THE ATLANTIC COUNCIL OF THE UNITED STATES
ADAPTING THE U.S.-EU SUMMIT FOR A GLOBALIZED WORLD
C. BOYDEN GRAY,
SPECIAL ENVOY FOR EUROPEAN UNION AFFAIRS,
U.S. DEPARTMENT OF STATE
THE ATLANTIC COUNCIL
UNDER SECRETARY FOR ECONOMIC, ENERGY
AND AGRICULTURAL AFFAIRS,
U.S. DEPARTMENT OF STATE
DEPUTY ASSISTANT SECRETARY FOR EUROPEAN AND EURASIAN AFFAIRS,
U.S. DEPARTMENT OF STATE
DIRECTOR OF TRANS-ATLANTIC RELATIONS,
THURSDAY, DECEMBER 2, 2010
Federal News Service
FRAN BURWELL: Thank you. Welcome to everyone. My name is Fran Burwell. I’m a vice president here at the Atlantic Council with responsibility for the trans-Atlantic relations program. It’s a pleasure to see so many people here to discuss the U.S.-EU summit. It’s usually not a high-profile topic here in Washington, and so I’m going to put this down as due to the high caliber of our panelists here today.
I’m going to very briefly introduce everyone so that we can get down to business. Immediately to my left is Warren Getler, who is the new director for trans-Atlantic relations at the Bertelsmann Foundation. In his previous incarnations, he has been a journalist with Bloomberg, The Wall Street Journal and others.
Moving on, we have C. Boyden Gray, former U.S. ambassador to the European Union and special enjoy on Eurasian energy issues. Ambassador Gray is also one of the top regulatory lawyers in the country, as well as a former counsel to the president. And most importantly, of course, he is a member of the Atlantic Council’s board of directors.
Next to him, we have someone who needs very little introduction in this town, Under Secretary of State for Economic, Energy and Agricultural Affairs Robert Hormats. He is, as under secretary, the senior economic official at the State Department.
He has served previously as vice chairman of Goldman Sachs, but he also has a long and distinguished government career prior to his current post, serving as assistant secretary of State for economics and business, deputy U.S. trade rep from 1979 to 81, senior deputy assistant secretary for economics and business, as well as covering international economic affairs at the National Security Council.
And next to him is Deputy Assistant Secretary Elizabeth Dibble. She has been deputy assistant secretary in the European bureau, now, since October, with responsibility for managing U.S. relations with the European Union and Western Europe. Prior to that, she was deputy chief of mission and charge d’affaires at the U.S. Embassy in Rome from 2008 to 2010, and she was also principal deputy assistant secretary in the Bureau of Economics, Energy and Business Affairs.
Let me also, in this beginning section here, thank Tyson Barker of Bertelsmann, along with Annette Heuser, who couldn’t be here today, and my colleagues Alexei Monsarrat and Garrett Workman in our business and economics program. Without them we would have neither a report nor a panel here today.
So my next duty is that Warren and I are going to talk very briefly about our report, which I think you have all had on your chairs. And then, after we do that, I’m going to turn it over to Ambassador Gray to moderate our other distinguished panelists. So Warren, the floor is yours.
WARREN GETLER: Sure, thank you. What we tried to get across in this report, “Adapting the U.S.-EU Summit for a Globalized World,” is the idea that Europe matters and that we need to focus on four major areas of common pursuits, common goals. And too often the U.S.-European relationship has been seen through the NATO prism – geopolitics and security – but we really are at a critical time, as everybody knows, whether it’s job creation, trade, investment and sovereign debt crisis to deal with.
So what we tried to get across is that it’s absolutely vital to continue this high-level dialogue of summitry. And I wanted to throw out just a few notations about why we think this is important, what’s at stake. The combined economies of the U.S. and the European Union generate a GDP of $32.7 trillion, or more than 50 percent of the world’s GDP. Trade between the two markets represents 31 percent of all international trade.
Direct investment between the U.S. and the EU represents 2.7 trillion, and the U.S. and the EU account for more than 61 percent of global FDI inflows and 75 percent of inflows. In terms of jobs, U.S. company affiliates in the U.S. – excuse me, affiliates in the EU and vice versa – employ an estimated 14 million people in the trans-Atlantic economic space. So that’s a huge part of global economic activity.
And what we’re trying to say is that so much is at risk right now that the dialogue has to continue, and there’s opportunity for job creation. One of the proposals we put forward here is a 1-million-job-creation program that would create 500,000 jobs on each continent. And this can be done through removing nontariff barriers, research and innovation attempts. I don’t want to go into all the details because it’s too complicated now, but there are ways of pushing the whole agenda forward, and we’re looking forward to more dialogue on that.
MS. BURWELL: Thank you very much, Warren. I just want to pull out a few points from the report. Since the report was written before the most recent summit, the question now is, did that summit lead us in the right direction? So point number one, the summit was held. And I think that that’s important in itself. It was done on the edge of the NATO summit, which is not ideal, but we all understand the tyranny of schedules.
Point number two: In the report, we mention the desirability of a more cohesive EU. I think there has been progress there as we go through a long Lisbon transition, as one might call it. But we can’t expect Lisbon to resolve one particular structural difference, and that is that when the U.S. president goes into the room, he goes into the summit with more flexibility and more authority than the EU presidencies do. And that’s likely to continue, and will continue to be a problem with the U.S.-EU summit.
Point number three: We advocated in the report using various councils to prepare major issues for the summit. I’m looking forward to hearing in more detail how the energy council lined up with the summit. It sounds like it was a very interesting and successful set of meetings in that way, but, curious and puzzled as to the timing of the TEC, which is coming after the summit.
Four, we argued for greater involvement by the European Parliament and Congress, and it’s still not clear how that will happen or if it will happen. In terms of substance, we focused in the report on jobs and growth. And that was the focus of the U.S.-EU summit and we’re looking forward to hearing more about that.
There was also a lot of emphasis on innovation, green technologies, energy security. The one problematic issue at both the real summit and in our report, at least from seeing it externally, is climate change. And here I think we all acknowledge that we have a long way to go.
