Remarks by Ambassador Michael Froman at the German Federal Ministry for Economic Affairs and Energy

Remarks by Ambassador Michael Froman at the German Federal Ministry for Economic Affairs and Energy
The United States, Germany and T-TIP

Berlin, Germany
May 5, 2014

*As Delivered*

Thank you Christoph, for that introduction, and thank you very much, Vice-Chancellor Gabriel, for welcoming us here, hosting this event. Commissioner De Gucht, first, it’s great to be here with you again.  I think they invite us to these events together to see if we’re going to fight with each other, and I’m afraid they are going to be quite disappointed because we have spent so much time with each other, that we can now finish each other’s sentences, read each other’s remarks quite comfortably. 

Let me tell them a story about our host. As the minister said, we worked together on something called the Major Economies Forum on Climate Change, back in 2009, when President Obama convened that group. I knew that Sigmar Gabriel was a formidable politician when I watched him during an eight-hour meeting on climate change. He would get up after hour two, and go have a press conference to determine whether the meeting was successful or not. And I knew, and he shared that with me, that I had better act quickly, otherwise the meetings would be determined a failure by Sigmar. So I will speak quickly here as well to make sure I live up to those expectations.

It’s a particular privilege to be here in Berlin again.  My father was born here, he lived here as a child. And as a student of the Cold War, I came here to see a divided city; as a student of German unification, I came here to see a united city; and as a student of integration and economic progress, I came back to see a city that drives European integration, and global economic integration. No city or country represents the renewal, reinvention, revitalization in the way this one does. And it is a privilege to be back in that regard.

And throughout this process, the United States has been a close partner, an ally and a friend every step of the way. We have forged an incredibly deep strategic and economic relationship.  And, therefore, it’s appropriate we’re here today to talk about how to take the Transatlantic relationship to the next level.  

Consider this: the United States and the EU account for nearly half of all global output and one-third of global trade.

Our exchange of goods and services between the United States and the EU fuels our economies – a trillion dollars each year. Our investment relationship, 4 trillion dollars.

That’s more than a statistic. It means a plant or an office in your town.  It means stability and economic security.

And it means jobs – more than 13 million direct jobs on both sides of the Atlantic are sustained by transatlantic trade.  

But we know we can, and must, do better.  

We had the honor of hosting Chancellor Merkel in Washington, D.C. just a couple of days ago.  And there she made clear that, with all of the trade negotiations going on around the world, it is inconceivable that we wouldn’t try to have one between the United States and the EU. As the Chancellor plainly said, ‘It is simply necessary.’

We agree.  That is why we are negotiating the Transatlantic Trade and Investment Partnership:  to create opportunity, especially for small and medium-sized businesses, and to help shape global rules, consistent with our shared values.

We’re seeking an ambitious and comprehensive agreement in T-TIP, one that brings benefits to workers, farmers, businesses and citizens on both sides of the Atlantic. 

And the biggest winners from T-TIP may well be our small and medium-sized businesses, and no one is better positioned to benefit from T-TIP than the mittelstand here in Germany.

Small businesses form the backbone of our economies.  We have 28 million in the United States, and over 20 million of them in the EU, and they help drive the job creation and innovation that fuels our economic growth.  But they are also woven into the fabric of our societies. They are our neighbors, our friend, and our family.  Through T-TIP, we can redouble our commitment to them, and the values they represent.

Take a company called Schoder, owned by Kirsten Schoder-Steinmüller.  Schoder is a machine and tool-parts company located outside Frankfurt. As growth in Europe slowed, demand picked up from the film industry in the United States, where Schoder’s products are used for film production equipment. U.S. growth has kept the company’s revenue steady, providing stability for Kirsten and her staff.

There are millions of companies like Schoder, on both sides of the Atlantic. A few weeks ago, I visited a small company named Atlas Devices in Boston. Atlas devices manufactures powered ascending tools, which help rescue workers and others scale buildings quickly, climb out of holes quickly. Fifty percent of their sales are now coming from overseas markets – including Europe – and Atlas therefore opened a new manufacturing facility, added new jobs that re helping keep up with that demand.

