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Remarks by Ambassador Michael Froman at the Bavarian Parliament

Remarks by Ambassador Michael Froman at the Bavarian Parliament

Munich, Germany
February 12, 2016

*As Prepared for Delivery*

Grüss Gott! Thank you. Thank you, everyone.

I would first like to express my condolences to the families who lost loved ones in the nearby train accident this week and wish those who were injured a full and speedy recovery.

As “the land of laptops and lederhosen,” Bavaria demonstrates that big changes, like technology, can coexist with tradition. Today, many people feel the pressures of greater competition and new technology. What Bavaria proves is that you don’t have to sacrifice who you are, your identity or your values in order to succeed in today’s global economy.

Bavaria has been doing that for quite a long time, and it has risen from being one of the poorest parts of Germany to one of the most prosperous. A key part of that growth story is Europe’s leadership in the global trading system – working with the United States to help write its rules, ensure respect for those rules, and improve them. That took decades of work, based on the understanding that you don’t wait for the future you want to arrive. You have to shape it.

We need that ambition today. In economic terms, our partnership has never been stronger. Today, over a third of Bavaria’s GDP comes from exports, and the United States is your top market. Already, $2 billion of goods and $1 billion of services are traded back-and-forth across the Atlantic every single day between the US and EU. Our mutual foreign direct investment stands at over $4 trillion. And these economic ties support more than 14 million jobs.

But this should be a foundation, not a ceiling. It’s clear we can do better. That’s what the Transatlantic Trade and Investment Partnership is all about: making common sense upgrades to this very broad and deep economic relationship -- eliminating tariffs, reducing non-tariff barriers, simplifying procedures, cutting red tape – and working together to raise standards around the world, consistent with our shared interests and common values.

This Partnership offers a historic opportunity to:

  • Boost our long-term growth;
  • Enhance our collective competitiveness in an increasingly competitive world;
  • Positively shape the global trading system consistent with our shared values; and
  • Strengthen the transatlantic alliance and partnership.

Let me unpack each of those goals, starting with long-term growth. This Partnership will benefit both our economies broadly, but it is particularly important for small- and medium-sized businesses, or SMEs, which are the drivers of job growth in both our economies. In Bavaria, SMEs employ three quarters of all workers. They provide 80 percent of apprenticeship positions. And they make up the vast majority of all export companies.

But there is still a lot of untapped potential out there. Out of the almost 50 million SMEs in the United States and Europe, only a small fraction engage in trade across the Atlantic. One reason is that many small businesses currently find international trade bewildering – the tariffs, the customs regulations, the divergent standards and regulations. We should be doing more to help our SME exporters succeed because we know that they tend to grow faster, hire more, pay better, and are more resilient during economic downturns.

Through this Partnership, we’re looking at a number of common sense approaches to making life easier for SMEs. Whether it’s eliminating tariffs on their products; knowing in advance how a shipment is going to be treated by customs; or not being required to meet redundant testing or inspection requirements. For SMEs, steps like these could be the difference between whether they are profitable or not, whether they engage in international trade or not, and whether they are realizing their full potential or not.

This Partnership is also focused on enhancing our collective competitiveness in an increasingly competitive world.

It goes beyond the traditional trade agreement in 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 our environmental, health and safety protection that people have come to expect of us.

And the examples are numerous. We’ve got regulators on both sides of the Atlantic who spend their limited resources auditing each other’s medical device manufacturing facilities -- from large companies like Siemens to SMEs like MIKROGEN in Neuried.  That can lead to multiple, costly time consuming and redundant inspections and audits. In T-TIP, we are pursuing a single audit protocol that would save costs for companies and allow our regulators to spend their limited resources on areas of higher risk, which enhances consumer welfare as well.

There is Dorst Technologies, an SME based in Kochel am See which builds high-tech presses for making precision metal parts. It’s fascinating technology, but because of divergent safety regulations in Europe and United States, it is not easy to build a single press that can be used on both sides of the Atlantic.