So did this summit take us in the right direction? I’m going to reserve my answer until we hear from our panelists. One question I have for them is the following: If a summit ends with everyone saying that there were no disagreements, and that they agreed on everything, does that mean that they were ambitious enough in that summit? And with that, I’m going to turn it over to Ambassador Gray.
C. BOYDEN GRAY: I love that question. I can’t believe there were no disagreements. Just one clarification on the introduction: It is true that I was U.S. special envoy, but I want to note that that never really got across.
And my last time in Brussels, I couldn’t go to this dinner because, in fact, I had been invited to a dinner given by the commanding general of the European Defense Force, a Brit named General Leakey. And he was very nice to send me a guest list, so that he could better entice me to go. And I was identified as Boyden Gray, U.S. special convoy. (Laughter.)
We have a report here which is really important because every day in the papers, the lead headlines are about the common debt crisis that we’re both facing, on both sides of the Atlantic, and if we don’t solve this particular problem – it’s not the only one, of course – but if we don’t solve it, we’re in fairly big trouble.
And people have heard me say this before: NATO is great, NATO is critical for our security problems, but it can’t really help with these financial problems and we need a basis for a discussion with Europe, for discussing these issues. The Transatlantic Economic Council is one such possibility. There’s also the energy council. They are possibilities, but I think we do need some kind of parallel to NATO to deal with these financial issues.
And so that’s my first question to the under secretary for economics, who will be taking part in, if not running, the TEC which is coming up in a couple of weeks. And so what’s your plan for – (inaudible, laughter) – and your solution to the current debt crisis? (Laughter.)
Bob, by the way, is quite qualified by his prior training on Wall Street to talk about financial issues, so I put it to him.
ROBERT HORMATS: In one way or another, yeah, right. (Laughter.)
Well, first of all, thanks very much, Boyden, and thank you, Fran and Warren. It’s great to be on this panel, particularly because some of us go back a very long way. Warren and I, back to Princeton –
MR. GETLER: You were my professor. (Laughter.)
MR. HORMATS: At Princeton, years ago. He got an A. (Laughter.) And Boyden, I think, I met probably my first or second week, when I came to Washington to work for Henry Kissinger. We used to play bridge on a fairly regular basis with a few friends, including Lynda Bird Johnson, who was actually a very – (inaudible, audio interference) – bridge player. And so we’ve known one another for a long time, and we’ve had countless discussions of these very same issues that we’re going to be talking about today. In terms of – can you hear me, or is that better –
MR. HORMATS: Also, this is a very important opportunity for myself and for Liz. She’ll talk about the summit and I will talk a little about the TEC, focusing on that primarily. That is going to begin on the 17th of December, which I think is going to be an important opportunity for the U.S. and the EU to cover a wide range of issues.
I also want to compliment Fran and Annette on their issue brief, and Warren for all the work he’s done in trying to focus attention on the issues that we’re going to be talking about today. Because the issue brief is useful in the sense that it targets very well and very succinctly the kinds of challenges and opportunities that are available to both the U.S. and Europe, to deepen our economic ties. And as a result, it’s a springboard for our discussions today.
One of the things that is interesting – and Boyden referred to it – but I just want to emphasize that the president, in describing the summit, said that it was not as exciting as some other summits, in large measure because we agreed on everything. Well, I think we certainly agreed on a lot, and we’ll be discussing that in a moment.
But I think it’s also true, in the broader sense, that U.S.-European economic relations do not receive very much attention. Certainly, they receive far less attention than U.S.-China economic relations or U.S.-India economic relations because they’re in such a rapid state of change and flux, whereas if you look at U.S.-European economic relations, they’ve been very steady for a very long period of time. And therefore people tend to take them for granted. And that, I think, is one of the first mistakes that we make when we look at the U.S.-European economic relationship.
A, we can’t take it for granted, and B – and I’ll discuss this in a few moments – it is, in quantitative terms, considerably greater than our economic relationship with any other country, or really any other group of countries. Obviously, we have very close economic ties with Canada and with Mexico, our closest neighbors. But the size of the U.S.-European economic relationship in terms of magnitude of trade, magnitude of investment, is really quite substantial.
And we think that if you look at this relationship, it’s important both to understand the quantitative significance of it, but also the fact that this is, in many ways, the central driver of the world economy today. I’d like to just give you some sense of the magnitude of this relationship, just to put it in perspective. From 2000 to 2009, over half of total U.S. foreign direct investment was in Europe. The value of U.S. goods and services exported to the EU was over five times the value of our exports to China – five times. We focus a lot on China, and China is certainly becoming increasingly important as a trading partner, but still, U.S. exports to the EU are five times that of China right now.
Also, let’s look at the issues of foreign investment. The stock of U.S. FDI in Brazil, Russia, India and China – the so-called BRICs – combined, in 2008, was equivalent to only 7 percent of the total U.S. investment stock in the European Union.
The public, of course, doesn’t have the impression, from the popular press, of the size of this relationship. People think that trade and investment with China is much greater. So it’s important to remind ourselves of the enormous quantitative, as well as quantitative relationship between the U.S. and the EU.
The dominance of the trans-Atlantic economic relationship will obviously change as the emerging economies growth and their role in the world increases, both financially and from a commercial point of view, and as they develop new technologies of their own and become more prominent players in the global economy. They will certainly become a growing part of the global economy. They already are, and they’ll be a larger one over the course of the next several decades.
But for the moment, at least, and for some time to come, Europe will be of enormous economic importance to the United States – to jobs here, exports, profits, overall prosperity. And one of the top priorities in working with the EU is to more fully tap the potential of trans-Atlantic commerce to generate economic growth and jobs on both sides of the Atlantic. And I think that is something we need to keep in mind.
Given the absolute size of the U.S.-EU economic relationship, even small gains in any one sector can mean significant new opportunities for trade on both sides of the Atlantic, and for job creation on both sides of the Atlantic. If we can work together or cooperate more robustly on the economic front, especially on issues such as regulatory matters and standards, we can help each other to meet today’s global economic and competitive challenges, and also set the pace for emerging markets.
