Remarks to AmCham’s Annual General Meeting

Carl, thank you for that introduction. And thanks to Susan and the superb team at AmCham EU for the hard work you do on behalf of US businesses and for your close cooperation with our Mission. I also want to recognize the terrific team we have at the Mission; some of them are here tonight.

I have been U.S. Ambassador to the EU for just over one year. And what a year it has been: European elections; a new European Parliament and Commission; new priorities and a new structure at the Commission; continued progress, despite some difficulties, on a transatlantic trade and investment partnership (TTIP) agreement; and many challenges facing the US-EU partnership on the borders of Europe and beyond. I look forward to a lively discussion this evening about these and other issues on your minds. Specifically, I’d like to hear how we at the Mission can improve our efforts to support you.

I would like to start with a brief assessment of the U.S.-EU relationship, including TTIP, cooperation regarding sanctions against Russia and energy security, before discussing digital issues in some detail.

Overview of the U.S.-EU Relationship

The Transatlantic Economy 2014 Report that Amcham EU co-sponsors makes clear that the trade and investment partnership remains strong: the transatlantic economy generates $5 trillion in total commercial sales a year, employs up to 15 million workers and represents over 50% of world GDP. These are the statistics: but what does the US-EU partnership look like in practice?

The two-traffic in top officials provides additional evidence that the partnership is deep and broad. President Obama attended a U.S.-EU Summit in March last year, and returned to Brussels for a meeting of the G-7. Vice President Biden visited Brussels in February to hold meetings with President Juncker, President Tusk, President Schulz and the leading members of the European Parliament. And we’ve had visits from six cabinet secretaries – especially Secretary of State Kerry, but also including Secretary of Treasury Lew, Secretary of Energy Moniz, Secretary of Agriculture Vilsack, USTR Froman and Ambassador to the UN Power. We have hosted the deputies from Treasury, USTR and Energy multiple times, as well as four Under Secretaries of State from the State Department, as well as two Under Secretaries from the Department of Commerce.

Of course, traffic is flowing the other way as well. President Tusk travelled to Washington to meet with President Obama and Vice President Biden in March of this year; over the past year 12 members of the Commission have also made the trip, and several more are about to do so. A large number of Euro-parliamentarians and US Members of Congress have crossed the Atlantic. These traffic statistics may be anecdotal, but they certainly suggest that the relationship is getting very high level and sustained attention over a broad number of issues.

After one year in this post I feel very confident that the EU is the essential partner of the United States on nearly every major transatlantic issue and even on many global issues – such as Ebola, humanitarian and development assistance, law enforcement and migration. The cooperation is even extending to fields that have not traditionally fallen within the scope of U.S.-EU relations, including counter-terrorism and military cooperation.

Our partnership has certainly been tested, perhaps most dramatically during last summer in reaction to Russia’s illegal annexation of Crimea and significant military support for the separatists in Southeastern Ukraine. Despite different perspectives on Russia borne of different cultures and histories, the U.S. and all of the 28 members of the EU managed to roll out nearly identical sanctions at roughly the same time. This was a remarkable achievement. We need to keep the pressure up. This is no time for us to roll back sanctions; and we need to consider the possibility of expanding them if Russian aggression continues.

The European Council meeting in March made clear that sanctions will be extended at the next meeting in June if Russia has not complied with all of its obligations under the Minsk Protocol. As some of those obligations can only be fulfilled toward the end of the year, sanctions must be extended. Any effort to offer Russia a “Chinese Menu” whereby they only need to fulfill some of their obligations in return for a partial relaxation of the sanctions must be firmly resisted.

Transatlantic ties would be significantly enhanced if we conclude TTIP – not only economically, but also politically. We just completed the 9th round of negotiations in April, the next round will be in Brussels in July, and we continue to make significant progress on the three broad areas of the negotiations: market access, regulatory issues, and rules. We have consolidated texts in quite a few areas including trade facilitation, competition, SPS, TBT, SMEs, state owned enterprises and regulatory coherence. Commissioner Malmstrom can take credit for moving the debate on ISDS in a positive direction. We are studying the ideas presented in her report; some of them are already reflected in our Model Bilateral Investment Treaty.

We welcome indications that the Commission’s Better Regulation proposals expected tomorrow will call for enhanced public input and feedback into secondary legislation, and will expand the role of impact assessments. We hope that this might have a positive impact on our discussions regarding regulatory coherence in TTIP. At the same time, important work continues regarding sectoral regulatory cooperation, including in auto safety and mutual reliance on inspections of pharmaceutical manufacturing facilities.

