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Remarks by Ambassador Michael Froman to Chatham House

Remarks by Ambassador Michael Froman to Chatham House

December 9, 2015
London, United Kingdom

*As Delivered

“Last week, there was an event at the National Archives in Washington, where we celebrated the 200th anniversary of the Treaty on Navigation, Friendship, and Commerce between the U.S. and the U.K. It was one of the treaties that ended the War of 1812. Of course, we had to fight two wars, the Revolutionary War and the War of 1812 – we had to see the White House burn down as a part of achieving that treaty. But I hope future trade agreements aren’t quite as onerous as that as we move forward.

“Sometimes they feel that way, but it was a good moment to reflect on how far things had come, both in our bilateral relationship – which as you imagine back then, was $70 million trade a year of trade, now upwards of $200 billion a year. We’re each other’s most important investment partners. We actually invest more in the U.K., I think three times as much in the U.K. than the BRICS altogether. And so we start off, both with regard to the U.K. and with the EU with the largest and deepest trade and investment relationship of any of our relationships. The Transatlantic Trade and Investment Partnership, or T-TIP, can take it indeed much further.

“There’s been a fair amount of misinformation out there about T-TIP. We were just discussing some of the challenges of explaining it, so I thought I’d take a few minutes to talk about what it is we are and are not doing with T-TIP, and then leave a bulk of the time for conversation.

“First, T-TIP is about making common sense upgrades to this very broad and deep economic relationship: eliminating tariffs, reducing non-tariff barriers, simplifying customs procedures, cutting red tape. That’s its main and primary focus. This is particularly important for small- and medium-sized businesses. Large businesses have the ability to navigate their way through red tape. They can hire legions of lawyers and consultants. But small- and medium-sized businesses, are the backbone of both our economies, and yet very few of them actually export as a percentage. They really are the drivers of future job growth and job creation in our economies, and they find engaging in international trade to be bewildering.

“In fact, I just came from a lunch with several U.K. small businesses who were each flagging for me the challenges they have exporting to the United States. I know as I meet with American small businesses as well, many of them have similar complaints about the European Union. From our perspective, one reason we have such a focus on small and medium businesses is, as I said, they are the job creators in our economy. But we also know that businesses that export tend to pay more, hire more, and are more resilient during times of economic downturns. So for all those reasons, it’s important to help them engage in the global economy.

“And through T-TIP, we’re looking at a number of, as I said, common sense approaches to making life easier for the small- and medium-sized business exporter. Whether it’s knowing in advance how one’s shipment is going to be treated by customs, which allows you to plan, price, and market accordingly. Whether it’s exempting some significant amount of exports from tariffs and other fees altogether that small businesses are involved in. We think all of these things can be very important to making the difference for a small business, whether they are profitable or not, whether they engage in international trade or not.

“One of the main areas of focus for T-TIP, as you know, though, goes beyond the traditional FTA, and that is our effort to take two advanced, industrialized, well-regulated, high-wage economies, and see if we can bridge divergences in their regulatory regimes and their standard-setting procedures without lowering the overall level of protection of our environmental safety protection, or other regulations, and standards that people have come to expect of us.

“And the examples are numerous. You’ve got car companies that have to crash cars in Europe to meet certain safety tests, and then have to do a slightly different crash test in the U.S. to meet those safety standards, simply because the crash tests are designed differently. The question is whether we can get our regulators together and design a common crash test to avoid crashing unnecessary cars.

“We’ve got medical device companies that are subject to inspections and audits by multiple regulators, U.S. and European. And yet, much of what they are looking for is the same and our regulators are stretched in their resources. And the question is whether we can find ways for regulators to come to terms with accepting each other’s inspection and auto results, making it easier for the companies, faster to get it to the market, better for the consumer, and expanding access to important new innovations.

