March 19, 2007
HP-323
Deputy Secretary Robert M. Kimmitt Makes Remarks to CDU-CSU Parliamentary Group Conference
March 19, 2007
[Introduction delivered in German]
Madam Chancellor, Mr. Kauder, Mr. Josefsson, Excellencies, Members of the Bundestag, members of the media and the business community. Ladies and gentlemen, it is an honor to join so many distinguished guests here to give a speech on the close transatlantic cooperation. I would like to thank Chairman of the CDU/CSU Parliamentary Group in the Bundestag, Volker Kauder, for organizing this important event; and in particular Chancellor Merkel. The fact that Germany added the Transatlantic Economic Partnership to the international agenda is a very important development that the United States welcomes. It is because of your initiative that we are here today.
It is great to be back in Berlin, and it always feels like a homecoming for me. My parents met and married in Berlin exactly 60 years ago, on March 19, 1947, and I was born exactly nine months later in the United States. So, like President Kennedy, I am proud to say "Ich bin ein Berliner," – and, in my case, "Made in Germany!"
As I speak to you today, I am reminded of the counsel I received before coming to Germany as Ambassador in 1991. My predecessor, Vernon Walters, passed along to me only one bit of advice: "Never forget that speeches are very important to Germans. They like to give speeches, listen to speeches, and analyze speeches far more than is the case in the United States." He once spoke for 40 minutes to a distinguished group like those gathered here today, and when he sat down – rather pleased with his performance – he was surprised to hear his host say, "Mr. Ambassador, thank you so much for your remarks. If you ever have time for a real speech, please come see us again!" Well, if 40 minutes is where a "real speech" starts, today you will receive from me only remarks!
The EU-U.S. Relationship
Much of my life has been spent on issues related to German-American relations, and like many of those gathered here today I am a child of the Cold War. From 1960 - 1964 our family lived in Germany while my father was stationed here with the U.S. Army. While a cadet at our military academy, West Point, I returned to Europe in the summer of 1967, as an exchange student at the Austrian Military Academy, and in 1968 I served with the U.S. 3rd Infantry Division in Aschaffenburg. These experiences gave me a personal perspective on the Cold War foundation of the German-American, and European-American, relationship, a foundation that was predominantly political and military.
As we entered the post-Cold War era in 1991, I came back to Germany as the first American Ambassador in over 50 years posted to a united Germany. Like many of you, I took part in the post-Cold War transformation of the relationship between Germany and the United States. Our conversations still involved important political-military issues, but the dialogue began to evolve and expand as we saw new emphasis in and attention to our economic, financial, and cultural relationship.
The institutions of the Cold War, such as NATO, were in the midst of fundamental transformation during this period, but so was the European Union, including intensive deliberations on the issues of: deepening versus widening; a common European currency; and the European Security and Defense Identity. I remember discussing these issues with then-Minister Angela Merkel during long walks in the Brandenburg countryside. At that time, there was much debate in the United States about whether Europe coming together was good or bad for America. One former American official even opined that the ideal state of affairs would be for Europeans to always be laboring toward unity but never actually getting there.
Fortunately, that debate is long over and that American official's opinion did not prevail. As the European Union prepares to celebrate the 50th anniversary of the Treaty of Rome later this week, let me take this opportunity to state our position clearly and directly: the United States strongly supports Europe coming together on an outward looking basis. A stronger, more united Europe – open to and seeking external engagement – is good for Europe, good for the United States, and good for the rest of the world.
In the economic and financial spheres how Europe comes together is just as important as the fact of its coming together. The best way to reap the full benefits of globalization, and to respond to its challenges, is to build a competitive, market-led, and integrated single market economy, with the flexibility to adapt quickly to change in the global economy.
Fundamentally, Europe and the United States both trust markets to serve as essential organizing principles of our economies. But our market systems also have their own characteristics. To enhance our transatlantic economic relationship, we must reinvigorate common efforts to address and reconcile our systemic differences and thereby reduce obstacles to economic growth. That is why the United States has warmly greeted and greatly appreciates Chancellor Merkel's proposal for a new transatlantic market initiative. When any European Union Presidency – but especially Germany's Presidency – makes a transatlantic initiative a central element in its agenda, it sends a very strong political signal.
Such an initiative recognizes that progress on economic and financial matters can help improve the overall political relationship between Europe and America, and can provide a strong foundation upon which to rely during periods of political turbulence. I would like at this point also to recognize the contributions to this initiative of Matthias Wissmann, one of Germany's and Europe's strongest transatlanticists.
