Speech: Industry Matters Trading our Way to Recovery

European Commission

Karel De Gucht

EU Trade Commissioner

Industry Matters Trading our Way to Recovery

Business Europe Day/ Brussels

28 January 2014

Ladies and gentlemen,

As far as trade policy is concerned, there can be no doubt that industry matters. And far as industry is concerned, trade matters.

I want to use my few minutes to look at this question - the relationship between industry and trade and trade policy - from both perspectives.

It is a question that is sometimes contentious. But it is also a question that is very important - for the European economy and therefore for European society.

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Let's start with the second question:

Why does trade matter for industry?

How can it help you compete in this challenging economic environment, so that you can invest and help Europe grow and create jobs?

The answer is that trade is essential.

Why? First, because we are living in a world where the lion's share of global growth happens outside the European Union.

That means there can be no route to success for many European manufacturing firms that does not cross our external border in some way. Exporting and investing are the best ways we have to connect to the dynamic growth in other parts of the world and bring a share of it back to Europe.

By the way, that goes for small companies as well as large ones - smaller firms directly account for 30% of the EU's exports and many more small companies contribute intermediate goods and services to the exports of multinationals.

The second reason is this: Two thirds of Europe's imports consist of energy, raw materials and intermediate goods. We import to make products for sale here in Europe and import to make the products we export around the world. 13% of the value we export is first imported from elsewhere.

The third reason is that trade and investment today are not totally free.

A range of…

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  tariffs…

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  restrictions on services and investment…

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  discriminatory rules on public procurement…

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  and regulatory barriers to trade…

… stand in the way of effective access to markets and supplies.

And that goes for very many economies around the world, as you will see from this year's Trade and Investment Barriers report, which will come out in March.

What industry needs therefore is an engaged and ambitious EU trade policy that works to make trade easier - both in and out of Europe.

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And that is what the European Union is seeking to provide - by working on many fronts at the same time.

Last year at the World Trade Organization we helped secure the first multilateral trade deal in nearly 20 years. The Bali package will make trade flow faster in and out of countries that need it most and boost the global economy by billions of euros.

The deal also sets the right atmosphere for the rest of the WTO agenda, which I have just been discussing with trade ministers in Davos over the weekend. We are making progress on how to put the trade facilitation deal into practice and we talked about our work programme on the wider agenda.

I was also very pleased to announce - with several other ministers, notably Ambassador Froman of the US - the launch of a new negotiation to free markets for a list of environmental goods. And on top of all this we continue to negotiate on liberalising trade in services and on information technology equipment.

In addition, the European Union has an agenda of bilateral and regional free trade agreements that is simply unprecedented. If we managed to achieve all the agreements we are aiming for then we would have free trade agreements covering almost 70% of our exports.

We are addressing the markets of the future through negotiations with countries like Vietnam, Thailand and Ecuador, as well as India and the Mercosur countries. We also put agreements with Central America, Columbia and Peru into effect last year.

With our second largest commercial partner China, we have just launched negotiations for a broad investment agreement that would tackle market access as well as investment protection. I need not remind you of the importance of China as foreign direct investment destination, particularly as we are beginning to see positive signs of further opening up and reform of the economy. The Middle Kingdom is also more and more important as a source of foreign direct investment for European firms.

Developing and emerging countries, however, make up only part of our free trade agreement policy. We are also bringing down the trade barriers that remain between the European Union and its developed partners.

We have already reached an ambitious deal with Canada, which I hope to be initialling in the coming months. However, two thirds of the economic gains from our trade liberalisation agenda are associated with just two countries.

We are deep into our negotiations with Japan, one of our largest trade partners and whose active government shares the view that trade liberalisation is an important tool for a re-launch of growth. Trade is part and parcel of the "third arrow" of Abenomics.

And I doubt there will be anyone in this room who hasn't heard that we are negotiating a Transatlantic Trade and Investment Partnership with the United States.

If we can pull it off, this deal would be the largest bilateral free trade agreement ever concluded. That goes not only for the millions, billions and trillions… of jobs, trade and investment respectively that it would cover…

… but also for the range of barriers it would remove - from the straightforward tariff to the complex costs of unnecessary differences in regulation.

It is also the negotiation that links our free trade agreement strategy back up with the multilateral system.

