C. Peter McColough Series on International Economics: The EU-U.S. Transatlantic Trade and Investment Partnership

Tuesday, May 21, 2013

WILLIAM DROZDIAK: (In progress) -- Bill Drozdiak, president of the American Council on Germany, and I'm delighted to introduce our special guest today, Karel De Gucht, who is the European Union's commissioner for trade and will be the key negotiator, along with Mike Froman, the United States U.S. trade representative, in these absolutely important to talks on establishing a new Transatlantic Trade and Investment Partnership between Europe and the United States.

This meeting is part of the CFR's Peter McColough Series on International Economics. The meeting is on the record. And if you would just turn off your cellphones so it doesn't disrupt the PA system, I'd appreciate it.

Minister De Gucht is somebody who has had long experience in European affairs. He was a member of the European Parliament for about 14 years. And as a leading figure in the Belgian government, he served as minister for economic trade and also for foreign affairs. In that respect I think he's somebody who has been a very devoted believer in the European idea but also in establishing close relations with the United States.

So, Minister Gucht, it's great to have you with us. We look forward to your remarks, and then we'll have plenty of time for questions afterwards.

KAREL DE GUCHT: Thank you very much, Chairman, and ladies and gentlemen. Indeed there is a challenge in talking about government policies today, which is that the substance lies in the technicalities. And that of course can get in the way of talking about the substance with people who have other important issues on their minds. This is unfortunate because the problems of different policy areas are more and more interconnected. Trade policy is no different. We have our own shorthand, but what we do is also intimately linked with a range of other policy areas, both foreign and domestic.

We are here this morning to discuss the Transatlantic Trade and Investment Partnership, a trade agreement between the EU and the United States that we hope to start negotiating very soon. And given that we are here in the home of American foreign policy, I would like to focus my remarks on the connections between this deal and the wider world of international relations, and more specifically, on how it will contribute to one of the challenges for foreign policy today, namely how we will govern in the 21st century the global economy that we created in the 20th century. So I promise I will do my best to translate from trade speak, if you promise to do the same from your side.

So let's start at the beginning. Transatlantic Trade and Investment Partnership would indeed be an exceptional deal. The figures on the economic relationship between the European Union and the United States are unknown but still staggering: 15 million jobs, 2 billion euro a day in trade flows, and mutual investment stocks approaching 5 trillion euro in total. Together we represent half of the world's economic output.

It's undeniable that this agreement would have considerable benefits. We predict that it could be as much as half a percent of GDP for both sides. But it's also undeniable that it would have considerable consequences for the wider multilateral trading system that is overseen by the World Trade Organization. And that is something that should grab the attention of everyone who has an interest in global governance, because the WTO is in many ways the international institution par excellence.

Like many others, it monitors the activities of its members. Like many others, it offers a forum for negotiation of new agreements. Like some others, it offers a legally binding way for members to resolve disputes. Unlike any other, it has a very effective means for enforcing those disputes through direct, unavoidable economic consequences for the offending party. The effectiveness of this system has enabled the WTO to guarantee trade openness, even in difficult times like those we have seen since 2008.

These are also, however, difficult times for the WTO. In 2011 its members acknowledged that the Doha rounds of global trade negotiations was blocked, and it remains blocked today. The reasons are complicated, but at the center lies a shifting balance of the global economy from West to East and from North to South. This is, first and foremost, a positive story of progress for the people of the developing world, but it also has implications for the WTO. The election of Ambassador Roberto Azevedo as director general is just the most recent sign of the new leadership role played by the emerging economies like Brazil, China and India.

However, that leadership means that emerging economies also now have increased responsibility for the well being of the overall system and ensuring that negotiations move forward is part of that responsibility. In the past, the European Union and the United States helped move negotiations forward by opening their markets further than others. This responsibility now falls on emerging countries too, particularly in the many economic areas where their companies are global competitors.

It's not clear, however, that the emerging countries see this question in the same way as the European Union, and that divergence of views about the different contribution needed from different players is the main reason we have not concluded the round. We will need to come to agreement if we want to resolve this problem. In fact, we think there is a need for a new global governance on free trade, one that recommits all WTO members, developed and developing, to the principles of open markets, and one that addresses the new positions of each in the new global economy. Only an agreement of that kind will unlock the Doha round and allow us to move forward with the next phase of trade liberalization and governance.

But that agreement is not on the cards today, for all we might wish it to be. So when it comes to trade policy in the short term, we are faced with a dilemma. We are obliged to move forward with new trade liberalization because it is a vital tool to boost growth in difficult times. To paraphrase President Roosevelt: Instead of twiddling our thumbs, we must roll up our sleeves. But at the same time we must make sure that, whatever we do, we strengthen the possibility of overcoming the impasse in the medium term.

