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Karel De Gucht
European Commissioner for Trade
EU-US Cooperation for Recovery
AmCham Eu Transatlantic Conference: "The Renewed Transatlantic Agenda: Creating Growth for the Future"
Brussels, 22 March 2012
Ladies and Gentlemen,
In difficult times, friends must stick together.
Well… these are certainly difficult times.
The United States and Europe are close friends.
And we have much work to do together.
The financial crisis has had disastrous consequences for both of our economies. First, because of its depth: Output fell by 3 and a half per cent in the US and over 4% in the European Union. Unemployment doubled in America and jumped by a third in Europe. And government debt rose by a third on both sides.
But the crisis is also significant because of its length. Even now, three and a half years after the Lehman collapse, things are not fully back on track.
Economic growth in Europe is slowing down. In the last quarter of 2011 the European economy actually shrank by just under half a percent, having grown robustly in the first part half of the year. Our Commission economists predict that we will only have a weak return to growth in the second half of this year.
Of course, the picture is not without nuances. Not all Member States are equally affected by the crisis. There are also some positive indicators of our performance that are often neglected, particularly when it comes to trade.
Europe remains the world's largest exporter, foreign direct investor and recipient of foreign direct investment.
Our share of world exports has held steady at around 20% even with the rise of new emerging trading powers.
In 2011, our exports grew by over 13%, two percentage points faster than imports, leading to a further reduction in our trade deficit. That deficit in any case is the result of our energy bill at a time of record high oil prices. Europe has a surplus of 190 billion euros in manufactured goods and 85 billion in services.
On the US side, the overall macroeconomic outlook is somewhat brighter. The last quarter of 2011 saw strong growth of 3%. Recent data show a significant improvement in the labour market and in consumption. There are projections of 3% growth for this year. And trade has recovered from the nadir of 2009 to higher levels than before the crisis.
But even with this welcome good news, the legacy of the crisis can still be felt. There are many uncertainties about the overall US outlook, not least because of America's exposure to developments in Europe.
There also a need for more work on trade. Over the last ten years, while Europe's share of world exports held steady, the US share fell by 6 percentage points to reach a low of 12%. This significant decline and its effect on jobs led President Obama to launch his National Export Initiative in 2010.
So we are certainly not out of the woods on either side.
It is exactly at times like this that we need to rely on our close friends. And there can be no doubt about the depth of our transatlantic friendship.
We have by far the largest trade relationship in the world: Bilateral trade in goods and services between Europe and the United States comes in at just under 2 billion euros every day.
But as impressive as they are, the trade statistics actually underestimate the extent of our economic connections.
That is why Mr. Quinlan and Mr. Hamilton's annual Transatlantic Economy reports are so interesting.
Because they focus on a central fact:
Our investment relationship is unrivalled by any other bilateral commercial relationship in the world. European and American firms each hold 1.2 trillion euros of FDI stocks in each other's economies.
Just so we have sense of scale, that is roughly equivalent to a tenth of the total annual GDP of the European Union.
Those numbers also make us far and away each other's largest foreign direct investor. From the year 2000 to 2009 Europe attracted 56% of all foreign direct investment flows from the US. In the other direction, Europe accounts for 72% of all investment stocks in the American economy.
But perhaps the most significant measure of the transatlantic economy is employment. As we have all learned from the annual Hamilton-Quinlan reports, 15 million people are employed in European and American subsidiaries on both sides of the Atlantic.
On that basis I think we can safely conclude that our economies are very much intertwined.
These figures are certainly very interesting fuel for discussion. But as policymakers what matters is what we do with them.
We understand the economic challenges we face and the fact that the European Union and the United States are so interconnected. But how should we proceed?
I think there are three conclusions to be drawn:
First, a solution to our economic problems that does not take account of the other partner is no solution at all. In other words, we must continue to avoid the temptation of protectionism even when faced with pressures from within. As Benjamin Franklin may have said, we must hang together or assuredly we will all hang separately.
Second, the relationship is big enough that if we work out how to improve it there can be significant and tangible economic benefits. We need to assess what's working well and find out how we can improve things. On that basis we will be able to facilitate further growth.