There’s Schubert & Salzer, an SME based in Ingolstadt that manufactures valves for a variety of industrial processes. To sell a valve to customers in both the EU and the US, for the same kind of pipe, with the same performance requirements, this company needs multiple designs, different tests and audits. We are fortunate to have the CEO, Bertram Kawlath, with us here today, and I imagine he will tell us more about this later. 

Through T-TIP, we are looking for ways to address these types of issues. For example, can we open up the regulatory and standard-setting processes to take the very best input from each other’s experts so that regulators are able to consider a range of outcomes that might be acceptable in their market? Can we ensure that tests performed on one side of the Atlantic can be accepted on both sides?  Can we create greater transparency, participation and accountability in our regulatory and standard-setting processes?  That is not only in the interest of the transatlantic relationship, but of interest to EU member states, the länders and their citizens.

After all, much of what the regulators on both sides are trying to achieve is the same.

And the spirit behind these efforts is not new. Long before T-TIP was launched, our aviation regulators realized that they didn’t have resources to each inspect every plane that could possibly land in their territory, and so they agreed on a set of protocols for inspections and now accept each other’s inspections of planes for airworthiness and safety. Because of this transatlantic cooperation, we have made air travel extremely safe, and at the same time, less expensive than it would be otherwise.

It’s that same kind of approach that we seek to take into this Partnership, and to expand it to more areas as well. And that’s important, because it allows our regulators to focus on higher risks, it promotes consumer welfare, and it helps maintain the collective competitiveness of our firms at a time when the world is increasingly competitive. It allows us, together, to be standard-makers as opposed to standard-takers from others around the world.

There is a lot of mythology out there, so let me also underscore what T-TIP is not. It is not an effort to lower standards or weaken regulations. It is not an effort to force the privatization of public services. It is not an effort to undermine the values of either our societies.

Instead, it is an effort to make common sense upgrades to what is already a deep and broad relationship. It is an effort to show that we can promote growth that is not only stronger, but more sustainable and inclusive, growth that doesn’t sacrifice standards but raises them, growth that doesn’t abandon labor and environmental protections but strengthens them.

Indeed, one of the themes of this Partnership is not just what we can do to strengthen the ties across the Atlantic, but what the two of us can do together to raise standards and to help define rules of the road for the global economy of the 21st century.

We’re not the only parties out there. Plenty of others are moving ahead with their own approaches to trade, and they don’t necessarily reflect the same interests and values that we share. Rather than sit on the sidelines and let others define the rules of the road, we think it is important to take the field and show leadership.

That’s why we recently brought together a diverse group of 12 economies, and we’ve united them around the highest-standard trade agreement in history: the Trans-Pacific Partnership, or TPP. That agreement includes, among other achievements, the highest enforceable labor and environmental standards ever negotiated, the first rules to keep the Internet open and free, and the first rules to level the playing field between state-owned enterprises and private firms. These high standards will cover nearly 40% of the global economy, and there is a growing list of countries expressing interest in joining this platform over time.

Looking forward, the United States wants to lead together with Europe side by side as equal partners. And that brings me to the last point I would make, which is that this Partnership is as important strategically as it is economically. It is a geostrategic choice to benefit both Europe and the United States: diversifying markets, enhancing energy security, and most importantly, reinforcing the strength of the transatlantic relationship.

But we can’t wait. Now is the time.  For two-and-a-half years, negotiations have made good, steady progress.  The Obama Administration is prepared to make every effort to reach an ambitious, comprehensive, high-standard agreement, and we have demonstrated our willingness to invest political capital in expanding trade.  But if we are going to succeed with T-TIP, we need political will on both sides to step up the pace and bring a pragmatic, problem-solving approach to the negotiations.

We know that this is a tough time for Europe: managing the refugee and migrant crisis, dealing with the risk of Brexit, addressing financial strains and high unemployment in some countries.  T-TIP offers a positive agenda for Europe at a time of great stress.

The world has always been stronger when the United States and Europe stand together. As President Obama has said during his visit to Krün for last summer’s G7 Summit, “We are grateful for your friendship, for your leadership. We stand together as inseparable allies, in Europe and around the world.”

Let’s stand together now. Let’s lead together on trade. Let’s get T-TIP done.

Vielen Dank. Thank you.