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European Commission

Karel De Gucht

European Commissioner for Trade

The Transatlantic Trade and Investment Partnership: Growth for Europe and Spain

Conference on the EU-US Free Trade Agreement at the Foundation for Social Studies and Analysis (FAES), Casa de America / Madrid, Spain

4 June 2013

President Aznar, Minister García-Legaz, My fellow panellists, Ladies and gentlemen,

I want to thank the FAES Foundation for organising this event today.

And I also want to thank them - particularly Minister García-Legaz – for producing this latest work on transatlantic relations.

  1. The book makes a serious contribution to our efforts to launch the Transatlantic Trade and Investment Partnership.

  2. It will serve as a useful guide for policy-makers as we work on this agreement.

  3. And it will be a good introduction for those who will become more interested in this process as our work moves forward.

Because the book seems to understand the need – as we approach this negotiation – for a balance between ambition and realism.

There is a significant prize for the taking. But can only do that if we reach out for it and make sure we avoid the pitfalls below us.

Since Presidents Barroso, Van Rompuy and Obama agreed to start work on these negotiations in February a lot has been said about this potential deal.

So I would like to focus my remarks today on three issues that I believe are the most important for the debate as it now stands:

  1. What can we expect to gain from a Transatlantic Trade and Investment Partnership?

  2. What needs to be in an agreement in order to get those gains?

  3. And what do supporters of our effort need to do if they wish to see success?

There is a great deal to be gained from a deal that effectively opens the transatlantic market – in economic and strategic terms.

First, the combined scale of our economies – by far the largest in the world – and the depth of our existing economic relationship – with mutual investment stocks that are approaching 5 trillion euro – means that this agreement should pack a significant economic punch.

Our estimate is that Europe as a whole can expect to see GDP gains of roughly 0.5% of GDP as a direct consequence of the new trade and investment flows created once the agreement enters into force.

Over the longer-term we can expect to see additional gains from the increase in productivity that accompanies market opening.

And in the short-term we can expect a successful deal to boost business confidence on both sides by reducing the risk of protectionism.

For Spain specifically the gains are likely to be significant because of the importance of international trade to Spain’s recovery strategy.

There has already been a dramatic overall improvement in Spain’s export performance. We saw the first trade surplus since 1971 earlier this year. That improvement was based not only on exports to the rest of Europe but also on significant increases in Spain’s exports around the world.

This is the beginning of what is needed. The Commission’s proposed economic policy recommendations for Spain – released this week – focus on the need to shift the economy towards more trade – to be in a stronger position to benefit from the opportunities of globalisation - as opposed to being on the receiving end of its more negative consequences.

Our Europe-wide trade strategy is a direct contribution to this process. By opening markets around the world we are creating opportunities for Spanish companies to grow. Overall we expect our agenda of trade and investment liberalisation with major trade partners to produce a 2% boost in Europe’s GDP. The US agreement alone is worth a significant proportion of those gains

And the Spanish economy is well-positioned to compete for a considerable proportion of the benefits. Spain posted a trade surplus with the US last year and 11% of your exports outside the European Union go to the United States. The challenge now is to deepen structural reforms in order to be even stronger by the time this agreement enters into force.

Our estimate of the impact of the agreement suggests that sectors like construction, public infrastructure, services and food and drink are likely to benefit the most from this deal.

In the difficult economic times we are facing, we cannot afford to turn up our noses at this kind of opportunity.

But even beyond economics, there is a broader benefit to be had from this deal - in terms its impact on the wider world.

This will be two-fold.

On the one hand there is the question of the World Trade Organisation.

Some have questioned whether this agreement could undermine the multilateral system. That strengthening our bilateral relationship with the US would weaken the multilateral process. I understand these concerns but I do not believe they are well-founded.

The fact is that the issues we deal with in this agreement will go far beyond what is on the table in Geneva at the moment. That means that our bilateral efforts could actually lay the groundwork for future multilateral progress. Especially given that any common approaches we agree on – for example on regulatory issues – will automatically have the weight of almost half the world economy behind them.

On the other hand there is the issue of our relationships with emerging countries.

