Speech: Opportunities from Globalization for European Companies

European Commission

[Check Against Delivery]

Karel De Gucht

European Commissioner for Trade

Opportunities from Globalization for European Companies

High-level conference "Spain: from Stability to Growth"

Bilbao, Spain, 3 March 2014

Ladies and gentlemen,

The fact that we are meeting here, in the Guggenheim Museum, is highly appropriate for our theme.

This remarkable building - designed by an American and brought to life here in Bilbao - is a symbol, the world over…

… of what creativity, technology and genius can achieve in architecture...

… and what urban communities can do to put themselves on the global map.

But, as part of the Guggenheim Foundation, it is also part of an international network of museums, whose story is also an illustration of the ever closer ties between different parts of the world.

First, across the Atlantic: the first Guggenheim museum was built in New York but housed much of the greatest European art of the early 20th Century. It was followed by Venice, here and Berlin.

And second, around the world: the next addition to the collection of buildings will be in Abu Dhabi. And a major focus of the Foundation's collecting of artworks right now is on pieces from Latin America, Asia, the Middle East and North Africa.

That development - from a national, to a transatlantic, to a global focus - is typical of our time - as so many of our institutions respond to the phenomenon we call globalization.

The right response to globalization is essential for all of them. And particularly so, I would argue, for our economic ones.

If we are serious about building prosperity for our people, here in Spain and across the European Union, the right response to globalization is fundamental.

Because it has consequences - both opportunities and challenges - that we cannot afford to ignore.

I would like to talk to you today first about how globalisation is affecting our economies

… second about the opportunities and challenges it creates…

… and finally about how the European Union's trade policy is responding.

So, how is globalisation changing our economic lives?

It is, of course, a complex process that involves changes in technology, behaviour and policies. But I would like to focus on the fundamentals:

In the last twenty years, the world economy has become significantly more trade intensive: the ratio of world exports to world GDP has risen from 15 to 26 percent in the last 20 years.

A significant part of that growth is because European firms are exporting more - to Europe and beyond.

That is being felt in Spain today - as growing export to the rest of Europe and beyond contributes to the recovery.

The companies joining me on our panel this afternoon are a testament to that fact. Their impressive mix of talents in precision engineering, manufacturing, construction and service provision are internationally recognised.

And that means international work is now a fundamental part of all their businesses…

… whether that happens within the European Union…

…or - as it increasingly does - in Latin or North America, in Asia or in Africa.

But if we truly want to understand globalisation, we cannot think only about exports. Because it is not only consumption that happens in other parts of the world. The same is true of production.

As a result, companies are importing more - because they need access to components, raw materials and services from across Europe and beyond if they are to be successful.

Today, some 13% of the value of European exports is made up of imports. In Spain that figure is just over 20%.

These international value chains are essential to our understanding of the process.

Of course, consumers are also buying more imported products - and getting them cheaper from a wider range of choices as a result.

This leads us to the final core aspect of globalisation: the fact that their choices have fuelled an enormous transformation in the world economy - helping to create the huge new economic giants of Asia, Latin America and Africa. As a result, emerging markets' share of world exports has already doubled to 20% since 1995.

But more importantly perhaps, 90% of global growth will happen outside the European Union in the coming years - a third of it in China alone. That is an enormous transformation.

If those are the main lines of globalisation, what are the consequences for us in Europe?

The first is that we need to look more widely both to take advantage of the opportunities and to make sure we have access to them.

Let's look at Spain.

Thankfully the 60% of Spanish exports that are sold within the European Single Market are surging.

But - also thankfully - Spanish companies are more and more broadening their focus.

Take the automotive sector. Most of Spain's exports go to other countries within the European Union. But the share of exports to other parts of the world is rising fast: up to one third of the total in 2012, from only a quarter ten years earlier.

Or take health - a Spanish speciality since Ramón y Cajal founded neuroscience. 40% of Spain's pharmaceutical exports go outside the EU, a figure that has more than doubled in the same ten-year period.

Similar patterns emerge for other products such as ceramics or olive oil.

These tighter links with the rest of the world are very welcome. But they also mean that the Spanish - and European economies - are affected more and more by decisions made in other parts of the world.

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  If a government in Asia raises its tariffs, Europeans feel it.

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  If an American state doesn't recognise foreign professional qualifications, Europeans suffer.

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  If Latin American leaders prefer to favour home producers in their tenders for government contracts, Europeans feel the pinch.

That means we need to influence those governments' decisions - to make sure they are made fairly and openly and that they take European people's interests into account. That is the work of trade policy.

The second consequence is that our trade policy must take account of interconnected global value chains.

The need to import before we can export undermines any remaining case for protectionist approaches to trade. In today's world - and this is borne out by the facts - open economies just do better. So we need to continue to tackle the many remaining barriers to trade and investment around the world, while staying open ourselves.