So how should we proceed? The first avenue is to do as much as we can at the multilateral level. For example, WTO members are working right now on a limited package of measures, including an agreement that will facilitate trade through more efficient customs procedures. That could be agreed by ministers' meeting in Bali by the end of this year. We are also negotiating an international agreement on trade in services and expanding the scope of an existing deal on information technology equipments, both of which will help support key industries of the future.

But the second avenue is to press ahead with liberalization on the bilateral and regional basis. As we do so, we need to acknowledge that this approach poses risks. It brings the day-to-day experience of companies further away from the WTO principle of nondiscrimination between different members. It creates a bureaucracy of different rules for different commercial relationships that will undoubtedly blunt the impact of liberalization to some degree. But we also know that it will bring important benefits. Trade barriers will come down. Growth will be generated. So the challenge is to deliver bilateral agreements that both move liberalization forward and do so in a way that supports the resumption of work at the multilateral level in the future.

The Transatlantic Trade and Investment Partnership is an excellent example of how this will work. And we really have to go beyond the agreements that both of us have done before if it's going to be worth the effort. Tariffs are low, so they will not be enough. We need to tackle more complex issues. And the most important of those is the whole area of regulation. Barriers caused by technical regulations and standards are much more important than tariffs in blocking trans-Atlantic commerce.

In fact, we estimate that they have the same dampening effect on trade as a customs duty of between 10 and 20 percent, depending on the product. But to deal with them we will have to be creative and flexible, because the reason regulation exists is not -- or should we say not always -- to create barriers to trade but to protect citizens from risks to their health, safety, financial well being or environment. And clearly these agreements can and should do nothing to undermine those protections.

So what we will need to look at are the methods and procedures we use to achieve those two objectives, and be very pragmatic about finding solutions that will allow those procedures to converge. All of this will require open minds, but if we are successful it will be valuable, not only for the United States and Europe but for the multilateral system as a whole, because the solutions we develop to these complex problems can help fill many gaps in the multilateral rulebook later on.

And this is why the level of ambition we strike in this deal needs to be high, because the more regulatory convergence we can achieve between us, the more scope there is for this model to influence other countries around the world. And this brings me to the broader issue. If we want to strengthen the chances for a future global agreement on trade policy, we also need to think about how the Transatlantic Trade and Investment Partnership will impact our relations with the emerging economies. No form of global governance we're to name can exist without their deep engagement.

The first point to make here is that the economic benefits of this agreement will not be confined to the trans-Atlantic area. And this is because much of what we planned to do will not discriminate against any of our other trading partners, developing or developed. Let me explain.

A customs officer can easily adapt duties owed on an important product depending on where it comes from. If the product comes from a country with a free trade deal, it's importer pays a lower tariff. If it does not, it costs more. But in the case of this agreement, that discrimination will be neutralized by two factors. First, our tariffs are already low, an average of about 4 percent, and in most cases the competitive disadvantage will be easily surmountable. But more importantly, the flexibility we have to change tariffs does not apply to regulatory barriers.

Let me give you an example. If we agree on a harmonized safety standard for car airbags on the European and American markets, that will lower costs for Fiats and General Motors. But it also benefits Kia and Mitsubishi, or any other company that exports to both our markets, because we are clearly not going to have a more complicated airbag standard for them. So they will make the same cost savings as U.S. and European companies from not having to make separate models for either side of the Atlantic, which is why we project the rest of the world should actually gain from this agreement -- and I stress "gain" -- to the tune of 100 million euro.

All the same, we know that some of our partners may sit up and take notice of our decision to launch these talks, perhaps China more than most given its stake in both of our markets, and that's demonstrated again this morning. But I want to be very clear: The purpose of this deal is not to unite against anyone. Of course any trans-Atlantic standards we create will have weight, given they will apply in half of the world economy. And that will be a strong incentive for other jurisdictions to adopt similar approaches because it would make the lives of their exporters easier.

But that is as far as it goes. It creates an incentive to adopt a trans-Atlantic approach, or something similar, but it will not bind anyone other than the EU and the U.S. If you want to move forward at the multilateral level, it will be by addressing the difficult issues head on. The time may not be right for that yet, but we will be ready when it is, and we will be more ready if we prepare the ground in the trans-Atlantic zone now.

In the meantime, we will continue to deepen our economic ties with all our partners as much as possible. That is why the EU is in advanced negotiations on a trade agreement with India, why we are preparing to launch an agreement on investment flows with China, and why both the EU and the U.S. worked so hard to persuade Russia to join the WTO last year.

Chairman, Ambassador, ladies and gentlemen, so there need be no concerns in this area. Europe is as committed as ever to an open, rules-based multilateral trading system that includes the entire world's economy, and we believe that this agreement with the United States is one of the most useful things we can do right now to strengthen it. I hope that we can count on the firm's support of the foreign policy community in that effort, and that you too will keep your sleeves rolled up. Thank you very much.