As Minister García-Legaz and Mr Quinlan point out in their book, these relationships have radically changed in recent years. Neither the developed nor the emerging countries have yet adapted to this new situation.

But it is important that this negotiation is not seen as an effort to run away from this fact. It most certainly is not.

Over time I believe that we will need to come to a new global covenant on open markets between the new leaders of the world economy, taking into account their new roles in the world. That will take time and there is no short-cut to reach that point.

But a Transatlantic Trade and Investment Partnership may help strengthen our hand in any such discussion, giving us a greater collective weight.

The second issue I want to address is what needs to be in an agreement if we want to get these benefits.

We will of course need to look at the traditional issues that are covered in a free trade agreement, with tariffs the most important of these.

EU and US tariffs are low on average but there are high levels on some specific products. In any case, the volume of EU-US trade is such that even small amounts add up to a significant tax on business.

But we will need to go much beyond tariffs if we want this agreement to be effective.

The most important issue that we will have to deal with is regulation. It is also the most difficult area of the discussion.

As the book points out, history does not provide us with many successful examples of regulatory cooperation.

That is because it is a complex and sensitive area. It involves democratic choices about how to protect citizens from very real risks to their health, safety, environment of financial wellbeing.

So we need to make sure that people understand from the outset that these objectives are not being called into question in any way. In fact by improving cooperation between regulators, we could see better enforcement of rules, not worse.

And if we want to make progress this time, we are going to have to be more open-minded and more creative than we were in the past. That means being guided by common sense.

We will need to keep in mind that despite differences between our regulatory approaches, Europe has a lot more in common with the United States than it does with most other countries around the world. From our own experiences we know instinctively that you are no less safe driving a car or taking painkillers in the U.S.A. than when you are doing these things in Europe.

So when people start to get agitated about specific issues as the negotiations on, it will be important to bear that idea in mind: We are more similar than we think.

Beyond regulation there are a couple of other areas that we need to work on if we want to make this deal a success:

Take public procurement. The American market is considerably more closed than Europe's, particularly at the state level. This needs to be addressed given the economic importance of the issue for Europe, with 26 million jobs in procurement-focused industries.

We also need to see progress on services. Services make up more than half of the value of all EU exports - so they are indeed crucial. Again, the barriers in the US are not only at federal level. They also affect the states.

If we can agree on all these things, and do so within a reasonable time – like we aim to – then we will have an excellent tool to help Europe out of the crisis.

But this brings me to the third issue I wanted to raise: what we need from supporters of this agreement.

We will need two things.

The first is your voices. Over the course of this negotiation there will no doubt be many controversies. We are already seeing them in fact. And we know the potential for passionate views, even if they are unfounded, to get in the way of progress.

The debate we are having around the audio-visual sector is one example of this phenomenon. What is being said in public is that we plan to sell out our cultural diversity to the Americans to get a deal.

Nothing could be further from the truth.

The Commission's objective here is to protect Member States' freedom of manoeuvre in this vital area. That means we would never consider or discuss restrictions on what Member States do now to support their film, television, radio and music activities. Neither is the question of online-distribution up for grabs.

All we want Member States to consider, in fact, is whether they really need the possibility of excluding 100% of foreign audio-visual productions, particularly in the name of cultural diversity!

Taking a whole sector off the table would run counter to Europe's interest in obtaining a broad and comprehensive agreement.

This is a dilemma we face today. And for better or worse we will need to resolve it before we move to begin negotiations.

It is very important, in itself, but also because we will see many issues like this arise in the future, each with the potential to undermine the agreement as a whole.

The Commission will certainly be doing its part to play an active role in the public debate and to correct misperceptions. But it is crucial that supportive Member States, businesses and civil society groups also get out in public and help spread the message of what we have to gain here.

The second thing we will need from supporters is your stamina. We are only now at the beginning of the process and it is going to take many months to negotiate and then a number of years after that to implement. If this agreement is worth doing then it is likely to be controversial the whole way throughout that process. We will need your continuing support the whole time.

This agreement is a historic opportunity to open markets for the benefit of the whole of European society. It is a chance to shape the 21st century economy.

If Europe is to move beyond its current difficulties, it needs to seize opportunities like this with both hands. I hope you will join me in doing so.

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