I am pleased to be here today. I owe Paul Adamson a great debt of thanks for having given me, shortly after my arrival in Brussels last year, a copy of a terrific book by Peter Baldwin, “The Narcissism of Minor Differences: How Europe and America are Alike.” I confess that when I first saw the hundreds of charts and graphs, the book slipped under a pile of Ken Follett and Stieg Larsson novels.
But a few weeks ago I started reading it and put aside the novels. Sigmund Freud coined the phrase “the narcissism of minor differences” to account for the “intense energy invested in parsing divergences that, to an impartial observer, might seem trivial and inconsequential.” The author of this excellent book conducted an exhaustive statistical comparison of the United States and Europe on the economy, crime, health care, education, culture, religion, the environment and much more.
He concluded that though there are many differences between Europe and America, in almost all cases, these differences are not greater than the differences among European nations. The debate about purported transatlantic differences has “degenerated into ideological posturing, motivated by local politics and tactics…Vast cauldrons of rhetorical soup have been boiled from meager scraps of evidence.”
The book is inspiring because it uses impartial data to shine light on the real agenda of those who want to make the Atlantic appear wider than it really is. Some of these efforts are amusing. The Russian Ambassador to the EU suggested recently that the EU shouldn’t bother negotiating T-TIP because it could sign a deal with Russia, a geographically closer “natural partner” that doesn’t chlorinate its chickens. More seriously, the crude disinformation campaign against T-TIP by Russia Today reflects the Kremlin’s concern that T-TIP would reinvigorate the transatlantic economies and bring the U.S. and EU closer together.
Fortunately, we continue to make important progress on T-TIP, including during this 8th round of negotiations. 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 made. Two weeks ago in Davos I witnessed the excellent chemistry between the two – also reflected in the relationship between our chief negotiators. I had the pleasure of getting to know the Commissioner in her previous capacity, and I look forward to continued collaboration with her and her very able team.
We need more confidence on both sides of the Atlantic, above all in Europe, that we can reach a deal good for both sides. Both 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 shouldn’t be expressed as a double negative –the conclusion of an agreement that doesn’t threaten Europe’s safety, health, social and data protection standards, or its cultural diversity. The case for T-TIP is positive, and Europe has offensive, not just defensive interests.
The United States is growing at 3% and has lowered unemployment to 5.8%. U.S manufacturers are relocating production and jobs back to the United States in record numbers because of increased productivity and competitive labor costs. We may be several months away from a very significant Trans Pacific Partnership Agreement, which will provide a significant trade boost to our economy. But we remain enthusiastic about what a transatlantic trade deal could do to further boost growth, productivity, consumer purchasing power and higher paying jobs. Too many people have dropped out of the job market in the United States; too many young people have remained out of the workforce; and too many workers have seen their paychecks stagnate for us to be satisfied with the current state of affairs.
The growth and unemployment picture in Europe is self-evident; Europeans will have to determine for themselves whether they are satisfied with the current state of affairs or whether they are prepared to grab the opportunity of a trade induced debt-free stimulus. Neither U.S. government officials nor U.S. businesses can lead the effort to sell T-TIP in Europe; Europeans will have to do the job.
I am often asked whether there is support for T-TIP in the United States. Although the debate is only starting in the U.S. and will no doubt become more active after the passage of TPP, I am confident that the answer will be “yes” if the deal is a good, balanced one. The new Republican majority in both Houses has expressed support. Our Congress, led by the two committees responsible for trade – the House Ways and Means Committee and the Senate Finance Committee – are actively discussing Trade Promotion Authority legislation. We are working with these Committees and with the new Congress as a whole to secure a TPA that has bipartisan support.
The risk to T-TIP in the U.S. will not come from philosophical differences with Europe; the idea of doing a free trade deal with a region that shares our values and the high standards of health, safety and environmental protections is not particularly controversial. Unlike in Europe, the risk will not come from a preoccupation with globalization; after all, the U.S. and the EU should be most at ease trading freely between each other.
The risk will come from the view that there isn’t enough upside for certain key constituencies. U.S. merchandise exports to the EU-15 were lower in 2013 than they had been in 2008 despite a 21.4 percent increase in overall U.S. exports. Over the same period, U.S. exports to Mexico – one of our fastest growing markets — increased almost 50 percent and could overtake exports to the EU-15 within the next couple of years.
