Remarks
Robert D. Hormats
Under Secretary for Economic Growth, Energy, and the Environment
Washington, DC
April 23, 2013


As prepared

Thank you, Dan (Hamilton). I am pleased to be back at the Johns Hopkins University Paul H. Nitze School of Advanced International Studies (SAIS). It is always a pleasure to speak here. And it is an especially exciting time to talk about transatlantic trade and transatlantic relations, because big things are under way.

President Obama’s announcement in the State of the Union address of the intention of the United States to negotiate a Transatlantic Trade and Investment Partnership, or TTIP, heralds a new era in the transatlantic relationship. The TTIP – if it works – will be a challenge, but one worth undertaking.

TTIP has the potential to be an historic agreement on many levels. Its scope is considerable. The TTIP seeks to create a more open market for 800 million consumers encompassing both sides of the Atlantic. And it will be very different from any trade agreement we have ever negotiated.

It will seek to break new ground by addressing a multitude of heretofore unaddressed non-tariff barriers, setting the stage for convergence between the United States and the EU on key standards and regulations, and establishing high quality norms and practices that can spread to other markets. It is also an opportunity to reaffirm and reinforce the strong economic, political, social and values we share with Europe.

Much as NATO was the glue that tied the United States and Europe together during the Cold War, TTIP can reflect and promote shared transatlantic interests and values that will bind us together more closely in the coming decades of the 21st century.

The Cold War tied the U.S. and Europe together as strong partners and allies for several important decades of the 20th Century.

The Cold War is fortunately behind us. But the patterns of economic, political and security cooperation and partnership created by this alliance were critical in setting the conditions for stability and prosperity in our own countries and indeed much of the world during this important period. They were also critical to ending the Cold War in a peaceful way – in a way that led to a united Europe and a more inclusive international political and economic system.

It is important for us to remember that U.S.-European ties that we have today continue to need periodic strengthening -- which is what we are seeking with TTIP. Although younger generations today do not share their parents’ and grandparents’ experience of the Cold War, they—indeed most of you -- will now benefit from the shaping of a great new trans-Atlantic endeavor of far-reaching significance -- from the jobs and investment that it will create and the strong new economic dimension it will add to our traditional strategic alliance.

And it will reinforce our shared values of freedom, democracy, pluralism and basic human rights that underpin our relationship.

U.S. - Europe relationship

U.S. ties with Europe evolved significantly during the 20th century. After the Second World War, America’s leaders recognized that our common future -- not just Europe’s future – depended on Europe’s economic recovery from the war, and of course that of Japan. The Marshall Plan underpinned U.S.-European security relations and established the basis for our future economic ties. That the Marshall Plan combined security with an economic dimension is why it got such strong support in the United States.

The division of Europe during the Cold War, of course, also required other structures – the centerpiece of which was NATO. Americans and Western Europeans recognized that our bilateral relationship was one of military necessity, with its focal point being Germany’s—and indeed all of Western Europe’s—security.

During the Cold War, shortly after the advent of the European Economic Community, we together initiated the Kennedy Round of trade negotiations in 1964. The Kennedy round had aims that included increased U.S.-European trade. More broadly it sought to sharply reduce global tariffs, break down farm trade restrictions, and strip away some non-tariff regulations. It also sought to boost trade with developing nations.

At the time we also saw the Kennedy Round as part of the broader goal of strengthening the broader transatlantic partnership – one that might ultimately lead to a transatlantic economic community. And in that respect, the Transatlantic Trade and Investment Partnership -- if it achieves its ambitious goals -- might be seen as the culmination of the spirit that animated the Kennedy Round.

In 2013, however, we are facing an entirely different world. While the importance of our relationship with Europe hasn’t changed -- in fact, it might be more important -- as I noted a moment ago, there is a generation or two on both sides of the Atlantic for whom the Cold War, and structures and alliances created during it, have little relevance.

For those of us like myself who remember the Wall going up and coming down, it’s difficult to grasp that many Europeans now reaching voting age know only unified Germany and a united Europe. The same is true for several generations of Americans.

I lived in Germany during the summer of 1964, as an intern in the U.S. Embassy in Bonn. I can still remember the searing experience of visiting Berlin and seeing the Wall for the first time. I was also in Berlin one week after the Wall began to be torn down, and experienced first-hand the extreme joy of that period, joining with thousands of people using hammers and chisels in pulling off pieces of the wall to keep as a souvenir of “Freiheit.” But as I did so, in plain sight of all of us were the graves of many men, women and children who died trying to cross the wall, and who never achieved their own freedom.