We are closing in on Trade Promotion Authority and on concluding the Transpacific Partnership Agreement, which would provide additional stimulus to the U.S. economy and would enhance focus on concluding TTIP. At a recent conference I attended in Florence, Italian Prime Minister Renzi stated that failure to conclude TTIP would be a “gigantic own-goal” for Europe.

In order to get to a successful conclusion, we will need to see a commitment to scientific, evidence-based decision making. As we have already stated publicly, we were very disappointed at the Commission’s recent opt-out proposal for imports of GMO food and feed because it allows Member States to block them on non-scientific grounds. We are pleased, of course, that the backlog in GMO approval requests has declined. Nonetheless, the timing and substance of the proposal were unhelpful.

Priorities of the new European Commission

I would now like to touch briefly on some of the key priorities that the Juncker Commission has identified, including the Energy Union; investment and entrepreneurship; and specifically the Digital Single Market. We share the conviction that progress on these issues is critical.

As Vice President Biden said last November, he and President Obama “believe that energy security is the next chapter in the European project of integration and market expansion that began decades ago with European coal and steel.”He added that the situation in Ukraine underlined the urgency of diversifying the EU’s energy sources, a key plank of the Energy Union plan. The USG supports “…a fully functioning and interconnected internal EU energy market,” as Secretary Kerry and Vice President for Energy Union Maros Sefcovic stated after the December U.S.-EU Energy Council meeting.

We are working closely with the EU and key countries to change Europe’s energy landscape to make it more secure, resilient and diverse: we are working to increase reverse flow capacity from Slovakia, Poland and Hungary to Ukraine; we are building out LNG infrastructure in Northern Europe and the Baltic states; and we are working 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 work on the critical Southern Corridor pipeline, that will bring Azeri gas to European markets by 2020, is well under way.

Similarly, we support the Juncker Commission’s emphasis on jobs, growth and entrepreneurship. I recently had the privilege of hosting Vice President for Jobs, Growth, Investment and Competitiveness Jyrki Katainen and a number of venture capital firms, business angels, funds and key members of the Commission at a half-day seminar to talk about boosting investment in the EU.

Tonight I’d like to focus on the digital economy. Cross-border data flows between the U.S. and Europe are the highest in the world. And with the rapid growth in mobile computing and advent of the Internet of Things, big data analytics, and cloud computing, those flows are projected to grow substantially over the next decade, to the benefit of new digital companies, established industries, consumers, researchers, and governments on both sides of the Atlantic.

We should keep in mind that in additional to being each other’s largest trading partners for digitally deliverable services, the U.S. and the EU are also the two largest net exporters of these services to the world. The EU, not the U.S., is the world’s largest net exporter of digitally deliverable services. 53 percent of digitally deliverable services imported from the U.S. (including consulting, engineering, design, and financial services) were used in the production of EU exports, and 62 percent of digitally deliverable services imported from the EU were incorporated into U.S. exports.

The Juncker Commission clearly recognizes the importance and the tremendous potential of the digital economy. We understand the Commission’s Digital Single Market strategy is intended to create the regulatory and market conditions to help companies to innovate, collaborate, invest, create jobs, and drive growth while better serving consumers. This is a vision that we, of course, support. 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.

Digital Single Market

The Digital Single Market (DSM) communication issued on May 6 is an important vision statement. We will closely follow the next steps the Commission takes to realize that vision, particularly through the development of specific legislative proposals. Greater investment in networks and digital skills, digitalization of traditional industries through greater technology uptake, harmonization of regulations, and reduction of barriers to doing business across the EU’s internal borders are all important objectives that we support because they would benefit consumers and companies, European and American alike.

Creating a true internal market means that technology companies should not be subject to multiple, overlapping and sometimes contradictory investigations by national regulators. Europe would be undermining its attraction as a place to do business if it forces companies to comply with 28 independent regulators with different agendas.

Although the Commission, most notably the Commissioner for Competition Policy, has been clear about the need for a common EU policy and for EU law to be applied without political interference, there has been some unhelpful rhetoric about digital issues over the past few months – especially from the European Parliament. A non-binding resolution sought to politicize the antitrust investigation into Google by calling on the Commission to take specific action; and then several press releases of leading political parties resorted to caricatures about US technology companies acting as if the internet were the “wild West.”