DROZDIAK: Well, thank you very much, Commissioner. Let me start with a few questions before opening up to the audience.

One of the most ambitious aspects of this negotiation seems to be the timetable. I think your mandate expires at the end of 2014, so if you start the negotiations next month, that gives you only about 18 months to conclude it. Have you and your interlocutor, Mike Froman, found a method in which you can compress these negotiations into such a short timetable and get some kind of a deal by the end of your mandate, 2014?

DE GUCHT: Well, first of all, the agreement will be ready when there is an agreement. But I think it should be possible, yes, to do it. And it would also be very good to do it, because if you say, look, this will be very important to get us out of the crisis in a structured way, then you better not discuss about it for five years. There are a number of reasons why possibly it would take less time than a normal-paced negotiation that is easily taking three years and a little bit more.

First of all, we happen to know each other rather well. I mean, we are perfectly aware what we are discussing about because we have done lots of preparatory work in the Transatlantic Economic Council, that Mike Froman and myself have revived and also brought to some results, like, for example, the secure traders system whereby when you check a container in Antwerp, that's also valid, that check, when you arrive in Houston, which is quite important. It applies to about 4,500 companies in Europe, for example, and must be about the same in the U.S. Also a number of other topics like e-cars, agreed principles on international negotiations, and that kind of thing. We made quite some progress also on e-health. So we are not really starting from scratch.

Secondly, we have been making a report and discussed it thoroughly for about a year. And in fact, that report is going much further than a traditional scoping exercise for a negotiation. It really tells you something about what we are going to do, the report.

And thirdly, the kind of problems you have to resolve, you could argue that they are more difficult than the problems that you traditionally faced in a trade negotiation, but they are also more political. And then I refer to regulation, which means that to resolve it, you will need a lot of political impetus, and that political resolve, let's say, surfaces. It's not only a matter of time but it's a matter of, well, whether or not you are politically ready to do it, and it could as well surface within 12 months than it would within 24 months.

But that all depends, of course, on a number of issues, and also you can have stumbling blocks on your road to an agreement. So it's such a negotiation, and that's also the charm of a negotiation is it's always a little bit unpredictable. But I don't think it's impossible to do it. So we will give it a try and we will see at the end of next year.

DROZDIAK: Well, the fact that there is such strong political will on both sides to conclude this agreement is one of the biggest factors it has going for it. Certainly Europe needs a new impulse for growth, and I think many governments in the European Union are looking for it.

But nonetheless, you're negotiating on behalf of 27 governments. Countries like France and even Germany have expressed concerns about certain aspects -- agriculture trade, for example, GMOs, hormone-treated beef. American farmers say -- or American senators who represent the farming constituency say they will not accept any kind of agreement unless this is accepted. And then you have the very -- unless it is accepted, that you allow your markets to open up to GMO products.

And then the other area where France certainly has expressed a lot of reservations, and indeed set a red line, is on culture, films, media, entertainment. They don't want to see their television shows overrun by all these American products. Do you think in the end the political will will be sufficient for them to compromise in these areas where they have been so reluctant to make concessions in the past?

DE GUCHT: The position of European Union and U.S. in this respect is not so different, you know. You say, Bill, that I'm negotiating on behalf of 27 member states. It will be the same for Mike Froman. And you gave some examples that opinions might very much differ from one state to another. So that's not that much different.

And the procedure in Europe makes that -- in fact, we have a permanent "fast track." You don't have that in the U.S. but we have, which means that in the fast track what is technically called trade promotion authority, the Congress can only say yes or no to an agreement, and if there is no fast track, then they can start introducing amendments, which makes it of course completely impossible if Parliament starts amending a trade deal and it becomes very difficult.

Now, in Europe we have a permanent fast track. So the commission has proposed a mandate to the council. The council will normally decide on that in the course of June. And once we have a mandate, it's the commission that negotiates. Of course we keep the member states informed, but it is a commission that negotiates and does the necessary undertakings. And then of course afterwards you need the ratification by the council and the European Parliament, who are in fact acting as a bicameral, quote, unquote, "congress." And that's, by the way, about the same procedure.

So I don't see that structurally we will be in a weaker position than the United States, international trade being one of the few exclusive competencies of the European Union. Of course we will have to tackle a number of very difficult issues, but not only Europe; the United States as well. You mentioned agriculture. Agriculture is not easier for the U.S. than it is for us. On GMOs, the two examples you mentioned, there is European legislation on GMOs, for authorizing GMOs, and 46 GMOs for animal feedstock have already been authorized, and also too for human consumption.