Before giving U.S. views on the Chancellor's proposal, let me make two brief observations. First, the Transatlantic Market Initiative is not a proposal for a Free Trade Agreement between Europe and the United States. Our common highest priority in the trade arena remains success in the Doha Round, to which both Germany and the United States are active and committed. The Chancellor's initiative focuses instead on improved cooperation to reduce non-tariff barriers and regulatory obstacles and thereby expand economic activity between Europe and the United States. However, a successful launch of this important initiative not only will not detract from Doha efforts, it should also help provide momentum for our continuing dialogue regarding Doha.
Second, any transatlantic effort to reduce regulatory burdens can only be as successful as, and cannot move faster than, Europe's own efforts to establish the European single market. These are complementary and reinforcing objectives. We cannot reap the true benefits of a meaningful transatlantic economic partnership if we attempt to forge such a partnership between the United States and 27 different member states. As the European Union increasingly participates in the political arena as a single actor, it must also do so in the economic arena. A more fully realized single market would put Europe in a far better position to effectively engage the rest of the world.
For this reason, there is much focus on the European Commission's process for assessing the single market. This effort, which included an interim update for the European Council earlier this month, will identify successes and shortcomings and develop policy changes for the future direction of the single market and could have major implications for our transatlantic relationship. As the Commission's interim report noted, it is time for a single market that has lower – and, I would add, fewer – barriers to entry for new firms, an overarching intellectual property rights regime that better promotes innovation, and greater competition in sectors such as transport, energy, and infrastructure that determine costs for other businesses.
We also welcome President Barroso's and Chancellor Merkel's plans to reduce the burden of EU regulations by 25 percent. Combined with the implementation of structural reforms under the re-launched Lisbon Agenda, this will provide a more favorable environment for business creation and growth. We need to be firmly on the side of reducing the regulatory burden and providing more flexibility for businesses, both in their transatlantic activities and within the single market.
A New Transatlantic Market Initiative: Not a Sprint, But a Marathon
Ladies and gentlemen, let me now turn to specific comment on the Chancellor's important initiative. Today, as we discuss globalization and the transatlantic economic relationship, it is clear that the nature of our transatlantic relationship has changed precisely because of its and the world's growing interdependence.
We both face challenges and opportunities related to globalization. How do we compete, cooperate, and succeed in a globalizing world? As Chancellor Merkel said in her recent statement to the Bundestag, globalization brings development at what can seem at times like a breathtaking pace. Globalization and its effects will only accelerate in the years ahead, meaning now is exactly the right time to strengthen the critical economic and financial relationship between the Europe and the United States. We have a unique opportunity with German leadership in the European Union and G-8 to make progress that will benefit not just the transatlantic economy, but will also develop common approaches of benefit to the global economy as a whole.
Over the past 15 years, EU-U.S. engagement has been marked by a series of initiatives that sought to strengthen and reinforce economic ties. While U.S. Under Secretary of State, I was one of the negotiators in Paris in 1990 who prepared the agreement under which the EU-U.S. Summits now take place. Yet while these past efforts set us on a good path, they have not created an overarching framework that is perceived to provide political commitment and accountability. Providing that strategic framework while establishing regularly reviewed benchmarks for achievement is what makes the Chancellor's initiative both new and important. Our goal is straightforward and clear: reduce regulatory burden on both sides of the Atlantic to the greatest extent possible, then converge, harmonize, or mutually recognize the fewer regulations that remain.
Before deciding what new steps to take and new structures to establish, the three partners in this effort – Germany, the European Commission, and the United States – are taking stock of the progress we have made under previous regulatory cooperative initiatives. One successful mechanism is the EU-U.S. Financial Markets Regulatory Dialogue, an informal and cooperative structure in which independent U.S. financial regulators and their European Commission counterparts focus on promoting strong cooperation on financial markets, fostering convergence and anchoring financial systems in best global practices.
Under the auspices of the Financial Markets Regulatory Dialogue, I recently met with Commissioner McCreevy in Washington, and we both underscored the importance of Chancellor Merkel's proposal for our common efforts in the financial sector. I commended Commissioner McCreevy for the progress the European Union is making under its Financial Services Action Plan in putting in place the framework for an integrated EU wholesale market and building a single European financial market.
