The Transatlantic Policy Network (TPN) published a 36 page report entitled – Toward a Strategic Vision for the Transatlantic Market. The full report is available, in pdf format, here.
This article summaries the key points below:
The report’s recommendations recognise the urgent need for closer economic cooperation between Europe and the United States at a time when both urgently need to stimulate jobs and growth. Given the interlocking nature of our current problems, the size of our shared market and the scale of transatlantic direct investment, a determined effort to remove remaining barriers to transatlantic trade and investment by 2020 can make a major contribution to jobs and growth on both sides of the Atlantic.
In order to fully realize this untapped potential for new jobs and growth, the report calls for a comprehensive Transatlantic Jobs and Growth Initiative, including a road-map for the removal of remaining non-tariff barriers and steps towards zero tariff levels on transatlantic trade. It recommends that such an initiative should be launched at the next US-EU Summit in late November in Washington DC.
Report Structure
- Executive Summary
- Strategic Challenges
- Economic Challenges
- The Political Opportunity
- Transatlantic Market Integration
- Toward the Future including Issue Roadmaps for 2012-2015 and 2016 to 2020
EXECUTIVE SUMMARY
The 2011 US-EU summit should encourage the Transatlantic Economic Council (TEC) to be restructured, streamlined and strengthened in the following key areas.
- Forum in which Europe and the United States implement a jobs and growth agenda and coordinate their response to systemic consequences of the euro crisis and America’s ongoing economic woes.
- Provide broad policy guidance on both bilateral and global issues;
- Be more deeply involved in agenda setting for the annual US-EU summit;
- Monitor the technical work that is the substance of the transatlantic agenda, while the principals should focus their efforts at their annual meeting on broader strategic concerns;
- Narrow its immediate agenda to focus more on jobs and growth, financial reform, energy and green technologies, protection of intellectual property, the digital agenda, and innovation.
Procedurally, the TEC should:
- Make its work more transparent and accountable to the various stakeholders in the transatlantic relationship;
- Involve leaders from both the European Parliament and the US Congress;
- Issue a public report about the results of each TEC meeting and its plans and goals for the future;
- Create a small US-EU Transatlantic Market Implementation Group comprised of elected and appointed officials in the executive and legislative branches to oversee the implementation of the roadmap;
STRATEGIC CHALLENGES
- 2025 world production will almost have doubled in relation to 2005.
- US and European markets will no longer dominate the world.
- The center of gravity of world production and world trade will have moved to Asia.
- The gap between the rich and poor will have grown, exacerbating social and political tensions.
- World’s population will grow to 8 billion, and three-fifths of those people will be Asian.
- Europe will become the region with the oldest population and both Europe and the United States will face an even larger budgetary burden thanks to the pension and health care needs of their ageing populations.
ECONOMIC CHALLENGES
- 2009, in the wake of the Great Recession, the Euro Area contracted by 4.3 per cent. The US economy shrank by 3.5 per cent.
- 2010, both economies rebounded, giving rise to hopes of renewed prosperity.
- 2011, the Euro Area is expected to expand by only 1.6 per cent and the United States by only 1.5 per cent, giving rise to fears that transatlantic growth is stalling out, raising the spectre of a double-dip recession.
- European growth prospects are haunted by the sovereign debt crisis that began in Greece, has spread to Ireland and Portugal and now threatens to engulf Spain and Italy.
- Joblessness in the European Union is 9.5 per cent, including 21 per cent in Spain and 14 per cent in Ireland. A whole generation of European youth risk never having a job: unemployment among those under age 24 is 46 per cent in Spain, 40 per cent in Greece and 28 per cent in Italy.
- In the United States, unemployment remains high at 9.1 per cent, home-owner mortgage indebtedness, restraining consumer spending.
The cost of transatlantic contagion from these economic maladies would be high.
- American banks have $1.3 trillion dollars in outstanding loans in Europe.
- Europe is America’s largest trading partner, the largest destination for US foreign direct investment and generates more than half the earnings of the overseas operations of US companies.
- With China expected to grow six times faster than either Europe or the United States in 2011, with India likely to expand five times faster and South-east Asia three times faster, the transatlantic market risks losing its pivotal role in the global economy.
THE POLITICAL OPPORTUNITY
- European and American public opinion polls show that people want growth, they want jobs and, above all, they want a reason to hope. What they lack is a sense of direction and purpose from their leaders.
- A majority of Europeans believe that the United States should exert strong leadership in world affairs.
- An even larger majority of Americans look to the European Union to show such leadership.
- Overwhelming majorities of elites in both Brussels and Washington agree that the US and the EU should lead on the world stage.
- A plurality of both Europeans and Americans want the relationship between the European Union and the United States to become closer.
- The political environment in the transatlantic space is ripe for a joint European and American effort to spur growth and jobs.
- Convergence of common economic challenges on both sides of the Atlantic are an opportunity for a transatlantic growth and jobs agenda.
- Europe and the United States have long demonstrated their shared commitment to market liberalization through multilateral trade negotiations.
- TPN is strongly committed to successful completion of the Doha Development Round at a high level of ambition as a means to spur trade and fuel economic development.
