Thank you for inviting me to speak at this conference. Amcham’s work is important; your voice is heard; and I hope that USEU’s collaboration with you continues to deepen and broaden in the years ahead. I’d like to discuss the important topics of T-TIP, digital issues and energy. I believe that promoting U.S. and EU cooperation in these three areas is fundamental to our continued economic wellbeing. These three areas also happen to align nicely with the European Commission’s three top priorities as laid down in its 2015 – 2017 “Investment Plan for Europe” released this past December, as well as Jean-Claude Juncker’s Political Guidelines and the 2015 Commission Work Program.
We continue to make important progress in the T-TIP negotiations. We have texts at a relatively advanced stage in a number of areas, including SMEs, trade facilitation, rules of origin, State to State dispute settlement, competition and SPS. We are hopeful that the separate initiative in the Commission on better regulation will bear fruit because our ability to align our regulations will depend on whether our regulatory decision making becomes more similar.
The United States remains committed to a comprehensive and ambitious agreement, not only for its beneficial economic impact, but also for important geostrategic reasons. We remain hopeful that Trade Promotion Authority will be granted soon after the Congressional recess during Easter. And we believe that we are months away from a very significant Trans Pacific Partnership Agreement, which will encompass nearly two-thirds of the global economy and will provide a significant boost to America’s trade prospects, bringing economic growth and jobs. Finalizing TPP has not been a distraction from our efforts on T-TIP; just like the EU, we are capable of negotiating multiple agreements at the same time.
We are eager on both sides for our negotiators to make continued progress and to give further impetus to the “fresh start” that Commissioner Malmstrom and U.S. Trade Representative Mike Froman have announced. The Commissioner has already made a substantial contribution: she has improved relations with the EP and can take credit for moving the debate forward on ISDS.
But it is no secret that we need to speed up progress further if we are to get a deal done. Europe should want to get this deal done before the end of the President’s term, and ideally before the presidential campaign heats up by the summer of next year. If the next president is Republican, it would be hard for him or her to carry Democratic votes on trade; even if the next president is a Democrat, it would take some time before the new administration is fully up to speed. By that time, there would be little time left in the Juncker administration to conclude T-TIP.
A few days ago President Juncker was quoted as saying: “At the meetings of the European Council, [European leaders] have pledged their unfailing support [for T-TIP] and as soon as they go back home, I read their enthusiasm has waned. I want to get clarity on this matter.” We second that sentiment. We now need to see that top level support manifest itself in greater willingness by the Member States to let the Commission negotiate a full and balanced deal.
There is no doubt that we continue to face some challenges.
We are working on making progress regarding our tariff and services offers. Our first tariff offer was widely considered to be disappointing; but we have made clear from the beginning that it was the first step in an iterative process and that our ambition is to eliminate all tariffs. We have offered to match and go beyond the elimination of 96% of tariff lines that the EU offered. But the EU continues to stick to its offer.
At the same time, we consider the EU’s services offer to be disappointing. It is less attractive than what it has tabled in recent agreements. The U.S. has tabled a services offer which is on par with KORUS, the best offer we’ve ever made.
We need more confidence on both sides of the Atlantic – but especially here in Europe – that we can reach a deal that is good for both sides. The United States and Europe have tremendous reservoirs of talent and can compete and win in free and fair international trade. Europe’s goal in these negotiations should not be expressed in terms of negatives to be avoided, or as redlines. The case for T-TIP is positive, and Europe has offensive, not just defensive interests.
Instead of issuing predictions about T-TIP’s impact on European growth and jobs, I think the EU would be better served to talk about its experience under recent trade deals. 1 July 2014 marked the 3rd anniversary of the EU-South Korea FTA. During that period EU exports to South Korea of fully liberalised goods increased by 46%; Imports of fully liberalised goods from South Korea increased by 21%. This gives a clear indication that the FTA has worked well for both sides.
The geopolitical stakes of T-TIP are also clear: we need to actively shape the global trading system and promote a race to the top, rather than engage in a race to the bottom. If the United States and Europe want to strengthen their respective economic power and extend their strategic influence during uncertain times, we must lead together. If we fail, other countries who do not share our values and whose weight in the international trading system is growing fast will set the agenda themselves.
Turning to the digital economy, we understand that the Juncker Commission’s Digital Single Market strategy is intended to create the regulatory and market conditions to allow companies to innovate, collaborate, invest, create jobs, and drive growth.
That kind of reform coupled with T-TIP would create the proper conditions for a robust transatlantic digital economy in which EU and U.S. businesses will prosper and find new opportunities.
We support the concept of a Digital Single Market that reduces market barriers and promotes economic growth and benefits to society.
We need to be careful, however, to guard against proposals that could lead to a more closed and insular model for the digital economy, one that might unnecessarily restrict data, stifle innovation through overregulation, or try to pick national champions and tilt the regulatory playing field against non-European companies.
Efforts to promote so-called “digital sovereignty” through discriminatory regulation, forced data localization, or the creation of a Schengen cloud leading to a Balkanization of the internet or digital autarky, are not what Europe needs to become more competitive in the global digital economy.
Such an approach would treat Europe as a defensive and inward-looking consumer of technology, rather than a strong and outward-facing Digital Union that fosters the conditions to create and harness new technologies, to increase both its digital and traditional exports to the rest of the world.
Following President Obama’s remarks during his recent visit to Silicon Valley, and in the wake of the European Parliament’s resolution that called for the unbundling of Google, it’s no secret that there is a perception in certain parts of Washington that some actors in Europe may be trying to exploit the legitimate debate over how to regulate the digital economy to try to weaken the positions of U.S. companies in the European market. One Commissioner has even advocated taxing U.S. internet firms. Why? Perhaps because they are big and successful – and, importantly, not European.