I think this is an important concept. The concept really is that there’s always a risk, in this environment, that countries will set national standards which are exclusionary of other countries. That is to say, China can set standards that will be applicable to its companies, and everyone who wants to sell into China will have to meet those standards.
If we get this, sort of, Balkanization of standards and of testing procedures and of regulations, that can actually fragment the global economy and reduce the efficiencies of the global economy. But if the U.S. and the EU work together in a more collaborative way, we can serve as a model for other countries, particularly emerging economies.
Together, the U.S. and the EU can provide an incentive for others to embrace our approaches to regulation, our approaches to standards, rather than impose more nationalistic or less rigorous standards or regulations of their own that could impede American and European access to their markets.
We tend to look at our relationship in terms of some differences between us, but we basically have very similar views about regulation and about standards, compared to many other countries of the world. So narrowing or eliminating the differences between us could give us a boost in terms of the trade between the U.S. and the EU, and also set higher standards for the rest of the world.
We hope to be able to extend into the 21st century the extraordinary level of U.S.-EU economic cooperation that was so vital to international prosperity in the decades after World War II. I think that it’s useful to reflect on this.
I was over in Germany when we celebrated the 20th anniversary of German reunification and gave a talk in Berlin, and sort of recounted the history of U.S.-European economic collaboration. And if you look at what’s happened, the great institutions of the global economy – the ones that are at the center of the global economy today – were really worked out between the United States and Europe, mostly in the immediate post-World War II period: the IMF, the World Bank, the GATT – now the WTO – the OECD and many of these institutions.
So there’s a history of the U.S. and Europe – Europe was a smaller group of countries at that point – but the U.S. and Europe working together to develop the institutions of the global economy. In the past three years, we’ve coordinated on important aspects of our bilateral economic agenda through the cabinet level – the Transatlantic Economic Council, the TEC, which is the topic that I want to focus on for the next couple of minutes.
This provides a way for our most senior economic policymakers to collaborate on the promotion of economic growth and job creation, in particular by addressing the regulatory barriers that I mentioned earlier in fostering innovation, thereby bringing benefits to business, workers and consumers in both markets.
U.S. and EU leaders have endorsed a strong role for the TEC in these areas, and have tasked the TEC to stimulate growth and jobs in key emerging sectors and technologies. This is one of the topics that the U.S.-EU summit, the recent U.S.-EU summit, focused on. We also want to make a number of moves that we think can be more effective to improve regulatory consultation processes in these areas and to develop joint principles that will marry regulatory needs with the freest possible flow of ideas, products and services.
Now, these are things that I just will touch on. We clearly have, for the moment, different approaches to regulation and standards that can slow growth of trade. We want to find ways of narrowing or eliminating these.
Sometimes these differences are immaterial to the level of protection, and their elimination or reduction can make business and trade far more efficient. For example, one study demonstrated that a European effort to harmonize standards in the electronics sector to international norms resulted in increased U.S. exports to Europe, due largely to new, particularly smaller companies finding it easier to enter the market.
Looking forward, we intend to sharpen our focus within the TEC on promoting innovation in emerging sectors, possibly including nanotechnology and e-health, which will be critical to our competitiveness in a globalizing world. As standards are developed in these areas, if we can work them out together, rather than as individual entities, that could be very helpful in terms of efficiencies in both of our economies.
At its last meeting, the TEC created the Transatlantic Innovation Action Partnership, which will enable the U.S. and the EU to exchange best practices and engage in mutual learning on policies needed to support innovation. In response to stakeholders on both sides of the Atlantic, we’ve selected three areas of focus and are finalizing work plans with the EU. One is, as I mentioned, innovation policy coordination. We’re going to try to find more specific ways of addressing that.
Two, access to critical raw materials – clearly, there was this issue of rare earths that, sort of, shocked a lot of countries. And I think cooperation between the U.S. and the EU on such things could be very useful. And the development of safe and eco-efficient bio-based products – there are a number of other things that the IAP is going to do – the Innovative Action Partnership – to enhance U.S.-EU opportunities to collaborate on new technologies and turning them into global competitive products and services.
Both the EU and the U.S. also believe that strong intellectual property rights protection fuels innovation, leading to economic growth. This is very important because the U.S. and the EU are not highly competitive in low-wage products; we are very competitive in knowledge-based products and high-end products that require innovation, creativity, lots of intellectual property. And where there are countries around the world that threaten that intellectual property, that’s a threat both to the prosperity of the United States and the European Union.
So we can work together, we hope, to encourage other countries to prioritize intellectual property rights protection as a strategy that encourages the development and marketing of new ideas, as well as ensuring that U.S. and European intellectual property is not used illegally. This is a very high priority for us; it’s a very high priority for Europe.
We’ve had a lot of joint démarches together in different parts of the world, and we’re going to continue to do this. That is critical to jobs and it is critical to our economic future. We’re particularly going to focus on policies in countries where there is a proclivity to force the transfer of know-how or intellectual property, or to engage in piracy.
This is an area where we see some improvement in China, but some of that improvement has also been as a result of the U.S. and the European Union working together and working with the Chinese, not in a confrontational way, but in a cooperative way; saying, the best way to support innovation is not through restrictive policies or forced technology transfers or insufficient protection of intellectual property, but by strengthening the protection of intellectual property, which means you’ll get additional investment and there’ll be a lot more collaboration between Europeans and Chinese.
We’re also involved in consulting with a variety of nongovernmental groups as we prepare the work for the TEC – the Atlantic Council and Bertelsmann, also the Transatlantic Business Dialogue, the Transatlantic Consumer Dialogue, the European-American Business Council and others.
So the fact is that the TEC, to be honest, has not really lived up to expectations. It’s a very useful vehicle potentially; it’s done some very useful things. Our goal is to reenergize it, enable it to do more useful things than perhaps it has in the past, by focusing on the kinds of areas that I’ve identified.
