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European Commission

Viviane Reding

Vice-President of the European Commission, EU Justice Commissioner

What's the Deal with the EU-US Free Trade Agreement?

Speech at Yale University/New Haven

30 October 2013

Main Messages

1/ On the Transatlantic Trade and Investment Partnership (TTIP):

For ambitious and complex negotiations to succeed there needs to be trust among the negotiating partners.

2/ Reflections on the future of Europe: "The US can inspire us."

We should start moving towards a United States of Europe - a model of government that draws the right lessons from the errors of the past: a model that further deepens the political and democratic foundations of the European Union.

Perhaps one day in the future we will need a directly elected President of the European Commission. The Presidential election campaign in the USA has shown us what a mobilising effect such a decision about a single person can have for a whole continent.

What we certainly need is a European Finance Minister. One person who protects the interests of all Member States and speaks for them in international institutions. Like (…) the U.S. Finance Minister. He is responsible for the federal budget and the interest of the US as a whole – not for the finances of Ohio.

Full Speech

Ladies and Gentlemen,

It is a great pleasure to be here at Yale University in New Haven, one of the most prestigious universities in the world, with a long history dating back to 1701.

It is in the best interest of both the US and the EU to work as closely as possible together. To that end we should learn more about each other's way of working and way of thinking. I want therefore to give you a European perspective on some current affairs.

I will talk about three main subjects:

First: The Transatlantic Trade and Investment Partnership (TTIP)

Second: The biggest economy in the world

Third: The United States

Starting on the Transatlantic Trade and Investment Partnership (TTIP)

I begin by going back to the classics. The French author Victor Hugo had a clear premonition in 1849 when he predicted that:

"A day will come when we shall see ... the United States of America and the United States of Europe face to face, reaching out for each other across the seas."

Today we are doing what Victor Hugo predicted. In fact, both the European Union and the US can look back to more than 60 years of successful cooperation. But we can now go a step further.

These days so many partnerships are called "strategic". But there is only one which is genuinely strategic: the US-EU relationship. Together, we account for nearly half of world GDP and 30% of world trade. More than that, we are also a community of values. We share a common narrative on many issues and we have shaped each other's history for the better.

True, we had a few unpleasant quarrels like "steel wars", "visa waiver disputes" and the like.

But overall, we have been working together as partners and are used to speaking to each other to resolve any disagreements.

On that note, let me stress that friends and partners do not spy on each other. It feels like being at school or university. Would you want your neighbour looking over your shoulder when you sit an exam? Would you like it if your friends would cheat and take all the credit for your intellectual property? I do not think you would and we certainly do not like it.

You are aware of the deep concerns that recent developments concerning possible intelligence issues have raised among European citizens.

Whilst I underline the close relationship between Europe and the USA and the value of that partnership, I should stress that partnerships must be based on respect and trust. This is the contrary of spying and control.

And for ambitious and complex negotiations to succeed there needs to be trust among the negotiating partners.

We want these ambitious negotiations to succeed. I count on our US friends to respect this: for the sake of our negotiations, and for the safe of our partnership and mutual trust.

We already had productive discussions during the first negotiation round of the TTIP in Washington in early July. Unfortunately, the second round in Brussels did not take place because of the US federal government shutdown.

I am certain that this bump on the road will not have an impact on the substance of our negotiations.

Let me now say a word on the substance: why do we need a Transatlantic Trade and Investment Partnership (the TTIP) if we already work so closely together? I see three main reasons:

First, we need to generate new growth in our economies – and in particular growth that does not require the use of public money.

Second, we need to get rid of unnecessary barriers which still stand between us - and often for no good reason.

And third, we need to set standards for global trade.

The TTIP is a comprehensive partnership which could bring significant economic gains for both sides of the Atlantic. Once the agreement is in place, we estimate benefits of around USD 160 billion for the EU and around USD 130 billion for the US. For the US, that's like adding another Oklahoma to the national economy.

Moreover, in the short run it is a strong signal that the EU and the US are committed to deepening and opening trade. This is a sign of confidence which businesses need in times of uncertainty and a sign of joint leadership on the global scale.

And it goes beyond that. The benefits for the EU and the US would not be at the expense of the rest of the world. On the contrary, liberalising trade between the EU and the US would have a positive impact on worldwide trade and income, potentially increasing GDP in the rest of the world by almost USD 130 billion.

Talking about abolishing unnecessary trade barriers: we in the EU have got some experience with this. The single market in the European Union comprises 28 countries, different regulatory and legal systems, and different levels of economic development. That is quite a challenge which we have mastered rather well.

TTIP is not about a single EU-US market but our experience can help us on designing the agreement. Imagine you travel from the US to Europe or vice versa. Wouldn't it be great to pass through the "nothing to declare" gate instead of queuing in front of a customs officer's booth?

Or look at cars. You all will want to have strict rules on car safety. And indeed, both US and EU regulations put public and consumer safety first. Yet, our respective rule books have developed independently even if they provide similar levels of safety. So it would actually make sense to come together and see how we can better recognise each other's standards.

