Pascal Lamy
EU Trade Commissioner

Congressional Economic Leadership Institute
Washington, DC

4 March 2003

Congressman Dooley, Cal, it is good to see you again. Thank you for your very kind introduction. I have enjoyed our previous discussions on trade and even our discussions about agriculture! 

I wanted to begin these lunchtime reflections by asking, in relation to EU-US trade, where the "old-timers" have gone. In most areas where human activity runs into problems, "old-timerism" usually prevails. For instance, I hear that last week's snowstorm was pretty bad, but nothing like as bad as 1996, when the snow was up to (gesture) here, school was out for three weeks, industry was shut down, everyone's pipes froze, etc. Compared to 1996, last week was a picnic in the park, they say. Old-timerism, in short, is a pretty good—if sometimes deeply annoying—way of minimizing the current scope of the problems we face and getting on with daily business. 

But for some reason, old-timerism doesn’t seem to work on transatlantic relations. Year after year, I am told that "transatlantic relations have never been this bad." Boy, they say, Secretary XX or Congressman YY (I'll spare you the names, or you can fill them in for me) is mad as all hell with the Europeans. And it is true, I have to acknowledge—particularly as a Frenchman with many friends on this side of the Atlantic and one who reads both American and French newspapers from time to time—some of the recent political and press comment has been both undignified and literally incredible. But we do need to remember that we have been through these periods before; we do need to remember that we have both shared interests but real differences in approach; and the right way to deal with the differences is to be refreshingly open and calm about them and work hard to bridge those gaps. 

So, once again, I find myself in Washington and trying to answer questions in a reasonably cheerful way about why our relationship is so bad, whether as a French socialist I agree—or disagree—with President Chirac or President Bush, etc., etc. 

And of course it is hard to pursue our trade policy in a vacuum. Ever since 9/11, I have been asked what the effect of the enormously changed strategic environment has on our international trade policy. My answer is that we have no alternative other than to pursue it with a heightened sense of responsibility and indeed, that much over-used word, leadership. The launch of the new WTO Round in Doha itself was at least in part the stubborn and rather professional response of the international community to the 9/11 crisis, reflecting our mutual determination not to be deflected from key objectives such as furthering sustainable development and developing trade to reduce poverty. And nothing has changed since then to reduce that determination: indeed, given the current transatlantic crisis on Iraq, we have to do what we can to move forward in difficult circumstances. That is very much the shared notion I took from my meetings yesterday and today with the Administration and the Congress. 

And so, in this context, in these circumstances, is the transatlantic trade relationship really so bad? One adjective I would apply to the relationship is enormous, and we would do well to remember this before we reach for the thesaurus in trying to find new heights of vituperative transatlantic rhetoric, because there are a lot of economic interests at stake. 

The figures speak for themselves. The EU and the US both account for around one-fifth of each other's bilateral trade, a small matter of one billion Euros a day. And the investment links are even more striking. In 2000, the US accounted for no less than three-quarters of new foreign direct investment in Europe, while Europe invests more, annually, in Texas than Japan invests in the fifty states combined. Our two economies are interdependent to a staggering degree; our multinationals are so thoroughly intertwined that some of them have forgotten whether their origins are European or American. Close to a quarter of all US-EU trade consists simply of transactions within firms based on their investments on either side of the Atlantic. The transatlantic relationship therefore defines the shape of the global economy as a whole. The EU and US are the largest players in global trade. We are each other's largest trade and investment partner. Either the EU and the US is also the largest trade and investment partner for almost all other countries. We are, as I have said before, the twin elephants of the world trade system. 

So it is something of a paradox. Despite the general closeness of connection, everyone talks all the time about transatlantic trade conflict. And, given the convergence of our economic interests, why don't we agree more in terms of how we view the world, whether in relation to the Doha Development Agenda or our bilateral disputes, such as on steel or FSCs or Genetically Modified Organisms?

These are the two points I would like to focus on today, before allowing you time to comment. 