And one of the key elements that will make it successful is to get input from groups such as yours, and the kind of work that has been done here to make suggestions as to how we can improve it because the economic relationship is vital. The TEC is really the central institution for addressing these issues. To the extent we can strengthen the TEC, we can also strengthen our economic relationship. And because of its importance, that helps jobs and growth on both sides of the Atlantic. Thank you very much.
MR. GRAY: Thank you, Bob. If others don’t have questions, I will have questions, certainly, in connection with your comments. But it’s really nice to see – it’s good to see this is given some new attention this month. I want to move now to Assistant Secretary Dibble, who is going to explain to us why there were no disagreements at the – (laughter).
I’m sympathetic to what the president said because, having attended three or four prep sessions – that is, the negotiations leading up to the summit – the fireworks occurred during those negotiating sessions, not at the meeting itself, which is what staff is supposed to do. So I could probably imagine no disagreement, but don’t tell me that there weren’t disagreements during the negotiations.
MR. : Don’t tell him.
ELIZABETH DIBBLE: Don’t tell him, yeah. Of course it’s all relative, you know. He was just coming from the NATO summit and the G-20 before that, so put it in perspective. I think as this first post-Lisbon Treaty summit demonstrated – it underscored that the U.S.-EU partnership remains central to confronting global challenges. The leadership provided by both sides of the Atlantic is critical to our ability to act effectively and in concert in the globalized world of the 21st century.
Although our relationship is scrutinized regularly in the press for signs of what we’ll call meddle fatigue, the results of the meeting just a few weeks ago paint a different picture. And to quote President Obama, “Europe is the cornerstone of our engagement with the world.”
As the post-Lisbon structures themselves solidify, and the competencies of the European Parliament, the member states and the commission become clearer – with the standing up, yesterday, of the External Action Service – I think we will see the European Union moving from strength to strength, allowing us to do even more than we are doing today.
I want to highlight just some of the results of the U.S.-EU summit. Our leaders discussed, in substantive terms, a wide range of economic and political issues, and leaders from both sides highlighted the many points of convergence, as has already been noted. Because job creation and economic growth are clearly the top priority for both of us, a large part of the discussion – the bulk of the discussion – focused on concrete actions that governments can take to ameliorate the current economic situation.
Our leaders agreed to take a series of steps to increase trade and investment, and directed the TEC to focus on streamlining regulations, encouraging innovation and eliminating the barriers that hamper trade and investment.
Under Secretary Hormats has already talked about the upcoming TEC meeting but I want to underscore what he said: We are poised to use the December 17th gathering as an opportunity for high-level economic policymakers and regulators from both sides of the Atlantic to sit down around one table and explore each other’s perspectives. We expect that the meeting will be an opportunity to engage with each other on strategies to enhance our regulatory cooperation and move our partnership on innovation further forward.
Building on the G-20 meeting in Seoul, we used the Lisbon summit to reiterate our joint commitment to work together on addressing global imbalances and emphasized our agreement on the need for currencies to be market driven and for countries with large surpluses to boost domestic demand. We also identified other areas where the U.S. and the EU can benefit from increased cooperation such as clean technologies.
Security cooperation is also an important component of the trans-Atlantic relationship. The free flow of people, goods and information is critical to the health of our societies and economies. We must be nimble in countering threats while fully engaged in protecting our citizens’ privacy. To address threats in cyber space, we created a U.S.-EU working group on cyber security, which we anticipate will focus on critical and material issues.
Similarly, we will continue to strengthen our partnership in ensuring global stability and averting crisis around the globe. Our common efforts to address Iran’s nuclear program, our shared interest in Sudan in connection with the upcoming referendum in January and our commitment to the pursuit of Middle East peace all reflect the reality that our critical policy imperatives are the same on both sides of the Atlantic.
We also spoke about ways to deepen cooperation with Yemen to help it develop institutions and capabilities to cope with the challenges that it faces including violent extremism. We’re looking for ways to work alongside the European Union in crisis-management missions and we anticipate that the EU’s Rule of Law Mission in Kosovo – we participate in – excuse me – the EU’s Rule of Law Mission in Kosovo and we’re looking at additional opportunities to cooperate and work together.
I want to touch for just a minute on the NATO summit since the two summits were held back to back. We’re pleased that the NATO summit demonstrated a renewed and strengthened commitment to our NATO-led efforts in Afghanistan. At Lisbon, several allies and partners announced the contribution of additional high-priority trainers to help the Afghan national security forces prepare to assume the lead on security by the end of 2014. In addition, our NATO and ISAF partners announced that the transition will begin in early 2011 and will be a conditions-driven process.
Finally, NATO demonstrated a long-term commitment to Afghanistan by signing a partnership declaration that underscores its endearing partnership with the Afghan government and the Afghan people. As the Afghan national security forces stand up, they can’t do it alone, they need our support. As noted by NATO, with the new strategic concept and the decisions taken in Lisbon, NATO has developed an action plan which sets out the concrete steps that it will take in order to put in place a renewed Euro-Atlantic alliance ready to meet the threats of the 21st century.
And just as the threats we face have proliferated since the last strategic concept was articulated so have our partnerships. One of our most important partnerships is, of course, the NATO and the EU relationship. NATO and the EU share common values and strategic interests and we are working side by side in crisis-management operations. We therefore welcome the decision at both summits to improve the NATO and EU relationship in 2011 and beyond.
Returning to the EU itself, on global issues such as climate change and development assistance, we are seeking additional paths to increase our coordination with Europe. For example, our leaders directed the U.S.-EU Energy Council to find ways to bring clean-energy technologies to market faster and to harmonize our regulations so that the U.S. and Europe can, together, lead advances in this exciting new field. Working together will not only buttress our joint efforts to reduce emissions but will also help create jobs. Together we are also continuing our work in promoting diversification of energy sources and routes as well as increased energy efficiency.
The summit resulted in an agreement to coordinate better our development assistance by leveraging the impact of being the source of most of the world’s development assistance. The U.S. and the European Union can ensure a more effective division of labor in order to avoid duplication and avoid inefficiency. This will enable us to help more people in need while making the most effective use of taxpayer resources.