The aim is that a US citizen can have the same hassle-free experience of buying a car in Europe as, for instance, a Portuguese person in Poland or vice versa.

What does TTIP mean for you and European citizens in concrete terms? First and foremost: jobs. TTIP means two million extra jobs.

Just think about that:

  • In the US, two million jobs would put every Californian back to work and still leave hundreds of thousands of posts to fill.

  • In Europe, two million jobs would eliminate unemployment in Greece and Portugal.

And TTIP is more. Everybody will benefit - through the form of cheaper goods and services. According to estimates, a family of four in the US would get an average extra USD 900 in disposable income each year. A similar family in the EU would save on average almost the equivalent of USD 750 thanks to an agreement.

Different studies from think thanks like CEPR, Bertelsmann and Hamilton may not agree on exactly how much each side will benefit. But they all agree that overall both sides will benefit and that overall there will be a broader positive impact.

And this agreement will set the standard - not just for our bilateral trade but also for the development of global trade rules. The size of the transatlantic market is so big that if it had a single set of rules it would be in the interest of other countries to adopt them too. It would set a model for others to follow. That way, they would only have to produce goods to one set of specifications, making trade easier and cheaper.

Last but not least, the challenge of international regulatory co-operation: if the EU and the US work hand in hand they pave the way for future global approaches to these issues. Today the World Trade Organisation is not in a position to take up these challenges.

The US and the EU are ready though - sitting on the same side of the table. Indeed, far from signalling the end of multilateralism and the Doha Round, TTIP could actually encourage others to restart the WTO negotiations.

Or to put it simpler: TTIP will not only break down cumbersome barriers but help prevent new ones being built in the future.

Secondly, a word on the biggest economy of the world

I would now like to talk about the biggest economy of the world – the European Union.

In 2013, the European Union brings together a population of 507 million (compared to 317 million in the US), it accounts for 7.3% of the world population (compared to the 4.5% in the US).

The European Union accounts for 23.2% (€13 trillion) of the world GDP. This is greater than the GDP of the US which accounts for 21.9% of the world GDP. And it is three times that of the China.

And all of them, regardless of whether they are German passport-holders, French nationals, or Italian citizens, no matter from which of the 28 Member States they come from, they are all also European citizens. They have got a European citizenship which entails rights and obligations under European law, in addition to national ones.

I know that some have been complaining throughout the financial and economic crisis that the EU always does too little, too late.

But markets have come to realise by now that there is strong determination to come together and always find solutions. The fact that European leaders have shown determination and commitment to find answers to all these serious challenges has kept the European Union and the euro alive – and it will continue to do so. The EU and the Euro are irreversible.

European leaders are fully aware of the implications of their actions for the world economy, not just for Europe. They take their responsibility seriously not to hold world markets hostage because of ideological differences. And unlike other parts of the world, in Europe, we do not see compromise as betrayal.

The recent debt drama in Washington has led some people in Europe to jostle with schadenfreude as they recalled some US lecturing on our handling of the crisis. I am not among those, because this is neither appropriate among friends nor helpful. We have all been facing unprecedented challenges to which there is no one-size-fits-all solution.

Secondly, the Eurozone is moving out of crisis mode. Many measures have been taken to improve its governance. And Europe has taken G20 recommendations about fiscal consolidation seriously - we look to our partners to live up to these joint commitments, too.

That said, we must also acknowledge that we still lack the completion of a scheme that melds responsibility, solidity and solidarity at European level. As long as individual decisions, as rational as they might be for the individual government, can create collective disaster, we must finish the reform of our financial, economic and political system. And this leads me to the third and last subject.

Third, a word on the United States

Finally, I would like to talk to you about the United States. The United States of Europe… which is how I see Europe's future. I begin by quoting George Washington:

"We will see a United States of Europe, united in finance, and many political questions which today appear without possible solution ... will be straightened out by financial necessities, as surely as the mountain snow melted by the sun runs by nature’s laws in the streams and rivers to the sea."

This vision was also articulated by Victor Hugo in the mid-nineteenth century. At that point bloody conflicts still lay ahead for both parts of the world. In America a brutal civil war divided this country into North and South before establishing the bases for today's Union. In Europe wars brought brutal devastation twice within 20 years. And yet we Europeans managed to create something extraordinary: today, 507 million people live in the European Union in peace and freedom. Over 315 million people share the euro as their common currency.

With all the crises in the news, one might well think that Europe was in bad shape. It is true that a small number of EU Member States have problems, in the same way as some states of the United States suffer from economic and fiscal problems. However, the doom-and-gloom nightmare scenarios of disintegration prophesied for the euro-zone have not been fulfilled. And they will not be.

The level of integration and inter-dependence in Europe is too deeply rooted for it to fall apart. Europe is more than simply a Free Trade Area. Our integration spans beyond that, to a single market, to an area of freedom, security and justice.