And yet, for every small company like Schoder or Atlas, which are taking advantage of transatlantic opportunities, there are many more for whom barriers to entry to exporting are just too high. And that’s why we believe our efforts to reduce barriers to trade in T-TIP is especially beneficial to small and medium-sized businesses, whether they are selling directly, or as part of supply chains, providing inputs to other companies that are.

We’ll be focused on the goal of eliminating tariffs and traditional non-tariff barriers that can price small and medium-sized businesses out of the market.  And let me be clear:  Our level of ambition is second to none.  When we launched these negotiations, we agreed that the goal was the full elimination of tariffs – on industrial products and on agricultural products.  We remain committed to that goal today.  We’re preparing a robust offer on the services sector as well – one based on a negative list, meaning that everything is open unless explicitly excluded.  We look forward to seeing the same level of ambition from our European counterparts as well.

But T-TIP is not just about eliminating tariffs and traditional non-tariff barriers.  It’s about promoting innovation, ensuring that our economies can lead and respond to the development of technology, which is happening at a pace unknown in human history.  It’s about promoting the competitiveness of the transatlantic economy in an increasingly competitive global economy.  We have such inherent strengths, and T-TIP gives us an opportunity to further unleash those strengths.

In that regard, for companies on both sides of the Atlantic, perhaps the most economically promising – and challenging – area for cooperation in T-TIP is in reducing the impact of the differences in our regulatory and standard-setting systems.

The United States and the EU have the strongest regulatory protections in the world, and nothing we do through T-TIP will change that.  But even though we achieve similar levels of protection in many, if not most areas, we often achieve those levels of protection through different routes, with different measures, and in a way in which those differences create obstacles to trade.

A product built to high standards in the U.S. cannot be sold in the EU – and vice versa -- due to often minor differences in regulations.  Then the product must undergo entirely separate testing, because we don’t recognize each other’s testing methods.  Large firms have the resources to maintain multiple production lines – allowing them to serve markets with different requirements – but small firms often cannot.  This results in massive costs to the economy, when the actual level of health or safety might actually be the same.  This is what we are seeking to address in T-TIP.

Some people have argued that, by seeking to address regulatory and standards issues, we are promoting a deregulatory agenda; that is simply not true. Nothing we do through T-TIP will in any way limit the ability of governments in Europe or the United States to regulate in the public interest or reduce the level of health, safety and environmental protection publics on both sides of the Atlantic have come to expect.  On the contrary, T-TIP is a core part of our effort to promote smarter, more effective, and more efficient regulation to enhance the competitiveness of our economies, to promote innovation and to lay the foundation for an international trading system that reflects our values.

A little over a month ago in Brussels, President Obama said, and I quote, “I’ve fought throughout my political career and am fighting as we speak to strengthen environmental protections in the United States. So I have no interest in signing a trade agreement that weakens environmental standards.”  And let me add, that applies to our all areas of our regulatory system.

Having said that, we think there are steps that can be taken to better align our regulatory processes so as to avoid unnecessary divergences by improving transparency, participation and accountability in the regulatory and standards-setting process.

For example, we should be able to publish an agenda of our upcoming regulations, and highlight the ones that have an impact on trade. We should be able to publish the text of the proposed regulations when they are in detail but still in draft form, at a stage when input can be meaningful. We should be able to provide for all stakeholders – companies, labor unions, civil society organizations, individuals -- from any country – provide them with the opportunity and time to comment on these draft regulations.  And when our regulators take a final decision, they should be able to respond to the substantive comments and explain how their regulations are grounded in science and evidence.

There is no one right way to regulate, and there is no ‘one-size-fits-all’ solution. But the principles of transparency, participation and accountability are not uniquely American.  They underlie the regulatory process in many European countries, they are already on the EU’s regulatory reform agenda, and they have broad public appeal.  We’ve heard from Member States and Parliamentarians who seek greater transparency and participation.  We’ve heard from European businesses and civil society groups who want more openness and accountability.  We have an important opportunity through T-TIP to further align our efforts with the emerging sentiments of our constituents. 