And there is a new legislation, a legislative initiative by the European Commission on cultivation that will considerably change that picture, because now when there is a problem with cultivation on one member state, that automatically spreads all over the European Union. And in the future it will be possible that a specific member state gets an exception for the cultivation of a specific GMO on other grounds than environmental or health and safety reasons, for example because or proximity of the cultivated grounds, and the proximity can result in contamination. That is well known.

So they could have an exception but it would be limited to that member state, and then you still have 26 others where you could cultivate your GMOs, you know? So I don't see the real problem in that. I can't imagine that the United States will insist that these procedures are shortened. But as Mike Froman already said, you are not going to change each other's societies, you know, and that's also not realistic to do.

On the cultural exception, I'm of the opinion that we should not carve out topics from the agenda, which does not mean that you will get an agreement on every topic. That's something else. But you should not start by carving out chapters, let's say. So I'm in favor of having also audio-visual on the agenda. That will be my position in the council.

It will be the first time ever that we have this on the agenda of a trade negotiation. We go to mandate -- to negotiate with Japan three months ago or something like that, not more, and it's carved out. The same with South Korea. The same with India. So in the past we have always carved out this sector. So if it is on the agenda, it will be the first time ever.

But I think it should be on the agenda because you see tectonic changes in this sector. The way content is delivering -- is delivered, excuse me, is dramatically changing, so we should discuss about it. And I believe it's also interest of Europe itself to have it on the agenda, but it's true that there is a sensitivity in France, and that sensitivity is also translated in the Treaty of Lisbon. So it's not an easy one but, OK, we will try to find a solution for that.

DROZDIAK: You mentioned that the economic benefits would not be limited to just Europe and the United States, but there are several countries directly connected to the negotiation, even though they won't be present at the table.

For example, Turkey has a customs union with the European Union and yet they will not be represented or consulted by you. And in fact, Prime Minister Erdogan was just in Washington, as you probably noticed, to express his concerns with President Obama about this. And then on this side of the Atlantic we have a North America free trade area, so Canada and Mexico would be directly implicated by whatever provisions are agreed upon in this negotiation.

What is being contemplated by you and also Mike Froman on this, and how to manage these concerns from your direct partners?

DE GUCHT: I'm aware of those concerns. For example, with Turkey it's not new. As we have a Customs Union, they are influenced by whatever trade agreement we are concluding. I have already made a number of proposals to the Turkish government how we could soften that problem.

But what we cannot do is have them at the negotiating table. But I am ready to engage so that they get the proper information and also react, but it's fair to say that up to now they have not reacted to what I have been proposing. So maybe after the visit of Prime Minister Erdogan to Washington, we should revisit the problem in Europe as well.

On NAFTA, yes, that's obvious that it will have an impact on Mexico and Canada, just as the negotiations that we are presently having with Canada have an impact on the United States and possibly on Mexico. So they would be interested to, at least one of them, to be immediately associated with the negotiations. But I don't think that will be a good idea, and for a very practical reason, you know. When you are negotiating with two partners, you have two variables. With three you have six, and with four you have 24, you know?

So it's dramatically complicating the negotiations, and we have experienced that with ASEAN. We have started -- my predecessor, Mandelson, started the negotiations with ASEAN region to region, Europe to ASEAN, and it failed because we cannot put all those variables in one agreement. It's extremely difficult. There's a different level of development, of cultural differences. That probably would not that much be the case with Canada and with Mexico, but for example probably a little bit more with Turkey.

And when we had to change our strategy with ASEAN and discuss separately with the ASEAN members, as we are presently doing with three, and we have already concluded an agreement with one, you know? But we try to have the same backbone so that afterwards we can coagulate that into region-to-region agreements.

So my opinion is that we should come to an agreement between the EU and the U.S. I understand that basically this is also the opinion of Mike Froman, of course duly informing the others about what is happening, but let's first come to an agreement between us and then we will find ways to open it to others.

DROZDIAK: Well, let me open the floor to questions from the audience. Please speak in the microphone and identify yourself for the benefit of our guest.

Yes, over here.

QUESTIONER: Good morning. My name is Joseph Cari with Integration Capital and Trade. What is your sense that --

DE GUCHT: Can you speak louder, please?

QUESTIONER: I'm sorry. Can you hear me now?

DROZDIAK: That's it. Pull it closer to you.

DE GUCHT: It's simply important I understand the question.

QUESTIONER: I'm not so sure. (Laughter.)

Good morning. My name is Joseph Cari. I'm with Integration Capital and Trade. Do you have a fear that elements within the EU will use your negotiations to either divide the EU even further, or to get concessions in terms of the economics within the EU, specifically the Spanish, Italian and Greek governments using this as a wedge issue regarding the financial drive of Germany within the EU? So is this a way to -- some elements will weaken the EU by being --

DE GUCHT: Elements?