Let me quote from one recent statement: “National data protection law is no longer respected by Google, Facebook or Apple.” Companies sit in Dublin, for example, and “soak up Europe’s data. German data protection is not heeded, but data from Germany is valuable and it is used.” Well, where is the evidence that these companies are infringing applicable data protection laws? Where is the evidence that the Irish data protection standards are inferior?
Apple and Google are sometimes criticized because they want, among other things, to become active in the software piece of the automotive industry. If they were called Apfel and Googlesmann, they might have an easier time in Germany.
Now don’t get me wrong: my job is not to protect specific American companies, except in unusual cases. For each one, there are five others that may have opposing interests. None of the companies at the center of controversy has asked me to intervene. But I will not shrink from upholding key principles of transparency, non-discrimination and the rule of law to ensure that U.S. companies benefit from fair treatment.
Why did the European Parliament’s non-binding resolution cause a stir in the United States? Well, it would be extraordinary for the U.S. Congress to pass a resolution instructing the DOJ or the FTC to take specific action in a legal case actively under review. The European Parliament issued its resolution merely weeks after the new competition commissioner had gotten her feet under her desk. It politicized what should remain a legal case, and a highly complex one at that. The resolution was even more suspect because it was promoted by media interests, especially in Germany, for their own benefit.
We believe that the EU’s existing antitrust laws are solid and have withstood the tests of time. The Franco-German proposals calling for new regulations that would apply the essential facilities doctrine to internet platforms are a solution looking for a problem. Continuing innovation within the sector may be a stronger guarantee of fair competition than ex ante regulations that will struggle to keep up with technological innovations.
The beneficiaries of the expanding digital economy are not just the American tech giants. Successful European Internet start-up companies have emerged in substantial numbers, building, incidentally, off the platforms provided by some of those very U.S. companies. To cite just one example, the launch of Apple’s ITunes App Store in 2008 created an industry from scratch. This has not only delighted consumers worldwide; it has also spawned significant business and job growth, including in Europe. According to a report prepared for the European Commission, EU app developers took in 17.5 billion euros in revenue in 2013. That figure is forecast to increase to 63 billion euros by 2018. That same report predicted that the EU app developer workforce will grow from 1 million to 2.8 million over the same period.
Amazon is another example. It has enabled many European SMEs to sell their goods on the internet, including cross-border and even across the Atlantic, for the first time. If it were a European company, it would be probably be upheld as the leading example of what the European Commission is trying to achieve in establishing a pan-European digital economy.
Vice President Ansip has said that his aim is “to make sure that Europe – its citizens and businesses – get the best of the online world in the safest and most open environment possible. That means openness and opportunity. Not obstacles.” We share his vision and look forward to collaborating in its implementation.
Data protection is another critical matter that we need to continue to cooperate to resolve, and we have taken important steps in both commercial and law enforcement arenas. We have made significant progress in talks on both Safe Harbor and on the Umbrella Agreement. Both sides recognize the urgency of concluding these talks soon with sustainable and mutually beneficial solutions.
Finding durable solutions on privacy, Internet openness, and cybersecurity matters not only for the confidence of individuals and companies moving information across the Atlantic: it also is crucial to the economic health of the internet, and of our respective economies as a whole.
We are also paying close attention to EU efforts to establish an Energy Union.
Energy security in Europe has been a longstanding U.S. foreign policy priority. Efforts to establish the Baku-Tbilisi-Ceyhan pipeline in the 1990s, steadfast support for a Southern Gas Corridor in recent years, and our current work to assist Ukraine, end the gas crisis with Russia, and address Ukraine’s immediate and long-term energy needs attest to our commitment.
But here in Europe, energy is an especially vital regional security interest because of Russia’s track record in using the supply of energy as a foreign policy tool against its neighbors in violation of basic commercial and international norms.
This is a huge strategic problem for many countries that rely on Russia for their energy supply. But the truth is this is also a unique moment for Europe.
The Commission ‘s Energy Union proposal is scheduled to be discussed at today’s European Council meeting. We applaud the European Commission for moving towards the goal of increasing energy security through diversification of fuel types, supply sources, and delivery routes. We are working with our European allies to increase reverse flow capacity from Slovakia, Poland and Hungary to Ukraine; to build out LNG infrastructure in Northern Europe and the Baltic states; and to establish interconnectors, new pipelines and LNG networks in Southern Europe to provide energy options to Bulgaria, Croatia, Hungary, Serbia and other countries in Central Europe and the Balkans.
And we applaud the EU for rigorously applying EU law, with the result that South Stream was blocked and Hungary’s long-term nuclear fuel contract with Russia will be revised.
It may be challenging to get Member State backing for collective purchasing of gas to offset the supply power of Gazprom. But it would be extraordinary for Member States to oppose the Commission’s push for greater transparency in the opaque world of gas contracts, especially at intergovernmental level.
As the Commission has stated in its Discussion Paper on Energy Union:
“To better defend its interests, the reform of the Commission’s decision on intergovernmental agreements (IGAs) should envisage a mandatory pre-consultation of the Commission so that a better ex ante assessment of IGAs’ compatibility with internal market rules and security supply criteria is ensured.”
Energy Union proposals could serve as an important tool for addressing Europe’s energy security, by further integrating national energy markets, reducing European energy demand through increased efficiencies, decarbonizing the energy mix, and promoting research and innovation.
In closing, as Ambassador to the EU, part of my job is to serve as a bridge between the EU and the U.S. My message to you today is that the United States is deeply committed to working together with the private sector on both sides of the Atlantic to promote T-TIP, to support the creation of a fair and open digital single market, and to address energy security concerns in Europe in a way that keeps the U.S. and EU economies growing, increases investment and business opportunities on both sides of the Atlantic and strengthens energy security.