Though Cold War thankfully is over, our work in strengthening U.S.-European relations is not. Even as we continue to recognize the need for strong security cooperation, our goal in coming negotiations is now firmly focused on further enhancing mutual prosperity. Today, we have the opportunity to draw on the same common values and same shared interests that forged the greatest alliance in human history – that was NATO -- to build a transatlantic relationship that meets the needs of a new century and serves as a beacon for the rest of the globe.

We are renewing what those before us began. Indeed, as the architects of post-war Europe realized, their task was to build a Europe that would be open and attractive to all those who wished to be “happy and free, prosperous and safe,” a wish they expressed so eloquently in the Europe Declaration of 1951.

This new Europe would be open to all European countries able to choose freely for themselves, and the leaders -- giants like Adenauer, Churchill and Schuman -- expressed the profound hope that as Europe came together and served as a beacon other countries would be free to join this common endeavor.

For coming generations of Americans and Europeans, the compelling argument for strong transatlantic ties must be future-oriented, based on jobs and economic growth, and on shared values of democracy, respect for diversity, freedom of speech and opinion, and on shared opportunity -- not on containing some common enemy. While security cooperation remains a key shared interest, and a high priority, the memory of the Cold War as the reason for it is not a relevant factor in the thinking of many Europeans or Americans today.

Transatlantic Trade and Investment Partnership (TTIP)

So, we are on the cusp of beginning negotiations with the European Union on the Transatlantic Trade and Investment Partnership. This is a historically important project. It is also one that many previously thought was not possible. Some even argued that it was not even worth trying for, given the political, economic, regulatory, and cultural challenges on both sides of the Atlantic. And, some questioned, given the increasing role of Asia, why we should spend the time and effort on major trade negotiations with Europe.

In this context, I’d like to discuss two key considerations.

First: the rebalancing, or “pivot,” of U.S. foreign and economic policy to Asia has received much attention of late. But, as Vice President Biden remarked in Munich in February, our engagement with Asia does not come at Europe’s expense. Indeed, the Vice President noted that it is profoundly in Europe’s interest for the United States to engage more broadly with the world, and we should be doing many more of these things fully and actively together.

There is no denying the economic importance of Asia. It is an enormous economic priority for the United States -- as it is for Europe. Indeed, I believe that both Europe and the United States will be in a stronger position to meet the competitive challenges of Asia if we have stronger economic ties with one another and if we agree on high common standards.

And second, strengthened economic ties between the United States and the European Union—and the benefits they produce for both of our economies—will enhance our ability to build stronger relationships with emerging economies in Asia and elsewhere around the world – relationships that support high quality norms and rules in the global economic system.

Why TTIP Can Succeed Now

As I noted a moment ago, TTIP is a mammoth undertaking. For decades there has been skepticism among Americans as to whether trade agreements benefitted the United States and whether the United States has the competitive strength to benefit from them. That said, however, Americans should approach both the TTIP and TransPacific Partnership – TPP--with a high degree of confidence.

• First, the Obama Administration has demonstrated that it can negotiate agreements that reflect the interests of a full range of American stakeholders. We have strengthened, and last year implemented, three major free trade agreements with Korea (KORUS), Columbia and Panama.

• Second, the administration has paid great attention to ensuring that our trading partners adhere to their commitments they make in these agreements. Moreover, we have strongly advocated for the interests of American companies when they encounter difficulties in any part of the world. We in the State Department have made advocacy in behalf of U.S. business and creating a level playing field for our companies a top priority.

• Third, the U.S. economy is growing steadily and creating private sector jobs here at home at a more rapid rate including, and importantly, in manufacturing – where jobs are beginning to return to the United States. March non-farm employment was up by 88,000, and we’ve enjoyed average monthly job growth of 169,000 over the past twelve months.

• Fourth, the oil and gas boom we are now enjoying has had profoundly positive economic and competitive effects. It improves our trade balance, puts more money in the hands of Americans to spend at home, improves our manufacturing capabilities, creates new export prospects, and makes the United States a more attractive place to invest.