QUESTIONER: Italy; people who want the EU not to succeed.

DE GUCHT: Who would have that ambition to do that?

QUESTIONER: I just said it, sir. That's my question. I said there are elements within the EU who do not like Germany's economic drive within the EU. My question is, would those elements use your negotiations and try to scuttle your negotiations for a trade agreement to prove a point? That's my question.

DROZDIAK: You mean because they want to weaken Germany?

QUESTIONER: They want to weaken -- they want concessions from Germany, who would ostensibly gain some significant traction in trade, and they would use this as a lever to try to change some of the economic policies of Germany within the EU.

DE GUCHT: No, I don't think so, no.

First of all, we should not exaggerate what you suggest, these bad feelings against Germany, you know, and the -- it's of course not -- it's not an easy situation because when you look at the figures, you speak about rather massive transfers, you know? And officially we are against a transfer union, no? But if you look at the financial streams from the north to the south, to Greece and Cyprus and then to Portugal, they are very important, no?

So from time to time there are some frictions, yes, but don't believe that there is a fundamental shift in Europe, you know, between the north and the south. We are 27 democracies. That's a very important element. It is much easier to do all this in an authoritarian system, but for example Germany, their Constitutional Court has rendered, well, a number of judgments, but one for example that if the government makes additional concessions, they at first have to go to Parliament, which is rather new, but which also puts emphasis on the fact that there is of course an internal debate in a number of member states.

But the idea that there will be a public resentment, to my mind that's not true. Of course, people that have -- some people in the south of Europe are set free, you know? Look at Greece, for example. They are set free. But when you look at the effort that has been done for Greece, it's massive. For the last 20 years there have been the structural funds, which amount to about 3 percent of GDP on a yearly basis. The historical Marshall Plan was 2.1 percent once, 2.1 percent of the GDP at that moment -- entire European GDP at that moment in time, 20 years, 3 percent. And so when you add up the cash disbursements, the loans and the guarantees to Greece, it's 200 percent of GDP.

But it does not avoid that they are going through a very, very difficult moment in their history, and you then have some anger, yes, OK, how are you going to avoid that in a society that is open and that is also open for whatever discussion. So I'm not surprised about that. So the whole idea that there is a fundamental shift going on in Europe and that this kind of negotiation would be used by the south against the north, I don't believe that, by the way.

One reason is a mandate that the European Commission is negotiating, and it's our duty to do it in a way that it creates benefits for all of our member states, and that we also do that. You know, we are very mindful about that. But, no, this will not be used as a lever for that. No, I don't believe that.

DROZDIAK: OK, next question? Yes.

QUESTIONER: Hi. Can you hear me like that? If not, I'll --

DROZDIAK: Just pull the microphone closer to you.


My name is Astrid Doerner with Germany's business daily, Handelsblatt. I have one question and one clarification, if I may. The question is on China.

There have been tensions concerning the solar panels. And there are discussions about raising tariffs and penalties on smartphones too. And there are worries that there might be a trade war or too much tension provoked in dealing with China. Could you just comment on that? Do you agree? What's your view on that?

DE GUCHT: And what is the question?

QUESTIONER: Do you share the worries that there might be a trade war with you and China that's sparked, or what is your view on that?

DE GUCHT: On solar panels, there has been a complaint by a number of companies that represents -- a sample -- representative sample of the industry in Europe. And when such a complaint is handed in and it is prima facie, not stupid but it has a ground, then the European Commission is bound to launch an investigation. It's an obligation to do so.

And they have to take a decision on that within 40 days. Then starts a period of nine months, a period of investigation. And that comes to an end the 6th of June of this year, so four or five weeks, which means that ultimately the 5th of June we have to take a decision whether or not we impose provisional duties. So that's an established procedure.

Now, I have always been saying that I'm ready to come to an amicable solution, and we have already had three rounds of negotiations with the Chinese, and also there have been two contacts -- three contacts at the ministerial level. And I'm still open for such an amicable solution.

I know that, again, the German government, by their -- (inaudible) -- has been asking for an amicable solution, and we are ready to do so. But of course that will mean that there come undertakings from the China side, and the practicality is how do you do that, you know, that amicable solution? It really means that the individual companies have to make price undertakings -- very simple. So it's up to them to do it. We can negotiate. We can find a formula to do it, but ultimately it's up to them to do it.

QUESTIONER: And you're not seeing that they're moving --

DE GUCHT: Excuse me?

QUESTIONER: Are you seeing that they're moving towards doing it?

DE GUCHT: I see a lot of things, you know. In the evening when I look at the stars I see even more. (Laughter.) But I'm not going to comment on the content of that.

QUESTIONER: All right.

DE GUCHT: Don't lose your time in trying to do so.

On the smartphones, it has to do with mobile networks, you know? It's a little bit more different -- a little bit different. It's not really about smartphones.

