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Trade Relations
Trade Relations
We Need a Transatlantic Framework for Economic Growth
By Gunter Verheugen
The global challenges that will determine the well-being of our children are only likely to be mastered if the United States and Europe work together. But we need the vision to renew our relationship to confront the changed circumstances of the 21st century, and the starting point must be full recognition of our interdependence. Our economies are now so closely connected that it is difficult to determine where Europe ends and the United States begins.
There are many ways in which we can ensure that our future partnership will be even more balanced and complementary. In a constant dialogue, we should aim to remove the remaining barriers to free commerce across the Atlantic.
The European Union is without doubt an interesting partner for the United States. We are by far the biggest donor of official development aid; we are a world leader in implementing global environmental objectives; we have gone farthest toward opening up our markets to the world's poorest countries; we are the strongest trading block and we have an extraordinary record of expanding freedom by enlarging our membership across Europe.
Now we need to translate our achievements into an effective European contribution to global governance. But there is a major pre-condition for this - the European Union needs a sound economic and social base. I am convinced that one reason why our citizens have not felt connected with Europe is that we have lost ground economically during the last ten years. The citizens have reacted to our inability to deliver economic reforms as fast as they were needed. Paradoxically, perhaps, most Europeans are against political and economic reform, but they blame their leaders for not having achieved it.
There are no quick fixes. Some politicians argue that going back to protectionism is the solution to globalization and increasingly fierce competition. They forget that keeping out foreign products also means depriving our companies of hugely lucrative markets abroad. There is also a debate in Europe on relocation, or out-sourcing, which is worrying because it is based on fears and scare mongering, and not on facts.
We must have the courage to be honest and tell our citizens how the world works. We shall not beat the Chinese in making cheap T-shirts. We have no other reasonable choice than to enhance our competitiveness and go for world-class solutions. The only way forward is for Europe to achieve competitiveness via excellence, and to achieve excellence via innovation. We need stronger growth and more and better employment opportunities. That is why we have relaunched an ambitious reform process - a European partnership for growth and jobs.
Competitiveness is the key. We accept competition as the basic rule for the market place. We fully support the idea of open and free markets. The role of public authorities is to create conditions that will encourage entrepreneurship, give businesses legal certainty and predictability, organize a level playing field and vigorously enforce competition rules. We will not shield any company from competition. We want European companies to become world market leaders, not as a result of artificial state intervention, but in fair and open competition.
Openness to trade and investment explains a quarter of the productivity gains witnessed across the European Union. That is why we have such a strong interest in an ambitious result in the Doha round of trade negotiations, tighter economic integration with our neighbors and close cooperation with other partners.
The European Union and the United States also have a global responsibility. Our combined GDP is around 60 percent of the world total, and together we account for almost 40 percent of world trade. Our bilateral economic relationship is worth just short of $3 billion a day in trade of goods and services and foreign direct investment. By 2003, the total stocks of two-way investments amounted to an astonishing 1.4 trillion. Headline-grabbing trade conflicts affect less than two percent of Transatlantic commerce.
"We must have the courage to admit that we shall not beat the
Chinese in making cheap T-shirts"
This explains why fair and open competition is so much to our mutual advantage. Our economic interests are best served when the United States and the European Union work together at the bilateral and global levels to provide a favorable environment for business. Together we have gotten rid of many of the classic trade barriers between us - tariffs, quotas and other obstacles - but we must expand and reinforce our cooperation. Our different regulatory frameworks are creating barriers to trade and investment, and we need more cooperation between legislators on both sides of the Atlantic.
That is why the EU-U.S. summit meeting in June 2005 established a high-level Regulatory Cooperation Forum to facilitate and promote regulatory dialogue, and to help us to cooperate in advance, before actually legislating. This will mean reinforcing the current network of regulatory dialogues that have already achieved some important results. In the pharmaceutical sector, for example, information exchanges between our regulators are permitting quicker access to new medicines, improving safety and avoiding the duplication of efforts.
The Commission is also discussing with the Office of Management and Budget (OMB) how to improve our understanding of each other's regulatory practices and methods of assessing the impact of regulations. We hope to learn from each other in order to cut red tape and avoid rule-making that puts unnecessary burdens on business. We have made good progress, but there is still much broader scope for cooperation.
In short, the EU and U.S. economies are growing together, rather than drifting apart, and we will try to strengthen the framework in which they can continue to do so. The EU and U.S. economies already operate to a very large extent as one single Transatlantic economy. Globalization is happening faster and reaching deeper between Europe and North America than between any other continents. That is part of our strength, but it also determines the challenges we face together.
Unfortunately, globalization is seen by some on both sides of the Atlantic as a threat rather than an opportunity. That is understandable because it touches everyone, and there are always some who are affected negatively. We need to meet that challenge and make the case for the enormous potential gains of globalization. Otherwise, we risk creating a "Fortress America" and a "Fortress Europe," and we know how dangerous that can be.
The truth is that we both depend on each other more than ever to cope with the threats and challenges of the 21st century. We are all in the same boat. We both want to achieve the same things: the freedom and security of our citizens, open democracies, human rights, the rule of law, and increasing prosperity from job creation and economic growth.
GŸnter Verheugen is Vice-President and Commissioner for Enterprise and Industry at the European Commission. He was previously European Commissioner for Enlargement. He was a member of the German Bundestag (Parliament) from 1983 to 1999, and Minister of State for European Affairs from 1998 to 1999. He has held several political posts, including General Secretary of the Free Democratic Party, and, later, of the Social Democratic Party.