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Karel De Gucht
European Commissioner for Trade
The Future of Transatlantic Trade
AmCham Germany Annual Membership Meeting
Hamburg, 11 May 2012
Ladies and Gentlemen,
As the European Commissioner responsible for trade, I am delighted to be here in Hamburg for the birthday of its port. And I am very happy to be speaking to the American Chamber of Commerce in Germany, which assembles such a great variety of successful companies engaged in transatlantic business.
In my work I spend a great deal of time talking about how we can adapt to and profit from global economic integration. Although this is one of the most important issues for the future of the European Union, it is also quite abstract. But when you come to a port like this and see the containers arriving and leaving in such vast numbers, the scale of this phenomenon becomes much more concrete.
The development of economic relationships with the world's major players will have a deep impact on our own prosperity. Europe has several major partners, but our partnership with the United States is the one we take most seriously.
I would like to use my time with you this morning to see where our partnership stands today and how it could develop in the future.
Let me first recall a few facts and figures that underpin the huge economic importance of our partnership.
It is the largest bilateral commercial relationship in the world. In 2010, the value of our traded goods and services came to 670 billion euros. But given that many of you work for American companies with operations in Europe you know that investment is even more important. Our total FDI stocks in each other's economies are 1.2 trillion euros each. As a result, more than 15 million people are employed by European multinationals in the US or the other way around.
Germany itself plays a vital role in this process. Trade in goods between Germany and the US represents almost a quarter of the total figure for the Union as a whole and 17% of trade in services. 10% of the investment relationship is made up by links between Germany and America.
We also have a huge economic weight in the wider world. Our economies make up 40% of global GDP, even if we account for only 13% of the world's population. Together we represent one third of all world exports and over 30% of world imports. We host almost 60% of world inward stocks of foreign direct investment and account for three quarters of the outward stocks.
If I were to stop there, I think you would agree that there is little need for innovation in our relationship. But as you know well, a full picture of today's world is much more complicated.
First, the crisis has had severe consequences for both of our economies.
In 2009, the year the crisis hit home, output fell by 3 and a half per cent in the US and over 4% in the European Union. Over the course of the crisis unemployment has doubled in America and jumped by a third in Europe. And government debt rose by 40% in the EU and by 60% in the US, albeit from a lower base.
This represents the most serious economic reversal since records began. And even now, three and a half years after the Lehman collapse, the outlook on both sides of the Atlantic is mixed.
In Europe, we have made real progress towards addressing the debt crisis in Europe. On the fiscal side we have created a firewall, provided assistance to countries who have needed it and put in place a reinforced system of economic governance. At national level Member States across Europe are taking tough but necessary measures to improve their fiscal position. We also have a concrete strategy to boost growth, which we are now working to reinforce. Indeed some parts of Europe, Germany included, have already been growing for some time. But there is no room for complacency, as the return of anxiety to financial markets in recent days demonstrates all too well!
German growth has so far not brought forward the entire continent. In the last quarter of 2011 the European economy as a whole actually shrank by just under half a per cent and our economists predict that we will only have a weak return to growth in the second half of this year. As this week has shown, we also have a way to go before we can say that fiscal stability has been restored in the euro zone. I sincerely hope that Greece will stay on its course of consolidation under the second assistance package. By the way, cohesion and structural funds account annually for about 4% of Greek GDP, twice the order of magnitude of the historical Marshall Plan. That Europe would do nothing to enhancing growth belongs to fantasy.
The Presidential elections in France show that many in Europe are growing impatient about economic stagnation and high unemployment. Indeed, we must find ways to foster growth, but that must not come at the cost of progress on budget deficits.
On the other side of the Atlantic, things may look a little better. The last quarter of 2011 saw strong growth of 3%. Even if the latest estimates suggest it slowed slightly in the first quarter of this year, the US recovery seems, on the whole, to be continuing.
But again, the legacy of the crisis can be felt. As the most recent jobs data demonstrates, there are many uncertainties about the US outlook – not least because of America's exposure to developments on this side of the Atlantic. Furthermore, the US' trade performance has slipped. Over the last ten years, while Europe's share of world exports was holding steady the US' share fell by 6 percentage points to reach a low of 12%.
But the crisis is not the only element in the global picture. In future, when we look back on this time I believe we will see the emergence of new economic powers onto the world stage as more significant. Just one last figure: An amazing 90% (!) of global growth will come from outside of Europe after 2015.
That is why developing economies are the new drivers of global trade, and that is why the relative weight of the EU-US commercial relationship will inevitably be diluted over time.
What does this analysis tell us policymakers? How should we strengthen our commercial relationship in times of its relative decline and in view of sluggish growth perspectives?