We are not in the business of defending the interests of any specific US company. But we will not hesitate to defend the basic principle that the law should be applied in a fair, transparent and non-discriminatory way to all companies, including those from the US.

Moreover, we should be wary of any proposals that could lead to a more closed and insular model for the digital economy, one that unnecessarily restricts data, stifles innovation through onerous or complex regulation, or tries to pick national champions and tilt the regulatory playing field against non-European companies. The phrase “create a level playing field” has been used very loosely and opportunistically in the public debate to suggest a range of measures against certain companies without presenting clear evidence of market failures or distortions and without clearly demonstrating that the proposed remedies would lead to positive outcomes. We are generally skeptical of calls for the special regulation of online platforms in the absence of evidence that such regulation would necessarily lead to better outcomes for consumers and a more dynamic and innovative marketplace, so we eagerly await the result of the Commission’s study of the role of platforms in the market.

In the DSM communication, the Commission wrote, “Platforms have proven to be innovators in the digital economy helping smaller businesses to move online and reach new markets.” We agree that, beyond delivering value to EU consumers, these platforms have built a strong ecosystem with European partners, suppliers and distributors; made major investments in Europe; promoted entrepreneurship and innovation; fostered research and digital skills training; and created jobs for Europeans.

To cite just one example, the launch of the iTunes App Store in 2008 created an industry from scratch. 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. In the past year businesses selling on Amazon’s EU websites earned a record 2.8 billion euros in revenue from exports within the EU. This is in addition to the billions of euros EU sellers earned from purchases made by Amazon customers living in their home countries (French seller to French customer) and outside of Europe (German seller to U.S. customer).

Meanwhile, Facebook recently announced that its social network generated 44 billion euros and enabled 783,000 jobs in Europe in 2014. At the same time, thousands of micro-entrepreneurs have launched their own YouTube channels that are now making six-figures annually. I’m sure there are many other examples; I encourage you to use these examples in your public diplomacy and to share them with the US Mission to the EU.

The calls from some Member States to promote “digital sovereignty” through discriminatory regulation, forced data localization, or the creation of a Schengen cloud leading to a fracturing of the internet or digital autarky, will not help Europe to become more competitive in the global digital economy. The EU, while addressing the problem of internal market fragmentation, should be careful to avoid inadvertently promoting external fragmentation in other parts of the global digital economy.

The creation of new barriers to the free flow of data both within and across Europe’s borders -whether intentional or inadvertent – could squander the potentially enormous benefits of Big Data analytics, the Internet of Things, digitalization of industry, cloud computing, and the preservation of an open, dynamic, and interoperable Internet. 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 creates and harnesses new technologies, to increase both its digital and traditional exports to the rest of the world. Policy makers should take great care to ensure that any new regulations that are being considered do not have the unintended consequence of creating market barriers rather than removing them. The robust consultation with all relevant stakeholders and thorough impact assessments, which the Commission has promised, should help to inform effective policy-making.

One last point on the digital economy: our trade agenda is focused on negotiating many more disciplines to support the free flow of goods, services and data across the internet. Our policies are well summarized by a recent speech by Deputy U.S. Trade Representative Robert Holleyman. You can find a copy on USTR’s website.

Data Protection/Intelligence Reform

Privacy and data protection are distinct from, but related to, the main issues raised by the digital single market. Consumers will only have the confidence to use digital services if they trust the internet and believe that their data is protected. Restoring public trust is also essential to ensure that US technology companies do not continue to suffer negative commercial consequences abroad.

I want to assure you that we are making every effort to address this issue. And we are close to concluding the Umbrella Agreement for the exchange of data between law enforcement authorities.

Two legislative proposals would also make a significant contribution to restoring trust. According to the Judicial Redress Act of 2015, citizens of U.S. designated allies, especially EU member states, will be able to avail themselves of the core benefits that Americans enjoy under the U.S. Privacy Act with regard to information shared for law enforcement purposes, in particular the ability to ensure that information is accurate and seek judicial recourse when it is not. Just a few days ago the House of Representatives overwhelmingly approved the USA Freedom Act, a bill this Administration supports; if enacted, it would end the government’s bulk collection of calling records, or so-called metadata, under Section 215 of the Patriot Act by limiting collection to instances where there is “reasonable, articulable suspicion” that a “specific selection term” is associated with international terrorism.

These are some of the issues that are occupying our attention at the Mission. I look forward to our discussion.