The European Commission has decided last week in the college and has adopted the principle -- unanimously by the way -- the principle of launching an investigation on mobile networks, and to do it ex officio, so without a complaint, for a number of reasons that we have also explained, the strategic importance of the sector. It's a very strategic sector for a mature economy.

But we have said, look, we are not going to actually already start the investigation, so that we leave some time for further negotiations. But the clock is ticking. So if there comes an amicable agreement, it will have to be done in a limited period of time. So that's the situation on both cases.

The danger of a trade war, I'm not going to launch a trade war. I'm not interested in that. I'm interested in solutions, but I also have to protect European interests. That's what I'm paid for.

DROZDIAK: Let me ask a follow-on question. Mike Froman, at the same time as he's negotiating with you on TTIP, he will also be negotiating the Transpacific Partnership with Asia. Do you see that as a potential complicating factor in your own negotiations, and could it be actually exploited by the United States as a new form of leverage in dealing with Europe?

DE GUCHT: No, I don't see that problem, because these are two very different negotiations, you know. We also have negotiations with a number of Asian partners. We have concluded an agreement with Singapore. We are negotiating with Malaysia, Thailand, Vietnam. Others may follow. We are negotiating with India. So they are doing it -- the U.S. are doing it region to region. As a choice we are doing it individually, but in fact we are doing the same. Also have open negotiations with Japan. And very recently Japan became, let's say, a member of this --

DROZDIAK: The TPP, that's right.

DE GUCHT: -- the TPP negotiations. They are different, you know. The TPP, in the end, and also our negotiations will be much closer to traditional trade negotiations, for a number of reasons: very different level of development. It's not so easy to have regulatory approximation between the U.S. and then the TPP members as it will be between the U.S. and the EU, and already that will not be easy at all, you know? It's quite different.

What I would argue is that probably if we get to an agreement between the EU and the U.S. that would give the United States a leverage in the TPP negotiations to get a deeper agreement, that I think would make more sense. But it doesn't bother me. I mean, if it adds to a more open trade regime and then to a level playing field, OK, then you have open competition and that's what we are in for. I don't mind about it. But I would rather argue that it's the other way around, you know?

DROZDIAK: OK, it's the optimist view.

Over here.

DE GUCHT: Optimistic? Why is it optimistic?

DROZDIAK: Well, I'm just saying because you hope that this will actually end up expanding the free trade area thus through Europe, but we'll see. The proof will be in the results.

Yes, a question over here.

QUESTIONER: Bart Szewcyzk, Columbia Law School. Two separate questions.

One, I understand that there is some consultation between the commissioner portrayed and the European Parliament before an agreement is reached so that you have greater buy-in from the Parliament and you have a positive vote after the agreement is signed. Can you describe, both informally and formally, how that consultation takes place?

I'm asking because in the U.S. context there's not that much coordination before -- while an agreement is negotiated with the legislative branch, and I was wondering whether you would have any particular sort of lessons learned or unique perspectives for the U.S. administration.

And then separately, are there any particular dispute settlement mechanisms that are particularly favored for these negotiations? Are there models out there that you've gravitated towards, or is there a wide range of explored options for arbitrating potential disputes under the agreement in the future?

DE GUCHT: The consultation of Parliament before a negotiation is sought, and even before a mandate is decided by the council -- it's not in the rulebook as such, but of course a parliament can always vote a resolution, no? And that will be an important resolution that, by the way, will be debated this week in Strasburg and voted upon on Thursday. So from here I'm more or less directly going to Strasburg for that debate in the parliament.

I think it's fortunate that they do it because at the end they will have to decide. They will have to ratify the agreements or refuse to ratify the agreement, no, so that they are implied in the consultations is not more than natural. And once the negotiations start, I will also frequently go to Parliament for the International Trade Committee to discuss, say, the progress made and the problems arising, and so on and so on. On the other hand, you need a certain degree of confidentiality when you negotiate. That's also obvious. That's an equilibriating (ph) effort.

On the arbitration, it's certainly not decided yet but it remains to be seen what exactly we need, you know? You could have a very far-going solution, kind of a special court for this TTIP, or you could do it in another way for specific sectors. We should not make the system too complicated, because we have both properly functioning judicial systems, you know?

So I would at first glance rather say, look, we have these judicial systems and they are open and fair. What they do, we should not duplicate it in another way. But there might be areas where you have to adopt other approaches. That depends -- I mean, we have not -- I have not perfectly made up my mind about it. We will see as problems and as files pass by.

DROZDIAK: Wouldn't the WTO be the natural place for arbitration?