We also discussed the release last month by the President's Working Group on Financial Markets of a set of principles and guidelines that will guide U.S. financial regulators as they address public policy issues associated with the rapid growth of private pools of capital, including hedge funds and private equity. Commissioner McCreevy has expressed support for these principles, and we look forward to continuing this discussion in the Financial Markets Regulatory Dialogue, the G7, and the Financial Stability Forum. We also agreed that the Financial Markets Regulatory Dialogue structure, with its informality and its focus on active dialogue and regulator-to-regulator contacts, provides a good example to other sectors considering expanded regulatory cooperation across the Atlantic.
In this context, it is important to note that in recent months transatlantic business and policy groups – seizing on the opportunity presented by the German proposal – have renewed their calls for a deeper and more unified transatlantic market. For example, the TransAtlantic Business Dialogue, representing businesses operating on both sides of the Atlantic, is pressing for stronger regulatory cooperation to reduce the costs to businesses of dealing with different regulatory standards and processes. Chancellor Merkel and I, together with European Commissioners Mandelson and Kroes, heard this message quite clearly when we met with the TABD in Davos. And the Transatlantic Policy Network, which brings together business and legislative leaders, has called for a more unified market and regulatory convergence in the most significant global economic relationship.
Chancellor Merkel's leadership provides us with new momentum to deepen our existing dialogue and encourage governments to take action to commit to improved regulatory cooperation based on shared principles. We are discussing a number of promising areas where we can redouble our efforts to foster an improved transatlantic economic relationship. The goal is to deliver an initial set of concrete results by the EU-U.S. Summit in Washington on April 30.
One major achievement that is within our grasp is the recently negotiated EU-U.S. Air Transport Agreement, set to be approved by the Transport Council of the European Union later this week. Approval of the agreement is absolutely essential to demonstrating that Europe and the United States can reach common understandings on difficult economic and regulatory matters affecting our most important business sectors. Other areas under discussion include: extending regulatory cooperation in a range of sectors; advancing cooperation on enforcement of intellectual property rights, thereby spurring innovation; encouraging progress on the work-plan aimed at promoting consistent application of IFRS and US GAAP accounting standards; and integrating our efforts on energy security and addressing climate change, including advancing work on biofuels, energy efficiency, and clean coal.
We were pleased that the Chancellor included both in her EU-U.S. initiative and the G8 agenda the issues of energy security and climate change. Our dependence on oil creates economic, environmental, and security vulnerabilities. President Bush has put forward a bold plan to reduce gasoline consumption in the United States by 20 percent in 10 years by rapidly expanding the development and use of alternative fuels and by increasing automobile efficiency. This initiative will transform America's transportation energy sector and put us on a path to energy security.
The European Union has also targeted this issue, with the recent agreement that includes a requirement for 10 percent of vehicle fuels to consist of biofuels by 2020. It is essential to energy security and long-term economic growth to have diverse sources of energy enabled by free, open, and competitive energy markets. Just as it is important to diversify the types of energy resources we use, it is also important to diversify the sources of supply and the supply routes, a challenge of particular importance in Europe. Diversification lowers the risks of supply shocks, whether due to natural or political causes.
With regard to climate change, I appreciated hearing the Chancellor's perspective today, and I look forward to Mr. Josefsson's remarks. Although I know the conventional wisdom in Europe is otherwise, let me make clear that climate change is an issue of great importance to the United States. The President stated directly in his State of the Union Address in January that global climate change is a serious challenge both to the United States and to the world. The President's energy plan has important climate benefits by potentially stopping the growth of CO2 emissions from our automobiles by setting an ambitious target for the deployment of biofuels and increasing mandatory fuel economy requirements.
In addition, the Administration has embraced policies that encourage the development of clean technologies to enable our economy to grow while protecting the environment. The United States has devoted nearly $29 billion to climate-related science, technology, international assistance, and incentive programs, and last year we awarded nearly $1 billion in advanced coal tax credits that will leverage billions of dollars in private sector investment to develop clean coal technology. And the private investment community in the United States, especially in Silicon Valley, is responding enthusiastically.
Recognizing again that climate change is a global issue, we have taken a number of important steps toward increasing international interaction. We have engaged with Europe through a High Level Dialogue that recognizes that our energy security and air quality goals are achieved in parallel with our climate change goals. We will continue our efforts to accelerate investment and open markets for cleaner, more efficient technologies, goods, and services while fostering sustainable economic growth and poverty reduction.
