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Transatlantic Management Project

Berlin School of Economics and Law (HWR) & San Diego State
University (SDSU)
June, 2014
















The Transatlantic Trade and Investment
Partnership (TTIP) and the Chemical Industry:
A Case Study of 3M and BASF


















John Wood - HWR
Lars Scholtyssyk - HWR
Laura Ho - SDSU
Sarathy Kalaichelvan - HWR

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Contents


1. Dimensions of FTA between the EU and US: The Transatlantic Trade and
Investment Partnership (TTIP) .................................................................................. 3
1.1. Existing free trade agreements .................................................................... 3
1.2. TTIP Outcome U.S. & E.U......................................................................... 5
1.3. Benefactors of TTIP ..................................................................................... 6
2. Sector Analysis: TTIP and the Chemicals industry............................................. 7
2.1. The European Union: No data, no market ................................................ 11
2.2. The United States: Reform underway ........................................................ 13
2.3. Global Regulatory Models .......................................................................... 14
2.3.1 Comparison: U.S. Regulation vs. E.U. Regulation .................................. 14
2.4. Conclusions: Uncertainties/Barriers to trade for Chemical companies ....... 15
3. Recommendations from the Sector Analysis ................................................... 16
4. Case Study ...................................................................................................... 17
4.1. Products ..................................................................................................... 18
5. Innovation and Corporate Governance Styles ................................................. 20
5.1. Speed of technological and commercial innovation: ..................................... 20
5.2. Corporate Governance in Germany .............................................................. 22
5.3. Corporate Governance in the United States ................................................. 22
6. Conclusion: ...................................................................................................... 23
7. Bibiliography:.................................................................................................... 24












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1. Dimensions of FTA between the EU and US: The Transatlantic
Trade and Investment Partnership (TTIP)

The proposed transatlantic free trade agreement (TTIP) or the transatlantic Trade and
Investment Partnership (TTIP) between the United States of America and the European
Union aims to bring the two economic powerhouses closer together and achieve
boosted growth and economic vitality after years of slow growth due to the financial
meltdown of 2008 and the subsequent recession. Although trade between the European
Union and the United States is in a steady growth trajectory with low tariff barriers to
trade, the TTIP aims to eliminate barriers, especially the non-tariff barriers (NTB) in
trade, and bring closer cooperation between the U.S. and the E.U. regulatory bodies
intellectual property protection.

1.1. Existing free trade agreements

Both the E.U. and the U.S. maintain a number of free trade agreements, which typically
cover both trade in goods and services. According to data published by the World Trade
Organization (WTO), the United States maintain 14 bilateral agreements, some of which
involve several countries (NAFTA, which includes the United States, Canada and
Mexico; CAFTA, which involves a number of Caribbean States, etc.). The E.U. has a
total of 35 bilateral agreements. Korea, Mexico, Canada, Singapore (not yet in force),
Israel, and Chile all have bilateral agreements with both the EU and with the US.
However, an agreement between the E.U. and the USA would be unprecedented in
terms of its sheer dimension. It would create a free trade area representing nearly 50%
of global economic output, representing only 11.8% of the world population. The United
States is third behind the EU and China as a source of German imports. Germany and
the United States differ significantly in their export shares. The German share stands at
50.5% of GDP, while the share of exports in the USA account for 13.9% of national
GDP.
1
This clearly highlights different economic orientations: Germany is strongly
orientated towards exports, while domestic consumption dominates in the United States.
With these facts in mind, it is not surprising that in 2010, Germany generated a goods
trade surplus of $208,252 million USD with the rest of the world. Conversely, the U.S.
had a deficit of $645,123 million USD. In 2010, 8.2% of total German exports went to

1
UNCTAD
Page 4 of 25

the U.S., valued at 108,372 million USD, while imports from the U.S. accounted for
6.6% of all German imports (76,898 million USD). Regarding industrial goods, Germany
had a surplus of 26,908 million USD in 2010. In total, more than 80% of all German
exports to the US are industrial goods. Trade in machinery and the automotive sector
alone account for over 50% of total exports, while exports in agricultural products and
services together represent less than 20%. It is clear that, from a German perspective,
manufactured goods dominate the transatlantic trade with the U.S. However, when
looking at trade in services, a different picture emerges. Germany was the second
largest exporter of services in 2010 in nominal terms, with services exports relative to
GDP at 7.4%. This was twice as much as the US (3.8% of GDP), the largest exporter in
nominal terms. However, Germany had an overall deficit of 24,192 million USD with the
world, while the United States had a surplus of 145,827 million USD. This difference is
also reflected in bilateral trade in services, where Germany recorded a deficit of 1,025
million in 2010. This divergence in traded goods and services suggests that the U.S.
has a comparative advantage in services exports, while Germany has an advantage in
manufacturing industries. This relationship also holds for the nominal trade volume.
Nonetheless it must be noted that Germanys deficit in services trade has declined
substantially in recent years, during which the German service industry has rapidly
caught up.
Turning to the agricultural sector, the U.S. exports larger volumes to Germany than it
imports. However, in general, trade in agricultural commodities commands much lower
volumes relative to output than the other sectors. Across all sectors, trade between the
U.S. and Germany (or, more broadly, the E.U.) has a strong intra-industry nature.
Additionally, intra-firm trade (i.e. international transactions within the same firm) is
quantitatively very important and accounts for, e.g., 80% of German exports in the
automotive industry, 76% in the chemicals sector and 61% in machinery. Interestingly,
however, the share of intra-firm trade in imports from the U.S. to Germany is higher than
in German exports to the U.S. This marked asymmetry has to do with the structure of
foreign investment between the two countries. Furthermore, the share of intra-firm trade
exceeds 30% in 12 of 32 sectors, measuring German exports to the U.S. as well as
imports from the United States. In almost all sectors, a significant fraction of German
imports from the U.S., and of exports to the U.S., takes place within firms. This
demonstrates the high degree of cross-linkages between the two countries. Low
average tariff duties, high industry variation tariff barriers between the U.S. and E.U. on
Page 5 of 25