- The Doha Development Round, which was launched in 2001, has yet to produce meaningful, tangible results. Differences over agriculture and market access for manufactured products and services have stymied progress.
TRANSATLANTIC MARKET INTEGRATION
- In 2010, trade across the Atlantic in goods alone exceeded $600 billion.
- Europeans bought three times as many American merchandise exports as did the Chinese and 15 times more than that bought by the Indians.
- Similarly, the European Union sold the United States nearly two times the goods it sold China and nearly seven times what it sold India.
- Foreign investment is the driving force in the transatlantic economic relationship. It dwarfs the trade relationship and is thus essential for American and European job creation and prosperity.
- The United States is the recipient of nearly three-quarters of European foreign direct investment and Europe more than half of US overseas investment.
- Three and a half million Europeans now work for American companies in Europe and a similar number of Americans work for European firms in the United States. Such investment drives trade, with a third of US exports to the EU and three-fifths of its imports from the EU accounted for by intra-company trade.
- The services economies of the United States and Europe represent the sleeping giant in the transatlantic economic space, with European countries accounting for five of the top ten export markets for US services providers.
- Sales of services by European affiliates in the United States more than double US services imports from Europe.
- Creation of a Transatlantic Market, rather than a traditional transatlantic free trade agreement, is a more ambitious undertaking, because it would explicitly deal with regulatory obstacles to economic integration.
- The EU already has a free trade agreement with Mexico, one with South Korea, and it will, by next year, have a Comprehensive Economic and Trade Agreement, as well as a framework agreement, with Canada, and may start negotiating a deal with Japan.
- The United States already has free trade accords with Canada, Mexico and one soon with South Korea.
- A joint effort to better integrate the transatlantic market with those to its south could reap great economic benefits for all involved.
TOWARD THE FUTURE
- In 2007, US president George W. Bush and German chancellor Angela Merkel, agreed to create a Transatlantic Economic Council as a permanent, high-level group tasked with “rationalizing, reforming, and, where appropriate, reducing regulations”, “achieving more effective, systemic and transparent regulatory cooperation” and “removing unnecessary differences between our regulations to foster economic integration.”
- The 2009 European Commission study, Non-Tariff Measures in US-EU Trade and Investment, found that for the EU, removing all actionable non-tariff measures would increase the GDP by €122 billion per year and improve exports by 2.1%.
- For the United States, the benefits of removing actionable non-tariff barriers would add €41 billion per year to the economy and boost exports by 6.1%.
- For the Transatlantic Market project to succeed, it is essential to have a shared strategic vision among all concerned and a sense of urgency, especially given the increasing competitiveness of Asian countries in the global system.
- Priority needs to be given to initiatives that can boost jobs and growth in the short term, such as removal of all tariffs on goods traded across the Atlantic.
- Once the TEC has been able to establish a rolling four-year programme, based on a shared vision, it will be essential to bring all the major actors onto the same stage. Currently the Transatlantic Business Dialogue, the Transatlantic Legislators’ Dialogue and the other dialogues set their own agendas, priorities and meeting places, with no coordination between them for the subjects they discuss.
The immediate TEC agenda should be narrowed to a few mutually supported, high priority issues:
Jobs and Growth: Identify immediate initiatives that Europe and the United States can take together or in parallel in the short run to spur job creation and revive growth.
Financial Reform: Focus on the leadership Europe and the United States can provide in strengthening global financial markets, avoiding protectionism, minimizing regulatory overreach in the wake of the global financial crisis and dealing with shared strategic issues.
Energy and Green Technologies: Enhance R&D cooperation, coordinate technical standards and testing for emerging products such as the electric car to ensure that the transatlantic market sets the global standard for these new technologies.
Intellectual Property: Coordinate protection of intellectual property rights for emerging technologies; align US and EU policy on counterfeit goods and protecting intellectual property rights in third countries; and encourage cooperation between regulators and legislators on patent reform.
Digital Agenda: The new US administration and the renewed EU institutions are moving rapidly to establish strategic policy agendas intended to exploit the transformational power of digital tools and technologies. On the EU side, a major focus will be the European “digital single market”. These initiatives must be pursued wherever possible with a full focus on transatlantic market challenges and opportunities.
Innovation: Transform the current transatlantic innovation dialogue into an innovation action council with a detailed agenda to encourage entrepreneurship, enhance education and promote research and development.
The Issues Roadmap 2012-2015
The 2012 roadmap should include the following goals for 2012-2015:
Jobs and Growth
• In the face of the economic crisis, both Europe and the United States need a number of short-term deliverables that have a quick and substantial impact on jobs and on market confidence.
Financial markets
• The United States and the European Union should establish a transatlantic working group that involves both members of the relevant bureaucracies and relevant members of the European Parliament and the US Congress to share experiences and insights and to coordinate responses to the ongoing euro crisis.
Energy and the Environment
• Make energy and climate change a priority issue for the TEC to speed the transition to a greener, cleaner and low-carbon transatlantic economy.
Intellectual Property
• Make progress toward patent harmonization, including facilitating an EU patent, and enhanced cooperation between patent offices and greater coordination in extension of patent life.