Because the EU and the US are such large players in the overall system, the solutions we find to these complex issues will serve as a reference point for regulators and trade negotiators around the world. That will help prepare the ground for future work back in the WTO.

This negotiation, however - aside from being the pinnacle of what trade policy makers can do to improve conditions for business - is also a good point to start looking in the other direction.

What can you as the business community do for trade policy?

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There are two aspects to this.

In the first place, companies are the channel by which trade policy affects the real world. Commissioners, Ministers and Parliamentarians can come to agreements. We can change laws. We can follow anti-dumping procedures and bring international trade disputes.

But if companies - small, medium or large - don't make use of the market opportunities that those changes create…

… if you don't export more, import more, or invest more…

… then there is no impact on the economy at all. No new growth. No new jobs.

That makes it essential that trade negotiators understand exactly what kind of obstacles you face in other countries when you try to do business there.

If we don't know what the problems are, we cannot solve them.

Let me be clear, business is not the only stakeholder we need to hear from on the impact of trade policy on the real world.

We need to hear from trade unions what new policies mean for workers.

We need to hear from consumer organisations how they believe households will be affected.

We need to hear from environmental groups about how they understand the impact of trade measures on the world around us.

But if trade policy is to be effective - and that means if it is to stimulate growth - then input from companies is certainly essential.

And what TTIP shows us that trade policy is moving in a direction that will require more from you in this respect.

As traditional tariffs have come down across the world, barriers behind the border have taken centre stage. Because those barriers are more complex, the input we receive from you - and your counterparts in other parts of civil society - has to become more refined as well.

Regulation in today's economy, with our advanced scientific understanding of impacts on the world around us is already complex. But the relationship between regulation and trade is even more complex. This is because what looks like protectionism is often actually just protection: The protection of people from real risks to their health, safety; the protection of the environment; or the protection of the financial system from instability.

Finding solutions that open markets while preserving those legitimate levels of protection is the job of governments. In Europe it's the job of trade negotiators working hand in hand with regulators, all under the watchful gaze of the European Parliament and national governments in the Council.

But business has the technical expertise on how it is affected by regulatory barriers which is essential to finding those solutions.

And an incisive EU trade policy needs companies to provide that input.

The second thing we need from you relates to the bigger political picture, and nowhere is this more relevant than in our talks with the US.

The fundamental nature of trade politics - from the Corn Laws to the Bali Declaration - is that the gains of trade are large but spread thinly while the losses are far smaller but much more concentrated.

That means there will always be vested interests with a big axe to grind. And it also means that the winners from trade - whether they are consumers, workers or businesses - don't always see why they should speak up more forcefully.

It has always been like this.

But today we have a new element. As trade goes behind the border we don't just encounter technical detail. We also run into the politics of the policy areas we cross. And in Europe debates about regulation are some of the most sensitive. GMOs and cloning come readily to mind

No matter how many times I make it clear - as I did in a speech in Düsseldorf just last week - that I have no intention of diluting regulatory protection, there will be those who do not believe it.

They will - and do - try to claim that the price for trade negotiations like TTIP is too high; that we sacrifice policy autonomy on the altar of free trade.

I believe these fears will be calmed as people learn more about these negotiations - through the close consultations now underway with the European Parliament, Member States and civil society. And they will be even more at ease when they look at the final deals we achieve. There will be plenty of time to examine the final texts, well before they ever come to a vote in Parliament or Council. And we will have an open and full debate about all the details that have been agreed.

I expect business leaders to be a strong voice in that debate - but also in the debate that is happening already. We need to see more of you in the press and at public events like this one all around Europe saying exactly how and why you think trade agreements like this will help you grow your company and create jobs. So please, speak up!

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Ladies and gentlemen,

In the changing world we live in today - with emerging economies, emerging technologies, emerging risks of all kinds - a European Union that is disconnected from the rest of the world stands no chance of success.

By contrast, if we can engage with our partners around the world to open our markets to them, and to encourage them to do likewise, while respecting our domestic policy concerns, I have every confidence that we will prosper.

That means we need to approach each new trade debate calmly and reasonably. We need to look at all the angles before we take any decision.

And in those debates business, alongside the full range of perspectives offered by European society is a legitimate and essential participant. We count on you!

Thank you very much for your attention.