average are low. In 2007, for the manufacturing sector, the trade weighted average tariff
rate was approximately 2.8% in both countries. However, this low average masks
extreme sectorial peaks (for example, in textiles or motor vehicles).

1.2. TTIP Outcome U.S. & E.U.

As per the center for economic policy research funded by E.U., The U.S. and the United
Kingdom would be major winners with an increase of GDP per capita by 13.4% and
9.7% respectively. For Germany the calculations estimate an increase of 4.7%. France
would be the country with the smallest gain of real income (plus 2.7%). Due to a
comprehensive bilateral trade agreement, the U.S. would have almost 1.1 million
additional jobs. For the United Kingdom, TTIP is supposed to create 400,000 additional
jobs. 180,000 new jobs are projected for Germany, while 143,000 are project for Spain
and 141,000 for Italy. Countries that suffer most are those economies that already have
free trade agreements with the U.S. and/or the E.U.; most notable are the African and
the emerging economies.

Interestingly, for the NAFTA members, Canada and Mexico, for example, TTIP is
supposed to reduce long-term GDP per capita by 9.5% and 7.2% respectively. Other
big losers include Australia, those European countries which are not part of the E.U.,
and all developing economies, especially countries in North and West Africa. The world
as a whole would profit from such an agreement: On the average global real GDP per
capita increases by 3.3%.
2
With respect to job losses, we can take into account that
economies not only have single goods but many different goods and domestic
companies will have a competitive advantage in the production of other goods as per
basic economics. If local workers and companies lose shares in some markets, they will
profit from larger exports to the partner economy of the free trade agreement on other
markets. Although tariffs between the U.S. and the E.U. are already very low, non-tariff
barriers (NTB) are crucial and play an important role for transatlantic trade. NTBs
restrict the import of goods and services from abroad by other means than duties on
imports for e.g. quality standard specifications, technical rules and requirements for

2
The Transatlantic Colossus - Berlin Forum on Global Politics Internet & Society Collaboratory - FutureChallenges.org
Page 6 of 25

imported goods, and labeling requirements, which differ significantly. All these
requirements constitute an obstacle to export products to another country.
The crucial economic effects of NTBs are the implication that these barriers increase
costs of production for companies that want to export their goods and services.
Consider auto parts: technical requirements specify the use of different flashing lights
and indicators and anti-shock and brake pads for cars used in the U.S. than for cars in
E.U. In this case the manufacturer has to produce two different products for two markets
and producing two kinds of a certain product causes additional costs. Hence with regard
to economics NTBs are treated as import duties. Therefore, abolishing NTBs are
equivalent to a removal of import duties.
Time plays an important role here. If an FTA decides to abolish import duties at the start
of 2015, prices for imported goods and services are impacted and decrease
immediately. But in the case of removal of NTBs would need more time for
implementation and take effect. Consider the European manufactured electronic display
system, for automobiles for U.S. export, it requires a costly and long process of U.S.
federal agency authorized technical tests in the U.S. The only other way to route this
long process is if the European manufacturer designs a new product. Hence an FTA
that removes tariff and NTBs will display its full effectiveness only after a period of 10 to
20 years.
1.3. Benefactors of TTIP

Some of the projected benefits of the TTIP, if implemented, are:
E.U. exports to the U.S. would go up by 28%, equivalent to an additional 187 billion
worth of exports of E.U. goods and services.
The E.U. imports from the U.S. will also increase by 159 billion.
The E.U. & U.S. exports to the rest of world would increase by over 33 billion and 80
billion respectively.
The TTIP would increase wages of about 0.5% for both skilled and less skilled workers.
Job movements (or losses) between sectors are predicted to be about seven jobs per
1000 jobs over ten years.
An average European household of fours disposable income would increase by 500
per year as a result of the combined effect of wage increases and price reductions.
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Positive spill-over effects: Common regulatory approaches between the E.U. and the
U.S. will reduce costs for exporters from and to markets of other trading partners (such
as developing countries).
The perceived benefit in exports from a TTIP for individual sectors includes Metal
+12%, Processed Foods +9%, Chemicals +9%, Motor vehicles +40%
3


2. Sector Analysis: TTIP and the Chemicals industry

A central question in the TTIP negotiations is that of regulations for various products to
ensure the protection of the environment and human health. These regulations, red tape
or non-tariff barriers, play an essential role for companies in the chemicals industry
across the Atlantic. There are few areas of transatlantic product regulations where the
transatlantic divide is as big as it is in the area of chemicals. For instance, the two sides
of the Atlantic have fundamentally different regulations on issues such as hormones,
genetically modified organisms (GMOs), cosmetics and the registration and restriction
of chemical substances.

