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European Commission

Karel De Gucht

European Commissioner for Trade

Open Markets: Making the Case

World Federation of Advertisers Annual Conference/ Brussels

6 March 2013

Ladies and Gentlemen,

I am very happy to welcome you to Brussels, capital of the European Union.

This is a political town.

What we do here – regulating and legislating – may seem a world away from what you do – advertising and marketing. And it is true that our lines of work are very different.

But we do have two things in common.

One is that neither of us – politicians nor advertisers – have the best reputation in the world!

And the other is that even if we know we have a very good product, we also know that we won’t get very far if we can’t convince others to believe that too.

Your job is to persuade people that your product is the best. Ours as politicians is to persuade people that the best policy is the one we propose.

In both of our roles the conversation with people is also a two-way one:

In marketing and advertising, you need to understand what the customer wants. But you also want to identify a need that he or she may not know he has.

In politics we are at the service of the people. That means that through elections the people must make the choice between the representatives on offer and the programmes they propose.

But elected representatives, to be effective, must be able to go beyond reflecting public opinion. They have to state what they believe to be the best approach and then defend it against criticism.

Moreover, our task of convincing is made more difficult, both as politicians and as marketers, by the fact that the concepts we deal in are abstract.

A brand by definition is intangible. And - while you might be able to touch the piece of paper on which a law or a treaty is signed – that is not the same thing as touching the act itself.

Explaining them can therefore be a challenge. Because we are really explaining the need for people to behave in a different way.

I have a product I would like to sell to you today. I feel like I’m in the lion’s den here – trying to persuade a room full of persuaders – but I do have some experience in this field myself.

What I want to convince you of is that what you need from Europe is an open and active trade and investment policy. You need the European Union to negotiate with other economies around the world to open new markets, to open the European market and to create transparent rules for the way international trade and investment operates.

Here is the first reason why: Open trade is what underwrites your businesses. I looked at the attendance list for this conference before coming here today and I think I can say that there is not one company here for whom the open global economy is not vital.

With suppliers, factories, sales teams, research and design centres, distribution channels and after-sales services spread across continents, your companies depend on governments’ decisions to open their markets to foreign investment and trade.

It is trade policy and trade agreements – most importantly the agreements enforced through the World Trade Organisation – that commits governments around the world to keep their market open and forces them to follow through on that commitment through tough sanctions.

Here’s the second reason. Opening new markets creates growth. In Europe, we have made incredible strides forward in addressing the crisis facing the European Union – we have created a new treaty, provided billions in funding, reformed national finances – all steps that would have been unimaginable not too long ago. But we know that all of these efforts will be for nothing if the European economy doesn’t grow.

Trade will be one of the most important sources of that growth. It already is. The small contraction of the European economy last year would have been four times larger if it were not for the money brought in by our trade. In the future we expect that 90% of world growth will happen outside our borders. So we need to be part of that.

Trade is also at the centre of the growth models of emerging economies. China, India, Brazil and South East Asia – in all of these places the reduction of trade and investment barriers has been key step in their development. And exports of goods and services remain crucial for their continuing growth, even as domestic consumption increases.

So we need to keep opening more markets if we want our economies to grow. An active and open trade policy will deliver that.

Here’s the last reason: Rules. As you know very well, once a company starts doing business outside its home country legal predictability drops dramatically.

The company is now subject to a different regulatory environment. New markets mean new ways of making rules on issues from food and product safety, to protecting the environment, through to how you can sell financial services.

The process may be less transparent or it may be that the rules discriminate against foreign companies. It may be that just complying with many different sets of rules creates an unnecessary cost. Or it could be that rules are not properly enforced, as is often the problem with intellectual property rights, crucial for protecting your intangible assets.

Those three reasons make a general case for why you should support an open trade policy. But let me give you a specific example of what we are doing.

The European Union is engaging with a huge range of partners. Some of our negotiations take place through the World Trade Organisation but they increasingly also happen through bilateral talks.

We have made this change in response to the massive shifts we have seen in the structure of the world economy over the last twenty years. Given these shifts, our agenda naturally includes negotiations with emerging countries in Asia, Africa and Latin America.

But I would like to use a different negotiation as an example, because, if successful, it would be quite simply the largest bilateral free trade agreement ever achieved. And it will therefore be vital for your companies.

I am speaking about the negotiation we that we hope to launch with the United States. Last month, Presidents Barroso, Van Rompuy and Obama jointly recommended that we open negotiations for a Transatlantic Trade and Investment Partnership.

Why do I think this agreement would be so important for you? Let me come back to the three reasons from before:

First, guaranteeing open markets.

An agreement with the US would be a particularly valuable guarantee of the international value chains on which your companies are based. This is the largest economic relationship in the world. It covers more that 2 billion euro a day in trade, 2 trillion euro a year in foreign direct investment and up to 15 million jobs. A huge proportion of that trade is within firms and much more of it is business-to-business.

Ask yourself, how many of the companies represented here today have more than 40% of their turnover in these two markets?

A transatlantic partnership would lock in the existing openness in the transatlantic economy. It would make sure that both sides avoid any temptation to resort to protectionism as a misguided solution to the crisis. And it would send a strong signal around the world that the two largest trading partners are convinced that liberalisation is still the best way forward.

The second reason that this agreement will be vital for you is growth. Obviously, this is not only about maintaining the status quo but also about delivering new market access.

Given the size of this relationship, removing any barriers to trade and investment will lead to important gains. Just look at the tariffs for example. The average tariff paid on goods crossing the Atlantic is only around 4% but given the 2 billion euro a day in trade between us the unnecessary taxes on your business will be enormous.

Overall, we think this agreement will bring gains of between 0.5 and 1% of transatlantic GDP.

And of particular interest for you will be the potential impact on consumers’ pockets: We believe that it will result in 130 billion in new household income.

We also believe that the agreement will have knock-on, positive benefits for other trading partners around the world - perhaps in the order of 100 billion euro - because much of the new market opening we that we hope to achieve will not discriminate against them.

The final and perhaps the most important reason that you need this agreement is that it will help create common rules.

Ask yourself the following questions:

Is a seatbelt in a European car more or less safe than in a US car?

Is a drug approved for the US market more or less safe than one approved in Europe?

Is an airplane that flies between Chicago and Phoenix more or less safe than one going between Copenhagen and Paris?

We have different regulations in all of these areas and they all create costs for your companies doing business across the Atlantic.

What we want is to take a significant step forward on the path to regulatory convergence.

We will seek to improve our coordination so that future regulation is more in line. And we will try to formally recognise that in many areas our approaches achieve the same objective even if they follow different procedures.

The value of such an agreement would not be restricted to the transatlantic zone either. The common rules we achieve will have the weight of 40% of the world economy behind them and will be a very strong model for future global rules. That would help your business in markets around the world.

I hope I have convinced you that you need open trade policies in general - and this transatlantic deal in particular.

I hope so because businesses, especially those that play an active part in the global economy, have a crucial advocacy role in the debate on international trade.

Real progress comes when both sides in a negotiation make real changes. And with change comes resistance from people with a vested interest in the status quo. That means that those who have the most to gain from moving forward need to speak out.

There is a strong positive story to tell on open trade. Business needs to communicate that story broadly and clearly.

I started by saying that we have same task as politicians and marketers: To convince people of the value of sometimes abstract ideas in order to change their behaviour.

As a result the product of our respective efforts can only be measured in human behaviour. Yours if customers buy your products. Ours if people come to share our point of view.

I hope that you have come to share my point of view on the need for open markets.

And I hope that I can count on your support in the future.

Thank you very much for your attention.

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