DE GUCHT: Well, that automatically is the case now, but you could think about arbitration systems with respect to regulatory matters, for example, but that has not been -- I mean, it's not discussed in detail yet, and I think it's also too early. Let's first see what comes out of the negotiation and what's then the best way to tackle possible problems in the application of it. So we'll see. I mean, that's an open question for the time being.


Next question? Yes, in the back here?

QUESTIONER: Hi. My name is Razif Kanikligel (ph) from Hurriyet Turkish Daily. You said earlier you made some offers to Turkish government to soften these trade agreements and the Turkish trade with USA.

DE GUCHT: Can you speak a little bit clearer because I think your mic is too close to the --

QUESTIONER: Sorry. So earlier you said you made some offers to Turkey to soften this trade agreement. And can you, you know, explain what these offers were? And also, last week Erdogan and President Obama, you know, they talk about free trade agreements between USA and Turkey. Do you see this happening? Do you think it's possible to have a free trade agreement between Turkey and USA?

DE GUCHT: I did not discuss this with the Turkish government within the orbit of the TTP, more generally because it's a general problem. As we have a customs union with them, whatever trade agreements we conclude has an effect on Turkey. It's like that, no? And we have in the past discussed on the ways and means to get that resolved, but no clear indication from the Turkish side on that, not for the time being.

But I'm open to discuss it again with them, because I see the possible impact, as we are one customs zone. But whether the U.S. and Turkey made a free trade agreement, that's up to them, you know? I mean, they are a sovereign nation. They can do so. I have nothing against it. I have not at all -- I mean, it's up to them.

DROZDIAK: Further questions?

Well, I have another one on -- it's been said that one template to be used in this negotiation could be the European Union agreement with South Korea and the American agreement with South Korea as a way of compressing the negotiations so that you could get this done by the end of 2014. Is that a valid understanding, that the separate agreements that the United States and the European Union have with South Korea could serve as almost the basis for the kind of accord that you're looking for?

DROZDIAK: What is true is that the EU, in its agreement with Korea -- and the same goes for the United States because our agreements are more or less the same, you know? They are not that different. And the United States even adapted a little bit their agreement with Korea once our agreement with Korea was concluded. You remember that. So they are very similar.

What is true is that as far as we are concerned, we went further in that agreement than any time before with another country. So the agreement with South Korea, it's certainly an agreement of a new generation of trade agreements. It has to see also with the fact that South Korea is a mature economy. If you have a trade agreement with a developing country or an emerging, the economies are the same. A number of things are included in that agreement that -- for example, it would be very difficult to include it in an agreement with an emerging economy.

But whether it's a template, that's something else. I mean, we know what we have to discuss and what we have to resolve. And you could have some inspiration from the agreement with Korea, but it's not a template. I mean, the template is what we have been discussing in the report.

DROZDIAK: Another question? Ron?

QUESTIONER: Mr. Commissioner --

DROZDIAK: Just introduce yourself for the --

QUESTIONER: Yes, I'm Ron Tiersky. I teach politics at Amherst College. I teach politics. I'm not a trade man or a finance man, so my question is a little different from those that have been asked so far.

At one point you talked about suffering. You talked about the suffering of the Greek people. I wonder if you could talk a little more about your -- perhaps your own views of the great hardships that are going on in various countries because of the economic difficulties. To what extent will trade agreements create more difficulties? To what extent will -- at least over the long term, will there be a better economic situation?

To get to the end of this, do you see the possibility of serious social disturbances going forward in the medium term, in terms of the suffering of the people?

DE GUCHT: First of all, let me say that something had to be done in those countries, you know. It was not sustainable to continue as we did before, simply not sustainable. But I'm not denying at all what the consequences of all this for the ordinary Greek or Portuguese or Spanish, or even to a certain extent Italian -- I'm not denying that, but something had to happen.

I remember that -- not these elections but the previous elections, the day before the elections the budget deficit was 5 percent and after the elections it was 10 (percent), you know? Now, there is a tendency that after an election some corpses fall out of the cupboard, but there were many. So something had to be done.

And what you see -- and that's interesting -- is that slowly they are coming to a new equilibrium. And the driving force for that is straight. You do not only see that in Greece but also in Spain. The recovery is in fact spurred by trade. If you look at the figure, it's like that, you know? So I do not see why, for example, an agreement with the United States would make it more difficult for Greece or for Spain. I don't see that at all.

And by the way -- and I put the questions because if you look at the trade balance, for example, we have a very positive trade balance in the European Union if you make a section from minerals and energy. And we can do very little about it. I mean, you can only dig out of the soil what is in it. But if you make a section from that, we have a very positive trade balance but it's very unevenly spread within the European Union, between the member states.

So, yes, adjustments have to be made, but you will only be able to make those adjustments provided that all member states participate more than before in the trades, you know, and that's what you see happening now in Greece and also in Spain. Even Italy, when they -- at the deepest point of their crisis, the only sector that did was well trade, especially their brands. They did excellently. The trade went up, you know? It was the internal consumption that went down, but trade went up, and not only in relative terms; also in absolute terms it went up.