One of the striking statistics I have seen recently concerns the growth in agricultural exports from the United States to Europe, relative to the rest of the world. Between 1990 and 2013 (23 years) U.S. agricultural exports to Europe have grown 60%, whereas in the past 8 years alone exports to China have quintupled and exports to Southeast Asia more than tripled. The EU currently benefits from a $9 billion surplus in transatlantic agricultural and food trade, in large part because the products where we are most competitive are prevented from entering the EU market. So if you were an American farmer, which markets would you consider most promising?
While there will be legitimate, difficult disagreements about complex issues as these negotiations continue, we need to be vigilant about combating the false fears and narratives. We are particularly concerned about the tone of the debate in some parts of Europe.
In Europe, as in the United States, there are legitimate concerns about the impact of globalization on patterns of production, on jobs and on wages. But as Mike Froman has stated, it is important not to “conflate globalisation with trade agreements…Globalization is a force. It exists. The question is whether we can use trade agreements to shape it, or whether we want to just sit and be shaped by it.” In parts of Europe the concerns about globalization are rather perplexing. As the author of the “Narcissism of Minor Differences” points out, when Germans, citizens of the world’s most dynamic export economy, attack globalization, they are attacking their ability to sell their excellent products everywhere. Germany is Europe’s export powerhouse and the most significant beneficiary in Europe of free trade.
In Europe there persists the myth that T-TIP will force Europe to accept laxer U.S. standards of social, health and environmental protections. This is despite the numerous academic studies that conclude that the levels of protection in various domains are broadly similar across the Atlantic. A few months ago I once again put aside my pile of Ken Follett and Stieg Larsson novels to read a fascinating report entitled “The Reality of Precaution: Comparing Risk Regulation in the U.S. and Europe.” It was a riveting page-turner. If you haven’t read it, you don’t know what you are missing. This report — authored by two European and two American experts – concluded exactly what other academic reports had found: neither side can claim to enforce stricter precautions against health, safety and environmental risks than the other.
The study found that Europe adopted a more “precautionary” regulatory approach than the U.S. in 31 cases, but the U.S. adopted a more “precautionary” approach in 36 cases. And in 21 cases the researchers found the U.S. and EU approaches essentially equivalent in terms of risk precaution.The fact is that 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. The U.S. Government 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.
And what about Europe’s famous “precautionary principle” which some observers claim is antithetical to our regulators’ approach to risk? In the United States, precaution is built into our risk assessment and risk management activities. It is reflected in our practice of adapting regulations based on the experience gained in implementing them and on new evidence that becomes available. The authors of the riveting report that I cited concluded – just as other have done before them – that the differences between attitudes of U.S. and European regulators to risk are overstated.
Millions of European visitors to the United States are happy to eat our food and drive our cars. Our people, our government and our Congress respect the health and safety of the American consumers and value the right to regulate appropriately as much as you do. We don’t want to force European consumers to eat food they reject; rather, we want Europe to follow the advice of its own food safety authority and to give European consumers a choice, rather than to persistently ignore science-based decision making for political ends. We believe that maintaining the role of the Chief Scientific Advisor in the European Commission would be an important sign that science will play a fundamental role in policy making.
Those critics of T-TIP who argue that it will undermine European standards have fundamentally misunderstood what is at stake. T-TIP would set a standard for future regional and global deals that reflect the value we place on rules-based trade, high standards, and regulatory transparency and accountability. It would enhance the U.S.-EU global partnership in the realm of trade negotiations, helping to make progress in stalled WTO talks and ensuring that world trade rules will continue to be compatible with free-market democratic systems.
We have a window of opportunity during the next few years to set a standard for future regional and global trade deals that reflect our shared support for rules-based trade, high standards and regulatory transparency and accountability. If we fail, other countries who do not share our values and whose weight in the international tradition system is growing fast will set the agenda themselves. As President Obama stated during his State of the Union address a few weeks ago:
“…China wants to write the rules for the world’s fastest-growing region. That would put our workers and our businesses at a disadvantage. Why would we let that happen? We should write those rules. We should level the playing field.”
The critics of T-TIP should reflect on the consequences of the U.S. and EU failing to set the trade agenda themselves.
Let me be clear: regional trade agreements like TPP and T-TIP are catalysts of, not substitutes for, multilateral trade agreements. As emerging economies have assumed greater importance in the global trading system and as non-tariff barriers have become more important than tariff barriers as obstacles to trade liberalization, it has been difficult to get consensus within the WTO.