Let me update you on our two most important transatlantic initiatives: the Transatlantic Economic Council, and the EU-US High Level Working Group on Jobs and Growth. I am in the happy position to be co-chair of both of them, and as recently as yesterday evening I had an intensive exchange with my counterparts USTR Ron Kirk and the White House Economic Advisor Michael Froman how to bring the relationship forward.
Let me give you a quick overview of how I see the way forward.
The first thing we can do is use the tools we already have. Since I took office, I have tried to reinvigorate the Transatlantic Economic Council – a project with German origins. As you are aware, the Council tries to foster regulatory convergence with input from both industry and consumers.
For example, last week the US agreed to recognise Europe's Authorised Economic Operator programme for customs security as equivalent to their own system - and we agreed to do same in the other direction. This regime of trusted traders will mean real cost and paperwork reductions for companies. In Hamburg, a main European port, I don't have to explain any further. You know how to value this better than I do.
Just this month the Transatlantic Economic Council also agreed to common principles on international investment. They are designed to serve as a best practice model for our respective investment discussions with emerging countries.
In the Argentina-REPSOL case we have all seen the risks to international investors from unpredictable action by governments – so allow me to take a few moments to focus on this.
In that situation we saw how important it was for an individual country, Spain, to have the backing of the whole European Union for its concerns. And in fact that is because the protection of international investments is something that Europe has just been authorised to start working on in the Lisbon Treaty.
Second, and coming back to the transatlantic relationship, I believe that our priority should now be to move towards a new comprehensive initiative to further liberalise transatlantic trade and investment.
Such an initiative would remove the remaining significant barriers to transatlantic value chains. It would also establish new benchmarks for international regulatory agreements which could help us in our relations with key emerging countries.
So I was very pleased when Presidents Barroso, van Rompuy and Obama agreed to launch the High Level Working Group on Growth and Jobs at last November's summit. We have a common objective: to identify actions that will increase transatlantic trade and investment and so support job creation, growth and international competitiveness.
To meet this challenge, we are looking at all measures that have a real impact on our trade and investment relationship. Let me go through the different "baskets" we are currently discussing.
First, and quite naturally, we are looking at tariffs, across the board, for industrial and agricultural products. I can assure you that we will work to get as close as possible to full tariff elimination with a clear determination to achieve ambitious liberalisation across all sectors.
Second, on services there are clear offensive interests on both sides. We both want improved market access as well as a framework for better regulatory cooperation. These are issues that we pursue in all our trade agreements but the specific EU-US context allows us to go beyond anything either of us has done before - in terms of both depth and scope. Naturally, this will need to involve the regulators both at federal and state level. Another aspect is how transatlantic liberalisation would relate to the multi-country services initiative that the US is currently pursuing. If we were able to establish a solid basis for dealing with services in a comprehensive bilateral agreement, both parties would have a stronger and more coherent position in the broader context.
Third, the EU is interested in having an ambitious deal on procurement. For us, getting exceptions from the Buy America Act as well as substantial additional commitments at state level is crucial.
Fourth, we need a common platform for tackling regulatory issues for both food and non-food products. Veterans of the transatlantic relationship know what this can entail: disagreements over chlorinated chicken, registration of chemicals or genetically modified organisms. We have recently managed to close one these disputes – on hormones in beef – but the subject remains very tricky.
My view is that we should approach the regulatory and the food safety chapters with a view to achieving stronger and more systematic cooperation in the setting of new rules, while being politically realistic about what can be done where we have entrenched differences.
So, in conclusion, it is my firm view that 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. I propose we negotiate for no longer than 18 months as from early 2013.
This can only be done in a comprehensive agreement, on all issues at stake, in a single package.
We all know that a more piecemeal approach will at best allow us to solve only the easy problems while the difficult ones – which have the greatest potential to generate jobs and growth – fall by the wayside. At worst, a piecemeal approach could lead to deadlock before we even get off the ground.
A truly ambitious outcome can only be achieved through a comprehensive approach. This is the only way to ensure that sufficiently broad trade-offs can be found across the most difficult issues on both sides, thus unlocking the true potential for jobs and growth in the transatlantic marketplace.
I believe that with sufficient political will we can get this done quickly and deliver a real and much needed injection to our economies. It would also make the rest of the world sit up, as two "old" partners would have brought a bold initiative to a good end.
Ladies and Gentlemen,
I do not need to tell this audience that significant new ties between Europe and the United States would be beneficial for both sides. In your work every day you see - and you deliver - the economic gains from international cooperation.
We hope to see significant progress in the transatlantic trade relationship this year. And I hope that we can start talks in earnest as soon as the US elections are over!
Thank you very much for your attention.