, existing 
priorities must continue. 
 
¶A. Progress on Accounting Equivalence: 
¶43. McCreevy emphasized how the first TEC meeting in 
all 2007 had contributed to progress on U.S.-EU 
accounting convergence, based on work in the FMRD. 
He noted that the SECQs action in December, 2007 to 
abolish the reconciliation requirement for foreign 
companies using International Financial Reporting 
Standards (IFRS) as issued by the International 
Accounting Standards Board (IASB) was a Qremarkable 
achievementQ. McCreevey assured TEC members that the 
EU is making good progress toward a reciprocal 
declaration Q as outlined in the 2005 U.S. QEU 
accounting QroadmapQ Q to accept U.S. Generally 
Accepted Accounting Principles (GAAP) as equivalent 
to IFRS, allowing U.S. firms to file in the EU 
without reconciliation. 
 
¶44. The Commission has received good technical 
advice on this issue from the Committee of European 
Securities Regulators (CESR), he noted, which issued 
a recommendation in January 2008 that U.S. GAAP is 
equivalent to IFRS.  The Commission will issue a 
proposal to this effect within a few weeks, he 
continued.  The Council and European Parliament will 
consider the proposal, said McCreevy, and he expects 
final approval by the end of 2008.  This would meet 
the roadmap deadline of eliminating the 
reconciliation requirement by 2009. 
 
¶45. McCreevy then noted the importance of also 
making progress on IASB governance issues. In 
particular, he underscored the need to improve the 
IASBQs transparency and public accountability.  He 
welcomed the joint SEC, Japanese FSA, and European 
Commission statement at the IOSCO meeting last fall 
in Japan as providing a good basis for forward 
progress.  He was encouraged that the IASB had 
accepted the proposal, but expressed frustration at 
the pace of progress.  He encouraged increased 
monitoring and engagement by both sides on this 
issue to encourage changes in the IASBQs process. 
 
¶46. Treasury Deputy Secretary Kimmitt complimented 
McCreevy in response on the good bilateral 
cooperation in both the FMRD and TEC.  He stressed 
that such cooperation has been vital to addressing 
market confidence during the current financial 
crisis.  Kimmitt noted that the strong consensus 
within the Financial Stability Forum (FSF) on how to 
address policy issues raised by the financial crisis 
closely tracked the analysis and recommendations in 
the PresidentQs Working Group on Financial Markets 
and the European CommissionQs own work in this area. 
Kimmitt also praised SEC work with the Commission on 
accounting convergence and issues around mutual 
recognition of securities regimes, saying this had 
been moving swiftly. 
 
¶47. SEC Commissioner Paul Atkins likewise stressed 
the strength of transatlantic cooperation on 
security regulatory issues. He noted that open 
issues include the funding and governance of the 
IASB.  In addition, he noted that more work remains 
to be done regarding consistency of application of 
IASB standards.  He agreed that the SECQs decision 
to eliminate the reconciliation requirement between 
IFRS and US GAAP would have been unbelievable five 
years ago. He noted the March 2008 CESR 
recommendation that the EU make an equivalence 
determination.  Atkins also noted that MEPS seem 
still confused by the U.S. process, with some 
seeming to think that Congressional action might be 
needed to make the SECs regulation on IFRS final. 
He clarified that no Congressional action was needed 
in this area and expressed an interest in helping 
the Commission with outreach to the European 
Parliament if necessary in order to facilitate 
approval of the CommissionQs draft regulation. 
 
¶48. Atkins then asked McCreevy for a more specific 
timeline for EU action.  McCreevy reiterated that 
the Commission would issue a proposed equivalence 
regulation within weeks, affirming that he fully 
expects it will be approved by the Council and 
European Parliament this year (despite some MEP 
concerns).  McCreevy underscored his personal 
commitment to obtaining approval from Parliament and 
the Member States in the Council. 
 
¶B.  Mutual Recognition of Comparable Regimes for 
Brokers 
 
¶49. McCreevy noted that work on mutual recognition 
of securities regimes is proceeding well.  He 
recalled his joint statement with SEC Chairman Chris 
Cox in February 2008 defining a process to engage in 
discussions regarding mutual recognition of U.S. and 
EU Member State securities regimes in mid-2008.  He 
stressed that the aim of such discussions should be 
a system based on mutual trust, greater coordination 
between regulators, and transparency.  He welcomed 
the Qunilateral opennessQ associated with the SEC 
proposal to provide expanded exemptive relief for 
certain foreign brokers as an update to rule 15a-6 
for large investors.  However, he noted the 
ultimate, long-term goal of these discussions should 
be regulatory convergence. 
 