A report by the British Foreign & Commonwealth Office found that the implementation of
an ambitious TTIP by the year 2027 is expected to increase U.S. chemical exports to
the E.U. by more than $35 billion, an increase of over 61 percent from 2012 levels.
4

About 60 percent of these gains would result from reducing non-tariff barriers, which are
therefore the focus of this chapter.

Chemical companies, as we will see below, are playing an essential role in overall
trade: At more than $960 billion, chemical products accounted for almost 6.2% of U.S.
GDP, and made up over 16.8 percent of U.S. manufacturing shipments in 2012.
5
The
chemicals sector has thus been identified by both the European Commission and the
Office of the United States Trade Representative (USTR) as one of the sectors being
particularly important for regulatory cooperation.
6


3
European Commission, Trade
4
https://www.gov.uk/government/publications/ttip-and-the-fifty-states-jobs-and-growth-from-coast-to-coast
5
Based on 2012 US Census data
6
Press conference with EU representative Ignacio Garcia Bercero and U.S. representative Daniel Mullaney on
20 December 2013.
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According to Eurostat and the US Census Bureau, 28 EU countries exported goods
worth 387.59 billion dollars to the United States in 2013, making it by far the largest and
most important market for European companies.
7
During the same year, U.S.
companies sent 262.15 billion dollars worth of product to the EU.

Eurostat trade statistics from the Chemicals sector reflect the significance of the U.S.-
E.U. trade partnership (Chemicals constitute the overarching commodity group 5
Chemicals and related products).
8
With 22.6%, the U.S. takes by far the largest share of
the European export market in Chemicals. Equally impressive, products from the U.S.
account for 27.5% of all Chemical product imports into the E.U

Table 1: Extra-EU28 trade of chemicals and related products by main partners (EUR millions): Share of
exports by partner (%)




7
Eurostat, http://www.census.gov/foreign-trade/balance/c0003.html
8
http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database
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Table 2: Extra-EU28 trade of chemicals and related products by main partners (EUR millions): Share
of imports by partner (%)


The total volume of transatlantic trade in chemicals has been growing steadily over
the last decade. Tables 3 and 4 present U.S. commodity exports from the E.U. and
imports into the E.U. in terms of value. The figures highlight the chemical industrys
importance for trade with the U.S. as well as the steady increase over the past
years.

Table 3: Exports to the U.S. from the E.U. (EUR billions)

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Table 4: Imports from the U.S. to the EU (EUR billions)

For the E.U., chemicals are the commodity group that constitutes the largest share
of exports to and imports from the U.S. of the reported commodity groups.
Particularly impressive, in 2012, almost two thirds of all exported commodities from
the E.U. to the U.S. are chemical products. The E.U. thus has an exceptional role
as a supplier of chemicals to the U.S.

2.1 Regulatory Models

Such strong interdependence requires regulatory cooperation. Though the United
States and the European Union have very similar levels of protection, their
regulatory systems are designed in a fairly different way, creating unnecessary
barriers to trade for companies in the chemicals industry.
9
The TTIP offers an
opportunity to reduce these differences in regulations. The following section will
examine these regulations in the chemicals industry before we continue with our
case study, which exemplifies the opportunities that a reduction in regulation would
create for 3M and BASF respectively.
These opportunities are highly relevant as a 2010 report from the OECD named
Cutting Costs in Chemicals Management demonstrates that harmonizing the
testing and evaluation of new chemicals and pesticides can reduce costs by up to

9
Regulatory Co-operation and Technical Barriers to Trade within Transatlantic Trade and Investment
Partnership (TTIP)
Page 11 of 25

153 million per year.
10
It can also add other significant non-monetary benefits, for
example reducing the number animals used in chemical testing.
One goal of this sector analysis is to highlight areas that would be particularly well
suited to mutual recognition and harmonization as far as regulation can be regarded.
In practice, this means balancing stronger market integration while retaining the
legitimate interests of e.g. health and safety on both sides of the Atlantic. The fact
that there is very little documentation available indicating the specific intentions of
the E.U. and the U.S. makes this analysis more difficult. An interesting result of the
analysis, we find, is that there are differences in preferences regarding TTIP not
only between government agencies and chemical companies, but also within the
sector. This relates to company size and investment a company has made in order
to adapt to regulations in the other market respectively.
Chemicals regulations in the E.U. and the U.S. differ in fundamentally important
areas. The following section will first give a brief overview of the regulatory systems
in place in both the E.U. and the United States. We will then compare both systems
while highlighting the main differences. Finally, we present the barriers to trade that
are resulting from these differences and make suggestions in terms of areas that
would be particularly well-suited to mutual recognition within the TTIP.
2.1. The European Union: No data, no market

E.U.-wide regulations in relation to the classification, packaging and labeling of
dangerous substances date back to 1967.
11
Environmental and health concerns
gradually came to play a more significant role. Testing requirements also became
more extensive and expensive.
The E.U.s current chemical regulation is defined by REACH (Registration,
Evaluation, Authorization and Restriction of Chemicals).
12
Reach took effect in 2008
and was under review in 2012. The report did not propose any changes to the terms,
though it did, however, acknowledge that there is a need to reduce the impact of

10
http://www.oecd.org/env/ehs/47813784.pdf

11
Council Directive 67/548/EEC of 27 June 1967 on the approximation of laws, regulations and administrative
provisions relating to the classification, packaging and labelling of dangerous substances.
12
Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006
concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), establishing a
European Chemicals Agency.
Page 12 of 25

