Thank you to Sorin Moisă for the invitation to be a part of this distinguished group of speakers today. Sorin is playing an important role in the European Parliament, especially in its international trade committee. He has emerged quickly as an authority on trade; we value his views and his partnership. And I am also pleased to be here with Commissioner Cecilia Malmstrom and EU Chief Negotiator Ignacio Garcia Bercero. They have travelled tirelessly around the member states to improve the debate about TTIP and they deserve a great deal of credit for moving the negotiations forward.
Since my arrival as Ambassador last year, I have been struck by the continued relevance, perhaps as never before, of our common transatlantic values as we have dealt with multiple challenges. The importance of closer transatlantic cooperation on areas of mutual interest is now more evident than ever, and we must seize the opportunities available to us to ensure our continued economic growth and security.
I’m happy to talk about one of those opportunities, the Transatlantic Trade and Investment Partnership, here in Romania – where there is the second highest degree of support for the negotiations in the EU! We need Romania’s voice to be heard even more loudly in the European Parliament and European Council!
There are manifest economic benefits of a deal, including providing a debt-free stimulus to jobs and growth, needed on both sides of the Atlantic, but above all here in Europe. There are also real and important geostrategic benefits. TTIP would be important to deepen transatlantic ties even further. You in Romania understand this point very well: your support for a strong transatlantic partnership is steadfast.
If the United States and Europe want to strengthen our respective economic power and extend our strategic influence during uncertain times, we must make a decision together: either lead on global trade or be left on the sidelines. There really is no other choice. Some people believe that TTIP would be an active choice to expose Europe to greater globalization. But globalization is a fact of life; it cannot be escaped. Either we try to shape it or we will be shaped by it. 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.
The geopolitics of this deal are well understood by many countries, including Russia. The Kremlin hates this deal; just look at the RT website and broadcasts. As one experienced observer as noted: “TTIP presents a huge challenge to the Kremlin’s efforts to divide European from Americans. It offers something that the Kremlin cannot match: a transparent, mutually beneficial agreement that creates a rules-based framework for international cooperation. A reinvigorated transatlantic marketplace among highly-connected, highly-competitive democracies, whose people enjoy greater economic growth and rising standards of living, would challenge the Kremlin’s version of “managed democracy;” render Russia’s own one-dimensional natural-resource-based economic model increasingly unattractive; and consign its rival economic project, the Eurasian Economic Union, to irrelevance.”
We know the Kremlin wants to use energy as a political weapon and to keep Europe vulnerable. And that is another geostrategic reason why TTIP is so important. Liquefied natural gas (LNG) exports to Europe would be facilitated by a free trade agreement between the United States and the EU. I realize that Romania may soon cease to import Russian gas; but your neighbors are more exposed.
Naturally, TTIP has to be a good deal for both sides on economic, not just geopolitical, grounds. In this respect, TTIP is all about evolution not revolution: in other words, it is about building on the existing strong transatlantic trade and investment – including between Romania and the United States — that has promoted prosperity.
In 2013, U.S. foreign direct investment in Romania neared $2 billion. This number is likely much higher in reality because many investments in Romania by U.S. companies are made through European subsidiaries, and not captured in official data. U.S. companies from the IT, auto, food and beverage, and consumer goods sectors, have invested here Procter & Gamble, Oracle, and PepsiCo, as well as major investments in the auto sector by Delphi, Johnson Controls, and Ford, who I understand has invested €350 million in a plant in Craiova, have identified the promise of Romania, and more broadly of the European market.
These companies, and many others I didn’t name, together directly employ tens of thousands of Romanians. And, let’s not forget, these well-known companies may get the headlines for their investments and the jobs they create, but their secondary-effect is even larger. Thousands of small Romanian businesses also benefit, as suppliers and service providers.
Arguments over specific projections of T-TIP’s impact on jobs and growth miss the point. Regardless of the exact numbers, creating more opportunities to create jobs, increase investment, and boost research and development and innovation are essential for the United States and EU. History shows that free trade agreements can boost exports: just look at the recent EU FTA with South Korea, which has boosted exports by 35% in the three years since it was signed. The United States has had a similar experience with its FTAs. We know that jobs tied to exports earn higher wages on average than those that do not.
One key area of the negotiations 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. Just think of how Romania might benefit if tariffs were eliminated for EU shoe and ceramic exports. Even in many instances where tariffs are low, they can be obstacles in a number of sectors with low profit margins. EU wine exports are doing well, and might do even better in the US market. And I hope that companies like Senator Wine of Romania will continue to participate in this success.
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 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.
There are millions of small manufacturers and producers in Europe and in the United States, and they play an important role in the Romanian economy. They are very well-placed to gain the most from the elimination of tariffs that T-TIP aims to achieve as they tend to dominate the sectors where increased trade is expected to result from an agreement. There are many examples of Romanian SMEs, about which we’ll hear about more today; but I was impressed when I read about success stories such as Sam Mills and Romina Furniture, for example, that have already cracked the US market. Even those SMEs who do not sell directly to the U.S. market may benefit from increased sales to customers who do.
