Trans-Atlantic Ties Are in Need of Update
The trans-Atlantic relationship is still largely powered by a successful trade relationship that is often taken for granted because, by and large, it works pretty well. Despite the strong euro for most of this year, European exports to the United States have been robust and U.S. exports to the European Union are likely to increase considerably.
So what’s not to like? What needs fixing if the European Union and the United States together account for 60 percent of world gross domestic product and 40 percent of world trade; when $3 billion in goods, services and investments cross the Atlantic every day, and 14 million people benefit in the form of good jobs?
The truth is that nothing stays the same. This economic relationship, which has been enormously beneficial not only for both parties but also for the wider cause of trade liberalization, is not immune from the competitive challenges from emerging economic powers. We simply cannot afford any constraints on our trade and investment relationship caused by non-tariff barriers and regulatory burdens.
This is why the Transatlantic Economic Council, established at the EU-U.S. summit in April 2007, potentially is so important. I use the word “potentially” because previous attempts to address the stubborn red-tape irritants impeding trans-Atlantic business all ground to an unspectacular halt. It wasn’t for want of ideas or ambition on the part of government agencies, or for lack of suggestions and/or complaints by business. It just didn’t happen because it wasn’t made a political priority at the highest levels of government, so when trade and investment became entangled in interagency or interinstitutional barriers, there was nobody at the top to untie the knot.
What makes TEC different from Sir Leon Brittan’s New Transatlantic Marketplace and successive variations on that initiative is the creation of a new role for the political leadership on both sides of the Atlantic to push and monitor change. This obvious but previously neglected component will, I hope, be the vital ingredient that gets rid of the regulatory encrustation that inhibits the full efficiency of the trans-Atlantic marketplace. Another reason why I believe TEC can succeed where others have failed is because it identifies specific “lighthouse projects” — in the areas of intellectual property, secure trade, investment, financial markets and innovation — that are extremely relevant to our competitive posture and to the areas where we can accelerate the removal of regulatory barriers. Finally, there is a clear commitment to deliver concrete results within reasonable time frames.
That is not to underestimate the challenges following the first TEC ministerial meeting on Nov. 9 in Washington, D.C., which was co-chaired by European Commission Vice President G nter Verheugen and White House economic adviser Allan Hubbard.
This new TEC will need to show progress to match the ambition with which it was launched by President Bush, German Chancellor Angela Merkel and European Commission President José Manuel Barroso back in April. We cannot afford for it to become another bureaucratic vehicle to be set aside as soon as the technical going gets tough.
The good news is that in some of the “lighthouse projects” I identified earlier, there is already real and promising work in progress. But “work in progress,” while important, cannot become a mantra-like substitute for concrete results, or “deliverables” as they are known in the business.
We need to use this new mechanism to give a real political push to things that matter to ordinary people — like cleaner and safer cars, cheaper drugs, better medical devices and so on. This is why I hope to see much greater involvement in the process by Members of Congress and the European Parliament who directly represent the citizens of the trans- Atlantic marketplace and who meet regularly in the Transatlantic Legislators’ Dialogue. After all, many barriers to trade arise from legislative acts where only legislators can provide relief. This is why dialogue is so important and why the TLD in particular must play such a very important role in the success of the TEC.
Hopefully, if we see TEC through, it will one day be a distant memory that in 2007 you could neither buy a Volkswagen in Germany and simply import it to the United States without going to the expense and trouble of modifying it to meet U.S. safety standards, nor import a U.S.-made passenger car to the EU without expensive technical work to meet EU specifications. These diverging standards oblige American and European car manufacturers to produce two models of the same car instead of one — hardly a recipe for remaining competitive. Cutting away those regulatory shackles will provide huge savings for everyone, and especially motorists who will enjoy lower prices and more competition.
The same goes for electrical and electronic products like mobile phones. The United States currently requires EU products to be tested for electrical safety and certified by a laboratory approved by a U.S. government agency, even though they have been certified as safe in the EU. By our estimation, if the U.S. agreed to move toward a system based on a firm’s declaration of conformity accompanied by a system of post-market surveillance — as is the case in the EU — this would bring significant savings (up to $2 billion in the next few years) to both our industries in terms of time-to-market costs and double testing; it would not jeopardize users’ safety but it would allow these industries to remain globally competitive. Again, if markets are competitive, this benefit will be passed on to consumers in the form of lower prices.
Similarly, cooperation on innovation has enormous potential. For instance, cooperation on radio frequency identification technologies could be important in combating health care product counterfeiting, and cooperation by standardization bodies to develop technical requirements for such items as computer keyboards would help people with disabilities or age-related limitations to use information and communication technology to access products and services. These are large markets and there are many social and economic benefits to be gained by working together to make ICT products more accessible.
The longer-term challenge for TEC will be to prevent regulatory divergence and to actively promote convergence on financial markets and accounting, container security, patents and so on. But let us not lose sight of the potentially life-altering lighthouse projects in the area of research and innovation that within five years could take us to a new frontier in terms of how we live, travel, cure diseases and treat our planet. I am thinking in particular of TEC projects to accelerate technological innovation and market penetration of bio-based products to replace the oil-based fuels and plastics we use today, and of the partnerships we have already established to stimulate research cooperation on nanotechnology, which is of potentially huge societal benefit.
Globalization will not go away; we must learn not only to live with it but to optimize the benefits it can provide. In this global world, it should be clear to everyone that Europe and the United States have much to gain from working together, and much to lose if we don’t.
Our aim must be a trans-Atlantic environment in which the European Commission when it considers a new regulation, or a U.S. Member of Congress when he or she proposes a new law, will both have an automatic reflex to ask themselves what impact it will have on the trans-Atlantic economy, an economy currently generating 60 percent of the world’s income.
And our ultimate aim must also be to show consumer benefit in the form of lower prices and more choice. That means that competition must be vigorous enough to ensure that most of the benefits are passed on to consumers, and are not merely retained by shareholders. That is why a vigorous antitrust activity also is vital, and the European Commission is giving a courageous lead on that.
Ambassador John Bruton is head of the European Commission delegation to the United States.