European Commission Delegation Spokesman Anthony Gooch (left) & Pascal Lamy

Pascal Lamy
EU Trade Commissioner

European Commission Delegation
Washington, DC

November 4, 2003

TRANSCRIPT

Commissioner Lamy’s Opening Remarks:

I came to Washington for my usual contacts with the US Administration, with Congress and with business. Starting with a few remarks, I just want us to remember that we have the largest trade relationship on this planet and that we trade $1 billion per day across the transatlantic and that is the big picture we all have in mind.

I discussed during the past two days the multilateral talks after Cancun.  I also discussed—because we have a few pressing deadlines—a number of bilateral EU-US trade disputes which are in the term of a compliance and I have also used this occasion to discuss a number of trade issues which are on our respective radar screens and which we need to "handle with care" in order to prevent that they turn into full-fledged disputes.

We also discussed the more positive agenda which we have, which is a revolving agenda on how we can increase trade-opening and the sort of number which I just gave you and which we can increase.

Starting with the multilateral trade talks, I think that it is no scoop that, for us, Cancun was an important setback, sufficiently important for me to go back to my "authorizing environment," as we say, and check with my constituencies, the member states, the European Parliament, business, trade unions, NGOs, a few questions which we need to revisit before we go back to Geneva again. I have raised a set of four basic questions which are:

1. whether or not we should keep our specific European mix between trade-opening, market-opening and rules-making;

2. whether we should keep, or not, our inbuilt bias in favour of the multilateral negotiation—and the answer to that is already "yes" following the European Council conclusions and what the European Parliament told me.

3. I also thought it was necessary to revisit this notion that we are in a development round and I think there should be no ambiguity or maybe less ambiguity on what it really means.

4. and, last but not least, addressing a few questions which have to do with the "organization" or rather disorganization of the World Trade Organization.

These contacts, which I have here, are part of this consultation process and they will be mixed and taken into account with a lot of other bilateral contacts I have with other WTO members so that my goal—to make sure that we can be back in Geneva by December 15th,, the deadline we agreed in Cancun—is met.

On this, my feeling after yesterday and today both on the Hill and with the Administration, is that on this side of the Atlantic there remains a strong commitment to this Round. I think we both see the necessity of trying to reignite this process and we both concur that, in order to do that, a number of positive signals have to come from a sort of sufficient critical mass of WTO membership. We will be checking this ourselves as, by the way, my US counterparts are doing.

On the bilateral side, and notably the sort of pressing compliance issues starting with the FSC [Foreign Sales Corporations], I spent a lot of time with various interlocutors in Congress who are handling this process, and my sense that there is a lot of good will in Congress to get this issue sorted in the time horizon which we have fixed, which is the end of this year. I find this encouraging. Now, obviously the devil is in the details and we need to make sure that the details are right. The details mean that the US have to do more not less than what the WTO ruling of three years ago—remember, it was decided in November 2000—which is repealing the FSC legislation and do it now.

I have clearly indicated that, as I did early this year when we were granted the authorization of retaliation, that we wanted to see is a draft bill on the President’s desk by the end of the year and that, failing this, we would impose trade sanctions. We are preparing this and the Commission tomorrow will decide on a schedule to implement trade sanctions if there is no compliance starting 1 March next year.

In short, the feeling I got on the Hill is that it can be done; and my message to my interlocutors on the Hill was the same one the runners got in New York on Sunday: "It can be done—so the message is: do it!" 

On steel, it is a clearer case, in a sense, because it is now with the executive authority of the President of the US. The WTO will next week issue its final ruling and, if the results confirm the first instance result, the US will have until mid-December to eliminate the safeguards. If they are not eliminated, then sanctions will automatically begin. We have already decided this in our decision-making process in the EU. We hope first that, and it is a necessary condition, the Appellate Body decides in the right direction and, second, if it does so, that the safeguards are removed before 15th December.

Shortly before I take your questions, I would like to mention a few issues which we discussed and on which we are currently working to prevent their escalating into trade disputes, starting with the Bio-Terrorism Act—where we have the feeling that the FDA requirements should be not be more restrictive than necessary and shouldn’t switch or translate into any sort of a discrimination. I answered many questions on the new EU chemicals policy—where we have since last week a draft legislation which was adopted by the Commission before we left Brussels for Beijing last week. We have very widely consulted on this and made sure it doesn’t itself turn into disproportionate obligations for business which will then lead us to believe or think that it might be protectionist. It is not the case and the legislative process is now starting on the EU side. Another piece of legislation which I mentioned to my interlocutors where we have a number of worries is the Buy America Act. As the legislation stands for the moment, but it is evolving every hour, we have a few concerns about whether or not it would be compatible with the US commitment under the WTO rules on open public procurement in a transparent and non-discriminatory manner.