¶50. Atkins underscored the SECs commitment to 
moving forward on a broad range of mutual 
recognition issues.  He explained that the SEC is 
also in talks with Australia and Canada on mutual 
recognition, noting it might conclude an agreement 
first with one of these countries before the EU. He 
noted skepticism exists in the U.S. Senate regarding 
broad mutual recognition agreements in the 
securities area and that much work can proceed using 
the SECQs broad exemptive authority. 
 
¶C.  Insurance Issues 
 
¶51. McCreevy then turned to address reinsurance 
collateral, which he recognized was a thorny issue 
in the U.S.  He explained that currently EU 
reinsurers in the U.S. must post 100 percent 
collateral against their gross liabilities.  In 
contrast, U.S. reinsurers do not face such a 
requirement.  He estimated that the cost of the U.S. 
requirement to EU firms was $500 million/year.  He 
indicated that his goal was to achieve mutual 
recognition for insurance supervisory systems as 
well, but that reform in the United States was a 
necessary precondition for such agreement.  He 
expressed sympathy for the difficulty the Treasury 
Department faces in addressing this issue, since 
insurance regulation authority is reserved to U.S. 
states.  He welcomed, therefore, the U.S. Blueprint 
for Financial Regulatory Reform, which proposes an 
optional federal charter for insurance and an 
interim Treasury insurance office to with authority 
to engage internationally. He lauded a legislative 
proposal in the Congress that would establish an 
Office of Insurance Oversight in the Treasury 
Department as part of the solution.  He also 
expressed frustration with the difficulties the 
Commission sometimes faces in engaging the National 
Association of Insurance Commissioners. 
 
¶52. Kimmitt noted that significant progress had been 
made in other areas of the Financial Markets 
Regulatory Dialogue because the relevant parties in 
the United States had authority to address the 
issue. 
 
¶53. He appreciated the CommissionerQs understanding 
of the challenges created by the state-based 
insurance regulatory structure.  Regarding 
reinsurance collateral, he noted that the U.S. is 
open to foreign insurers, which have 85 percent of 
the U.S. reinsurance market, so this is not a market 
access issue. 
 
¶54. Kimmitt then noted that there are actually two 
different insurance issues on the TEC agenda: 
reinsurance collateral and the EUQs proposed 
treatment of the insurance companies from third 
countries that do not have consolidated home country 
supervision (the proposed Solvency 2 directive). 
Solvency 2 would require an equivalence 
determination; it seems likely that the 50 state 
systems in the U.S. would not receive such a 
determination, which could significantly affect the 
ability of U.S. insurance firms to operate on an 
equal footing in the EU. 
 
¶55. Kimmitt expressed an interest in working with 
the Commission at the tactical level to address 
Solvency 2 and other insurance issues in the FMRD. 
He noted that one key aspect of the Treasurys 
proposed blueprint would be to create an optional 
federal charter.  An intermediate step would be to 
create an office of federal insurance oversight 
inside the Treasury Department, and noted that, as 
Commissioner McCreevy had observed, Mr. Kanjorski 
and Ms. Pryce in the U.S. House of Representatives 
had already introduced a bill to make this a 
reality.  He indicated that the U.S. and the EU 
would need to work closely together to avoid a 
potentially distracting and counterproductive fight 
over Solvency 2.  He also noted that in an earlier 
meeting with the Commissioner that day, they had 
agreed to work together and that the Treasury 
Department would be sending specific ideas on how to 
address the issues raised by Solvency 2. 
 
¶V.  Keeping our Investment Regimes Open 
 
¶56. Trade Commissioner Peter Mandelson opened this 
part of the meeting by underscoring the importance 
of working together to promote open investment 
regimes, calling this a Qkey economic issue for the 
coming decade.Q  He stressed that foreign direct 
investment (FDI) is an important driver for the 
competitiveness of both the EU and U.S. economies, 
noting that FDI is critical to support our supply 
chains in foreign countries.  There is nothing to 
gain, Mandelson continued, from tit for tat 
policies restricting foreign investment.  He 
underscored that there is no international regime 
backstopping global openness to investment, pointing 
out it is subject to political pressure within 
countries. 
 