• Develop a joint agenda for dealing with counterfeiting and piracy around the world and bring joint legal action against such abuses at the World Trade Organization.
Digital Agenda
• Converge policy and regulation affecting digital market access and participation across the Atlantic (and where possible beyond), notably in the areas of intellectual property, consumer protection, network access, network security and internet governance, and standards (for example, for e-health).
Innovation
• Focusing on the building blocs of an innovative transatlantic economy—education, research and development, entrepreneurship—lay out and implement a short-term action plan to boost innovation on both sides of the Atlantic.
In addition, the TEC should continue its work in the following areas:
The Regulatory Dialogue
• In pursuit of their G20 commitment to build a more sustainable financial system, Europeans and Americans should closely coordinate their initiatives to strengthen investment rules, revise bank capital requirements, supervise credit agencies and consolidate financial sector supervision.
• The TEC should redouble its efforts to mobilize departments and agencies on both sides of the Atlantic to search for areas where regulatory friction can be reduced or avoided.
• The EU and US should agree to a framework for resolving reinsurance issues involving the EU Solvency II directive, the state-based approach to insurance regulation in the United States and any new American regulation of insurance.
• The American administration and the EU Commission ought to come up with a framework for developing compatible rules affecting new technologies that are not yet regulated in Europe and the United States.
• Develop a common, open, technology-neutral standard on eAccessibility for the blind, deaf and infirm.
• Pursue standardization, digitization and interoperability of patient health care records, with appropriate privacy protections, to reduce medical errors, to facilitate real-time transatlantic sharing of information on contagious diseases and to improve health care productivity and cost-containment.
• Resolve the dispute over supplier’s declaration of conformity for electrical products.
Investment
• Agree, in light of recent global financial market turmoil, on a framework for deeper, ongoing coordination between European and American financial regulatory agencies.
• European and American leaders should agree on a comparable code of conduct and best practices governing Sovereign Wealth Fund investment in the transatlantic market, following up on efforts by the International Monetary Fund to develop a code of conduct for Sovereign Wealth Fund investors and by the Organization for Economic Cooperation and Development to come up with best practices for investment receiving countries.
• Europe and the United States should finally resolve remaining transatlantic differences over accounting standards, promoting investment and the efficient allocation of capital within the transatlantic market.
• Complete the third phase of the Open Skies agreement removing investment restrictions for European and American air carriers in the transatlantic market to demonstrate the practical benefits of an eventual transatlantic investment accord.
Secure Trade
• Commit to the creation of smart ports to ensure the security of cargo container traffic.
Security Technology Cooperation
• Collaborate on joint defense and homeland security technology initiatives to maximize the economies of scale inherent in a $1 trillion transatlantic defense market at a time when defense budgets on both sides of the Atlantic are under growing pressure and the cost of research and development continues to rise.
The Legislators’ Dialogue
• Engage Members of the European Parliament and the US Congress more directly in joint consideration of pressing transatlantic concerns by focusing on shared challenges such as jobs and growth, climate change, internet policy, agriculture, financial issues and China.
• Lay the groundwork for eventual creation of a Transatlantic Assembly of legislators from both sides of the Atlantic to discuss mutual regulatory and economic concerns and to hold to account the executive on both sides of the Atlantic.
The Issues Roadmap 2016-2020
In the 2016-2020 timeframe, the United States and the European Union should include:
The Regulatory Dialogue
• Commit to develop comparable regulatory decision-making processes, with, at minimum, agreement on underlying principles and regulatory objectives, mutually compatible transparency, including an early warning system for new regulations under development, similar timeframes, appeal procedures and post-regulatory monitoring.
• Develop a framework for resolving differences in international standards setting bodies so that there can be collaboration in these forums whenever possible.
• Establish a system of mutual recognition of automotive products with functional equivalence to ensure comparable automotive test procedures, emissions and safety regulations.
• Agree to a framework for establishing a parallel process for granting approval for pharmaceuticals.
• Build on the experience gained by the FDA and the EMEA in the medical product equipment regulatory area by embedding a senior-level agency representative or expert within each other’s offices in a range of regulatory agencies to share ideas and to gain insights into each other’s regulatory cultures and procedures.
Investment
• Establish a date certain for creating a transatlantic capital market.
• Negotiate an investment agreement that opens most sectors of the transatlantic economy to reciprocal capital flows.
• To that end, achieve mutual recognition of securities regulation.
Manufacturing
• Reaffirm their commitment to multilateral trade liberalization by pursuing tariff-free trade worldwide in key manufacturing sectors of importance to the transatlantic economy.
Environment
• Agree to a transatlantic market for green products, including zero tariffs and the mutual recognition and certification of products.
Multilateral Trading System
• Using lessons learned from the Doha Round improve the functioning of the World Trade Organization, with special emphasis on mutual rules of the road for negotiating bilateral trade agreements and what more the United States and the European can do to foster growth in the least developed economies through trade and investment.
People and Commerce
• Commit to the freer movement of people for work, study, residence and tourism through a smart visa program.
NOTE :
Toward a strategic vision for the transatlantic market – A synopsis of the fourth report from the Transatlantic Policy Network (TPN)
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