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Günter Verheugen

Vice-President of the European Commission responsible for Enterprise and Industry

«EU-US Cooperation a Partnership for Growth»

Luncheon Speech – Industry Ourtreach Event
Washington, D.C., 21 June 2005

Ladies and Gentlemen,

I am happy to be with you today and discuss the transatlantic relations.

Europe and the US are closely interlinked. We share a common history. Our profound belief in freedom and democracy were inspired by the same ideas developed over centuries and best expressed by the fathers of the enlightenment 300 years ago. During Europe’s dark years of oppression, dictatorship, brutality and war, US was on the side of those who resisted. Our economies are so closely connected that it is difficult to determine where Europe ends and US begins.

For the future we share common challenges: The outcome of yesterdays EU-US summit between President Bush and leaders of the European Union was all about this. We agreed on an ambitious joint declaration on the direction of our co-operation. It reflects some of the major challenges we are facing in today’s global world

  • We need to promote freedom and democracy on a global scale
  • We need to provide security at home and world wide
  • We need to work for prosperity for all

Indeed, the list of the threats and risks of the 21 century is long: Increasing inequalities and poverty, concentrated in parts of this world, religious hatred, nationalist confrontations, wars and conflicts, proliferation of weapons of mass destruction, terrorism. Our economies are exposed to increased competition and globalisation. This does not only produce winners in our societies but also losers.

As we are faced with all these issues, we have to ask ourselves whether to address them alone, or to do so together, in close partnership, with a common agenda. My answer is clear: we need a strong partnership between the EU and the US. This partnership is based on common values and integrated economies.

To slightly paraphrase Winston Churchill’s “iron curtain” speech on March 5, 1946, at Westminster College, in Fulton, Missouri:

“If the populations of (Europe) be added to that of the United States, with all that such cooperation implies in the air, on the sea, all over the globe, and in science and in industry, and in moral force, there will be no quivering, precarious balance of power to offer its temptation to ambition or adventure. On the contrary there will be an overwhelming assurance of security”.

I am well aware of some sceptical voices suggesting that a closer relationship between the EU and the US would not deliver the right answer; even that such a relationship is bad in itself. I am also aware that the present situation in Europe gives some reason for concern for our friends here in the US. And I will later give you my view on this.

But let me first say something about the EU-US agenda for the 21 century.

We are not starting empty handed. The EU-US partnership has accomplished far more than most people recognize and covers a much broader spectrum of actions, in the political sphere, in crisis management and in addressing together the issues of poverty, development, global trade liberalization, counter-terrorism and other global issues. The positive agenda we share is more impressive than the divisive menu, though of course it is always the friction that captures the headlines.

To me, it is clear. While we may differ in detail, at the deep end – at the strategic level – our long-term interests are common. The global challenges that determine the well-being of our children are only likely to be mastered if the United States and Europe work together. This is true for the need to prevent terrorism, genocide and nuclear, biological or chemical war. It is true for the challenges to improve the situation in the near East, influencing the rise of the far East and helping the poor South and it is true for sustaining human life on earth. This is also true for the global environmental challenges. The simple truth is that neither of us has a partner in the world anywhere near as close or as important as the other.

We have to think about our relationship and how to adapt it to these changing circumstances. We need the vision to renew it. The relationship we need has to be equipped to deal with issues which are very different from those we faced only 20 years ago. Our starting point is to recognise fully our interdependence.

In a constant dialogue, we should look to remove the remaining barriers to free commerce across the Atlantic. We need to, and we will, work jointly on protecting intellectual property and fight against counterfeiting, be it in China or elsewhere.

But we also need to ensure that NATO and the emerging defence capacity of the EU are complementary. We need to develop common approaches to aid, debt relief and climatic change, to mention some examples. Through such process I am convinced that our future partnership will be even more balanced and more complementary.

For it to happen, Europe needs to be more united and more willing to take a role in global leadership, in international affairs, and in foreign and defence policy. We need to build stronger foreign policies and defence capabilities to contribute to the security challenge.

Clearly, this will not be easy. The events of the last weeks with the negative referenda on the constitutional Treaty in France and the Netherlands and our inability, which I consider is temporary, to agree our financial framework for the years 2007 to 2013 are not encouraging. But then again, Europe has been expanding to over 450 million citizens; it has created a single market, a single currency, a single space for justice and security in just over 50 years. And always though crises. So I remain optimistic and promise you that the Commission will show leadership in this situation as the European citizens expect us to do.