Managing the WTO process in the Doha Development Agenda

Let me start with the multilateral aspects and, in particular, the New Round. Because if we want to talk about identifying shared interests, and moving forward on that basis, they don't come much bigger than the Doha Development Agenda, the current Round of negotiations in the WTO launched at the end of 2001.

As Bob Zoellick put it so eloquently when he came down to the Hill last week, the US has a big stake in the New Round. But so does the European Union. So do a number of increasingly influential developing countries, such as Brazil and India. And so—though less volubly, less immediately hands on—do the world's poorest countries on earth. We all have a stake. And another reason why we have to continue to work very hard to finding a way through the key differences.

One key difference that I would immediately identify is the sense of priorities the EU and US have within the overall Round. If my constituency could identify one priority for the Round, it would be development. That is the pressure I get from member states, from the European Parliament, from NGOs, from members of the public and from of course developing countries themselves. Of course we will defend and indeed fight for European interests along the way: but the prism, if you will, is whether it helps bring developing countries into the system, helps them integrate into the world economy.

Why is this so important? Politically speaking, it reflects the fact that the days when the WTO functioned as a rich man's club are long gone. Our recent mini-Ministerial meeting in Tokyo, attended both by Bob Zoellick and myself, included no fewer than six representatives from Africa and indeed featured a majority of developing countries around the table. These countries are not shy about identifying their interests, nor to negotiate on that basis. And I welcome this, by the way: it certainly makes life more complicated, but it was high time that negotiations over the global trading system reflected the genuinely global nature of the system. But either way, the EU and the US are no longer solely in charge; we no longer have all the levers to pull. And for all these reasons, we have a development Round of negotiations, which will only succeed if we bring right up front in the mix the issues of prime interest to developing countries,and ensure that we tackle all other issues in a development-friendly way. The Doha Development Agenda must exist in more than name only. That is why it has to be our top priority.

But—again, I am trying to be frank here—the overwhelming sense I get listening to the US debate is that the priority is on market access and on agriculture in particular.

To be fair, I also hear you say: well, moving forward on agriculture is an absolutely key way we can help developing countries in this Round, and indeed that is what a number of developing countries say. My answer is three-fold. First, we should not exaggerate the importance of agriculture to developing countries: 80% of their exports are industrial goods, 10% are energy products and 10% only are agriculture. Aha, you say: because developed countries, and particularly the EU, protect their markets to keep out products from developing countries. This might be a good point, secondly, except for the inconvenient fact that the EU imports more agricultural produce from developing countries than the US, Canada, Japan and Australia. Combined.

And, thirdly, the fact that reform of the Common Agricultural Policy remains a work in progress. But as a result of the reforms already implemented, we have been able to put on the table a proposal for the agricultural negotiations which would increase market access by 36%, reduce our export subsidies by 45% and our domestic support by 55%—together with a whole raft of proposals aimed at helping developing countries, such as a food security box. What we could, what we should now do is to drop the blame game on agriculture and look constructively at ways to bridge the rather considerable gaps between our starting positions. We, after all, have offensive interests in this negotiation too, such as Geographical Indications—offensive interests which are not being addressed by either the Cairns Group or indeed the US. There is a time for extreme negotiating tactics, and there is a time to get real. And the EU and US could both offer some leadership, as we enter the "get real" phase of the Doha Round and of the agricultural talks in particular.

There is a lot more I would like to say about the Doha Round and to address some of the other critical issues before us, such as non-agricultural market access, services and the whole discussion on rules, which we believe, for one thing, is a vital means of actually giving meaningful effect to market access and which should not be left to one side. In one area of rules, in particular, I rather think that a number of developing countries will not let the US stand to one side, and that concerns WTO rules on trade defence instruments.

Bilateral trade disputes 

Which actually brings me, rather nicely, to the other aspect of trade relations I want to discuss with you: and that concerns our bilateral trade disputes and, in particular, compliance with WTO rules, because a number of cases include US trade defence instruments, including of course the steel cases. 