QUESTIONER: Alfredo Timmermans with Telefonica. And I would like to go back --

DROZDIAK: Could you speak up, please?

QUESTIONER: I'm sorry. Alfredo Timmermans from Telefonica.

So I would like to go back to a treaty. I'm interested in hearing some comments on --

DE GUCHT: You should really speak loudly because you are --


DE GUCHT: -- very softly spoken and I'm a little bit deaf, so that combination doesn't work. (Laughter.)

QUESTIONER: Excuse me, sir.

(Cross talk.)

QUESTIONER: Commissioner, I would like to hear some comments from you on our sector, on the telecom sector, because as the regulatory approach is one that you are taking. I see a lot of complicated issues like data flows, privacy, intellectual property. And I would like to know if you're optimistic about the possibility of reaching an agreement.

DE GUCHT: It's certainly not an easy sector, but the example that you are mentioning, on data flow we have to find a solution because the whole economy of the future is riding on that, you know? So we should find a common space for that between the United States and the EU. And that will not be easy because it's fair to say that we have a somewhat different opinion on the extent privacy should prevail over security.

I mean, how do you make that balance? You know, that's a different issue to tackle, but I believe that especially on data flow we will have to find a solution. I mean, this is a problem that we cannot just forget about and put it aside. But I'm optimistic, you know. I don't know; I'm a little bit an optimist by nature, but what does it add to the debate you will have to see on the basis of the result. But I'm not a fundamentally pessimistic politician, so we will see. We will do our best.


DE GUCHT: There was a question there, no?

DROZDIAK: Right. Yeah, go ahead. We only have time for two more questions.

QUESTIONER: My name is Michael Barris. I'm a reporter with China Daily here in New York. I'd just like to return to the subject of China momentarily, if I can.

China may be getting nervous about the Transatlantic Partnership because the U.S. and the European Union are China's two largest trade partners. So the question is, is there a kind of an overall awareness, when negotiations are taking place, of the broader implications in the sense that, you know, they're worried, because often there is a sense in the West anyway that -- the West are often nervous about China. It's not always the other way around. So I just was wondering if you'd have any particular comment on that.

DE GUCHT: Well, there's no reason that it should be nervous. It can be that they are but there's no reason they should, because as I explained in my introductory remarks, they will even profit from a number of the features, as they are our biggest trading partner for both of us -- well, the second one because we are each other's biggest trading partners, of course.

On the other hand, I believe that this agreement would contribute to a global level playing field, you know. And this should also be the aim of China. They have now become a very important economy. They have to take up global responsibility and they have also to take up global -- responsibility for a global playing field, for a global level playing field. That will never be ideal, of course, but they have also -- have the same kind of duty as we have with respect to that. And in that way I don't think they should be afraid of it.

But of course the result of this agreement will have an impact, for example, on the trade -- how do you say that? You disturbed me.


DE GUCHT: On trade export credits -- on export credits, for example, for the disciplines on export credits. That will have an impact if we reach an agreement. You know that there are plurilateral negotiations now. Up to now there's no result at all -- talk but nothing. If we agree on the disciplines -- and I think that will certainly be possible, that will have an impact, and it also should have an impact, you know?

So there is no ambition whatsoever, and we will do everything to avoid that China would feel cornered. But on the other hand we asked them to take up more responsibility for the global economy.

DROZDIAK: Last question.

QUESTIONER: Hi. Daniel Bases with Reuters.

There was some suggestion earlier today that perhaps the EU and the United States are having some kind of joint front on the solar panels issue and negotiation with China. Can you comment on that? I'm not saying that's my idea. It's in the press and I'm just wondering if you would clarify that.

DE GUCHT: I've read it in the press, yes.

Well, the United States, they are further on in the process and they have already imposed duties, and we will make a decision on the 5th of June. But the problem is similar. It's a similar problem. It's not exactly the same but it's a similar problem and there are no templates how you find an amicable solution to that.

It's by -- as I explained to answering a previous question -- is by price undertaking. But we have not had consultations yet between us on this matter. But we are discussing a lot of things, you know, and probably in the coming weeks and the coming months we will see each other more than before because we are negotiating this deal.

So no special comment at this moment in time because we have not yet taken a decision, but I can only come to the conclusion, together with you, that it's about the same problem.

QUESTIONER: Thank you. Great.

DROZDIAK: Well, Karel, thank you so much for being with us. This has been a very interesting discussion about a very important negotiation that I hope will end as a win-win result for both Europe and the United States.

So please join me in thanking Commissioner De Gucht. (Applause.)

(C) 2013 Federal News Service

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