Significant external pressure is needed to invigorate the multilateral process. We believe that a successful effort to resolve disagreements across the Atlantic could become a template for the stalled global trade talks in several difficult areas, from agriculture to cross-border rules on services, investment and regulations.
Just like the Trans Pacific Partnership Agreement, T-TIP can create positive pressures on key countries to liberalize their own trade policies and shift their positions in multilateral trade talks for fear of being left behind. Early indications are that TPP and T-TIP are serving as a magnet for other countries. We hope that these agreements will encourage other countries to embrace the same high standards and principles. If other countries do eventually join, plurilateral or perhaps even multilateral trade liberalization would have been achieved indirectly.
History supports the proposition that regional trade agreements have pushed countries to liberalize trade on a multilateral basis. Examples include the completion of Europe’s common market stimulating the Kennedy Round and the completion of NAFTA resuscitating the Uruguay Round and stimulating the conclusion of the Information Technology Agreement two years later.
We can get this deal done. We can win the debate. We simply need to explain the deal and empower the silent majority to counter the vocal minority. 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. At the time the single market was launched there were fears that it would lead to a lowering of standards and an influx of unsafe products; neither fear was realized, of course. And there is no reason to think that T-TIP would have such an effect.
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 succeed 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 (SMEs) should again significantly from T-TIP because SMEs tend to dominate the sectors where increased trade is expected to result from an agreement. 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. Let’s not forget that LNG exports to Europe would be facilitated by a free trade agreement between the United States and the EU.
Our negotiators are working to cut customs duties on goods sold by small businesses to U.S. and European customers. We’re working to reduce customs paperwork, perhaps even eliminating it for lower-value shipments. And we’re working to reduce the amount of time that recipients have to wait for their goods to be released.
For some businesses, especially small and medium-sized businesses, less customs paper work and lower duties could mean the difference between growing through exporting overseas or remaining confined to local markets. Consumers could choose from a wider variety of products and gain from lower costs. Producers could spend less time and resources on meeting duplicative testing requirements and filling out unnecessary customs paperwork.
My message today is one of optimism. Although we have set ourselves an ambitious task, we can get it done. We continue to make progress in addressing some of the issues in the transatlantic trade relationship, even if some of that progress does not grab the headlines. All too often the negative stories crowd these out. Here are some recent good news examples:
At the end of last year, the Food Safety Inspection Service of the U.S. Department of Agriculture declared that Ireland will soon become the first EU Member State to regain access to the U.S. beef market after nearly 20 years. And French apples and pears will soon be exported to the U.S. once again, following an embargo introduced after the detection of a damaging pest.
And here’s another piece of good news: in May of last year, the U.S. Food and Drug Administration announced the Mutual Reliance Initiative –a strategic collaboration between the U.S. FDA and the EU that would allow them to rely on each other’s inspection reports and to reallocate limited resources to increase oversight of higher risk manufacturing operations in other parts of the world. The FDA has already observed an audit of the Swedish inspectorate and will be present when Greece is audited in March and Germany is audited in May. The EU will be auditing FDA’s inspectorate in May. We hope to have the majority of the mutual assessment work and negotiations concluded in the early part of 2016.
You all know that regulatory issues are an important part of what is being negotiated. Some observers have expressed skepticism about the chances of success, based on the complexity of the issues. But let’s keep in mind the examples where we have made progress in the past.
U.S. regulatory agencies already work with their EU counterparts to share scientific data as well as to respond to emerging threats to public health and safety on both sides of the Atlantic. One example of this is the ongoing cooperation between the Consumer Product Safety Commission and the European Commission’s Directorate General for Health and Consumers, which allows us to share information to better protect consumers from unsafe products, including children’s toys.
There is also the example of air safety. Thanks to an agreement between the U.S. and EU in the regulation of civil aviation safety, specifically promoting reciprocal acceptance of repair and maintenance standards, you can fly on an airplane and be confident in its safety, regardless of whether it has been serviced in the United States or Europe.
We can get this deal done. But we need to give each other political space. The drawing of red lines, for example, is counterproductive. Despite the progress that we are making in the negotiations, we are still at a relatively early stage. We need to give the negotiators time to complete their work. We have issues on the table that are important to our economies’ growth and that are complicated to address. Let’s focus on these and have a frank debate based on fact and free from fiction.