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SPEECH/12/21

Karel De Gucht

European Commissioner for Trade

Working together for growth

Making the most of the internal market and external trade

High-level Conference on Working Together for Growth - Making the most of the internal market and external trade

Brussels, 20 January 2012

Ladies and Gentlemen,

We all know that the EU is currently facing arguably its most difficult challenge in history. The EU economy has not yet fully recovered from the crisis of 2008 and now its growth is projected to stagnate again in 2012.

The vulnerable financial sector, the fragile public finances and the weakening of the real economy combine in what is ultimately a confidence crisis. Our citizens and the rest of the world are wondering: are we really able to do whatever is necessary to preserve the euro?

We definitely need to put in place the mechanisms to ensure that excessive deficits, asset bubbles and loss of competitiveness in some member states do not happen again. However, austerity cannot be the only policy answer. Equally important is the need to resume growth.

President Barroso reminded the European Parliament this week that:

"more and more, our partners and international investors are asking the following question: what is Europe's medium and long-term prospect for growth? It is clear that we will not overcome this crisis without a credible response to the question of growth." [end of quote]

Without growth, we will not be able to durably tackle our public financial problems nor safeguard our welfare state.

To stimulate growth, various measures can be taken. The good thing is that two of them do not cost any taxpayers' money.

First, we must get our business environment right, without compromising on our environmental and social objectives. It is urgent to lift barriers to competition and innovation and to reduce the costs for companies.

With the Single Market Act, Michel Barnier has launched the process on the internal front as regards all aspects of our market: goods, services, people, ideas and capital. I am convinced that the deteriorating economic situation forces us today to act with even more determination and ambition.

There is much evidence from the OECD and the World Bank in particular that the EU as a whole is not doing as well as it should in terms of business environment.

Let's have a thorough look at innovative ways to achieve similar levels of safety and protection at lesser costs and through less cumbersome procedures.

Equally important is to take full advantage of the dynamic sources of growth outside the EU. Over the next two years, 90% of supplementary world demand will be generated outside the EU. External trade already constitutes the fastest growing contribution to EU's growth and is likely to remain so for the foreseeable future. We need to do more to make the most of it.

This is also a golden opportunity to have a fresh look at how these two elements, our internal market and international trade, can be mutually reinforcing. How could we leverage the necessary domestic regulatory changes to improve access to external markets? More than in any other area, the EU must make the best use of the positive interaction between the Single Market and our external trade policy when it comes to regulation and standards.

Before elaborating this issue somewhat further, let me say a word first about protectionism. I hear repeated calls to raise barriers to trade instead of facing up to the competitiveness challenge.

Let's be clear: there is no cheap and easy way to confront modern global competition other than through our capacity to innovate and produce quality products at a competitive price.

The EU economy is not hollowing out. The EU is not just a buying-selling economy; it is a real production economy.

21 million jobs are linked to our exports to third markets; they would be put at risk if the EU were to start closing its own market.

This is confirmed in our trade statistics. Our trade surplus in manufacturing has more than trebled over the last decade from € 56 billion to € 194 billion. Together with the surge in our services surplus, it has entirely offset the widening of our trade deficit in energy which has increased by € 184 billion over the same period. What it means is that the EU is successfully specialised in exporting goods and services in large part to pay for our increasing energy bill.

On regulatory cooperation, I hear almost every day that unnecessary incompatibilities between different regulatory regimes represent the thorniest obstacles to trade.

Increasing the compatibility between regulatory regimes with a view to reducing trade costs is a very important element of our trade policy as I see it, in particular with our main trade partners. It should be more at the core of our regulatory agenda.

The size of our Single Market, our capacity to influence and even to set world standards gives the EU an incomparable influence on the world stage in this area.

Yet, we may have considered for too long that our size and our clout were enough to get other countries to adopt, almost without discussion, EU's regulations and standards. It may be true to some extent for countries in our neighbourhood. But it hasn't delivered all the benefits we could hope for in other regions of the world.

This is not a new issue, of course, and the EU has in recent times started to deal with this question more concretely.

For instance, with the United States, we are refocusing the transatlantic regulatory dialogue on those barriers that are most important for the future. Energy standards, climate change, financial sector reforms, internet based services, e-vehicles and high-tech industry standards are a few examples where today's debates will determine the regulatory environment of our future economy.

In many areas, both sides of the Atlantic have very sophisticated regulations as a result of long and complex democratic processes that would be extremely difficult to reopen for the sake of a trade agreement. There is an "installed base" of regulations that international trade has to take as a given. But that does not mean that we cannot try to prevent new barriers from arising.

With other, smaller, partners we also seek to tackle existing regulatory obstacles that come at a significant cost.

We have demonstrated our capacity to make important progress on this front in the EU-Korea FTA. We put regulatory obstacles to trade at the core of the negotiation, and we have obtained substantial results for EU's business. But we need to do more and better in particular with our most important trading partners.

This is also a central part of the negotiations with Canada. A potential FTA with Japan will not do either without a strong regulatory cooperation element.

The strategic question before us is therefore: how can we do better on the interface between EU regulation and regulatory approximation or mutual recognition with third countries?

Ladies and Gentlemen,

I know we are here for an open debate. Without pre-empting it, let me express some concrete ideas on which I would very much welcome your views.

First, we must take advantage of our engagement with other countries and take due account of regulatory solutions developed across the world. This way we will ensure that the Single Market is always built around the best rules. In the context of impact assessments, I believe we need to compare better the merits of our proposed new regulation with those of the most advanced countries. When the objectives and the levels of ambition are similar, we should systematically opt for the less trade disruptive approach.

Secondly, I know that Commissioner Tajani would have very much liked to be here today but he is unfortunately unable to attend. He is at the origin of a very interesting initiative which is now agreed by the College and should be implemented soon: the competitiveness proofing of all new EU legislation. I would like to put to you today the idea to include in that context an "external competitiveness proofing". We could ask Commission services to assess the impact on trade and investment of any new initiative to make sure it is not unduly trade disruptive. I would very much welcome your views on this suggestion.

My third point is on whether and how we could engage more in a two-way approach without jeopardizing the high level of protection required by our citizens. Could we consider adapting our own regulations in a spirit of give and take, while recognizing that our own regulations are often the fruit of legislation.

Fourth, I believe giving a fresh impetus to mutual recognition agreements might also be part of the solution. There are often different ways to regulate to achieve a given and shared objective. With some of our most advanced trading partners, we should focus less on the divergence of regulations and more on the convergence of objectives. In that spirit, I am convinced that in some important economic sectors, when the level of security and safety achieved are deemed comparable, we should move more actively to "enhanced" mutual recognition agreements on the basis of the equivalence of requirements. This might be the case with the US for instance.

Finally, given that industry plays a crucial role in setting standards, how could we help EU industry achieve a globally coordinated approach, thus ensuring better coherence and interoperability between standards in different countries?

We are here to discuss these issues. Together with my services, I primarily want to listen to your concrete ideas and suggestions. So, I won't take more of the time for the discussion. Let me thank you for coming here today for what I hope will be a fruitful exchange of knowledge and ideas.


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