Speech De Gucht on TTIP: Getting Input from Europe's Regions

European Commission

[Check Against Delivery]

Karel De Gucht

European Commissioner for Trade

TTIP: Getting Input from Europe's Regions

108th Plenary Session of the Committee of the Regions

Brussels, 8 October 2014

Ladies and gentlemen,

Thank you for inviting me to be here with you in the Committee of the Regions. I am glad to be able to join you here before the end of the current Commission.

But though this is my first time here I can say that I have had the fortune to meet with many individual regional representatives over the course of the last four years - both here in Brussels and in their home regions.

And those conversations have been essential to my work as Trade Commissioner of the European Union.

That may perhaps seem surprising. After all, trade policy is one of only a small number of policy areas which are the exclusive competence of the European Union. Furthermore, as a subset of foreign policy, trade is an area where unity is vital. The fact that the whole Single Market of 500 million people speaks with one voice on trade policy is very much to our benefit.

Some might suggest, then, that treaty principle of subsidiarity, which this body of all EU structures, most embodies, is less relevant to trade policy than other areas.

I would disagree. Not because I advocate changing the decision-making structures of trade policy. I do not. But because I believe that an effective European Union requires a much broader understanding of subsidiarity than a narrowly administrative one.

The function of the principle, and of this Committee, is to ensure that decisions are taken not only at the closest level possible to the people, but to ensure that all decisions taken in the European Union are taken with the interests of all EU citizens at their part.

And that is essential for EU trade policy today.

It has always been essential of course, but today it is even more so. Because of the way that EU trade policy is changing.

And that change is embodied in the negotiations for a Transatlantic Trade and Investment Partnership - in two ways.

The first is about scale.

The European Union and the United States are the two largest economies in the world, together representing 45% of the world economy. The economic relationship between us accounts for roughly 15 million jobs, 2 billion euros a day in trade and more than three trillion euros in mutual investment stocks.

As such it will be the largest bilateral free trade agreement ever negotiated, if we are successful. But the TTIP is just the flagship of a much wider current trade agenda - which I believe is the most ambitious in the world today.

It includes our ongoing essential work at the World Trade Organisation of course, but also an extremely wide range of bilateral trade negotiations. It covers developed countries - like Canada, with which we just finished negotiations two weeks ago. It covers developing countries - like India and Vietnam. And with China, a very special case - we have direct negotiations for a bilateral investment agreement.

As a result, the EU trade agenda will affect - positively - many more people than it may have at any time in the past. In total we believe it could lead to a 2% increase in EU GDP - or more than 250 billion euro - and the creation of more than 2 million jobs across the EU.

Given this size, it is essential that we hear from regions about their priorities for EU trade policy - in order to make the most of the current opportunities.

There is a second aspect of TTIP that is also both emblematic of the new EU trade policy and a reason for close consultation with regions.

And by that I mean its depth.

There are several reasons for the spectacular growth in world trade over the last sixty years. Transport costs have reduced drastically and improvements in communications make it possible to coordinate truly global value chains.

But the success of trade policy, most importantly through the World Trade Organization, is a core factor. It has meant that tariffs at the border - the traditional way that governments were able to limit international trade - have come down dramatically. They average only 3 to 5% on transatlantic trade.

What this means is that if we want to continue to use the power of more open markets to drive growth and jobs - we need to get into much more complicated areas of policy. And in these areas democratic input - from as close to the people as possible is essential.

TTIP is the best example of how we need to tackle a wider range of barriers than before, because the EU and the US are two of the most open economies in the world. That is also why, as you will be aware, this negotiation has become so controversial.

Even here though, we do have to start with basics. Even low tariffs - when they are on high volumes of trade - can have a real economic cost. And not all tariffs are so low. In textiles and food, for example, they can be rather high. Take textiles for instance. Exports to the US of bed linen often face duties of almost 12%. TTIP - and other EU trade agreements - must effectively address the tariffs that remain.

But after tariffs we quickly get into more complicated, though essential areas.

Services, for example, are very important for Europe - not only because services trade is important in itself, but also because competitive service companies contribute to the success of the rest of the economy. More than half of the value embodied in Europe's goods exports is added by services like finance and business services. Service liberalisation is more complex than goods because regulation is often decided in the US at state level.

Public procurement is also essential to the negotiations, and potentially sensitive.

It is important for Europe as companies who make a large part of their sales to government bodies account for 25% of EU GDP and 31 million jobs. However, a number of US federal and state level laws limit European participation in tenders there, meaning lost opportunities. We know that there are powerful lobbies who support those restrictions and that removing them will be a challenge. But it is essential if this agreement is to be economically valuable.

But the most complicated area - and certainly the one where regional level views are most useful - is the aim of the agreement to reduce regulatory barriers to trade and investment.

Why regulation? Surely the purpose of regulation is to protect people from risks to their health, safety, environment and financial security.

That is true, but often regulations also affect trade:

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  They may needlessly ban imports of particular products.

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  They can make it too expensive for foreign producers to enter a market, especially a small one.

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  Or they can just raise the cost of doing business across borders, reducing growth.

But given that regulation has a primary purpose that has nothing to do with trade, we need to be especially careful in how we proceed here.

It is certainly possible to deepen regulatory cooperation without lowering standards of protection for citizens. The European Single Market itself is proof of that: We have removed trade barriers without compromising on the level of protection.

Of course we are not aiming for a transatlantic single market here. Even the most ambitious TTIP will be more modest than that. And let me be 100% clear. Deregulation is not on the agenda.

But we can make some very useful improvements to the way our regulations and regulatory systems work together, while keeping in place the protections that people need.

We can do that by taking a pragmatic approach.

On the one hand, we want to look at some existing regulations. There, we will try to make the technical aspects of EU and US regulations more compatible - while leaving the political choices about the level of protection firmly intact.

This is what we would like to do with pharmaceuticals and cars, and EU exports of apples and pears to the US. In all of these areas the level of regulatory protection offered under the law is the same. It is just that some of the technical ways to achieve that protection are different. We have double inspections, or cumbersome procedures or slightly different standards. We can solve this kind of problem in TTIP easily.

And where this kind of solution is not possible, where there are good reasons for different EU and US approaches, we will not make changes.

That means: We will not be changing our legislation on chemicals or on beef treated with hormones.

On top of this sectoral work, we also want to bring more transparency and cooperation to the way we make new regulations, to gradually bring our systems closer together. Again, here we will take precautions. The EU will not agree to anything that would change the way democratic control operates over our regulatory system. If we choose to go our own way in the future we will still be able to do that.

The final, and certainly the most sensitive area of the discussion is on investment protection.

Many people have concerns. And the negotiations remain frozen pending the outcome of our public consultation.

But I would like to express what I believe. A high quality, balanced agreement on investment in TTIP will improve on the current system of 1400 EU Member State agreements.

We will be more protected from abusive investment cases, through a more transparent system, and one in which arbitrators have to follow a code of conduct.

And at the same time we will be able to send a signal that the EU and US are highly open and stable markets for investment - encouraging other countries around the world to do the same.

We will see over the coming weeks and months what the next steps are here, most importantly the outcome of the public consultation we have conducted on the issue during the course of negotiations, which is a key element of the serious consultation effort we have made around this negotiation.

Ladies and gentlemen,

Because of these new types of challenges - a broader scope and a deeper policy focus - your input and views on the way we make all types of trade policy are more important than ever before. The Transatlantic Trade and Investment Partnership, given all the public interest in it, is the best example.

So I am very happy it will be the focus of our discussion today. And I look forward to hearing your views.

Thank you very much for your attention.