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Remarks by Ambassador Miriam Sapiro at the European Policy Centre

“The Transatlantic Trade Relationship – Achieving its Full Potential”

Remarks by Ambassador Miriam Sapiro
Deputy U.S. Trade Representative

European Policy Centre
Brussels, Belgium
Thursday, February 10, 2011

*As Delivered*

"Thank you for that introduction, Josef.

"I am so pleased to be here at the European Policy Centre, my first stop on this visit to Brussels. EPC has been an important forum on EU policy for years, and it is an honor for me to be with you today.

"We are meeting at what I hope is the end of a period of some hand-wringing about the strength of the transatlantic partnership. We have had our share of challenges in recent years on issues of foreign and economic policy. I think many of you will agree, though, that our engagement on foreign policy and security matters is more productive than it was just a few years ago. Both the Obama Administration and European leaders deserve credit. I also believe that the changes made by the Lisbon Treaty are making the EU a stronger partner for the United States and a more influential actor in world affairs.

"We’ve also had a few disagreements on economic policy, the area on which I will focus this morning. At times, for example, we have differed on the best regulatory and fiscal policy response to the global financial crisis and its aftermath, and on the best way to bring the WTO Doha negotiations to a successful conclusion.

"Today, however, I think we’re back on track. We are both working to secure an ambitious outcome on market access in the Doha Round. And our cooperation in the G-20 has helped make that process a more effective tool for global governance at a time when the urgency of our economic situation demands no less.

"This morning I want to talk about what we can do to make the transatlantic relationship even stronger, and how trade policy can help accomplish that goal.

"I think it is important at the outset to underscore the fundamental strength of the U.S.-EU relationship. Let me illustrate this point with data, some of which may be familiar to you:

• Transatlantic trade flows exceed $3.5 billion each day, making ours the world’s largest trade relationship.

• Transatlantic investment is estimated to support more than 7 million jobs in the United States and the EU.

• The value of what the United States exports to the EU is two and a half times the value of our exports to China.

• And the stock of U.S. direct investment in Brazil, Russia, India, and China combined was equivalent to just over 8% of the total U.S. investment in the EU in 2009. In fact, Europe today represents nearly half of the total stock of U.S. foreign direct investment.

"We can measure the strength of our economic relationship in other ways as well:

• Almost all transatlantic trade and investment proceeds without conflict. Our disagreements account for only a small share of our total commerce.

• We cooperate very effectively on most important trade and economic issues of our time, including on the critically important challenges of bringing China, Russia, and the other major emerging markets into positions of responsible leadership in the world economy.

"And of course we are economically critical not just to each other, but to the rest of the world:

• Our open, prosperous economies are among the largest markets for just about every other country in the world.

• Many countries seek to emulate our regulatory approaches.

• Billions of people benefit from the inventions and innovations of U.S. and European firms and entrepreneurs.

"Nonetheless, I sometimes detect flagging confidence on both sides of the Atlantic as to the relevance of our relationship to the economic challenges ahead. Perhaps this isn’t surprising. It is easy to take for granted a partner with which you generally get along well. And it is only natural that the emerging market economies would come to occupy more of the attention of governments on both sides of the Atlantic, as their rise offers challenges as well as opportunities. But nothing should undermine the importance of the U.S.-EU relationship, politically and economically. As we reaffirm that foundation, we must ensure that we tap the full potential of the transatlantic economic partnership. Together we must do everything possible to boost trade, create new jobs and maintain our competitive edge.

"Let me suggest several areas where closer cooperation on trade and related policies can make us both stronger and more competitive.

"First, our joint leadership will be essential to bring the Doha Round to a successful conclusion. A successful Doha Round can provide a significant boost to global trade, growth, and economic confidence. But we need the EU’s help to achieve ambitious results on agriculture, industrial products, and services.

"The Doha negotiations are at critical juncture. Unfortunately, the deficit of ambition on market access remains as large as ever. A year-long effort by U.S. negotiators to engage China, India, and Brazil in specific, detailed market access negotiations has yielded very little so far. What’s currently on the table would enable China to keep up to 420 industrial products untouched by tariff cuts. Brazil would be shielded from increasing market access on nearly half of all industrial products. India would offer no new market access for 97 percent of total tariff lines covering all industrial products. This is unacceptable. In addition, we are nowhere near where we need to be in services negotiations with these three and other WTO members.

"The U.S. and Europe know that real negotiations must begin to bend the market access ambition curve upward, with China, India and Brazil participating fully in that effort. The United States will engage on issues that are hard for us – but only when these key partners engage in give-and-take on critical market access issues. This process needs to start if we are to stand a chance of finishing the Round this year. The United States has its sleeves rolled up. The President’s commitment to Doha is genuine. We are ready to get down to serious work now.

"Second, in the near term – in just the next year or so – the U.S.-EU relationship could support additional jobs on both sides of the Atlantic if we finally tear down some of the remaining obstacles to our bilateral trade. While it is true that our disputes affect only a small share of our total trade, given the scale of that trade in absolute terms, our disagreements do impede potentially significant gains in exports and employment. In economic times like these, we simply can’t afford to leave on the table any opportunity to create and support jobs by eliminating existing trade barriers.

"Over the past two years, USTR and the European Commission have managed to find pragmatic ways to accommodate or resolve differences on several longstanding issues, including those involving bananas and beef hormones. I look forward to working with my new counterpart at DG Trade, Jean-Luc Demarty, and his Commission colleagues as we continue to look for ways to address ongoing disagreements, including those relating to food safety, governmental support for industry and procurement.