Beyond this, the depth of our integration means we need to look at the broader range of trade and investment barriers our companies face. Customs duties cannot be our only focus.

We need to look at barriers to trade in services. The companies on the panel with me today all show clearly that there is no longer a clear line between goods and services - only a gradual changing of the shade.

We need strong, fair rules on public procurement. They also show that our consumers are not only individual people, or even other companies, but also governments.

And these are only two of a long list of areas we need to look at. A list that also includes regulatory barriers to trade, investment and the protection of intellectual property rights.

All of these new issues require technical expertise and sensitivity. Our goal in trade policy is not to stop governments from protecting their citizens from real risks to their health, safety, environment or financial security. Neither are we trying to stop them from making policies to help their economies to grow.

Instead, we want to encourage solutions to those problems that also boost trade and investment - helping everyone to prosper.

The final consequence for our policies is that we need to take account not only of the opportunities - but also the challenges. European firms today must be ready to compete with new market entrants, partner with new suppliers and sell to new consumers.

As we have been hearing today, that means we need an economic environment at home that helps companies prepare for that competition. We need:

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  to foster innovation

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  to make our labour markets more flexible

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  and to complete the Single Market.

We also need trade policies that make sure European firms can compete internationally on a level-playing field - whether here in Europe or abroad.

And we need to think about the full range of competition we face - not just for customers but also for raw materials - increased world demand means higher costs. That means we need to make sure that raw materials are sold according to market principles.

Those consequences can be summed up in three principles for a European trade policy: open markets - both at home and abroad, a broad concept of the trade barriers we need to address, and a need to ensure we can compete on fair terms.

My last point is to share with you how we in European Union are translating those principles into practice.

Our first port of call is the multilateral World Trade Organization, where we can talk to almost 160 countries at once.

In December, the World Trade Organization (WTO) reached an agreement on trade facilitation that will allow products to move faster, more smoothly and more cheaply across international borders. This will benefit developing countries the most, but it is also very good news for European firms.

The deal also sets the right atmosphere for some of the other issues on the WTO agenda - like unfair subsidies, for example. The European Union is now assessing the best way to resolve that impasse on these wider questions.

But we are also using the multilateral context to move directly ahead where we find groups of willing partners:

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  In January, I joined my counterparts from the US, China and other countries to launch a new negotiation on products and equipment that help protect the environment - like solar panels or wind turbines;

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  We are also working with a group of interested countries to further open markets for information technology equipment;

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  And we are in similar negotiations with a group of interested countries to open markets to trade in services.

This is only a part of our work, however.

For example, we have an agenda of bilateral and regional free trade agreements with countries around the world that is simply unprecedented.

In all of these negotiations, we try to resolve as many types of trade barriers as possible - from tariffs to procurement, to open markets for energy trade.

And if we achieve all the deals we are aiming for today, we would have free trade agreements covering almost 70% of our exports.

Some of our energy is focused on bringing down the trade barriers that remain between the European Union and its developed partners:

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  We have already reached an ambitious deal with Canada, which I expect to be initialling in the coming months;

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  We are deep into our negotiations with Japan, one of our largest trade partners;

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  And, as I'm sure we will discuss, we are negotiating the Transatlantic Trade and Investment Partnership with the United States - which would be the largest free trade agreement in the world.

Beyond developed countries, we are also seeking to improve our access to the emerging markets of the future:

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  We have negotiations with countries like Vietnam, Thailand and Ecuador, as well as India and, of course, the Mercosur countries;

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  We put agreements with Central America, Columbia and Peru into effect last year;

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  And - last but not least - we just launched negotiations for a broad investment agreement with China that should tackle market access as well as investment protection.

Finally, we do not hesitate to tackle unfair trade practices when we see them.

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  We use the dispute settlement procedures in the WTO or bilateral agreements;

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  We also use our own systems to tackle subsidies and dumping - which we are currently modernising.

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  And we are proposing a new international procurement instrument which seeks to level the playing field between the European market that is very open and others around the world that are not.

The purpose of trade law after all is to establish international rules of engagement. So we must make sure they are enforced.

Putting these policies into practice will strengthen Europe's ability to compete in an international world. It will boost growth. It will boost employment.

However, it is not straightforward. Many of our partners share our conviction that open markets are the right way for others to respond to globalization. Not all of them believe they should apply the same principles at home.

To convince them, we need to combine our influence.

Of course, the beauty of Europe is in our differences. And the fundamental strength of our democracy comes from their expression.

But today, even as many question the benefits of European cooperation, it is important to remember that we are a Union of 28 countries.

When we speak together we speak with the voice of 500 million people - consumers and workers in companies like the ones represented here.

That is a powerful sound.