Transatlantic Economic Council Report to BDI Member Company Executives
As prepared for delivery.
I appreciate this opportunity to discuss the current status of the transatlantic economic relationship. The transatlantic economy is the bedrock of the global economy. U.S. and EU markets make up 60% of global GDP. Trade alone between the European Union and the United States makes up for 40 percent of world trade altogether. Together, we are the biggest exporters of foreign direct investment in the global economy.
Those impressive statistics lend us as partners the collective weight and influence – and most important, the responsibility – to shape the global economic agenda. Our open markets are a ladder out of poverty for the developing world. Their growing markets are a source of growth for us. A world of growing prosperity and economic integration is a more stable world. From my perspective from years in the boardroom of an American company with extensive multinational business interests and now from the U.S. Embassy in Berlin, I am convinced that economic integration is the principal means of meeting the global challenges of the 21st century. In this new global age, strong multilateral institutions that bind in the big new players who are emerging in that global economy will matter more than ever before. With this in mind, I would like to talk to you today about two sizable opportunities.
DOHA DEVELOPMENT AGENDA
First, the recognition of the importance of emerging economies goes hand in hand with a balanced Doha Development Agenda agreement. Closing the Doha round successfully is the highest international trade priority of the United States government. While achieving consensus among the 150 World Trade Organization Member States is no easy feat, no other trade agreement under consideration could unlock so much new market access. Beyond the loss of market opportunities, the cost of failure in Doha would be a much weaker international trading system.
We are working effectively with Germany and the EU in the current negotiations in Geneva. But our cooperation is not enough. We need to ensure that all WTO members engage in a positive outcome. That means real cuts in industrial tariffs in 30 developing countries as we, in turn, hold out new opportunities to them. Chancellor Merkel and President Bush discussed Doha during the Chancellor’s recent visit to the President’s ranch in Crawford. Their discussions were productive. I applaud the Chancellor’s efforts to get others to step up to the plate. Earlier this month, she announced progress with India's Ministry of Commerce.
We sincerely hope, that this apparent progress gets translated into negotiating flexibility on the part of both India and Brazil. We also need the cooperation of China. There are texts on the table right now in Geneva on both agricultural and industrial products. We are urging all countries to negotiate on the basis of these texts. We believe that such a course of action can lead to a successful conclusion of the round.
TRANSATLANTIC ECONOMIC INITIATIVE
The second opportunity is the Transatlantic Economic Initiative. During Germany’s EU Presidency, Chancellor Merkel proposed a new concept aimed at reducing transatlantic regulatory barriers. Businesses on both sides of the Atlantic have repeatedly cited the lack of mutual recognition of regulatory standards as one of the largest detriments to transatlantic trade and investment. By reducing regulatory barriers on both sides of the Atlantic, we could gain up to 3 percent growth in GDP.
The potential rewards were so great and the idea made so much economic sense, that the White House and industry on both sides of the Atlantic speedily embraced the concept. At the U.S.-EU Summit in April, the United States and the EU agreed to a Framework for Advancing Transatlantic Economic Integration. On June 28, President Bush’s economic advisor Al Hubbard and I met with Chancellor Merkel to kick off the work of the Transatlantic Economic Council. Today I am pleased to report excellent results from the Council’s first six-month review. On November 9, representatives of the Council sat down to plan the road ahead. I am not going to go into the detailed work program of the Council, but I do want to emphasize the importance of the Transatlantic Council in the wider global context that I mentioned earlier. The Council is a major forum where the EU and the U.S. set out joint approaches to a world in which the economic and political order is changing very fast quickly.
Let me mention, however, just a few areas where significant progress has been made.
Mutual recognition of accounting standards is a top priority for industry on both sides of the Atlantic. It would eliminate the need for firms to keep two sets of books. Perhaps no other work item on the Transatlantic Economic Council’s agenda touches such a wide span of our industries. The U.S. Securities Exchange Commission just adopted a new rule to allow foreign companies to file financial statements in the U.S. prepared in accordance with International Financial Reporting Standards, instead of the U.S. standard known as U.S.GAAP. European Commissioner McCreevy estimates this will save European firms 2.5 billion Euros annually.
Simultaneously with the TEC meeting in Washington on November 9, the U.S./EU Investment Dialogue also formally began its work. This Dialogue seeks to reduce barriers on transatlantic investment as well as to address protectionist pressures and barriers to global investment. It is only natural that the most important investment relationship in the world play a leadership role in this area.
We also formalized regulatory discussions through the U.S.-EU High Level Regulatory Cooperation Forum. Safety issues have grabbed headlines in both our countries. It is important that the U.S. and EU work closely together in ensuring the safety of products for our citizens.
Another area of broad concern is dealing with the threat of terrorism to both our citizens and to industry and commerce. Both the U.S. and the EU are strengthening systems to ensure that trade moves securely and safely. On November 9, we issued a roadmap that would provide mutual recognition of the U.S. Customs-Trade Partnership Against Terrorism supply chain security program and the EU’s Authorized Economic Operator approach by 2009. This will spare participating companies the burden of qualifying as a secure partner under two different sets of criteria. I know there is a lot of concern in Europe over the U.S. 9/11 Act requiring 100% scanning of containers entering the U.S. beginning in 2012. But I can assure you that we will work closely with our major trading partners to ensure this measure does not disrupt trade.
In conclusion, I would like to offer a few thoughts on why the Transatlantic Economic Initiative has proved to be so successful.Much of the credit must accrue to Chancellor Merkel. The commitment and attention of the leader of Europe’s largest economy have been invaluable. The Merkel Initiative is unique in its call for top political leadership in directing the work of the Transatlantic Economic Council. Regulation is a complex area. It is easy to get bogged down in the details. Top-level political engagement is vital. Al Hubbard, President Bush's economic advisor, leads the work on our side and Günter Verheugen, VP of the European Commission, is his EU counterpart. The two have developed a strong working relationship. Five members of the European Commission, plus a representative of the presidency of the European Union, attended the meetings in Washington. Germany was also at the table, represented by Jens Weidmann, Chancellor Merkel's chief economic advisor. Some of our most senior economic officials, including Treasury Secretary Paulson and USTR Ambassador Schwab, represented the United States. It’s very rare that you have this many principals all in the same room.
Representatives of the Transatlantic Business Dialogue, the Transatlantic Consumer Dialogue, and the Transatlantic Legislative Dialogue also participated in the TEC meeting and in the process leading up to the meeting. American and German business organizations played a key role in identifying the areas where we need to work the hardest. I would like to highlight the role of the BDI, which nurtured and won support for many of the ideas that took shape in this initiative; BDI deserves much of the credit for the progress made to date. For its potential to be fully realized, the Transatlantic Economic Initiative must have the continued support of you all. The initiative must endure beyond the inevitable changes in political leadership on both sides of the Atlantic. For that to happen, industry needs to provide its unwavering commitment and press government for meaningful results. With your support, we can achieve substantial economic efficiencies and continue to strengthen our partnership.
It is in that spirit that, next year, we will open the new U.S. Embassy on its historic pre-war location beside the Brandenburg Gate – just yards away from where President Ronald Reagan called upon the Soviet Union to tear down the infamous wall that divided Berlin, Germany, Europe and the world. Our new Embassy will symbolize all that the United States and Germany have accomplished together – and all that is yet to come.
We plan to celebrate the grand opening with a very special 4th of July party on Pariser Platz. This celebration –and others throughout the course of 2008 – will demonstrate not just our new building but also the ongoing commitment of the United States to the bilateral partnership.
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Updated: June 2008