¶57. National security reviews of investment have a 
legitimate place, Mandelson said, but should not be 
overused.  In this regard, the EU and U.S. must 
avoid applying a double standard to Qstate backed 
investment.  National security restrictions on 
investment should be Qcarefully calibrated 
exceptions to a strong rule,Q he explained. 
 
¶58. Mandelson said the U.S.-EU Open Investment 
Statement adopted by the TEC was strong but should 
be backed up with concrete steps.  He identified two 
specific EU concerns regarding the U.S: tax code 
requirements for EU firms and the negative political 
response to the recent Northrup-EADS military tanker 
contract announcement.  The latter must be upheld on 
a technical basis, he declared, noting that we must 
apply our standards consistently and objectively. 
 
¶59. Commissioner McCreevy underscored the EUs 
treaty commitments to open investment with limited 
exceptions. He then noted that some Member States 
are seeking to expand these exceptions to strategic 
sectors. He stressed that DG MARKT examines all EU 
legislation on investment to ensure compliance with 
EU rules, and underscored that the Barroso 
Commissions is more pro open-investment than prior 
Commissions. In his opinion, efforts to create an 
EU-level security 
 
¶60. review process would generate a system based on 
the lowest common denominator, which would not be a 
good thing. He considered that protectionist 
pressure may have eased somewhat over the last year, 
saying it is an ongoing, fluctuating problem. 
 
¶61. Dan Price responded that U.S. foreign affiliate 
sales overseas dwarf U.S. exports, so it is critical 
to get investment rules right.  He encouraged the 
Commission to remember its roots in the pioneering 
bilateral investment treaties with Germany, the 
Netherlands, and the U.K.  Those treaties created 
only narrow exceptions to the principle of national 
treatment and open investment markets to address 
national security issues.  He encouraged the EU to 
lead by example globally, particularly given 
developments in Japan, Canada, and France. 
 
¶62. Kimmitt said that a free flow of capital based 
on investment policies is the lubricant of the 
global economy.  He highlighted how establishment of 
the U.S.-EU Investment Dialogue last fall was an 
early TEC success that has already borne fruit in 
improving legislative proposals in Germany.  He 
noted excellent U.S.-EU cooperation in developing 
policy toward Sovereign Wealth Funds (SWFs) through 
the OECD, and he congratulated the Commission on its 
recent communication regarding SWFs.  Even though it 
is important for SWFs to develop best practices in 
consultation with the IMF, Kimmitt noted that the 
U.S., EU, and other recipient countries also have 
responsibilities to promote basic principles of 
openness, transparency, nondiscrimination and 
predictability regarding investment policy.  He 
underscored the importance of the first ever joint 
statement between the U.S and the EU on this topic 
as a good foundation on which to build. He suggested 
that in the next year the U.S. discussion will 
likely shift to investment by State Owned 
Enterprises (SOEs), which raise more complex issues 
than those of SWFs. 
 
¶63. Much more work is needed on maintaining open 
investment climates, Kimmitt underscored, noting 
recent actions by Japan and Canada to block FDI.  We 
need to publicize better the benefits of open 
investment, such as the three to four million U.S. 
jobs created by EU FDI.  When EU business leaders 
are in the U.S., he said, they should visit not just 
FDI sites around the country and the Administration, 
but also Congress to highlight their role in 
providing jobs and other benefits associated with 
FDI. 
 
VI.  Sustaining the Work of the TEC 
 
¶64. Verheugen then moved on to discussing next steps 
for the TEC.  He noted that there are good reasons 
to hold the next meeting in Washington in October, 
before the U.S. elections; Price agreed.  Kimmitt 
suggested that the TEC should discuss an agenda for 
the next year or two, to show continuity across 
administrations.  Verheugen agreed, saying that 
stakeholders have asked for an 18 month-two year 
workplan.  Kimmitt said that TEC members should ask 
stakeholders for their suggestions on such a 
workplan; Verheugen said this was a great idea. 
 
VII.  Finalizing the Joint Statement and Progress 
Report 
 
¶65. Price and Verheugen then discussed finalizing 
the TEC joint statement and progress report. 
Verheugen suggested the documents needed some work, 
including additional language to provide greater 
political emphasis, before release.  Price expressed 
serious concern about having the concluding TEC 
session with stakeholders and a press conference 
without having finalized the Joint Statement.  He 
asked if there were any issues still open that the 
TEC itself should resolve.  When told yes, he asked 
that the negotiators be brought into the room to 
report to the TEC plenary. 
 