REACH on SMEs, particular those relating to administrative burdens and fees.
13

Accordingly, REACH was identified by SMEs as the single most burdensome pieces
of E.U. legislation at a European Commission public consultation.
14

The aim of REACH is to i) ensure a high level of protection of human health and the
environment, ii) promote the free circulation of substances on the internal market
and iii) enhance competitiveness and innovation. REACH requires firms which
manufacture and import chemicals to evaluate the risks resulting from the use of
those chemicals and to take the necessary steps to manage any identified risk.
Industry has the burden of proving that chemicals produced and placed on the
market are safe.
15

This translates to the fact that producers of chemicals are responsible to produce all
the information on the chemicals before they introduce it to the market. It implies the
precautionary principle
16
, as formulated by the European Commission, which aims
at preventing potential risk. If there is a potential risk, there are several measures
that can be adopted such as conducting additional research or simply informing the
public.
According to the literature, there is an ongoing discussion on whether REACH
constitutes a barrier to national regulation. The Swedish Chemicals Agency KremI
finds that member States have a smaller scope for national regulation under
REACH compared with what applied under previous legislation.
17

The REACH rules require all E.U.-based companies to register (or pre-register)
chemicals they manufacture or import in significant quantities a tonne or more a
year (Article 5 of the Regulation).
18
The information requirement in the registration
correlates to the volume of the manufactured or imported substance. This data is
then considered to assess safety risks as well as the chemicals effects on health
and environment. All information is submitted to and evaluated by the European
Chemicals Agency (ECHA) before the product is introduced to the market. The no
data, no market guideline was established in 2008. Any company that did not pre-

13
http://ec.europa.eu/enterprise/sectors/chemicals/documents/reach/review2012/index_en.htm
14
http://ec.europa.eu/enterprise/policies/sme/files/smes/top10report-final_en.pdf
15

http://europa.eu/legislation_summaries/internal_market/single_market_for_goods/chemical_products/l21282_en
.htm
16
Communication from the Commission on the precautionary principle, COM(2000) 1 final.
17
wedish Chemicals Agency memorandum, apin-mlet (C-35811) Reachfrordningens harmoniserande
verkan, dnr 13-335.
18
http://ec.europa.eu/news/environment/080513_1_en.htm

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register between 1 June and 1 December 2008 had to stop producing or importing
immediately.
ECHA and the member states cooperate closely on evaluation issues. Also, certain
chemicals may also be made subject to authorization.
19

2.2. The United States: Reform underway

In the United States, the regulation of manufacture and sale of chemicals follows
the Toxic Substances Control Act (TSCA) from 1976. Under the act, producers are
responsible for submitting information to the Environmental Protection Agency
(EPA). They do not however have to produce any data other than what they already
have available. The EPA can only have products removed from the market they can
prove that the product poses an unreasonable risk to humans or the environment.
Until 2013 however, the EPA has only decided on restrictions for five existing
chemicals.
20

Unlike within the E.U., individual states are not prevented from adding additional
rules and regulation regarding chemicals. California, Maine and Massachusetts
have introduced stricter regulation similar to REACH (see for example California's
Safe Drinking Water and Toxic Enforcement Act from 1986).
21

The TSCA went into force in 1976 and has not yet been revised. There is currently
a proposal on the table to update TCA called the Chemical afety Improvement
Act (CIA). In the bills original language the lawmakers express the necessity to
update the law to ensure that chemical regulation in the United States reflects
modern science, technology and knowledge. Similarly, they acknowledge that,
public confidence in the federal chemical regulatory program has diminished over
time.
22

Accordingly, the bill has won bipartisan support and would give the EPA more
authority to demand further testing and additional data from chemical manufacturers
and require a systematic evaluation of grandfathered chemicals. It also calls on the
EPA to make more information available to the public.
23


19
http://echa.europa.eu/regulations/reach/evaluation/substance-evaluation.
20
Bergkamp, The European Union REACH Regulation for Chemicals, 2013.
21
http://www.oehha.org/prop65.html
22
http://reformtsca.com/Main/CSIA-Bill-Language.pdf
23
http://reformtsca.com/Main/CSIA-Bill-Language.pdf
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2.3. Global Regulatory Models

Both the United Nations as well as the OECD have developed systems for
harmonizing the classification, testing, or labeling of Chemicals:
UNECEs Globally Harmonised ystem of Classification and abelling of Chemicals
(GHS) wants to raise awareness primarily concerning physical hazards and toxicity
from chemicals.
24
The system addresses classification of chemicals, proposes
communication elements, including labels and safety data sheets. GHS is not
binding, though the E.U. has adopted it in 2008.
25


Mutual Acceptance of Data (MAD) is the OECDs chemicals program. MAD focuses
on reducing the costs and the efforts associated with having to test and assess the
same chemicals in different countries. Via MAD, test data generated in any
member country in accordance with OECD Test Guidelines and Principles of Good
Laboratory Practice (GLP) shall be accepted in other member countries for
assessment purposes and other uses.
26
The MAD guidelines were first adopted in
1981 and are legally binding in all OECD countries as well as several non-members.

