Copyright 2003 Commission of the European Communities

Copyright 2003 Commission of the European Communities
RAPID

June 26, 2003

SECTION: SPEECH: 03/328
LENGTH: 2949 words
HEADLINE: Pascal Lamy EU Trade Commissioner Partnership of a Great Purpose: The European Union, the United States and the WTO Business Dialogue/ National Foreign Trade Council/ National Association of Manufacturers Washington, 26 June 2003
BODY:
Dick, many thanks. And thanks also to Judge Morris who is an absolute stalwart of the Washington trade scene. Basically, both of you have fought for many many years for progress on trade, through good times and bad. It is a tribute to those long term efforts, and your short term organizational efforts, that you have pulled together such a large crowd today.
Your timing is good: the transatlantic married couple renewed their vows yesterday in the EU-US summit. It has been a difficult year for the marriage, with allegations of infidelity on the one side, with a bit of spouse beating on the other. But as your title suggests, and indeed as has been the case constantly for the last fifty years, the marriage has managed to sustain the sense of a greater purpose than simply staying together for the children. Of course, if you can bear the cliche, we no longer have the famous "glue" of the Soviet threat. But looking at the some of the topics trade and non-trade we discussed and it remains evident that a strong transatlantic relationship is needed. Better still, for me, one of the key messages that came out from a rather constructive and workmanlike summit, including in the trade area, is that the authorities on both sides of the Atlantic, want to continue with their partnership
EU-US Trade relationship
Just to remind you that one reason why we cannot let the EU-US relationship fall on stony ground is because of trade, and our enormous trade and investment relationship, which must not be allowed to unravel. The EU and US exchange one billion euros a trade per day and our investment relationship is even bigger. In 2000, the US accounted for three quarters of new foreign direct investment in Europe; while Europe invests more annually in Texas than Japan invests in the 50 states combined. And this investment creates jobs over 4 million on each side of the Atlantic, and that's only counting the jobs directly created by foreign affiliates. Indeed, and as I said before, some of our multinationals have become so intertwined that some of them no longer know whether their origins are "European" or "American", any more than the public does. Remember the probably not apochryphal story about the young kid from Germany, who gets off the plane in New York, and says to his father: "look, MacDonald's opened a branch here in the US".
So it falls to Bob Zoellick and myself to show some responsibility: to refuse to allow the inevitable disputes which occur from time to time to spoil the very, very substantial trade and investment between the EU and the US. Some of the things we have to deal with could put quite a strain on our relationship. So it is just as well that I have a strong personal admiration and affection for Bob, even if his personal best for the marathon is rather better than my own. But then again, I am still running marathonsa As I said in Jordan earlier this week, we are content to be in our corner, our pragmatic, rather prosaic corner of the international system marked "trade policy", with a clear mandate to deliver. We are the blue collar guys of diplomacy, and fine with that.
WTO Disputes
One aspect of our partnership which does gather rather a lot of attention is our trade disputes. There has been an honourable history of the press filling what would otherwise be empty column inches with stories about transatlantic trade wars, be it over pasta, chicken, bananas, beef hormones, steel, FSCs and GMOs. And the WTO, with its mandatory dispute settlement mechanism, has added a new and more dramatic angle to these stories. It provides winners and losers, and it dishes out fines and censures to those guilty of trade protectionism.
From the point of view of journalists, trade disputes are good sport, good drama, and quite accessible. At least compared to some of the things we do. Try getting a snappy story out of rules of origin, for example.
And to be fair, when the EU and US do fall out, which can happen, there have been plenty in leadership positions over the years who have been only too happy to help the press by providing some juicy quotes. Transatlantic mud-slinging is quite easy to do - I call it duelling by press release at a distance of three thousand miles. The only comparable relationship I have seen is perhaps the US and Canada. The only problem is that it doesn't help clarify why some issues have become contentious, it doesn't help us solve the problems.
And it's true that despite our shared interest in the multilateral rule-based trade system, and despite the rather large capacity of each of us to hurt the other through trade sanctions, the US and the EU continue to target each other heavily at the WTO. Disputes between the EU and US made up 16 of the total 54 completed cases that had been to dispute settlement panels that's almost a third. Not out of proportion when you consider we account for 40% of world trade. But still a substantial case load.
So the answer to handling these cases is to manage them: to avoid surprises along the way, as far as possible: by picking up the telephone, not a megaphone. Bob Zoellick and I have made a habit of doing this. Where we can head off a dispute or two this way, that's value added for the two of us. We're trying to build an approach that goes beyond simply setting out our different positions, based on addressing and where we can resolving these differences. We have resolved the dispute on bananas, for example, which immediately takes one good source of headlines away.