• Fifth, we are finally seeing a real turnaround in American housing market, after a very difficult period – producing more stability for our overall economy and giving people more confidence about their own economic stability.

• Sixth, continued entrepreneurialism and innovation in the American economy is producing more and better goods and services – keeping our economy dynamic and highly competitive.

• Seventh, the President’s successful National Export Initiative has helped American companies take better advantage of access to foreign markets.

We also have had experience in a wide range of cooperative activities with the European Union on regulation and standards that will inform our upcoming TTIP negotiations.

The Transatlantic Economic Council, or TEC, continues to work in areas such as e-vehicles, e-health, nanotechnology and raw materials, to name a few, that create deeper transatlantic economic ties, tackle impediments to commerce, and shape global standards.

Benefits of TTIP

With the Transatlantic Trade and Investment Partnership, and all the enthusiasm it engendered from leaders on both sides, we hope to build on the important progress of the TEC in a larger and more systematic approach.

We aim to address entrenched obstacles to U.S.-EU trade liberalization—concerns over agricultural market access, risk assessment, management of sanitary and phytosanitary measures, and technical barriers to trade, among others.

A significant portion of the benefit of a potential transatlantic agreement turns on the ability of the United States and the EU to pursue new and innovative approaches to non-tariff barriers, with the aim of moving toward a more integrated transatlantic marketplace.

This larger and more systematic approach that we are undertaking now – if it continues to be enthusiastically supported by leaders on both sides of the Atlantic -- can make a big difference. And here let me emphasize that – as with past trade negotiations -- the success of TTIP will depend on full-throated, sustained and enthusiastic leadership of the President and of his counterparts in Europe. And I believe we have both. It will also depend on very close cooperation with the Congress and constituencies throughout the United States. The same types of coordination must take place within Europe utilizing Europe’s institutional structures. I believe these are also well in train.

None of this will be easy. And both sides will have to be highly innovative. The U.S. and EU will need to explore new means of addressing “behind-the-border” obstacles to trade -- through provisions to reduce unnecessary regulatory costs and administrative delays, while maintaining appropriate health, safety, and environmental protections.

A key shared objective should be to prevent non-tariff barriers from limiting the capacity of U.S. and EU firms to innovate and compete in global markets. The two sides should also seek to strengthen upstream cooperation by regulators and increase cooperation on standards-related issues.

Both we and the EU agree on the importance of promoting greater compatibility to resolve concerns and reduce burdens arising from existing regulations -- possibly through such things as equivalence, mutual recognition, or other agreed means.

Importance of evidence-based regulations

Importantly, we seek regulatory compatibility that is based on transparent and evidence-based consultations and that will reduce burdens on both sides -- while protecting consumer health, safety and the environment.

While sanitary and phyto-sanitary – or SPS -- issues remain highly contentious, TTIP negotiations provide a real opportunity to break down some of the barriers that have kept us from taking full advantage of trade opportunities in the past. Our aim is for commitments to base SPS standards on science and international standards with an emphasis on scientific risk assessments.

We also seek agreement to apply these only to the extent necessary to protect human, animal or plant life or health, to develop such measures in a transparent manner, and to establish an on-going mechanism for improved dialogue and cooperation addressing bilateral SPS issues.

It will be essential for us to make significant progress on these issues and other key matters to reach a TTIP outcome that earns support from key stakeholders in the United States and in the EU.

Role of the State Department

The State Department is committed to working closely with our colleagues in USTR, which has the lead negotiating role in this effort. I used to be Deputy USTR in an earlier incarnation in government, and I work closely with USTR on many issues today. I have great confidence in their negotiating skills and in their commitment to the success of TTIP. We at State aim to play a robust and supportive role in these negotiations.

We have a considerable number of people with expertise not only in the traditional trade issues that will be discussed, but also in key 21st century areas that will be high on the agenda such as IPR, the environment, labor, investment, and rules related to state owned enterprises. We also have extensive legal and political expertise, built up over decades, with respect to EU member states and EU institutions.

And we will use the unique on-the-ground resources we have at our Embassies in the EU member states, and our mission in Brussels, to engage the EU Commission and proactively reach out to EU member state governments, parliamentarians, and other stakeholders in Europe to discuss the mutual goals and the benefits we see in TTIP.