2.3.1 Comparison: U.S. Regulation vs. E.U. Regulation

a. Responsibility
The main difference, as described above, relates to how the responsibility for the
chemicals and their risks is distributed. Following no data, no market, the E.U.
shifted the full responsibility to the producer of chemicals through REACH. If the
manufacturer cannot produce the required information, the product may not enter
the market. This follows the precautionary principle, which clearly aims at
preventing risks.
In the United States, in contrast, the governmental regulatory agency EPA assumes
the responsibility. To restrict chemicals and have a product removed from the
market, the EPA has to produce data that demonstrates the existence of an

24
http://www.unece.org/fileadmin/DAM/trans/danger/publi/ghs/ghs_rev04/English/ST-SG-AC10-30-Rev4e.pdf
25
Regulation (EC) No 1272/2008 of the European Parliament and of the Council of 16 December 2008 on
classification, labelling and packaging of substances and mixtures, amending and repealing Directives
67/548/EEC and 1999/45/EC, and amending Regulation (EC) No 1907/2006, Preamble, Recitals 5-8 16
December 2008 on classification, labelling and packaging of substances and mixtures repealing Directives
67/548/EEC and 1999/45/EC, and amending Regulation (EC) No 1907/2006, Preamble, Recitals 5-8
26
http://www.oecd.org/env/ehs/mutualacceptanceofdatamad.htm
Page 15 of 25

unreasonable risk. Otherwise companies can freely place their products on the
market.
Similarly, EU.. regulation is more encompassing when it comes to new and existing
chemicals. REACH regulates both new and existing products while TSCA only
applies to chemicals that were introduced after its inception in 1976. By that time
there were already 62,000 chemicals on the U.S. market for which no data is
required
27
.
b. Impact on human health and the environment
REACH requires producers to submit information that shows how human health and
the environment are impacted by the product. The EPA however cannot require
additional information from the manufacturer.
c. Restrictions
REACH includes restrictions for just fewer than 100 substances.
28
In contrast, since
its introduction in 1976, only five substances have been restricted under TSCA.
29

4. Public information
Under TCA, the EPA s ability to share information about company identities or the
chemicals structures with the public is restricted. In line with its responsibility role,
the EPA can only disclose confidential information when it determines that it is
necessary to protect human health or the environment from an unreasonable risk.
30

REACH, in contrast, requires firms to submit and publish safety data sheets for
users, retailers or importers. Unlike TSCA, REACH can also share company data
on chemicals with government authorities and EU institutions.
31


2.4. Conclusions: Uncertainties/Barriers to trade for Chemical companies

From the sector analysis as outlined above we can derive the following conclusions:

27
Vogel, Swinnen, Transatlantic regulatory cooperation, 2011.
28
http://www.echa.europa.eu/addressing-chemicals-of-concern/restrictions/list-of-restrictions/list-of-restrictions-
table
29
http://www.cicc.org/pdf/TSCA-101_update-13.pdf
30
Chemical Regulation: Comparison of U.s. and Recently Enacted European Union Approaches to Protect
against the Risks of Toxic Chemicals : Report to Congressional Requesters. Washington, D.C.: U.S. Govt.
Accountability Office, 2007. Print.
31
Chemical Regulation: Comparison of U.s. and Recently Enacted European Union Approaches to Protect
against the Risks of Toxic Chemicals : Report to Congressional Requesters. Washington, D.C.: U.S. Govt.
Accountability Office, 2007.
Page 16 of 25

The main uncertainty for chemical companies involved in transatlantic trade relates
to who is responsible for the chemicals that are placed on the market and which
data the company needs to present.
Registering products in order to comply with REACH is costly and presents a large
barrier especially for SMEs in the chemical industry.
As European companies have already adapted to the more restrictive REACH
system, they might have opportunities to offer more sustainable solutions compared
to American producers, especially if a future common regulatory system or other
reforms such as the currently discussed Chemical Safety Improvement Act (CSIA)
include more regulations for the industry.
3. Recommendations from the Sector Analysis

It appears that harmonization is not a viable option in the transatlantic dimension
considering the existing regulatory models. Both in the E.U. as well as in the U.S.,
regulatory systems for the chemicals industry have developed over a long period of
time and are already well established. Harmonization is a long and expensive
process that also requires a common legislative framework. Additionally, the
complexity of technical barriers to trade is not only linked to the fact that the
regulations often have a legitimate purpose, but also to the fact that many technical
barriers to trade arise outside the direct control of states. Industry associations and
standardization bodies for example regularly set conditions that affect the trade in
goods and services.
Mutual recognition is a feasible way of to reduce non-tariff barriers to trade or
technical barriers to trade. This means that neither party needs to chance its rules
but that each others rules are being accorded as equivalent, making them mutually
acceptable.
The lowest level of regulatory corporation is information exchange and transparency.
There are two tools already in place on which can be built: GHS for the
classification and labeling of chemicals and MAD for the production and exchange
of data. A crucial question is then if the U.S. is willing to implement the GHS criteria
just as the E.U. previously did in 2008. Another question is, if the by many
considered groundbreaking Chemical Safety Improvement Act (CSIA) will actually
be passed by legislation. Some academics however also fear that the TTIP process
Page 17 of 25

could harmonize down European chemicals regulations so that they approach low
U.S. standards.
32

It needs to be mentioned here that third countries such as South Korea have
adjusted their legislation towards REACH (see K-REACH).
33
If the U.S. does not
adjust accordingly, U.S. companies risk losing ground to competitors from Europe
or Asia that have adapted to more restrictive regulations. If their products are put on
the most regulated market, they can be put on every market.
4. Case Study