Most of the spotlight now is on the GM dispute and the Foreign Sales Corporation dispute too, although they are at different stages, have very different origins, and a different public profile. A word or two about both.
FSC
On FSC, which is an issue which has been around, in its different forms, for almost thirty years, we are at the end of the process. Indeed, for most of my time as Commissioner for Trade, we have been waiting for the US to comply, since the WTO approved period for compliance expired in November 2000. Waiting, waiting and waiting. Of course, we well understand that it is a complex, politically difficult case, with some pretty big interests at stake. But we have waited, waited and waited for compliance and in that context it is still rather galling to hear some in the Congress say that the EU is being "impatient", and that we should behave as the US did in the bananas dispute.
Well fine: but the bananas precedent means retaliating before the WTO comes back with its definitive ruling, not waiting years and years for the other party to get its act together.
So where do matters stand now? Broadly as follows: we have indicated that we will hold off on retaliation until the end of this year, but that we will move forward with the necessary internal EU legislation for retaliation if there is no satisfactory progress by September. So it is very simple, and let's also put it positively: the headline we would like to see before the end of the year is a very simple one: "US moves to comply with WTO ruling".
Genetically Modified Organisms (GMOs)
Turning to GMOs, I think we are capable of managing the dispute over genetically modified organisms, too; it's certainly been our intention in Europe. I have to say I thought it was the US intention too. I strongly regret the US decision to take this to the WTO. This is not a case of trade protection. In Europe, concerns over the health or environmental impact of GMOs is widespread - also a reflection of the various food scares we have lived in the 1990s. In order to restore consumer confidence, we have been working hard in the EU to develop a comprehensive, transparent and science-based regulation. We should be there with authorisations by the end of the year. So the timing of the US attack in the WTO is, from this point of view, decidedly odd.
But of course we all know that this case is not really about the European market. It is about the concerns of US farmers and agribusiness, who understandably want to export their products, and who fear that more and more countries around the globe see the need to regulate GM products tightly, as witnessed by the 100 countries that have signed the Cartagena protocol under the UN Convention on Biodiversity.
So I fully understand the economic interests behind this case, but I just rather wonder these interests are best served by a WTO case, given the risk of consumer backlash. That's a matter for the US and its industry to judge, not me.
But I do object strongly, however, to the allegation that through its biotech policy, Europe is contributing to hunger in Africa; and the notion that the export of GM crops is somehow primarily driven by the development imperative. This is both dishonest and cynical. When African governments took sovereign decisions last year - without pressure from the European Union, by the way - to refuse US GM food aid last year, they were concerned about the possible health risk of consuming modified corn, and the environmental impact of releasing modified corn into the eco-systems in southern Africa, where corn is the staple grain. As far as I understand it, their concern was not about their exports to Europe indeed, very few of these exports would be impacted by EU rules on GM crops.
Now, had they wanted to, it would have been easy for the US to address these governments' concerns. Had their primary consideration really been fighting hunger in Africa: they could simply have followed the African governments' request to respect the World Food Programme's guidelines and provide funds to purchase locally available and preferred food, as other donors do. As in fact the EU does, for over 90% of its food aid.
And most recently, we are very concerned about the recent Sense of the Congress resolution requesting the conditioning of US aid to combat HIV/AIDS in developing countries on the acceptance of US GM food aid. This is really too much. Assistance to fight diseases as well as food aid to starving populations should be about meeting urgent humanitarian needs. It should not be about trying to advance the case for GM crops abroad, or indeed finding outlets for domestic surplus. So, when US food aid programmes are no longer used as export support devices, programmes which vary with the cyclical change in world market prices and not with the needs of poor people, then, and only then, we will take high toned moral lectures from the US Administration and Congress. Not before.
Doha Development Agenda
The pity about the current row on GM foods is that we are actually doing pretty well in terms of our co-operation on the number one priority right now, that is to say the Round. A co-operative EU-US approach on trade is particularly important if we are to successfully complete the Doha trade round by our deadline of the end of 2004. This is vital not just for the EU and US, but for all WTO Members. Particularly the developing countries, whom have the most to gain from integration in an equitable, rules based system of world trade.
Is this Round just another replay of the Uruguay Round, with seven years of bickering between the EU and US, between north and south? I don't think so. While we may not agree on all the issues, the EU and US are working hard to achieve our shared aims of improved market access, stronger rules and a better deal for developing countries. To take just one example, industrial tariffs, the EU and US are in strong agreement that we need a negotiating method which tackles remaining peak and high tariffs, while looking after developing countries, particularly the poorest among them, who are not able to make an identical effort at this stage. And we agree on the need to have a manageable agenda on the table at the 5th Ministerial Conference at Cancun, which marks the half way point of the current trade round. For if we overload the boat for Cancun, or fail to deal successfully with the issues we do take on board, the Round will be in serious trouble.