The EU is with no doubt an interesting partner for the US. We are by far the biggest donor in international development policy. We are a world leader when it comes to implementing global environmental objectives. We have gone furthest towards opening up our market to the world’s poorest countries. We are the strongest trading block. We have an extraordinary ability of enlarging freedom. At the height of the Second World War there were only a few free countries in Europe. By today the vast majority of European countries are vibrant democracies.

Freeing a country from communist dictatorship and becoming a member of the EU was a driving force for the peaceful revolution in Central and Eastern Europe and their successful transformations process. Indeed, free European countries wish to join the EU. For Poles as for Spaniards the return to freedom and the integration into the European Union has gone hand in hand. The result is a Europe that is closer to being fully united and freer than anytime in its history.

Enlargement is a powerful tool, and one of the success-stories of Europe. We are helping other countries to transform radically. We see this process today in the previously war-torn countries of Balkans and Turkey.

However, we need to translate our achievements into an effective European contribution to global governance.

But there is a major pre-condition for this. The EU needs a sound economic and social base.

I am convinced that one reason why our citizens have not felt connected with Europe is the economic development of the past 10 years. To be frank, we have lost ground during those years. And the citizens have reacted to our inability to deliver economic reforms as fast as they were needed.

As you know, the gap in terms of growth to the United Sates has widened considerably, and economies like India and China are growing 4 to 5 times as fast as the EU. We are also facing a major demographic challenge with low birth rates and ageing.

As so often in life, there are no simple answers, no quick fixes. I know there are politicians who pretend to have the magic stick. They tell their people that going back to the “good old days” of protectionism, re-erecting trade barriers and borders is the solution to globalisation and increasingly fierce competition. They tell them “buy European!” and forget that keeping out foreign products also entails depriving our companies from hugely lucrative markets abroad. We have to have the guts to be honest and tell it like it is. We have in Europe a debate on relocation or out sourcing which is worrying since it is based on fears and scare mongering and not on facts.

We will not be able to beat the Chinese in making cheap T-shirts. We have no other reasonable choice than to enhance our competitiveness and to go for world class solutions.

We need more growth and we need more and better employment opportunities.

Therefore we have re-launched an ambitious reform process – an European partnership for growth and jobs.

Competitiveness is the key, with clear political parameters: We accept competition as the basic rule for the market place. We fully support the idea of open and free markets. The role of public authorities is seen very restrictive -Politics have to create the right frame-work-conditions which will encourage entrepreneurship, give businesses legal certainty and predictability, organize a level playing field and vigorously enforce competition rules.

We will not shield any company from competition. And we want strong European companies, champions, world market leaders, not created by artificial state intervention, but in fair and open competition.

In concrete terms the reforms are articulated around three themes:

Raising our capacity to grow through

  • Knowledge and innovation
  • Making the EU a more attractive place to invest and work, and
  • Creating more and better jobs.

The responsibilities for the agenda lie both with the EU institutions and the Member States. But to be clear: most of the reforms called for will have to be implemented by actions on national level. That is why the partnership is so important.

The economic agenda is not just a process. It means also very concrete measures and reforms. Let me mention some key issues:

Better regulation is one of the main priorities for the years to come. We want a regulatory environment in the EU which is efficient and simple to apply. This is particularly important for Small and Medium Sized Enterprises. Our ambition must be to reach the objective in the most cost-efficient way possible. We should not be afraid to pose the question: “Do we need to legislate?” If there is no need to legislate, there is a need for no legislation. That is our credo.

This is not only to be reflected at EU level; it is also relevant for the legislation on national level. I am well aware that this is a question that is also discussed here in the US.

Second, Innovation and entrepreneurship. We are lagging behind you! But we are willing to run and catch up.

We want to draw on your experience how to better value those who are prepared to take risks when reaching out for new opportunities. We must develop a vibrant market for venture capital which can meet demands from entrepreneurs and innovators. And we must be better in getting innovations into productive goods or services.

We have to increase our spending for Research and Development and are committed increase in R&D spending in the EU to 3% of GDP by 2010.

Third, we have to better and fully exploit the Internal Market, which is a big asset and a job machine. Between 1993 and 2003 tearing down borders and tariffs among EU member states has created contributed to an increase in the EU’s GDP of 1.8% or € 870 billion extra prosperity and 2.5 million additional jobs. Key areas like financial services or energy are still to be delivered: The internal market for services has to become fully operational and we are discussing at the moment how to unlock this important part of our economic potential.

We need to inter connect our economies in Europe better. We need to go further down the road of a modern trans-European infrastructure system to facilitate exchange, trade and mobility.