A single market requires fundamental changes in which nation states cooperate. They must abolish their prerogative to establish border controls, excise customs duties, guarantee the free movement of people, goods, services and capital, etc. Overall, they must guarantee each of their own citizens and of every other member state of the European Union the same, Europe-wide enforceable rights. This cannot be governed by intergovernmental cooperation.

It requires a supranational organisation like the European Commission, a European-wide Parliament like the European Parliament and a judiciary with the power to enforce law beyond national borders like the European Court of Justice.

At the height of the crisis, many predicted that the EU and the euro would fail, would fall apart. They were evidently wrong. Even Noble Prize winners like Paul Krugman got it wrong. Many underestimated the depth of both our integration and commitment to maintain this. Europe is committed to "an ever closer union".

This statement is firmly inscribed in the European Treaties and is followed by a genuine commitment of European leaders to achieve this goal. It is not always an easy game. It is rather a continuous process requiring the art to negotiate and accept compromises.

Europe is engaged in a far-reaching reform process. Many steps are taken at national level. But even more important are reforms at European level. They change the relationship between the national and European level, they create new rules and mechanisms. But above all, they help to complete the economic and monetary union.

The recent establishment of the first pillar of a new, federal shock-absorber for our banking system in Europe, for instance, was another important step. We are making sure that in the future it will be the banks, their owners and creditors, who pay when things go wrong, not the taxpayer. And in the process we are of breaking the vicious link between sovereigns and their banks. The completion of what we call banking union is of immense importance to us. Unlike in the US, more than two out of three companies in Europe use bank loans as a source of external financing. Our SMEs have an even bigger share. Hence a smoothly functioning banking sector regulated and supervised at European level, with common rules on how to resolve failing institutions, is of key importance.

But we cannot stop here. We have begun to find ways out of the debt and financial crisis. We must now consolidate what has been achieved in the past years.

I believe that we should start moving towards a United States of Europe - a model of government that draws the right lessons from the errors of the past: a model that further deepens the political and democratic foundations of the European Union. In the heat of the crisis, some new rules and institutions had to be set up outside the framework of the European Treaties, like the European Stability Mechanism, our kind of "European Monetary Fund" that will support Member States experiencing financial difficulties. Because we had to take speedy decisions, not for Europe alone but also taking into account repercussions on world markets, on partners and friends.

But from a democratic and parliamentary point of view, this cannot and must not be a long-term solution. Decisions must not be left exclusively to “troikas” of financial experts. On the contrary, I believe that debates about long-term solutions must be conducted in full view of the public in the European Parliament.

I believe that, as in the US, we will need a two-chamber system for the United States of Europe. Perhaps one day in the future we will need a directly elected President of the European Commission. The Presidential election campaign in the USA has shown us what a mobilising effect such a decision about a single person can have for a whole continent.

What we certainly need is a European Finance Minister. One person who protects the interests of all Member States and speaks for them in international institutions. Someone who really sees the bigger picture. Like Jack Lew, your Finance Minister. He is responsible for the federal budget and the interest of the US as a whole – not for the finances of Ohio.

This is one way in which the US can inspire us when moving into the future. Maybe we can offer some inspiring ideas to you in return. I know the debt ceiling is a topic that keeps causing painful discussions in your country. You know what countries in the EU have done? They have pledged to implement so-called debt brakes to make sure they put their finances on a responsible path.

More democratic control and accountability require politicians to be ready and able to engage in direct dialogue with ordinary citizens, something you are very well accustomed to. Of course, we cannot create the United States of Europe overnight. But we should start now.

All this is for the choice of the people. Next year will be the year of choice in Europe. In May 2014 we will see the election of a new European Parliament and subsequently a new European Commission. It will be a decisive year in any account.

Ladies and Gentleman,

We have important challenges ahead.

First, we have been through turbulent times. And hearing many doomsayers, we are able to say that the news of the death of the euro and the demise of the European Union was greatly exaggerated. We have developed strategies to return to sustainable growth and employment. What we must do now, first and foremost, is to stay the course.

Second, we are two large economies, we are two big investors – and it is too big to miss an opportunity like the Transatlantic Trade and Investment Partnership.

Let me finish by returning to the classics and again quote from Victor Hugo:

"A day will come when we shall see those two immense groups, the United States of America and the United States of Europe, stretching out their hands across the sea, exchanging their products, their arts, their works of genius […] And to bring about that day will not take another 400 years, for we are living in a fast-moving age.

I am very much convinced that it will not take 400 years, not 400 weeks but less than 400 days for our negotiators to stretch out our hands and congratulate each other for a successful conclusion of our Transatlantic Trade and Investment Partnership. This has however to be correctly handled and built on trust the same trust that was shaken following the latest revelations.

Imagine what a clear signal for leadership and encouragement this sends to world markets. That would be a good deal and that is the deal with the TTIP.

Thank you for your attention.

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