Another major difference with the Uruguay Round is the regularity of political contact, the sense of political ownership of the Doha Development Agenda. Bob Zoellick and I have just met in Sharm el-Sheikh in Egypt, in the company of 29 other trade ministers. This was the third such informal meeting in six months not a bad strike rate considering that most trade ministers are constantly flying around the globe, as if we alone are responsible for keeping airlines solvent. And most importantly, it was not just the rich countries represented. Also at the table were a strong group of ministers from the developing world. Which reflects, I think, just how much the game has changed since the early days of the GATT. China is a new and assertive member of the WTO, likely to be followed soon by Russia. Brazil and India have been weighty players from the outset; and others, including African states, have recently taken places at the top table.
Agriculture
Turning for a moment to the detail, I can also let you into a secret: that one of the subjects we discussed in Sharm el Sheikh was agriculture. And another one: that there are many countries, notably the US and the Cairns Group of agricultural exporting nations, who argue that it is exclusively the EU's fault that there has not been so much progress on the Round until now, with our Common Agricultural Policy to the forefront of criticism.
How to respond to these two rather open "secrets"? Let me set out for you the position in as simple and as straightforward way that I can. Yes, the CAP needs to continue with the reform process that has gone on since 1992. Yes, the Commission, and particularly Franz Fischler and myself, have consistently urged the Member States to move further, and faster than hitherto.
And yes, the news is that the Council has now agreed during the course of last night - to a fundamental agricultural reform which means an overhaul to the nature of EU farm subsidies. There is much less incentive now to produce more just to gain more subsidy. Subsidies are now strictly conditioned to high environmental, sanitary and quality standards.
As a result of this and prior reforms undertaken since 1992, the CAP has never been less trade distorting (because of decoupling) or more predictable (the position is now clear until 2013). I am absolutely delighted with the package, and it is a tribute to the amazingly determined efforts of my colleague Franz Fischler. He has stood his ground, and absolutely refused to water down the fundamental points just to get a deal.
So what does this mean in WTO terms ? This package, combined with the agreement last October to cap the CAP in real terms, will have a substantial impact on the CAP internally. But it also has a substantial potential effect in the WTO talks. Why only potentially ? Well, it is true that the outcome of the talks gives me a very useful new credit line in the WTO negotiations, a new margin of manoeuvre. But it is clear that the Council will not allow me to use this flexibility unless others are willing to put equivalent concessions on the table too, and in fact nor will I ask them to do so. For example, the EU has already (in February) suggested a cut of 55% in levels of trade distorting domestic support. If others had made a similar effort, these negotiations would now be over. But if we are ready to go further than that 55% figure, what is the US ready to put on the table? This isn't a game of poker. But all the same, they need to be ready to show us, and more importantly, to developing countries, the colour of their money, notably in domestic support. The Farm Bill cannot remain untouched in this process. That way, we can crack this negotiating round wide open, and produce a really substantial result by the end of 2004.
Conclusion
So given how much time I have spent dwelling on the negative sides of our trade relationship, would you be right to conclude that I don't think there is a partnership for a great purpose at all, except to bicker and fall out rather publicly, preferably in multilateral fora? The opposite is the case. I wanted to avoid the Pollyannaish view that says "it will all turn out alright on the night", and not to be afraid to enter into issues of controversy. I won't try and tell you that the EU and US agree on everything. We do have quite sharp differences on both bilateral and multilateral issues, from time to time. Yes, we have also played into hands of the media by letting them play up the occasional disagreements that inevitably occur from time to time.
But the broader context overall is of a very good relationship on trade, particularly given the enormous complexity of the transatlantic trade and investment relationship Indeed, the Summit spent some time yesterday discussing the Positive Economic Agenda, the vehicle we have established to package up a few issues and add value between summits, reporting back on an annual basis.
The transatlantic trade and investment relationship is vast and deep, and it needs careful managing, particularly in the WTO context. So Bob Zoellick and I will continue to build an approach based on co-operation, as far as possible, rather than mud-slinging. Less fun for some, perhaps. But while it may not be so good for filling the newspapers, it is certainly more beneficial for the EU, the US and indeed, the rest of the world.
Thanks very much. <TABLE WIDTH="100%" BORDER="0" STYLE="border-top: 2px groove; border-bottom: 2px groove; margin-bottom: 20pt"<TD STYLE="padding-top: 10pt; padding-bottom: 10pt; padding-right: 5pt">
LOAD-DATE:June 27, 2003