Let me touch on another area where the United States and the EU share fundamental goals and which has generated significant attention, and that is investment protection.  Our values are aligned in the belief that governments must abide by the rule of law, and prevent discrimination and expropriation without due process and adequate compensation. 

We both have strong rule of law.  We have strong legal traditions against discrimination against foreign investors.  But many of the other countries don’t, and for this reason, we hope that investment protection will be one of several areas in which T-TIP is able to set a new global standard.

We acknowledge the concerns some stakeholders have raised with investor-state dispute settlement, and in fact, we share many of those concerns.  That’s why we in the United States engaged in a four-year long review of our model investment treaty, including extensive public consultations, hearings and written submissions.  And when we launched T-TIP, we had an additional public consultation process, including around investment issues.  We welcome the consultation process the EU recently launched and look forward to the results.

We have worked over the last several years to strengthen the safeguards around investor-state dispute settlement to make sure that governments can engage in bona fide regulation in the public interest.  In recent agreements, we have proposed mechanisms to make sure we have the ability to discourage and dismiss frivolous suits; to create greater transparency around ISDS proceedings and allow non-parties such as civil society organizations to make their own submissions to ISDS tribunals. To allow the two governments involved to direct the tribunal to dismiss cases in certain areas or to agree on an interpretation of an obligation that is then binding on the arbitral tribunal.

Germany, of course, invented ISDS more than 50 years ago in its bilateral investment agreement with Pakistan.  Now there are more than 3000 investment agreements worldwide, the vast majority of which have some form of ISDS.  Germany is party to more than 130 of them, the U.S. is party to 50 of them.  More than half of all ISDS cases have been brought by European firms.  So, the availability of neutral, international arbitration through ISDS is not a concept the United States is introducing to its partners in Europe.  It was invented here; it has been embraced here; and it is used more here than anywhere else in the world. 

The question is whether through T-TIP we can better align ISDS with our shared values.  Some of those 3,000 agreements have stronger standards than others.  Through T-TIP, we can jointly set a new and higher standard, introduce important safeguards into the system, and have T-TIP be a model that raises the bar for investment protection, not just between the U.S and the EU, but for the global trading system as a whole.

More generally, we see T-TIP as providing an opportunity for the U.S. and the EU to not only to deepen the transatlantic space that reflects our shared interests and values, but to work together to strengthen those values beyond our borders.  T-TIP is an opportunity to articulate and promote globally our shared values on the rule of law, transparency, public participation, and accountability. And beyond this, we seek to ensure strong and enforceable labor and environmental commitments, protection of consumers against inferior, counterfeit products, and robust protection of intellectual property rights-- issues consistent with providing access to affordable medicines and maintaining an open and free Internet.  As we provide our people with more choice and lower their cost of living by reducing costs and barriers to trade, we seek to maintain strong consumer protections, safe foods and safe products.  We seek to update the global trading system to take into account some of the most promising opportunities, such as those presented by the digital economy, and to address some of the emerging challenges, such as leveling the playing field between state-owned enterprises and private firms.

This is, as Prime Minister Cameron has noted, a ‘once-in-a-generation opportunity’.  The world is not a static place; other countries are not standing still waiting for us.  The question is who will play a leadership role in helping to shape the rules of the road?  Will we be standard-setters or standard-takers?  And will we do everything we can to ensure that the global trading system reflects not just our interests, but also our values? This is the time to act.

T-TIP is about opening opportunities for our workers and businesses.  It’s about promoting innovation and competitiveness.  It’s about shaping a global system – one with our shared values at the core.  And it’s about establishing an economic relationship commensurate with the strongest alliance on earth.  As I’m sure I don’t have to remind people in light of recent events, the economic and strategic imperative of T-TIP has never been stronger.

Making progress on the issues won’t be easy. There will be some bumps in the road.  But our experience tells us that nothing worth doing is ever easy.  I for one look forward to working hand-in-hand with Germany and the EU to achieve this important goal.

Thank you.