In the post-Lisbon world, the role of Europe, of the European Parliament and its interaction with the U.S. Congress will continue to grow. Therefore, in addition to the trans-Atlantic legislature’s dialogue – which will begin its next meeting in San Francisco tomorrow – we are expanding our working-level interactions in both Washington and Brussels in order to give this dimension of our relationship more content.
Following so closely on the heels of the U.S. midterm elections, many reasonably question how the changes in the makeup of the Congress will alter the commitments that I’ve just described to you. Realizing the importance our administration, our Congress and our citizens place on economic growth, job creation and the effective use of government resources, we believe the agenda we have articulated with the European Union will be an important contribution to furthering these goals.
In closing, the summit was an important opportunity for both the European Union and the United States to reaffirm our close partnership and recognize the importance of having a partner with whom we can engage easily, readily and constantly, as well as substantively, on the range of international challenges.
The Lisbon Treaty has given us a capable and empowered interlocutor on foreign policy and security issues in the form of High Representative Ashton. Nowhere is the tremendous link in U.S. and EU interests and cooperation so evident as in the relationship between Secretary of State Hillary Clinton and High Representative Ashton. Their frequent meetings help keep our efforts in sync. They talk frequently in between the meetings and they have developed a personal relationship which is important moving forward.
Our shared values and goals allow us to work well across the entire spectrum of economic and political issues and, most importantly, to serve our citizens and national interests effectively.
So in addition to the items I’ve mentioned and that I know we will accomplish over the coming months, I can assure you that whatever challenges the world may throw our way, the EU and the United States will be working closely together to address them. Thank you. (Applause.)
MR. GRAY: Well, we’re lucky to have two very current accounts. I’m going to use the prerogative of the chair and ask the first question and then turn it over. My question has to do with the world of finance which, from what I read, is basically a G-20 competence. But if you are talking – it does have implications, obviously.
So my question is how do you coordinate? An example being innovation: It takes financing, venture capital; Europe has adopted new rules for hedge and equity funds; we’re about to, a lot, with under Dodd-Frank. How is the financing part of, say, innovation or energy efficiency or bio products? How is that coordinated with the G-20 part of this – of the finance issues?
MR. HORMATS: I mean, clearly, the – the financial part of the G-20 is really, as you know, run by the Treasury and is dealt with on its own level. But there is clearly an effort, as we talked about in innovation, as we talked about energy cooperation and a wide range of other things – there’s clearly a process underway that primarily enables the U.S. government, not so much as a direct player but as a catalyst or as a convener to work with companies on both sides of the Atlantic that are interested in developing cooperation in these areas and with financial institutions, as well, that are engaged in this.
So what we’re – we’re not necessarily trying to put all the pieces together. What we’re trying to do is develop a framework within which a great deal of cooperation takes place through the interactions among American companies and European companies in a lot of these areas.
The point about reform of the regulatory system and standards is that it’s our hope – and particularly protection of intellectual property, is that it’s our hope that if we can get these right and we can get a greater degree of consistency between American and European standards then it also creates improved opportunities for profitability because there’s less friction in the trade relationship which, in turn, given the greater degree of profitability and the greater consistency among regulatory standards, improves the attractiveness of these companies for investors. But we really haven’t gotten directly into the investment side, per se. It’s much more company-to-company kind of synergies that we’ve been talking about.
MR. GRAY: Any questions from the audience?
Q: My name is Walter Djurasik (ph). I see that incredible statement and very inspiring people shaping the future. My question to you, a huge monopoly and industry complexes in U.S. as well as Europe and in the world today really is this advantage for the inspiring people to do their own businesses? It’s very difficult to get in market for those small businesses; it’s very difficult to get loans. And why don’t we think about microcredits and looking for the smaller picture – just the big picture with the big industries and big credits for those monopolies.
MR. HORMATS: Well – (chuckles) – there are two parts to your question. On the first part of the monopolies, I’m sure the antitrust division would be interested if you have any – (laughter) – any particular issues to bring to it.
But the broader point is the – is the – is the small-business point which I think is a very important one and that is that we do believe, and I think your – the premise of your question suggests that you share this view, that there’s a lot of opportunity in small businesses and the Small Business Administration is in the process of developing a much greater outreach to companies to figure out ways of helping them to obtain more financing.
The Export-Important Bank, in particular, has been much more proactive in providing support not just for the large companies that are obviously beneficiaries of Ex-Im financing but of a lot of small companies. And even more specifically, one of the things we’re trying to do, using our ambassadors and our embassies and our advocacy, is to advocate for small businesses. Many small businesses – as you know, in Germany, the mittelstand companies are huge exporters. Small-and medium-sized American companies have really not been major exporters for the most part – some do, but not a lot of them.
So what we’re trying to do is find ways of getting them more engaged in the export area through additional financing, through additional advocacy and through work by American embassies. We have what’s known to the financial world as “reverse roadshows,” where ambassadors from various parts of the world come to the – come back to the United States from their various posts, go around the country, talk to these companies and develop relationships with small businesses and help to explain what’s going on in their countries. And then when the small businesses need the help to navigate the regulations in these markets the embassies are ready to do that. So it’s a very valid point. We see a lot of growth potential and export potential in those – in those industries.
MS. DIBBLE: Now, I’d just like to add that I think the TEC and the attempt to work on standardization and to develop – work together on regulations will also benefit small-and medium-sized enterprises as they are trying to get into the export market both here and in Europe.
MS. : (Off mic.)
MR. GRAY: Please.
MS. BURWELL (?): I have a completely different twist on that. I was in a meeting this morning with a number of representatives of, shall we call them, trans-Atlantic companies – not small companies, but companies that operate a lot on both sides of the Atlantic – and they made the point that essentially the markets in the U.S. and Europe, from their perspective, are largely saturated. They’re hoping to sustain the business that they’re doing in the U.S. and Europe that these are mature markets and that in their areas of growth are in the emerging markets, at least, potential growth. But they face a lot of issues in terms of market access.