As I said in a press article on this yesterday, neither of us has a 100% compliance record. But I am concerned that US compliance cases are now starting to pile up in Geneva faster than snow on the Washington sidewalks. There are currently five cases where the US has been found to be in breach of WTO rules and where the necessary action has not yet been taken to bring them into compliance, against just one on our side. We both have to act this year to resolve the problems, or we risk bringing the multilateral system into disrepute. 

That's the key bilateral message I have been pushing on the Hill yesterday afternoon and this morning. 

But what I want to explore with you now—not least for my own education!—is why the reluctance to move forward on compliance, indeed why the growing hostility on both sides of the aisle to WTO dispute settlement decisions. 

I start from the basic position that the EU and US have shared interests in the multilateral rules-based trading system and, in particular, in the binding dispute settlement machinery that we set up in 1995. It was in fact the US itself which pushed for a binding system during the Uruguay Round of negotiations. And the US Administration has just recently restated its belief that a binding dispute settlement is in the national interests of the US. The old system, whereby we would just ignore repeated findings against us, proved useless. Our own inaction started to bring the whole system into disrepute. 

Since we had a binding system, in 1995, the figures show that we have had a fair number of bilateral disputes. Of the fifty-four completed cases that went to dispute settlement panels from 1995 -2001, the US was defendant twenty-six times and plaintiff twenty times. The EU had taken cases against others on twenty-six occasions and had faced eight cases against her. And fully sixteen were essentially disputes between the EU and the US.

But even though these figures appear to show that the US has a heavy dispute settlement trade deficit, if you will, the overall balance is positive, even for the US. USTR figures show that the US has been involved in seventy-three dispute settlement cases (some of which did not go to panels). Of these seventy-three, in more than two-thirds, the US obtained satisfaction, either by informal settlement or by formally winning a WTO case. So I do not believe that the US has done badly out of the WTO, despite what I hear about generally negative views in the Congress.

I should say from the outset that both Bob Zoellick and indeed a number of people in the US Congress, including Bill Thomas and Chuck Grassley, are both taking compliance issues very seriously, and are pushing for rapid resolution of the current five cases where Congressional legislative action is needed. But others say, for instance on FSC, that we should accept a negotiation in the Doha Round to address the current incompatibility of the US system with the rules.

Still others ask: why does the EU care so much about compliance? Are there real, concrete EU interests at stake? Answer: absolutely. Ask European companies facing triple damages in a US court case under the 1916 Anti-Dumping Act, even though the WTO has already declared the case out of line with US obligations in the WTO. Ask European firms who are trying to compete against those who benefit from the FSC subsidies of up to $4 billion a year. And ask those who also have to compete with subsidies administered under the Byrd Amendment.

So it is a puzzle to me. I believe binding dispute settlement rules are demonstrably to the US as well as the EU's benefit. I see a number of key US players struggling to comply with an increasing number of cases. And I also think that there is increasing recognition that, when the EU or the US fails to apply the rules, we increase the moral and even legal ability of other countries to duck their obligations and weave around legal obstacles to unfair trade. But, thus far, precious little movement on the US side. 

And before I conclude, if you would permit me one additional comment, this also serves as a poor backdrop to US concerns about EU policy on GMOs (Genetically Modified Organisms). Doubtless we will discuss this more fully in a moment, but—whatever you think about the position on GMOs—it surely weakens the arguments of the US if it wants to take a high-profile, politically controversial case like GM food to the WTO when the US has failed to implement so many of the WTO's own findings to this point. 

Conclusion 

A good point to stop and hear your views, your comments. In conclusion, I think the point I would want to stress is that, even though the EU-US situation is not as bad as often painted, the current international situation requires us to work even harder together, to try to address common problems whether they occur in the Doha negotiations or indeed bilaterally. And that requires each of us—Commission, member states and Parliament on our side and the Administration and Congress on your side—to address our differences with renewed determination. 

Failing that, old timers will be able to say: in 2003, on trade, just like everything else that year, the transatlantic partnership failed to deliver. 

Thank you. Happy to discuss this further with you.