Question:  FSC – can the US get the legislation done by the end of the year and, if not, will the EU move to sanctions?

Commissioner Lamy: On the first question—whether it can be done before the end of this year—my feeling is that the notion I got from my interlocutors is, yes,  it can be done before the end of this year, thus matching the time horizon which we had set in springtime this year. And remember, when the WTO found the FSC to be an illegal export subsidy,  it gave the US until 1st November 2000 to repeal the scheme. So we have been extremely patient. That was three years ago. On the question of transitions, it is true that is included in various proposals in Congress. I just want to make clear that such a period has been specifically rejected by the WTO ruling itself, which—given that these transitions are WTO-incompatible, as it stems from the text of the WTO ruling—limit my interpretation as an executive. I have no margin of interpretation, which is a problem we have been discussing yesterday and today.

Question: Which positive signals could come from the US and EU to re-engage the Doha Round?

Commissioner Lamy: Speaking for the EU, the process of consultation, revisitation, re-checking about our negotiating position is, across-the-board, a clear testimony that I intend to try and reignite the process. I just want to make it on grounds which I feel sufficiently secure as a negotiator and which my authorities, the member states and Parliament, the two sort of political authorities I have, can accept. Hence this revisitation process, which is a bit longish because the European Union is complex animal.

The feeling I got on the US side was that as, by the way, Bob Zoellick said it in the APEC meeting a long time ago, they were ready to resume the work in Geneva on the basis of the latest text which was issued in Cancun—which is a notion I haven’t yet answered to because for me it has to do with the position of substance and that both of us see the necessity to relaunch the process. Now we all know that it is not because both of us see eye-to-eye on something like this that it will happen and it doesn’t date from Cancun. I think both of us will be waiting for a number of signals coming from other parts of the trade constituency, notably the G20 plus or minus..(inaudible)…. I was in China last week and tested a number of ideas. I will be having contact with the G90, which is Africa and the least developed countries. So both of us are sort of consulting and we will proportion our own ability to restart the process and the coal we are ready to put in the engine according to these signals. Some of these signals are rather promising but we need a bit more time to make sure were we step.

Question: Any goodwill from the Administration re: FSC or steel?

Commissioner Lamy: On the first question [FSC], my simple goal is compliance. I have made that clear from the very beginning; this is why I have been patient. I know it is a complex system. That is why, the day we were granted the authorization to retaliate in spring this year, I said we want this to be done before the end of this year because we know the pace of the way Congress works. I will not change this deadline, nor do I intend to change the 1 March which I have put forward—it is not 1 January because there is always a little bit of flexibility which you need given the complexities of these processes. I have always tried to announce in advance what I would do so that there is not an unexpected move which would trouble the understanding by Congress that they have to focus their mind on a precise deadline. This is the way I will proceed.

On steel tariffs, listening to people in Congress, you have got obviously a mixed view. Some people in Congress like these tariffs and some people dislike the tariffs. It is not something which is now with Congress; it is with the President. I don’t think the President has given any sort of serious signal on the one side or the other. The Administration has been very careful to protect the President’s authority on this one, which I understand; and it is now for him to decide. The WTO context is well known, and I doubt whether the President of the United States would not decide compliance as by the way he did on the FSC issue. But, moving out from these procedural grounds, whichever the rationale behind the steel tariffs were, one of the cases which were made in favour of these steel tariffs (which as you know we disputed and we want them to be removed) is that the US steel industry needed consolidation which by the way has started happening. We have had very bad news on the steel front since last year, but we have one good news—which is that restructuring, consolidation is now happening. If that is the goal—and, at the end of the day, that is the ultimate goal: to have a US steel industry that can compete with the rest of the world on the level playing field with normal competitivity, having addressed the problems of competitiveness which it has, and notably this whole problem of legacy of the past in terms of pensions and productivity—then we are moving in the right direction.

I personally believe that, given where we are now in this process, maintaining steel tariffs becomes counter-productive, that it would allow unproductive capacities to remain on the market which is detrimental to the goal which I think we are all looking for, namely a more productive and more able-to-compete-internationally US steel industry.

Question regarding FSC and remarks by Sen. Grassley and Rep. Thomas.