“This is not a new idea. In fact, long before T-TIP was ever a glint in Chancellor Merkel’s eye, our aviation regulators figured this out some time ago. And they figured out that they didn’t have resources to each inspect every plane that could possibly land in their territory, and so the U.S. and the EU aviation regulators agreed on a set of protocols for inspections and now accept each other’s inspections of planes for airworthiness and safety as part of this collaboration.

“It’s that same kind of approach that we seek to take into T-TIP, and to expand it to more and more areas as well. And that’s important, one, because it does take costs out of the system, but it also helps, on one hand, maintain our collective competitiveness of our firms at a time when the world is increasingly competitive. At the same time, it allows us, together, to help set standards as opposed to being standard-takers from others around the world. Indeed, one of the themes of T-TIP is not just what we can do to strengthen the ties across the Atlantic, but what the two of us can do together, vis-à-vis the rest of the world, to raise standards and to help define rules of the road, whether that’s in intellectual property rights, protection of workers’ rights, protection of the environment, or any number of other areas.

“We’ve done this recently in TPP, where we’ve worked with our TPP parties to raise labor and environmental standards, raise intellectual property rights, take on new issues like state-owned enterprises, take on issues related to the digital economy for the first time in a trade agreement, and to begin to lay the foundation of a set of rules in this area, and there’s no reason we can’t do that with the EU and take it even further, whether it’s on human trafficking or wildlife trafficking, illegal logging, illegal fishing, protections against the worst forms of child labor. There are lots of issues out there where the U.S. and the European Union share certain perspectives, share certain values, and ought to be working together to help raise these standards around the world, first, by doing it ourselves and then taking it to the rest of the world as well.

“And the reason why that is so important and so urgent is that we’re not, obviously, the only parties out there. Lots of other parties are moving ahead with their own kind of trade agreements, and they don’t necessarily reflect the interests and the values that we share, and from our perspective the question is whether we collectively take the field and show leadership or sit on the sidelines and let others define the rules of the road instead.

“From the U.S. perspective, we made this concerted decision that we’re going to take the field and show leadership, and I mentioned TPP as being our most recent example. But we’re also working in the context of the WTO and in Geneva to move forward with the expansion of the Information Technology Agreement, the Environmental Goods Agreement, the Trade in Services Agreement, and looking at how to take even the Doha Development Round forward and see if we can harvest some of the areas of consensus there in order to revitalize the WTO and continue to play an important role in trade negotiations.

“Taking a step back, it’s important to say what T-TIP is not. T-TIP is not an effort to lower standards or weaken regulations. It’s not an effort to force privatization, whether it’s the water system in Germany or the National Health System of the UK. It is instead an effort to take these two well-regulated economies and make common sense enhancements to their relationship and try and show that not only can we promote stronger growth, but we can promote growth that doesn’t sacrifice standards but raises them, that doesn’t abandon protections but strengthens them, and growth that’s not only stronger but sustainable and inclusive.

“The last point I would make is T-TIP, as you will recall, really grew out of the 2008-2009 financial and economic crisis and was seen at its start as a key component of a growth strategy. Much has happened since that time. The U.S. is growing. We’ve created thirteen-plus million new private sector jobs. Our unemployment is down to five-percent. We still face a number of headwinds. Wages are only beginning to turn up after several years of stagnation. We face headwinds in terms of global demand.

“And in Europe, growth is uneven. We’ve seen more growth here, in the UK, than in many other parts of the continent, and the economic dimension, or the economic rationale for T-TIP remains as strong as it was at the start. But what’s happened since, of course, is there’s been greater geopolitical instability on the margins of Europe, and with what’s going on in Ukraine, and the highlighting of energy and security that has underscored—it has given T-TIP a second and important rationale, which is the political and the strategic rationale for moving forward.

“Both for the economic and for the geostrategic rationale, it’s very important that we move this project forward and we get it done. Let me just say, we’ve been at this now for about two-and-a-half years, in earnest. We have made good and steady progress during this period, but if we’re going to get it done in this window of opportunity, we need to see accelerated progress, and that’s what we’re very much focused on: working with the European Commission and with key member states right now. Thank you.”