Third, our focus in these efforts will largely need to be behind the border. We can see that tariffs are important, particularly as so much of trade happens within firms. But clearly they are much less important, in economic terms, than regulatory obstacles to trade in goods and services.
For all these reasons, I was very pleased that Presidents Barroso, van Rompuy and Obama agreed to launch the High Level Working Group on Growth and Jobs at last November's summit.
Our Working Group has a clear objective: to identify actions that will increase transatlantic trade and investment and so support job creation, growth and international competitiveness.
If we want to meet this challenge, we should be ready to consider all measures that have a real impact on our trade and investment relationship.
That means we are looking at tariffs for instance. As we have seen, although tariffs are low they are often applied to trade within companies. So I think we should be prepared to eliminate most of the tariffs affecting transatlantic trade.
But tariffs are only the backdrop to the real subject of this picture.
Regulatory measures have a huge effect on trade in goods. Of particular importance are the differences between regulations that oblige companies to change their production processes for each market. This imposes unnecessary costs. But we are also looking at the effects of our customs policies, like security measures, for example.
Furthermore regulation is a key factor for trade in services like information and communications technology, the professions, transport, and finance. We should not forget that services represent about three quarters of our economies and about 300 billion euros a year in transatlantic trade.
Let me be clear, we know that addressing regulatory differences is not easy but we have learned a great deal over our long years of work on these issues, not least in the Transatlantic Economic Council.
We are therefore in a good position to make real progress in two directions:
Last but not least we have to substantially improve reciprocal access to public procurement markets. Procurement accounts for a huge proportion of our economies – in Europe the figure is 17% of GDP. If we can each go further than our WTO commitments we will make a real difference in terms of growth and jobs.
As to the process, the Summit leaders have requested that the Working Group deliver an interim report in June and a final proposal for action at the end of the year.
As things stand a whole range of possibilities are on the table – a beefed-up Transatlantic Economic Council, specific agreements on tariffs or investment and services, or a fully-fledged FTA.
For us the choice is clear. This project only makes political and economic sense if we clearly aim for an effective tool to spur economic recovery. After all, our trade policy is not about window dressing. It is about delivering tangible results.
If we want to be effective, our objective needs to be both ambitious and realistic: Ambitious enough to include all areas of economic importance. And realistic enough to be successful within a limited period of time.
This can only be done in a comprehensive agreement,
on all issues at stake,
in a single package.
There is nothing to be gained from slicing the work into little pieces.
We all know that in a piecemeal approach in the end only the easy problems will get solved and the difficult ones will fall by the wayside.
And this is fundamental to the value proposition of the whole exercise.
Because the real business interests can only be addressed if we are ready to make tough choices.
If we frame our objectives correctly and establish a common understanding of where we want to go there is no need for negotiations to drag on for years.
We can get this done quickly and deliver a real and much needed injection to our economies.
Beyond those benefits, I also believe that a robust new initiative could have positive knock-on effects on our wider trade relations.
That has become particularly important as emerging countries modernise their own regulatory systems.
This last point is fundamental to our efforts in the Transatlantic Economic Council. Central to the work has been the goal of broadening the circle of like-minded countries in strategic areas like electric cars, ICT services, investment and raw materials.
The TEC has much more work to do so I hope that business will continue to provide us with the input we need. Indeed, I believe that maintaining momentum in the TEC agenda is critical for the credibility of our efforts to tackle regulatory obstacles to trade.
Ladies and Gentlemen,
This bilateral relationship is clearly our most significant. Together the Europe and the United States account for a third of world trade, half of global output and almost three quarters of total foreign direct investment.
But in these dramatically changing times it is sometimes possible to forget that fact, particularly as we see eye to eye on so many issues.
However, over the next few months we have a moment to take stock of where we stand today and lay out a plan for where we want to go.
We will need substantive, constructive and consistent input from the transatlantic business community if we are to succeed.
I believe that this morning's discussions will make an important contribution in that light.
I wish you the best in your work.