BASF, a German company, the Badische Analin- und Sodafabrik, is the worlds
leading chemical company with over 110,000 employeess worldwide serving
customers in nearly every country in the world. BAFs core competencies are built
around the following units: chemicals, performance products, functional materials
and solutions, agricultural solutions, and oil and gas. In 2013, BAF reported 70
billion in sales with income before special items estimated at 7.2 billion.
34
Its stated
corporate purpose is creat[ing] chemistry for a sustainable future. The list of
customers is immense, particularly when considering that their business is a B2B
business. Customers include the automotive industry, chemicals and plastics,
detergents, and agricultural industry.
The 3M Company, formerly know as the Minnesota Mining and Manufacturing
Company, is, fundamentally a science-based company looking to create solutions
for customers. In 2013, the company generated over $30 billion dollars in sales,
with close to $20 billion in international sales accounting for approximately 65% of
its total sales worldwide. 3Ms products range from health care to highway safety,
office products to abrasives and adhesives. Like BASF, 3M conducts sales in
virtually every country in the world and employees approximately 90,000 people
globally.
35
Different from BASF, the 3M does sell products directly to consumers
most people are familiar with Post-It Notes and Scotch Tape.


32
http://www.ciel.org/Publications/TTIP_FactSheet_EU_Feb2014.pdf
33
https://chemlinked.com/chempedia/k-reach
34
http://www.basf.com/group/corporate/en/about-basf/index?mid=0 accessed on 10 June 2014
35
http://solutions.3m.com/wps/portal/3M/en_US/3M-Company/Information/AboutUs/WhoWeAre/ accessed on
10 June
Page 18 of 25

4.1. Products

BAFs chemical segment is made up chiefly of chemicals and intermediaries. The
chemical portfolio, ranges from solvents, plasticizers, and high-volume monomers
to glues and electronic chemicals as well as raw materials for detergents, plastics,
textile fibers, paints and coatings, plant protections and pharmaceuticals. BASF
works to supply the chemical industry and as well as other sectors while ensuring
that BAFs other segments are supplied with the chemicals necessary to enable
downstream production.
36


Fig. XY, shows BAFs global production sites
Although smaller, 3M assortment is equally diverse. The business segments include
consumer goods, electronics and energy, healthcare, industrial applications and
safety and graphics.
3M Vice President Jeff Rageth pressed for a creation free trade agreements in 2011
when he wrote to congress. Although his remarks were specific to stalled trade
agreement talks in Korea, Colombia and Panama, the currently stalled Transatlantic
Trade and Investment Partnership. Mr. Rageth wrote in 2011,
3M is a large U..-based employer and manufacturer established over a century
ago in Minnesota. Today, 3M is one of the largest and most diversified
manufacturing companies in the world. Thousands of 3M jobs in the U.S. are tied to

36
http://www.basf.com/group/corporate/en/about-basf/index?mid=0 accessed on 10 June
Page 19 of 25

exports and the support of our international companies. While we conduct the
majority of our manufacturing and research activities in the U.S., over 65% of 3M
sales were outside the U.S. in 2010. 3M exported over $650 million from Minnesota
alone in 2010. The elimination of tariff and non-tariff barriers in Korea, Colombia
and Panama is critical to help us level the playing field for our exports in those
growing markets. The three pending free trade agreements help boost U.S. exports
to and engagement in these markets, thereby helping to maintain and grow jobs
and investments for 3M at home.
37

Current CEO of BASF and President of CEFIC, the European Chemical Industry
Council, Dr. Kurt Bock, spoke with equal excitement when the TTIP talks
commenced in Brussels in June of 2013.
38
A full abolishment of tariffs for chemicals
would positively affect BASF and 3M as well as the industry. In 2012 alone, duties
and tariffs accounted for $1.5 billion (US) of the approximate $48 billion of chemical
goods traded. The council (CEFiC), lead by Dr. Bock, views the TTIP as an
outstanding opportunity to enhance regulatory transparency and cooperation while
minimizing cost and burden for government and industry.
39

The strong belief in an urgent need for increased regulatory transparency is
mirrored by CEFICs American counterpart, the American Chemistry Council, who is
ready to contribute constructively to this work. For both organizations, the ultimate
goal of the TTIP is enhanced regulatory cooperation. Both CEFIC and the ACC
consider the chemical industry an utmost priority for the TTIP talks. Central to the
industrys concern are data and information on which regulatory decisions are
based, process for identifying priority substances, approaches for characterizing
risks and hazards, transparency in regulatory processes and rules to protect
commercial and proprietary interests.
40

Manufacturing leaders on both sides of the Atlantic have been outspoken in their
support of a free-trade agreement, urging the United States Congress to take action
to promote expanded free trade between North America and Europe. According to
the ACC, increasing regulatory cooperation could creative positive export synergies

37
http://paulsen.house.gov/press-releases/how-the-pending-trade-agreements-will-affect-minnesotas-economy/
12 June 2014
38
http://uk.prweb.com/releases/2013/6/prweb10843914.htm 14 June 2014
39
http://uk.prweb.com/releases/2013/6/prweb10843914.htm 14 June 2014
40
http://www.americanchemistry.com/Policy/Chemical-Safety/Endocrine-Disruption/ACC-Comments-on-Trans-
Atlantic-Trade-and-Investment-Partnership.pdf 14 June 2014
Page 20 of 25

of up to $800 million dollars between the U.S. and the EU.
41
Great regulatory
compliance between nations and continents means savings for both 3M and BASF:
even where regulatory approaches differ, opportunities should be pursued to
minimize divergence in regulatory outcomes and reduce costs of compliance.
42