So I’d like to ask Bob and Liz about – putting aside Doha because that won’t happen anytime soon but – (chuckles) – putting that aside – (chuckles) – there are other issues aside from tariffs and quotas in terms of investment rules, ease of doing business, rule of law, other things of that nature. Are there things that the U.S. and the EU, together, can do – and Bob has spoken on intellectual property, for example – can do that would help these trans-Atlantic companies which are essentially multinational companies, international companies, get greater market access in some of these emerging markets where they’re more likely to see more growth?
MR. HORMATS: Well, I mean – let me just – they’re two parts of the answer. One, the U.S., clearly, is making a major effort on its own with a strategic and economic dialogue with China, with the dialogue that we’ve just had with the Indians when President Obama went to Mumbai and Delhi just very recently across the board to help American companies to gain access to these emerging markets. Protection of intellectual properties is an important part of it since many of them find it difficult to do business if their intellectual property is pirated or there’s a threat of piracy in any case.
And in many cases we’re doing these joint démarches, as I mentioned, between the U.S. and the EU in other countries on intellectual property. In terms of individual company advocacy there’s a lot of competition. The U.S. – Europe has its champions, the U.S. has some very big companies and we’re going head to head with the Europeans in trying to sell into these third markets so there – there is some competition when it comes to rules and regulations and practices like intellectual property. In most others, there’s a sort of – a very proactive head-to-head competition where when President Sarkozy or Chancellor Merkel goes somewhere they normally have a list of companies – (laughter) – they advocate for and we’re doing the same thing. When the president goes, Secretary Clinton goes, I go, others do – same thing.
But I also want to just make one point about mature markets: It’s certainly true that the most rapidly growing markets are the emerging markets. They’re growing at 9 percent and most industrial markets are growing at, you know, 1 (percent), 2 (percent), 3 percent and some below that; so that’s where the growth is in these markets in terms of GDP growth and per-capita income growth, also.
But I think it’s also a mistake to look at mature markets as saturated markets. If a new product emerges it can be – sell in very large numbers. I mean, look at a BlackBerry. BlackBerry is – when a new product comes out, it’s sold like wildfire. It’s a Canadian – originated in Canada, but it’s sold in every large developed country as well as emerging country in the world.
So if you come up with a new pharmaceutical product, it can sell quite dramatically. So the notion that mature products – mature markets are saturated markets – if you come up with new, innovative products they can do very well in mature markets as well as emerging ones.
MR. GRAY: Do you – yeah. Do you have time for one more question?
MR. HORMATS: Sure.
MR. GRAY: Okay, Bob.
MR. GETLER: The TEC is a great format and it will yield a lot of progress on these issues. But I would just ask, is there not an 800-pound gorilla in the room in the context of where this is happening, which is, the U.S. and certain European nations are at odds, I think, in how they are approaching job creation.
And I mean, this is a picture of the finance minister, Schaeuble, of Germany, you know, castigating the U.S. for living too long off the pump – pump-priming.
And I’m wondering how does – how does these bilateral frictions impede progress on the TEC and other areas?
MR. HORMATS: Well, they –
MR. GRAY: I think you were glad at having at – not – (inaudible, cross talk).
MR. HORMATS: I see – well, Warren asked these questions. I’ve – (laughter).
MR. GRAY: You talked – (inaudible, cross talk).
MR. HORMATS: I know, and that’s right. You can see what the corpse was like. (Laughter.) The U.S.-German issue, I’ll leave to Tim Geithner and colleagues to work out. And this was, of course, discussed, as you know, in the G-20.
But I would say that the broad answer to your question is, it really doesn’t affect the TEC very much. I mean, those issues have their lives and they’re being discussed in a very active way, and will continue to be. But we don’t see any of that, really, interfering in the activities or the conversations of the TEC. We think they’re – the TEC is really focusing a lot on the kind of issues that Liz and I talked about earlier – regulatory-standard setting, protection of intellectual property, issues of that sort. And whatever the – whatever the nature of the debate over macroeconomic policy, those issues are still going to be important ones and will need to addressed, whatever the broader macroeconomic fiscal policy of Germany or the U.S. or any other country might be.
So the short answer is that it won’t – it shouldn’t and won’t affect our dialogue at all.
MR. GRAY: One more question? Do you have a question? Yes, identify yourself.
Q: I’m Kathryn Hauser with the TABD. The past TECs have spent the lunchtime talking about a common issue of China. In light of what you just said, do you envision the TEC going forward to actually really spend some time and coordinate positions on going into RSED (ph) and the Europeans’ equivalent discussions with China? Are they serious about this?
MR. HORMATS: Well, without going into great detail, I think there is generally – as you know, because you follow this very closely – there is generally an opportunity to discuss relations with third countries. Coordination, you know, may be too strong a word because there may be areas where we have a similar view and there may be some subjects where we do not have a similar view.
I think we can generally agree that the kind of things that we’ve seen in the press about rare-earths policy on the part of China is an area where there would be a similar view, that it’s not a particularly good idea to restrict exports of rare earths or other items, for that matter.
Intellectual-property protection – I think we would have a very similar view. So yes, I think there would be areas where there would be similar views. And how we would express them would obviously have to be worked out. But as I mentioned, we have worked jointly in China to support those industries on both sides of the Atlantic that are concerned about intellectual-property protection or indigenous innovation.
So how the – how each of these issues would be worked out would – remains to be seen, but I do think there is a desire to get – have, sort of, a common way of looking at some of these issues, not just with China – China is one that comes to mind – but vis-à-vis other countries as well.
Just as, you know, when the BRIC countries meet – they met in Yekaterinburg and then they met in Brasilia – I’m sure they talk about how they’re going to work together to address issues they might have with the United States or with the European Union. So we don’t look at it as a threatening or a ganging-up kind of approach; we look it at it more as, we have common interests and where we have those common interests, there may be opportunities for us to work together to pursue such interests.
MS. DIBBLE: And that’s something we talk to our European partners about all the time, and at various levels. I mean, it – we don’t just need a summit or a TEC meeting to do that. And I think that’s something that sometimes gets forgotten, that because this relationship is so broad and so deep and sort of spans the gamut of levels, we don’t need to wait till there is a summit or some – or another sort of action-forcing event to talk about these kind of things.