"We must also cooperate more effectively on new challenges so that we both will be better equipped to thrive in the new competitive landscape. Building a more deeply integrated transatlantic economy would be a perfect place to start.

"We enjoy a vast consumer market, an extraordinary pool of entrepreneurial and innovative talent, and broadly similar historical and cultural perspectives. How do we leverage these assets to make our economies more productive and innovative for workers, firms, and farmers on both sides of the ocean? Will our firms and workers and farmers be able to take advantage of these “opportunities of scale,” or will they be divided by policy and regulatory differences into two largely separate economies?

"Certainly we would prefer the first scenario. This requires that we address non-tariff barriers – the regulatory and other measures that limit or obstruct trade behind borders. Varying estimates of the impact of these NTBs have been offered, but I think we can all agree that they impede a great deal of potential trade. Now that we have lowered most of our tariffs and other border barriers to trade, NTBs have become the biggest impediments to increased transatlantic trade and investment.

"Historically, NTBs have proven to be thorny issues. Many of them are rooted in differences in the way we regulate our economies – differences that are not easily narrowed around the negotiating table. We’ve had some successes in achieving greater regulatory compatibility in specific sectors, but it is painstaking and slow work. We have learned that it can be especially difficult to align our approaches more closely after we have both already adopted our own regulations.

"We have also learned that regulatory cooperation is not something that regulators can do by themselves. Success requires input from private sector stakeholders and economic policy officials on priorities and proposed solutions. Coordination between our legislatures is another essential part of the process.

"This means that enhanced and sustained cooperation and collaboration among policymakers and regulators around an ambitious regulatory cooperation agenda is more important than ever before. This goal got an important boost in December, when the United States hosted the Transatlantic Economic Council.

"At the conclusion of the meeting, in which I was pleased to participate, the TEC launched several regulatory cooperation initiatives with the potential to reduce existing NTBs and avoid future ones. Let me highlight two:

• We directed EU and U.S. regulatory experts to seek agreement by the end of this month on joint principles and best practices for developing regulations.

• We are also going to develop a process for identifying economically promising sectors in which the United States and the EU could implement compatible regulatory approaches – pre-empting unnecessary obstacles to exports.

"The TEC also gave new impetus to regulatory cooperation in specific sectors, all of which we hope will provide models for future sectoral initiatives:

• We agreed to develop common interoperability standards for electronic health records.

• We agreed to develop common methodologies for measuring the performance of several energy-saving products.

• And in response to a joint plea from the U.S. and EU auto sector, we agreed to collaborate more closely on the development of common standards for electric vehicles and their infrastructure.

"Work on all of these initiatives is well under way. At the end of this month, the three TEC “facilitators”– Director General Demarty, Under Secretary of State Robert Hormats and myself – will review progress on these and other TEC agenda items. It will take time for some items on this agenda to generate increased trade. But the more we cooperate, the better at it we will become.

"Our successful December TEC meeting also launched important work on innovation, the other priority for joint efforts to promote competitiveness that I want to highlight today.

"The inaugural work plan of the Transatlantic Innovation Action Partnership provides, for the first time, coordinated, high-level direction to joint U.S. and EU efforts to strengthen innovation and promote the commercialization of emerging technologies and sectors.

"Our goal in this new partnership is to identify areas where technological innovation could generate considerable economic and quality of life benefits, and then mobilize our combined resources to make those innovations a reality. Along the way, we hope to spur U.S.-EU leadership in establishing global approaches to innovation.

"One of the initial areas of focus for the Innovation Partnership will be industrial raw materials, a topic that is critically important to innovative industries in Europe and the United States. We will explore how we can address jointly restrictions on raw materials trade, and promote research, recycling, and other approaches to maintaining an adequate global supply.

"As part of our joint approach to innovation, we are seeking agreement on trade-related principles for information and communication technology (ICT) services. The industries that are creating and marketing these services are among our most successful and technologically advanced. I believe we agree, for example:

• on the need for transparency in the development of laws and regulations in this sector;

• on the importance of open networks;

• on non-discriminatory access to spectrum, consistent with market-based principles;

• on the independence of regulators; and

• on the principle that suppliers of network-based services should not be required to establish a physical presence in every country in which their services may be available.

"Because other countries have not yet embraced these principles, together we are in a privileged position to lead the world by example. A wider embrace will not only accelerate the global development of network-based services: it will also reinforce the technical and commercial lead of U.S. and European firms in this critical sector.

"In closing, let me refer to what my good friend Bill Kennard, our Ambassador to the European Union, said when he addressed another European Policy Centre audience. Referring to the U.S.-EU relationship, he asked:

"'Will we have differences? Yes. Do we have domestic issues that sometimes delay or constrain our ambitions? Of course. But, we would make a grave mistake to lose sight of the fact that our highest priorities are common priorities: Today our interests are more aligned than ever. We should all feel a great sense of urgency to seize this opportunity – together.'

"I hope my remarks this morning have given you a better understanding of our approach to this challenge, as well as the tremendous potential I see our relationship holds for both our economies. We share great advantages, based on our longstanding and deep ties. It is indeed time to seize the opportunities before us, for that is the surest way we can maximize our competitive advantage and ensure that all of our people can share more fully in the benefits of a strong transatlantic partnership on trade.

"Thank you."