NAM (National Association of Manufacturers) International Economic Policy
Committee Chairman, Executive Committee Member and Ball Corporation
Chairman David Hoover Jay Timmons, was quoted in March of 2013,
A successful trade agreement with the EU will level the playing field so
manufacturers in the United tates can increase exports and sales. [] U.. export
growth slowed over the past year, and the answer is access to new markets and
removing trade barriers. Trade agreements have a proven track record of success,
as exports to just our 20 free trade agreement partners accounted for nearly half of
U.S.-manufactured goods exports last year.
43

Futhermore, NAMs U..-EU Task Force chairman Greg Walters, also 3Ms
International Trade and Governmental Affairs supports ambitious agreement [to]
drive economic growth, lower existing barriers and serve as a model for the rest of
the globe to follow.
44

5. Innovation and Corporate Governance Styles
5.1. Speed of technological and commercial innovation:

Environmental Conditions (make the choice of the conditions to be analyzed based on
the most significant differences)
45
:

Technology and Communication
Among all its European counterparts, Germany ranks number one when it comes to
Technological innovation. The German government understands how much it can
contribute to a sustainable and stable economy. The emphasis it put on technological

41
http://www.americanchemistry.com/Policy/Chemical-Safety/Endocrine-Disruption/ACC-Comments-on-Trans-
Atlantic-Trade-and-Investment-Partnership.pdf 14 June 2014
42
http://www.americanchemistry.com/Policy/Chemical-Safety/Endocrine-Disruption/ACC-Comments-on-Trans-
Atlantic-Trade-and-Investment-Partnership.pdf 14 June 2014
43
http://www.nam.org/Communications/Articles/2013/03/Manufacturers-Outline-Goals-for-Successful-EU-Trade-
Agreement-Negotiations.aspx accessed on 12 June 2014
44
http://www.nam.org/Communications/Articles/2013/03/Manufacturers-Outline-Goals-for-Successful-EU-Trade-
Agreement-Negotiations.aspx 14 June 2014
45
Embassy of the Federal Republic of Germany in the US - www.germany-info.org/rights.htm
Page 21 of 25

advancement is reflect on the amount of money it invested in education and research.
(A whopping 12 billion Euros between 2010 and 2013)
46

In 1996, the recent Telecommunications act became effective, which ultimately
liberalized the telephone market and made Germany an even more attractive place for
business investors. Today Deutsche Telekom is the largest telecommunications
provider in Europe and with approximately four million customers at the end of 1996, the
third largest carrier in the world.

With its increasing emphasis on technology advancement, Germanys lead in high tech
products development and marketing has also improved tremendously. Germany is
currently the world's third largest export nation in this field. It is slightly behind Japan
and the US by less than 1 or 2 %. The US, on the other hand, is definitely the world
pioneer when it comes to technology. NASA, for example, is the incubator for a lot of
large-scaled and complex technological developments in the States. Like its ally
Germany, the US puts a lot of emphasis on promoting technology development among
universities and students. According to a recent article published by NASA in June 4
th

titled: NASA Invites Universities to Submit Innovative Early-Stage Technology
Proposals, NASA is NASA is trying to get students from universities take part in the
agency exploration to deep space and Mars. The Stage Innovations NASA Research
Announcement is seeking for innovative space technology proposals that could benefit
the space program.
According to Michael Gazarik, NASA's associate administrator for the Space
Technology Mission Directorate in Washington: "The sparks to fuel the fire of innovation
that will develop the new space technologies of tomorrow reside within American
universities," He also mentioned that the main goal of this project will eventually boost
economic growth and competitiveness."
Beside, during an interview with Mark Muro (@markmuro1), a senior fellow at the
Brookings Institution and policy director of its Metropolitan Policy Program, when being
asked what the drivers for a major manufacturing revival are, he suggested that
Computer-assisted design and prototyping is accelerating the engineering process. He

46
http://www.germany.info/Vertretung/usa/en/07-Econ-Energy innovation/03__Science/00/__Science.html


Page 22 of 25

used iPad-driven additive manufacturing, 3-D printing, and robotics as examples to how
they all contribute to reducing the need for labor, and merging simulation and modeling
with physical making. As Mark suggested, all these means that U.S. companies are now
leading the world in accelerating product development cycles and delivering on the
promise of mass customization. And that the result is the game is now being played on
American terms.
47

5.2. Corporate Governance in Germany

The way corporate works has always been pretty straight forward in Germany. Most of
the publicly traded German operating companies are served by stable and consistent
management boards that are composed of German nationals as well as shareholder
bases represented by "a preponderance of cross-holdings by German banks, insurance
companies and other operating companies"
48
. Generally, there are not a lot of outsider
and most of the time German companies are run on a consensus style, meaning that
everyone to a certain degree agree to each other presence at board meetings. Unified
outcome and decision are more preferred to than differences in the both. Such
approach contributes a lot to the economic stability Germany has always been known
for as well as making Germany the one of the most prosperous Western powers in the
world.
Despite all there, changes are slowly happening to its old approach. Due to
globalization, the numbers of foreign investors have been on the surge and activist
shareholders are taking more control and initiative over decision making. According to
the article "Current Corporate Governance Trends in Germany" by Ken Altman, "In their
22nd of August, 2008 edition, the highly respected German newspaper, Handelsblatt,
published their leading story with the headline" Foreigners increase pressure on
companies international investors use general meetings for criticism."