¶66. The first unresolved issue that was addressed 
concerned the language in the Progress Report on 
poultry.  Price pushed hard for recognizing in the 
document that the scientific reports the Commission 
had received in March concluded that the use of PRTs 
was safe.  Verheugen was clearly concerned about 
making such a flat statement, saying that while it 
applied to consumer consumption of the poultry, the 
environmental studies left open that some problems 
might arise.  He also noted during the at times 
animated discussion that he was facing 
interference (presumably from the French presidency 
representative) and even that the staff of President 
Barroso was telling him not to go any farther. 
Price wryly commented that the Commission was 
unlikely to adopt a proposal that would allow for 
something that was unsafe, and then proposed that 
instead the Progress Report note that the studies 
showed there was no scientific basis for continuing 
the ban on imported poultry.  A commission staffer 
noted the ban was on the use of PRTs, not on imports 
per se.  After conferring with each of the 
Commissioners present (Mandelson for Trade, Kuneva 
for Consumer Safety, McCreevy for Internal Market, 
and Kovacs for Customs and Taxation), Verheugen 
agreed to this language. 
 
¶67. A second issue related to poultry was related to 
the wording of an explicit commitment from the 
Commission to take active steps with the Council 
and the Parliament to get the proposal enacted 
before the next TEC meeting in the Fall.  This was 
ultimately agreed. 
 
¶68. The third issue addressed concerned REACH and 
cosmetics, and specifically the nature of the 
commitment the Commission could enter into to 
describe what the Commission would do, in addition 
to its administrative measures, to provide legal 
certainty for imported products.  Verheugen again 
reiterated that he could not bind the Commission to 
seek an amendment to REACH, but that he would 
advocate this.  The language ultimately agreed was 
softer than this, but indicates a clear commitment 
not to allow REACH to disrupt trade in these 
products. 
 
¶69. Finally, Kovacs asked to make sure that the 
language about the EUs concerns about the U.S. 
legislative requirement for 100 pct scanning of 
containerized cargo imports was sufficiently strong. 
He agreed to the language after it was read to him, 
and seemed pleased that the TEC had agreed this 
issue would be addressed in more detail at the next 
TEC meeting. 
 
¶70. The Progress Report was then closed (pending 
some additional political language for the opening). 
Price and Verheugen both agreed that the Joint 
Statement should be aligned with the language that 
had just been agreed. 
 
¶71. Price and Verheugen thanked participants for an 
incredibly worthwhile meeting.  Price said the TEC 
is proving its worth as a key problem-solving 
mechanism; Verheugen agreed. 
 
VIII.  Other TEC-Related Outcomes 
 
¶72. While the TEC discussed poultry, SDOC, REACH, 
capital markets and investment, the process leading 
to the TEC, and discussions on the margins of it, 
brought additional accomplishments.  Among other 
things, Verheugen agreed to chair on the EU side a 
Council-level video-conference of climate change and 
energy issues.  In addition, the two sides agreed to 
bring experts together to get an overview of the 
various sanitary and phytosanitary issues each has 
with the other. 
 
Comment 
 
¶73. Indeed, the TEC has proved its worth if in fact 
the poultry issue Q a stumbling block in U.S.-EU 
trade relations effectively since the Chicken Wars 
of the early 1960s is finally resolved.  The 
Framework and the TEC provide a vehicle for 
identifying priority issues to address to promote 
transatlantic economic integration, providing a 
political profile to those issues, shining a bright 
spotlight on the work experts are undertaking to 
address them, and ultimately, if necessary, actually 
resolving them at the political level.  This can be 
particularly important where the issues are long- 
term such as ensuring greater coherence in the way 
the U.S. and EU approach regulation and where each 
side has long-cherished approaches that 
(intentionally or unintentionally) impede trade. 
Further, the opportunity to have a principals-only 
inter-agency/inter-services discussion of our 
respective approaches to such strategic economic 
policy issues as China, Russia, protectionism and 
investment provides policy makers valuable insight 
into how the other side perceives these issues.  All 
these advantages should help assure the TECs 
continued viability through the 2008 change in 
Administration in the United States and change in 
the Commission in 2009. 
 
Murray