Commissioner Lamy:  First a note a caution. I have not expressed any view on the content of these bills but for WTO compliance. These bills are complex bills and an EU Commissioner for Trade has no authority—and even if he had authority, it would be extremely unwise for him to use it—to say whether or not it is good for US corporates to have a tax system which works one way or another. I have systematically refused and I will systematically refuse to enter into any discussion about these drafts other than the WTO compliance aspect. As I said a moment ago, answering a question about transition periods, our position, and I made it clear both to Chairman Grassley and to Chairman Thomas, is that what is presently in a number of drafts, which is a three year transition, is WTO non-compatible.

Question relating to optimism that US can get its FSC house in order:

Commissioner Lamy:  I did not express any optimism on my side. I said the feeling I got from the people I have been interacting with in Congress, and there were quite a lot of them, the feeling I got is that it can be done.

Question on Steel: sense of any Administration openness to dropping tariffs?  

Commissioner Lamy:  You have probably information which I don’t have. I am glad for you…but they have all been very careful at each and every level to protect the President’s position. If I were them I would do the same.

Question on Expiration of the Peace Clause:

Commissioner Lamy:  The disappearance of the peace clause is a sword that hangs on many many necks, and the conventional wisdom in WTO is that there are so many necks under this sword that pulling the trigger would probably be very harmful to many people. The sword is that some of the major issues in terms of agricultural trade, such as cotton or sugar, are already under litigation with or without the peace clause, and that with these two major litigations having started, most of what the peace clause is there to protect is already sort of up in the air. So those are probably the two main explanations why there is not such an anxiety around, but we may all be right we might all be wrong. 

Question about whether the steel situation would be defused if the Bush Administration expanded exemptions for European produced steel:

Commissioner Lamy:  We have already tried that and, to my knowledge, once you are in a litigation process you have to abide to the ruling and that is the stage where we are. We have negotiated exemptions in a modest quantity as a trade-off with not using our WTO right to enact rebalancing measures according to the safeguard agreement immediately. I think it was a reasonably good deal on both sides but we will have a decision on 10 November and you can’t be half-pregnant.

Question about how EU sanctions in FSC dispute would play out:

Commissioner Lamy:  It is very simple. It is about compliance with a WTO ruling. The reason why I choose March, and I think my colleagues tomorrow morning in Brussels will agree to that, is because, once more, I wanted to give a signal that I am more interested in substance than procedures. I am more interested in the result than spinning the result any way. This is why my proposal, and I think they will agree to that—but we have to wait until tomorrow to be sure about that—is that by 1st March we will put a 5% tariff across-the-board on the retaliation list which we were granted by WTO last spring, starting with a sort of modest penalty which then would be increased by 1% a month until we reach the ceiling which we were granted—which if my memory is right is 17% on the list which we have submitted to the WTO. I hope we won’t get there and I think I have put things sufficiently in advance for this not to happen and for minds to concentrate on the result.

Question regarding further concerns in FSC bills that could trigger sanctions:

Commissioner Lamy:  I haven’t looked into all the details of these various draft bills. We are not yet exactly at a situation where you have one. There are still different bills and the right of amendment at least on the Senate side is not waived at all. It is a very complex process. I can only make a judgment when I have a fully-fledged text, and of course then I will make my views clear—with the help of experts, because I am not an expert on US tax legislation.

Question: If the US were to remove its safeguards, will the Europeans respond by removing the safeguards you have put in place on steel?

Commissioner Lamy:  Yes.

Question about whether, given the fragility of the economic recovery now going on in the United States and especially also in Europe, a trade war right now would actually do more damage than it can possibly do good:

Commissioner Lamy:  I don’t know who talks about a trade war; there is nothing like a trade war. As I said in the beginning, we have $1 billion a day transatlantic trade relationship and 99% of this trade relationship is fine. It is total peace. So we may have problems on 1%; we will always have problems with 1%. Do people talk about a trade war between Canada and the US about softwood lumber or about wheat gluten or do people talk about a trade war between Canada and Brazil about (inaudible) or between Philippines and Australia about oranges?  No. We have a system of multilateral disciplines which we are all committed to abide to and that is precisely what is good for economic growth. That is what business needs. Business needs clear rules so that the rule of the game in international trade competition is obvious to everybody. Clear rules are rules which can be enacted when necessary according to the procedures which we have all agreed in WTO. So I don’t believe at all this notion that there are sanctions for the system, which by the way, are there not to be used. It is all a question of compliance incentive. At the end of the day, it is better for economic growth than the law of the jungle.

ENDS

Prepared by Julie Calaz, Washington Delegation