But we have – because as Under Secretary Hormats said – because we have so many issues in common, we don’t always approach them from the same perspective. But that doesn’t mean we can’t talk about them.
MR. HORMATS: And if we differ, we differ. But at least we try to share perspectives. But in many areas, we have a similar view. And if we do, there is no reason why we shouldn’t put it forward jointly. But this is the nature of this relationship. It’s a very comfortable one, and there must be a thousand cables a day going – I shouldn’t even – no –
MS. DIBBLE: No, don’t talk about cables. (Laughter.)
MR. HORMATS: No, no – a thousand “conversations.” (Laughter.)
MS. DIBBLE: Thank you.
MR. GRAY: Well, thank you, Bob, for coming. This was very, very good and thank you all for coming to listen and to ask questions – if you can stay, Liz, can’t you? For a couple of minutes.
MS. DIBBLE: Yeah, he’s going to manage it but I can stay for a few more minutes.
MR. HORMATS: Liz can answer all the economic questions. (Laughter.)
MR. GRAY: Don’t leave. Thank you, Bob, for –
MR. HORMATS: Thank you, Boyden. (Applause.) Thank you. Thanks.
MR. GRAY: So we have a question – yes?
Q: Well, I just wanted to point out that – I’m Lloyd Day with Syngenta Corporation. I just wanted to underscore how important Mr. Hormats is because he has a book that says “Thursday.” (Laughter.)
I wanted to ask – from the perspective of the State Department, the issue of food security’s been a big deal for Secretary Clinton and the president – and do you have any comments on that?
MS. DIBBLE: Maybe I’m on. I don’t know. Yes, it is a very important issue and it’s one that this administration has made a real priority. I have just come from Rome where our – I was at the bilateral embassy, but our sister mission to the U.N. agencies spent, probably, 90 percent of its time working on this whole issue of food security.
It is one that we talk to the Europeans about as evident in the joint statement that came out of the summit. We are trying to coordinate better on development assistance. This is one aspect of that. But given that we are the major donors – the two of us are the major donors worldwide – and given that resources are scarce everywhere, budgets are tight, it only makes sense, I think, to try and coordinate better to be more efficient, to avoid duplication and also to avoid having things fall through the cracks.
So – yeah. Food security is very much at the top of the agenda for this administration. And I anticipate that it will continue to do so.
MR. GRAY: So we have two questions here. Do you want – ladies first, and then ask – (inaudible, cross talk.)
Q: My name is Sunjin Choi, Langham Partners. Could I follow Ambassador Gray’s question about G-20 coordination?
When I look at G-20 summit in Seoul, they invited 100 business leaders and formed three working groups: working group number one looking at the financial crisis issues, which is chaired by Peter Sands and Standard Chartered; working group two is looking at exit strategies by Joe Ackerman (ph); and working group three is innovation and infrastructure, run by Marcus Wallenberg.
My question is, is there any coordinating mechanisms between G-20 three working group dealing with the TEC innovation issues?
MS. DIBBLE: There’s no direct coordination, but obviously if the issues that are being discussed in – nobody has a monopoly on where these issues are discussed. So there may be some issues that the G-20 groups are discussing that the TEC will be discussing, as well. So I would say, yes, there is probably some overlap, but there is no direct coordination between the G-20 and the TEC.
Q: I’m Harlan Ullman. I’d like to ask the panel – and particularly, its distinguished chairman – to comment on what is, thus far, the missing element in this conversation. And that could well be the reliability and credibility of the United States and its government.
The WikiLeaks affair will have a certain impact, and probably even more of an impact as more of these cables come out. But you have this extraordinary situation when at the NATO summit, you have everybody, including Russia, asking of Congress to ratify the START agreement. So you have the 111th Congress with all these particular issues that are swirling, to be followed by the 112th Congress, which is going to have its own rather interesting agenda.
And I wonder if you might share your thoughts about how you could see this really impacting the relationship between the United States and the EU economically – because my guess is that some of these things are going to be profound, but not necessarily in ways that are going to be helpful.
MS. DIBBLE: Yeah. I mean – there is no question that the WikiLeaks revelations are going to cause damage to our foreign policy across the board. Secretary Clinton has said this. She was in Astana for the OSCE summit – will be in Manama, Bahrain tomorrow where she’ll meet with Arab leaders. This has been the subject of numerous conversations at the top levels of government.
So there is no question that this will have an impact on how we do business going forward. If your question is, do I – do I see with regard to the EU in particular what – you know, what that impact will be, again I would say the relationship is strong enough, deep enough that we’ll certainly weather this – that it’s not going to, you know, it’s not going to turn things around.
Will we do things differently? I would have to say, yes, things will change. I can’t tell you exactly how that’s going to change. I mean, when you have 250,000 diplomatic communications spanning a number of years coming out in dribs and drabs, you know, this is – this is something that’s going to be with us for a while.
And as a diplomat, you know, I – we’re all asking ourselves what does this mean, going forward? But we’re moving forward. We’re doing it.
Q: Actually, my question was that WikiLeaks is really the hors d’oeuvre. The 112th Congress may be – (laughter) – the main course, and that was really the brunt of my question.
MS. DIBBLE: I don’t know. Well, you want to take that one? You can talk about Congress, yeah.
MR. GRAY: You want to –
MS. BURWELL: Let me just say two things – a couple of things about WikiLeaks, and then a couple things about the Congress. Although, I think the biggest thing to say about the Congress is, we don’t know. Because a lot of us have no idea what the people who – the new people who are coming in, what their interests are, what their priorities are. We heard a lot about what they were against but not necessarily what they were for. And most of them were domestic issues that they were focused on – things like health-care reform, and things like that.
