Ambassador Gardner Discusses T-TIP with COR Members, Trade Commissioner De Gucht

Ambassador Gardner at the Committee of the Regions on October 8, 2014.

Thank you very much for the opportunity to speak today. It is a pleasure to share this podium with Karel de Gucht, our partner in the transatlantic trade negotiations. On behalf of the United States, I’d like to thank the Commissioner for all his hard work to date on the Transatlantic Trade and Investment Partnership Agreement; Karel, you have been a tireless and effective advocate of the agreement and we wish you the best in your future endeavors. The Commissioner has been supported by a highly effective team led by Director-General Jean-Luc Demarty and Chief Negotiator Ignacio Garcia Bercero. We look forward to continuing our close collaboration with them and to working closely with Commissioner Malmstrom, for whom we also have the highest regard.

The Committee of the Regions will play an important role in promoting T-TIP: You can explain that T-TIP is not just about big business; it is especially about small and medium sized businesses, the backbone of our economies; it is about providing consumers with more choice and better products at lower cost; it is about growth and jobs necessary to provide work for the unemployed, to fund pensions for our retirees and pay for the health, safety and environmental protections our citizens demand. You can explain that much of what we are trying to achieve is actually a natural extension of what Europe has already done in creating a single market without tariff walls in which goods and services can circulate freely. There are many vocal critics of the T-TIP negotiations, but there are no critics of the extraordinary achievement of the single market, and for good reason.

Although T-TIP is certainly an ambitious undertaking, especially due to its focus on removing non-tariff barriers, both sides have negotiated many free trade agreements in the past. We know from our own experience that these agreements have in fact stimulated exports, high-paying jobs and consumer benefits. An agreement between two advanced economies that share many values and high standards should be inherently much more attractive than an agreement between economies at different stages of development that do not share values and standards.

I noted with interest President Juncker’s recent open Mission Letter to Commissioner Malmstrom. In it he instructs her not to conclude a deal which “threatens Europe’s safety, health, social and data protection standards, nor jeopardizes [Europe’s] cultural diversity.” We do not believe there is a risk of this occurring; we believe that the case for T-TIP is positive, not a double negative. The United States is growing at 4.6% and has lowered unemployment to 5.9%, but we remain enthusiastic about what a tradssssssssssse deal could do to further boost growth and jobs. Too many people have dropped out of the job market in the United States; too many young have remained out of the workforce for us to be satisfied with the current state of affairs.

Frankly, I am puzzled by arguments that the Commission’s projections regarding T-TIP’s impact on jobs and growth are too optimistic. Perhaps these projections are too optimistic; perhaps they aren’t. There are many serious studies on both sides of the Atlantic that have arrived at roughly similar conclusions. But that’s not the point. There is no doubt that T-TIP represents one of the best levers available for stimulating growth without increasing debt. It isn’t the only one: the completion of the single market, including in services and particularly in the digital single market, and the implementation of needed structural reforms are also important. But neither Europe nor the United States can afford the luxury of passing up this opportunity on spurious grounds that the benefits are not large enough or that they will take time to realize.

T-TIP is all about evolution, not revolution. The U.S. and the EU already have a deep and mutually beneficial economic relationship: U.S. affiliates in the EU provide 4.2 million direct jobs to EU citizens, and EU affiliates in the United States provide 3.8 million jobs to U.S. citizens. The United States invested €313 billion in the EU during 2013 according to Eurostat, making it by far the largest foreign investor. The EU has long been the largest foreign investor in the United States. The impact of this is real, including in your own regions.

One of the key areas of focus in the T-TIP negotiation is tariffs. Although transatlantic tariffs are generally low on both sides of the Atlantic, there are high tariffs in numerous areas that represent significant obstacles to trade. Even in the many instances where tariffs are low, they can represent obstacles in many sectors with low profit margins. According to a well-known study, a transatlantic zero-tariff agreement could boost U.S. and EU exports to each other by 17%. Tariff reduction can also help to reduce the cost of inputs, an extremely important objective in an increasingly globalized marketplace. Businesses based in Europe already face very high energy costs and, in some places, high labor costs; their ability to survive in a global supply chain will depend in part on their ability to source goods at the lowest possible price.

Small and medium sized enterprises are expected to gain significantly from T-TIP because SMEs tend to dominate the sectors where increased trade is expected to result from an agreement. For example SMEs account for more than 95% of the processed food, machinery, and motor vehicles and parts sectors. Even those SMEs who do not sell to the U.S. market may benefit from increased sales to customers who do. Lower input costs, including for energy, will particularly benefit SMEs that are part of a global supply chain.

Agriculture is important to many European regions. There is a misconception that Europe’s agricultural interests in T-TIP are purely defensive, not offensive. I don’t agree: in the $30 billion annual trade across the Atlantic every year, the EU has enjoyed a significant and growing surplus since 1999. And no, our different intellectual property regime relating to geographical indications has not proven to be an obstacle to European exporters of cheeses and meats, who have significantly increased their exports.

Another misconception is that T-TIP seeks to promote a deregulatory agenda. This is despite numerous assurances by the President of the United States, the President of the European Commission, and many political leaders and senior negotiators on both sides of the Atlantic that nothing in T-TIP will in any way limit the ability of our governments to regulate in the public interest or reduce the level of health, safety, labor, and environmental protections. We in the United States value the right to regulate appropriately just as you do in Europe.

Critics allege that U.S. standards are lower than those in Europe. It is impossible to generalize about standards—there are thousands of them on either side of the Atlantic. Sometimes European standards are stricter, sometimes our standards are stricter. But the U.S. and the European Commission agree that it is pointless to hold a beauty contest in this area: usually we regulate to achieve the same objectives, but do so in different ways.

We can only achieve the full potential of T-TIP if we succeed in narrowing the divergence in our regulatory and standard setting systems. This is the area of greatest economic promise, especially for small firms that struggle to spend the time and resources managing multiple regulatory requirements; but it is equally the area of greatest challenge. In some instances we may be able to agree on common standards where the existing differences are modest; in other areas, we might be able to agree on mutual recognition where the standards provide equivalent degrees of protection. Even in those areas where common standards or mutual recognition is not possible, we may be able to achieve significant benefits from eliminating duplicative tests of products and facilities.

We’re making steady progress in the negotiations. Despite this progress, we need to remember that we are still at a relatively early stage. We need to give the negotiators time to continue with their work. And we need to stop the growing tide of misinformed criticism, often about peripheral issues in these negotiations, such as chicken washed in chlorine. There are real, detailed points of disagreement over major issues: public procurement and financial services are among them. Let’s focus on the real topics and have a frank debate. But we should always keep the debate in the perspective of the wider geopolitical context in which our common values are under attack – including from a nationalistic Russia, which bears responsibility for the slaughter of 200 Europeans over the skies of Ukraine, and from the scourge of militant Islamists who are slitting the throats of our innocent citizens.

I’m confident that we will get to a successful conclusion. This week we welcomed a congressional delegation led by the Chairman of the powerful House Ways and Means Committee. He assured his interlocutors that T-TIP enjoys bipartisan support and that Congress and the Administration are working together on a bill for Trade Promotion Authority. But we have a long road ahead and the Committee of the Regions will play a critical role in ensuring that there is public support.

Thank you.