Impact on Emerging Economies and the Global Trading System

Our objective in pursuing the TTIP is not only to strengthen economic ties with Europe – although that is our central objective. We see this as a way to strengthen economic ties with the rest of the world as well. This is an important dimension of these negotiations. TTIP could contribute to rules and disciplines between the United States and the EU that -- if more broadly adopted -- could be a catalyst for other trade liberalization initiatives. It could help shape practices, and norms throughout the global economy, strengthening the rules-based trading system from which all economies benefit.

Indeed for businesses in many emerging countries, the benefits of common U.S. – EU standards resulting from the TTIP could be considerable. Instead of manufacturing to conform to both EU and U.S. standards, their production would have to conform to only one standard to the extent they want to export to these markets.

And– recognizing the costs of conforming with both Euro-American standards and their own national standards, many companies in these countries will see it in their interest to press their own governments to accept the Euro-American standards. If they do so, our own companies would benefit greatly – because that would create a more level playing field in those emerging markets.

But this will not come automatically. The United States and the EU need to build on our shared economic interests and values in order to collectively demonstrate our support for them. This will give us a stronger platform to seek support for global acceptance of the key rules, norms and practices that have been so important in the success of the global economy we have today – one that has benefitted our own economy and many emerging economies as well.

We generally think of regional preferential trade agreements as having trade diversion effects, but this is not a very useful way of thinking about this one. Here the thrust will be a desire for deeper integration.

Tariffs between the U.S. and EU are already very low. The majority of the subjects the U.S. and EU agreement would cover go well beyond tariff commitments to address non-trade barriers, and other policy areas that may not be covered by existing WTO agreements. These include competition policy and investment – that are essential to the effective functioning of integrated supply chains.

It follows that the U.S.-EU agreement will result in little trade diversion. In fact, it can complement and reinforce the multilateral system, and contribute to the development of global rules in areas where progress at the multilateral level has not been possible in the past. So down the road, the TTIP has the potential to create new international standards that could become the building blocks for future progress in the WTO.

Conclusion

The first great project of economic statecraft in the 20th century was the peaceful integration of a number of nations in what was then called the free world into the post-war international economic order established in the 1940s and 1950s. This order was based on common trade, finance and development objectives. It provided a center of gravity for others to move toward and benefit from later in the century as the Iron Curtain fell and international ideological, political and physical barriers disintegrated -- or at least diminished.

The challenge for the 21st century is to build on common bonds and shared values to help fully integrate the United States, Europe and other established economic powers with a new group of rapidly emerging economic actors—such as China India, Brazil, Russia, and others—as enthusiastic and supportive participants in the international economic system, based on procedures and high standard rules for successful market –oriented commerce.

And there is a larger benefit of strong economic ties as well. Countries whose economies are closely linked are more likely to aim at forging a common future in others areas.

So let me conclude where I began...The TTIP builds on an established traditions of U.S.-EU cooperation.

Today’s united Europe—a remarkable success—is a powerful tribute to the far-reaching ambitions and determination of European visionaries such as Jean Monnet, Robert Schuman, Konrad Adenauer, and Ludwig Erhard and Americans who supported this effort such as George Marshall, Dean Acheson, and Harry Truman.

These leaders understood the value of closer economic ties. They saw them as important to prosperity and security on both sides of the Atlantic and as a politically unifying force within Europe. Indeed, President Harry Truman sagely remarked that “our relations, foreign and economic, are indivisible.”

In the post-Cold War 21st century world, we need to ensure that current and future generations of Americans and Europeans recognize not only the important legacies we share, but also that at present and in the future our common economic benefits and security relationships are intertwined. It is similarly important to ensure that this reinforces the values and principles that underpin our societies, our systems of government, and our view of the world we want to pass on to future generations.

It is important to recognize and reiterate to our publics that the United States and Europe share, in so many ways, a common future. Too many on both sides of the Atlantic take this relationship for granted or think little about it.

In many ways, America is stronger if Europe is stronger, and vice versa. Our mutual prosperity and our security still depend heavily upon our relationship—as do solutions to many global, political, security, environmental and developmental and other challenges.

The Transatlantic Trade and Investment Partnership is a bold vision based on the recognition of our many potential areas of shared opportunity. Reaching a ground-breaking and mutually beneficial agreement will not be easy. And there will, of course, be bumps in the road. But working together to realize these opportunities is well worth the effort. It will benefit our own people and contribute to a better world for many others – for many decades to come.

Thank you very much.