5.3. Corporate Governance in the United States

On the contrary, the US adopts a different approach when it comes to corporate
governance. It is way more shareholder-oriented or market based compared to its

47
http://blogs.wsj.com/briefly/2014/06/04/how-technology-is-transforming-u-s-manufacturing/

48
http://www.econstor.eu/bitstream/10419/50757/1/348829639.pdf
Page 23 of 25

German counterpart, which thrives on stability and prudence. Unlike the Germans,
where ownership is way more exclusive, ownership of corporations in the US is
relatively more dispersed and involves a heavy engagement from institutional investors,
such as pension funds. Also, American Corporate boards have a higher proportion of
outsiders and independent members, who might not necessarily be chosen based on a
consensus, so as to improve board processes. Pay for executives are often closely
linked to shareholder returns. In other words, the more money the company makes on
behalf of its shareholders, the more the executives are going to be paid. Finally,
corporate governance is also achieved externally through "the monitoring of
gatekeepers, such as audit firms, that certify the flow of information from managers to
capital markets
49
".
6. Conclusion:

TAFTA/TTIP is still an evolving agreement with both pros and cons and there are still
areas that needs clarity and conceivability for its final push as Free Trade Agreement.
But from our analysis and case study of BAF and 3M, what we see is that Pros of
TTIP coming into force outweighs the cons as the industry on both sides of the Atlantic
stands to gain a lot and the benefits are to be passed on to consumers for a better
business standard.













49
http://www.boeckler.de/pdf/p_arbp_223.pdf
Page 24 of 25

7. Bibiliography:

- UNCTAD Report-2013
- The Transatlantic Colossus - Berlin Forum on Global Politics Internet & Society Collaboratory -
FutureChallenges.org
- European Commission, Trade
- https://www.gov.uk/government/publications/ttip-and-the-fifty-states-jobs-and-growth-from-
coast-to-coast
- US Census data, 2012
- Excerpt from 20 December 2013, Press conference report with EU representative Ignacio
Garcia Bercero and U.S. representative Daniel Mullaney.
- Foreign Trade,Eurostat, - http://www.census.gov/foreign-trade/balance/c0003.html
- Stats, Eurostat - http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database
- Regulatory Co-operation and Technical Barriers to Trade within Transatlantic Trade and
Investment Partnership (TTIP)- http://www.oecd.org/env/ehs/47813784.pdf
- EU Council Directive 67/548/EEC of 27 June 1967 on the approximation of laws, regulations and
administrative provisions relating to the classification, packaging and labelling of dangerous
substances.
- EURegulation (EC) No 1907/2006 of the European Parliament and of the Council of 18
December 2006 concerning the Registration, Evaluation, Authorization and Restriction of
Chemicals (REACH), establishing a European Chemicals Agency.
- http://ec.europa.eu/enterprise/sectors/chemicals/documents/reach/review2012/index_en.htm
- http://echa.europa.eu/regulations/reach/evaluation/substance-evaluation.
- Bergkamp, The European Union REACH Regulation for Chemicals, 2013.
- http://www.oehha.org/prop65.html
- CSIA - http://reformtsca.com/Main/CSIA-Bill-Language.pdf
- UNECE- http://www.unece.org/fileadmin/DAM/trans/danger/publi/ghs/ghs_rev04/English/ST-SG-
AC10-30-Rev4e.pdf
- Vogel, Swinnen, Transatlantic regulatory cooperation, 2011.
- EUrostat, Chemicals - http://www.echa.europa.eu/addressing-chemicals-of-
concern/restrictions/list-of-restrictions/list-of-restrictions-table
- TSCA, CICC- http://www.cicc.org/pdf/TSCA-101_update-13.pdf
- CIEL-TTIP: http://www.ciel.org/Publications/TTIP_FactSheet_EU_Feb2014.pdf
- Reach: https://chemlinked.com/chempedia/k-reach
- BASF Corporae: http://www.basf.com/group/corporate/en/about-basf/index?mid=0
accessed on 10 June 2014
- 3M About Us: http://solutions.3m.com/wps/portal/3M/en_US/3M-
Company/Information/AboutUs/WhoWeAre/ accessed on 10 June
- http://paulsen.house.gov/press-releases/how-the-pending-trade-agreements-will-affect-
minnesotas-economy/ 12 June 2014
Page 25 of 25

- American Chemistry: http://www.americanchemistry.com/Policy/Chemical-Safety/Endocrine-
Disruption/ACC-Comments-on-Trans-Atlantic-Trade-and-Investment-Partnership.pdf
- Embassy of the Federal Republic of Germany in the US - www.germany-info.org/rights.htm
- http://www.germany.info/Vertretung/usa/en/07-Econ-
energyinnovation/03__Science/00/__Science.html
- Wall street Journal: http://blogs.wsj.com/briefly/2014/06/04/how-technology-is-transforming-u-s-
manufacturing/
- Econstor: http://www.econstor.eu/bitstream/10419/50757/1/348829639.pdf
- Boeckler: http://www.boeckler.de/pdf/p_arbp_223.pdf