However, we all realize that tackling global climate change will require global solutions that include fast-growing countries such as India and China. This is why we launched the Asia-Pacific Partnership on Clean Development and Climate with Australia, China, India, Japan, and South Korea – countries that represent 50% of the world's economy – to speed up the transfer of clean energy technologies. And Secretary Paulson has made energy and the environment an important element of our new Strategic Economic Dialogue with China.
Returning to the Merkel Initiative, between now and April 30, we will work with our EU and EC counterparts to put forward results that will strengthen the economic relationship between America and Europe. But our goal is not just a successful summit in April. As significant as that date is, we want this important initiative to be judged successful not only on April 30, 2007, but on April 30, 2008, and each year beyond. This effort is a longer-term marathon, not merely a short-term sprint to the next EU-U.S. Summit. The progress we make during the German Presidency and beyond will contribute to our goal of a more integrated transatlantic marketplace that will also provide greater stability for the global economy. But we must also put in place an enduring effort that will produce results beyond the German Presidency, and we are discussing with Germany and the Commission a structure that will make this initiative one of lasting importance and effect.
The United States and the European Union share common ideals and deep linkages, and the benefits of our relationship are evident. Our reasons for seeking to strengthen this partnership are clear: Even two economies as powerful as ours cannot respond alone to the gale winds of globalization. It is time to join together in our efforts to energize our economic growth. Modern economies adapt and grow based on their ability to harness the forces of globalization to deliver economic growth and job creation.
Together we can provide increased opportunities for our workers to share the benefits of economic integration. But as Chancellor Merkel has said, "in order to achieve these goals, we first of all need growth and pronounced growth at that: qualitative growth, but also, in many areas, quantitative growth. Without growth, it will not be possible to maintain our level of prosperity; and so it will also not be possible to practise solidarity."
The Chancellor's transatlantic market initiative has the potential to be the cornerstone of a market-based, growth-oriented, more integrated transatlantic economic partnership. Success will require considerable effort over a long period of time. Let us today have the courage to accept the challenge and opportunity the Merkel Initiative presents.
The Importance of Open Investment and the EU- U.S. Relationship
Ladies and gentlemen, as we work toward this common growth agenda spurred by the Merkel Initiative, there is a separate but related topic that must be addressed: growing protectionist sentiment, and new obstacles to trade and investment, on both sides of the Atlantic. Allow me to say a few brief words on this important topic before closing my remarks.
Dynamism in our economies can lead to the concern that international business interests are a threat to jobs at home. In Europe, some countries have attempted to thwart takeovers of perceived "national champions," while other countries continue to raise concerns about the free movement of labor and capital within the European Union. We often discuss this issue in the context of trade. But since investment flows are many times larger than trade flows, we must also pay close attention to cross-border capital flows and maintaining open investment policies. Our common interests make the European Union and the United States natural partners in ensuring the three fundamental principles of a healthy world economy: free and fair trade; flexible exchange rates; and the free flow of capital across borders.
The United States and the European Union are the two largest beneficiaries of foreign direct investment. In the United States, recent figures for direct investment flows in 2006 totaled $184 billion; up from $110 billion in 2005, and more than double the figure from a decade earlier. By comparison, Eurozone countries received $189 billion in direct investment from outside the Eurozone last year, up from $112 billion during 2005. Foreign investment in all its forms – including foreign direct investment and portfolio investment – is a growth engine that must run smoothly for our countries to continue to prosper. We must come together to make clear on both sides of the Atlantic that we are open to investment and trade, and actively reject the rise of investment protectionism across the Atlantic or elsewhere in the world.
For our part, the United States is keenly focused on keeping our
economy open to investment while addressing national security concerns. For that reason, we are working to ensure that proposed changes to the process for reviewing foreign investments do not create unnecessary and counterproductive barriers to participation in the U.S. market. Let me make my message crystal clear: the United States is open to investment from abroad, and we hope Europe will remain open to investment as well.
In Chancellor Merkel's remarks in Davos earlier this year at the World Economic Forum, she discussed the importance of working together to confront challenges across the world. I was struck by the African proverb she quoted: "If you want to go fast, go alone. If you want to go far, go together." I cannot think of a better way to describe the working relationship between Europe and the United States as we move forward. Together, we have an opportunity to point the way toward sound, market-based, growth-oriented economies in Europe, the United States, and throughout the world.
Madame Chancellor, I would like to thank you again for your strong leadership, support, and promotion of a stronger transatlantic economic partnership, as the foundation of a stronger European-American relationship that serves the vital interests of Europe, the United States, and the world at large.
Vielen Dank für Ihre Aufmerksamkeit.