An ambitious T-TIP can create opportunities for these companies by making border procedures more efficient, shipping and paperwork simpler, and internet transactions more seamless so entrepreneurs can more easily access new markets for their products. This reduced paperwork and lower duties could mean the different between growing through exports overseas or remaining confined to local markets. Producers could spend less time and fewer resources on meeting duplicative testing requirements and filling out unnecessary forms.
Along with traditional market access issues, T-TIP provides opportunities to narrow 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. The United States believes that we can reduce these unnecessary divergences if we better align our regulatory processes by improving transparency, participation and accountability in our respective regulatory and standards-setting processes. I must stress, of course, that these discussions will not limit in any way our ability to maintain the high safety, consumer, labor, and environmental standards we all enjoy.
In the discussions on specific economically significant sectors, such as autos, cosmetics and medical devices, our negotiators and regulators continued their joint technical work that will be necessary to achieve greater regulatory compatibility. Our goal in these sectoral discussions is to agree on steps that yield cost savings and regulatory efficiencies, while maintaining high standards of regulatory protections that our citizens expect.
With regard to the automotive sector, we are discussing the alignment of safety and standards, to eliminate duplicative requirements and tests that don’t contribute to high consumer protection. The U.S. and EU are also engaged in proposing new global regulations with regard to emerging technologies in the automotive sector. This could be important for the successful automotive supply chain in Romania.
On pharmaceuticals, the FDA and the European Commission are exploring relying on each other’s inspections of manufacturing facilities – saving significant time and cost. By the end of 2015, the FDA will have observed eight EU audits of Member State Good Manufacturing Practices inspections and the EU will have audited the FDA’s inspection program. Perhaps these discussions, over time, will help companies like Antibiotice SA sell more of its pharmaceuticals in the United States.
With regard to chemicals, we are focused on two areas: (1) sharing the burden in testing substances that either side has prioritized for further assessment; and (2) cooperating to reduce divergences in our regimes for classification and labeling.
This is difficult work, but it can be done. As you know, we finalized the Trans-Pacific Partnership Agreement (TPP) with our negotiating partners last week. This historic agreement links together countries that represent nearly 40 percent of global GDP and one third of world trade; if China joins, these figures will of course be much higher. The agreement will give a further stimulus to the dynamic economies of the Asia Pacific region, including the United States. Europe should want to prioritize TTIP in order not to be left behind.
There has been an enormous amount of misinformation, indeed disinformation, about the objectives of TPP and TTIP. I encourage you to read about TPP yourself on the website of the US Trade Representative:www.ustr.org. There is a useful summary of the chapters, including the ones dealing with small and medium-sized enterprises, customs and trade facilitation and investment.
TPP is a high-standard, ambitious, comprehensive and balanced agreement. It includes the strongest commitments on labor and the environment of any trade agreement in history, and those commitments are enforceable.
TPP also promotes a free and open Internet, and includes cutting-edge rules to promote Internet-based commerce. The agreement also includes strong rules that make sure the best innovation, not trade barriers and censorship laws, shapes how digital markets grow. The parties to the agreement specifically agree not to require that TPP companies build data centers to store data as a condition for operating in the TPP market. TPP helps preserve the single, global, digital marketplace.
TPP does this by preserving free international movement of data, ensuring that individuals, small businesses, and families in all TPP countries can take advantage of online shopping, communicate efficiently at low cost, and access, move, and store data freely. TPP also bans “forced localization” – the discriminatory requirement that certain governments impose on U.S. businesses that they place their data, servers, research facilities, and other necessities overseas in order to access those markets. There will be no TTIP without similar commitments to ensure free flow of global information and data that drive the internet and the digital economy.
TPP also includes a chapter on investment, which includes provisions for neutral and transparent international arbitration of investment disputes. As you know, this has been an area of much debate in Europe and the European Commission recently announced its draft proposal for an investment chapter in its free trade agreements. We are keenly aware of the EU’s continuing internal consultation on this issue.
The United States went through a similar process of domestic consultation a few years back, and we have noticed a number of common concerns on both sides of the Atlantic. It’s important to note that the TPP investment dispute provisions include strong safeguards to ensure the right of governments to regulate in the public interest and to issue binding interpretations of key provisions; to enhance transparency and eliminate conflicts of interest; and to prevent abuses, including frivolous claims. We look forward to receiving a Commission’s textual proposal on investor state dispute settlement so that we can return to a discussion of investment in the formal negotiations.
Across all issues, we continue to make progress in the TTIP negotiations. The next round in Miami next week is vital. We have an opportunity to conclude the negotiations during President Obama’s presidency, but this will require us to take advantage of every month and of every day available because we still have a lot of work to do.
These negotiations are by far the most transparent either side has ever conducted, and for good reason because we are seeking an ambitious agreement. But transparency should be a two way street; our NGO critics also need to be transparent, including about who they speak for and by whom they are financed. That is not the case in Europe today.
Both sides should focus on pragmatic, practical positions if we are to reach an agreement that promotes the interests of people in both Europe and the United States. We can get a good deal for both sides – but only if we stay focused, respect the facts and keep an open mind.