Finally, we have all interest in an open economy with a level playing field internally and as far as possible also globally. Openness to trade and investments explain a quarter of the productivity gains witnessed across the EU. That is why we have such a strong interest to pursue the efforts in reaching an ambitious result in the Doha-trade round. It is also why we have to continue our support for closer economic integration with our neighbours and to closely cooperate with our other partners.

In Europe we are at a crucial point of time. The EU has given itself a new and ambitious economic agenda. It is a major effort which will include substantial reforms in the Member States and at the EU level. The main objective is strengthened competitiveness leading to growth and jobs. We need vision and courage to match our ambition. It also calls for the involvement and support from our stakeholders, whether trade unions or business, to which American companies in Europe belong.

And this brings me back to the EU-US relationship, Ladies and Gentlemen.

Today, the combined EU and US GDP is around 60% of the world total. This gives us a global responsibility. Between us, we stand for almost 40% of world trade, and our bilateral economic relationship is worth just short of $3 billion dollars per day in trade of goods, services and foreign direct investment. And by 2003, the total stocks of two-way investments had amounted to the exorbitant figure of €1.4 trillion. The headline grabbing trade spats affect less than 2% of transatlantic commerce.

This explains why we have a shared interest in fair and open competition. Transatlantic relations very much directly concern those of you who belong to the business community. Your interests are best served when the US and EU work together at the bilateral and global levels not least to provide a favourable business environment.

Over the decades we’ve become vital stakeholders in each other’s societies. Many here today know this intimately - for you this isn’t just some concept trumpeted in Brussels or Washington. Your companies have invested in buildings and factories, in foreign affiliates, funding research, and creating jobs in the European market and European companies have come here and done likewise.

On the governmental level, we also have successful examples of our cooperative efforts. Together we have gotten rid of many of the classic trade barriers - tariffs, quotas and prohibitions - and our success is reflected in the figures I just mentioned. But we need to expand and reinforce our co-operation.

Both the EU and the US are market societies, and every time public authorities want to become active we should first of all question the need. But, it was business that has identified that the different regulatory frameworks are creating the current barriers to trade and investment. And it is business that is asking for more co-operation between legislators on both sides of the Atlantic.

This is why regulatory cooperation was high on yesterday’s Summit agenda. The results show our common ambition. The Summit established a high-level Regulatory Cooperation Forum to facilitate and promote regulatory dialogues. The Forum should also be the focal point for exchanges and discussion of each others’ annual regulatory work programs – thereby helping us cooperating up-stream – before regulating.

The Summit also encouraged enhanced efforts under a new 2005 EU-US Roadmap for Regulatory Cooperation. An important network of regulatory dialogues is already in place and we have agreed to reinforce the current work. There are some good concrete examples.

In the pharmaceutical sector information exchanges between our regulators enable accelerated access to new and innovative medicines, and improved safety as a result of the involvement of the best regulatory expertise from both sides. Avoiding duplication leads to important resource savings.

Another example is in the automobile sector. Our regulators co-operate on various aspects of automobile safety. This is an incredibly important sector in terms of R&D investment, manufacturing output and employment. In 2002 the production value of motor vehicles in the 25 EU countries was nearly €600 billion. Work on increased harmonisation of the regulatory environment can bring huge benefits to both the EU and the US. Success of these efforts depends on the willingness of both parties to cooperate.

In more horizontal terms, the Commission is engaged in a dialogue with the Office of Management and Budget (OMB) to improve our understanding of each other’s regulatory practices and methods of assessing regulatory impacts. Or to be more clear : we should learn from each other in order to cut red tape and avoid rule making which puts unnecessary burdens on business. There is good progress, but the scope for potential co-operation is far broader.

In short, the EU and US economies are continuing to grow together, rather than drifting apart. And we will contribute to make the framework conditions even better. The EU and the US economies already operate to a very large extent as one single transatlantic economy. Learned men tell us that “globalization is happening faster and reaching deeper between Europe and North America than between any other two continents in the world.” Indeed this is part of our strength and determines also the challenges we are facing together.

Let me in this context express one worry. Globalisation is seen by some, on both sides of the Atlantic, as a threat rather than an opportunity. That is understandable because it touches everyone. There are always some who are affected negatively. We need to meet the challenge and make the case of the enormous positive potential of globalisation. Ladies and Gentlemen,

Being here as a German, born in “old Europe” I am a firm believer in a strong EU-US relationship. The truth is that we both depend upon each other more than ever to successfully address the new threats and challenges of the 21 century. We are all sitting in one boat. We both want to achieve the same things: the freedom and security of our citizens, open democracies, human rights, the rule of law, and prosperity from growth and jobs. We all share the universal values. We both pursue common political goals.

Thank you

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