I will say that most Europeans find our debate about health care to be totally mysterious because they don’t understand why the richest country in the world doesn’t have universal health care to start with. And if we were to see a big debate in Congress about repeal of health-care reform that still does not cover – does not provide universal coverage, I think that in terms of West Europeans, EU Europeans looking at the United States as a model, as something similar to themselves, I think we would see a widening gap between the European republics and their views of the United States as a desirable – I don’t want to say partner, but as – I think it would cause them to question whether the United States shares some of the same social values that they share.
On the WikiLeaks issue – of course, I can speak from the perspective of someone who doesn’t have any cables that might be released. So that’s a luxury – (laughter) – but I think in terms of EU Europe, this area has a very lively press that already says much tougher things about their leaders. I think they realize that – I’m sure that certain apologies will be required, but everybody realizes what is in diplomatic cables.
There will be certain countries where the press might have conspiratorial tendencies and will enjoy playing this game of who said what. But I think that the real issues over the long term are two: number one, the sharing of intelligence and the – and the desire of others to share intelligence with the United States, which could be of great detriment to us. But since we seem unable to keep secrets at the moment, that’s a real problem.
And secondly, there have been some WikiLeaks that have come out and indicated that in places like Norway and other places that U.S. diplomats were asked to try and get people’s, individuals’ credit card numbers, frequent flyer numbers and things like that. Whether or not that is true, the fact that it is out there, I think, feeds into the privacy debate, which is one of the big issues between the United States and Europe, and will continue to be.
And it feeds the view of the United States as a country that cares only about security and not about personal privacy and data – the proper handling of data. So that could be an issue that WikiLeaks contributes to, aside from, you know, colorful descriptions of European leaders which are probably pretty shallow compared to some of the European press portraits of their leaders, so –
MR. GRAY: I would hate to see what they said about me, if they said anything. (Laughter.)
MR. HORMATS: That’s coming next week – (inaudible, cross talk.)
MS. BURWELL: Yeah, next week. Yeah.
MR. GRAY: If I may offer up a slightly different angle to it – as I understand it, there was no real breach of sources or methods in this – in this – (inaudible, cross talk) –
MS. BURWELL: So far.
MR. GRAY: What?
MS. BURWELL: So far.
MR. GRAY: So far. So keep your fingers crossed. And I think that’s an important thing to bear in mind. We know – we know that diplomats spy on each other. I would recommend for the reading of everybody here a marvelous book called “The Irregulars,” which is about the biggest spy ring in the United States during World War II, which was the Brits, who utilized various artifices, including my favorite author – at least, raising my daughter – Roald Dahl, you know, of “Charlie and the Chocolate Factory.” He used to chase down every well-placed American woman to find out what he could. (Laughter.) And it was a – it’s a glorious book. I really recommend that you all read it.
But we all are spying on each other. This is not really a big shock. “Oh, gosh – there’s gambling going on here.” (Laughter.)
As for the “tea party,” I don’t mean to belittle it. I think the State Department owes – I don’t know why that was breached and I – we, you know, have to find out more about just how a 23-year old corporal got access to it all.
But on the “tea party,” I’m going to offer sort of a provocative – you know, the Europeans, I think, from what I’ve read – I haven’t been over there since the election. I’m nervous about the “tea party.” I think maybe nervous about the process because it was unpredictable.
But in terms of where the “tea party” is going, I think, you know, if you take Mr. Schaeuble, for example, he and the “tea party” would made fast friends – very good friends – because the “tea party” wants to cut back on spending just like he does. I think he would find great allies among the “tea party” crowd. I think those Europeans who like to see a – less adventuresome-ness on part of our foreign policy, our military security policy, our adventure – I mean, our nation-building.
Europeans would like to see us save a little money so we have it in reserve for something that might be more important than what they think we’re doing in some places. The “tea party” would be great allies. They’re skeptical about some of our defense spending and think we’re not saving enough insurance for what might be a really rainy day someday. So I think that the “tea party” is not necessarily bad for Europe. I think there are a lot of things that the “tea party” movement stands for which would be viewed quite well by certain parts of Europe. And of course Europe isn’t by any means united on Mr. Schaeuble.
Any other questions? You got more time. We got a couple more answers.
MS. BURWELL: There’s one back there.
MR. GRAY: Any other questions?
Q: Thank you. Garth – Garth Trinkl, Department of Commerce. Since we have a few more minutes – Miss Dibble, I appreciated your analysis as well as the comments of everyone.
Based upon the summit as well as the secretary’s recent meetings – ongoing meetings, could you talk about some global players that lie between the United States and the European Union and that – and China, and that is Russia, Turkey, Ukraine, Belarus, Kazakhstan. Is there anything that you sense on either the energy front or the agriculture front that’s occurred in the last month that would indicate either a divergence or convergence of U.S. policy toward Turkey, Russia, Ukraine?
MS. DIBBLE: Do you mean a convergence or a divergence between the U.S. and –
Q: Yes, the U.S. and the EU.
MS. DIBBLE: I can’t think of anything in the recent times – obviously in the lead-up to NATO – the NATO summit, Turkey and the issue of missile defense – this was a huge subject of discussion. You had elections recently in Ukraine. We’ve just – we have actually in Astana they were still – discussions were still ongoing today, so – you know, these countries were all represented. So I can’t think of anything – I’m not quite sure what you mean, but –
Q: No. I was just wondering, do you think in the U.S. – the U.S. has a special interest in Mexico and Latin America and it’s pursued – and also South Korea – pursuing bilateral trade agreements. Is there any convergence or divergence on issues such as the pursuit of bilateral trade agreements? Or is there any way that the U.S. and the EU could treat the near Eurasia more like the U.S. treats Mexico? Is there any special – is there any divergence or convergence of concern toward whether Turkey will get into the EU because it’s in NATO prior to Eastern Europe?
MS. DIBBLE: Well, on Turkey in the EU, obviously this is an issue for the European Union. We have made our views on Turkey in general and Turkey-EU pretty well known. So I think where you see a divergence is within the European Union itself, so –
MR. GRAY: Any more questions? Do you have any more questions before I end? Do you have – no more questions?
Well, this has been really great. Thank you very much, Liz, for escaping the –
MS. DIBBLE: (Chuckles.) Foggy Bottom.