Meeting of the TransAtlantic Business Dialogue Friday, January 25, 2013 Note of the Meeting

The TransAtlantic Business Dialogue (TABD) convened its first meeting under the new banner of the Transatlantic Business Council (TBC) in Davos, Switzerland, on Friday, January 25 on the margins of the World Economic Forum. TABD members and observers met with senior level U.S. Government and EU Commission officials, Irish Prime Minister Enda Kenny, and OECD Secretary General Ángel Gurría. TABD was most interested in learning the status of the High Level Working Group’s deliberations for a EU-U.S. trade agreement, and in sharing TABD priorities on how to shape such a transatlantic economic pact.

Participants

TABD Members

Mark Spelman, Accenture; Sir Michael Rake, BT; Phillip Harrington, CA Technologies; Ambassador Stuart Eizenstat, Covington & Burling; James Quigley, Deloitte; Sven Oehme, EABO; Beth Brooke, Ernst & Young; Jürgen Thumann, Heitkamp & Thumann; Hans Stråberg, Jacob Wallenberg, Investor AB; Alan Buckle, KPMG; Geralyn Ritter, Merck; Brad Smith, Microsoft; Dr. Harry Hendriks, Philips; Peter Solmssen, Siemens; Tim Bennett, Transatlantic Business Council; Dr. Heinrich Hiesinger, ThyssenKrupp; Marc Grynberg, Umicore;

Special Guests

Prime Minister Enda Kenny, Republic of Ireland Ángel Gurría, Secretary General, OECD

Business–Government Dialogue

Jean-Luc Demarty, European Commission Michael Froman, White House Jon Leibowitz, Federal Trade Commission Marc Vanheukelen, European Commission

Observers

Brian Ager, European Roundtable of Industrialists Tom Donohue, U.S. Chamber of Commerce

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Opening Session with Enda Kenny, Prime Minister of Ireland

Prime Minister Kenny greeted all members and guests personally before opening the discussion with an unfettered endorsement of an EU-U.S. trade agreement. The importance of transatlantic trade to Ireland is reflected in approximately 100,000 jobs that are directly linked to U.S. investment on the island. There is strong support for an EU-U.S. trade pact during the Irish Council Presidency of the EU, which has as its priorities: stability, growth, and jobs. The Prime Minister emphasized that the current momentum to launch such a historic negotiation is a once in a lifetime opportunity. At the same time, EU recovery is imperative and reform plans need to be implemented swiftly to ensure the bloc remains an attractive and relevant player in the globalized economy. The prospect of two million jobs an EU-U.S. trade deal could create is crucial on both sides of the Atlantic, as is the boost it would give to the transatlantic and the global economy.

The Prime Minister further underscored that the EU is ready to move ahead, and that this Council Presidency’s priority is to pass on the mandate to the EU Commission to launch negotiations with the U.S. There was no apparent reason for the delay of the final report of the High Level Working Group, except for the nomination of the new USTR which is still outstanding. He added that the sooner a transatlantic trade agreement becomes reality the better given the benefits it would yield for both economies. The importance of this deal was part of a recent phone call the Prime Minister had with President Obama.

With regard to the UK’s potential referendum on EU membership, Prime Minister Kenny referred to the crucial importance of the single market to Britain. He added that Ireland will remain close to Britain and at the same time stay at Enda Kenny, Prime Minister the heart of Europe. of Ireland

Business-Government Dialogue

In this session, Michael Froman, Assistant to the President and Deputy National Security Adviser for International Economic Affairs; Jean-Luc Demarty, Director-General and Marc Vanheukelen, Head of Cabinet, both at DG Trade, shared their insights on developments to agree to launch negotiations for a EU-U.S. trade agreement.

Mr. Demarty emphasized the great enthusiasm about a potential transatlantic trade deal on the EU side. Member states are very supportive and willing to look at new ways to resolve thorny issues. An example for this willingness to take on a positive attitude was the recent acceptance of lactic acid use on beef carcasses. With this scientifically based decision, the European Parliament has proved that it is possible to move ahead. He emphasized that regulatory issues are particularly difficult to resolve and that strong political push on regulators is vital to ensure their work is ongoing in a coordinated fashion. Even though solutions need to be found for thorny issues, not all challenges will be solved in advance. Instead a framework needs to be built to continue constructive cooperation.

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Mr. Demarty also noted that economic impact studies conducted by the EU conclude that such an agreement would have a significant positive economic impact on not just the EU and U.S. but also on global trade overall (+240 billion euro). He emphasized that the agreement should be “comprehensive and ambitious”. Demarty also suggested that the negotiations could begin before the summer break.

The past has shown the obstacles to a transatlantic trade pact, Mr. Vanheukelen said in his remarks, particularly with regard to technical barriers to trade (TBTs). Thanks to the joint consultation by OMB/OIRA, USTR, DGs Trade and Enterprise, business provided numerous ideas for cooperation in several sectors ranging from automotive to chemicals, healthcare, and cosmetics. The High Level Regulatory Cooperation Forum (HLRCF) will be meeting in April in Washington, DC to further discuss these proposals and systems that would streamline regulations. Legal barriers to improved cooperation are not insurmountable as long as political will and managerial organization drive the process.

He added that the EU may appear less attractive due to its current economic woes. It is important to bear in mind that the EU is a significant player in terms of global trade. In the past year, the 27 member states achieved substantial surpluses in manufacturing goods, services and agriculture. Merely on energy a deficit was notified.

Mike Froman responded to Marc Vanheukelen’s remarks, reassuring that the U.S. strategy towards Asia does not imply retreating from Europe. Geo-political pressures in the Middle East and the strategically important Asian market should not be considered as a fading desire to cooperate with Europe. The opposite is true: More cooperation is essential, particularly if the transatlantic economy is to become the global benchmark for standards in a globalized world. Tariffs are hence important for a transatlantic trade pact, but they are not the decisive factor. More than ever regulatory barriers need to be tackled in innovative ways. Whether the answer to simplified rules and regulations implies mutual recognition, functional equivalence or other methods, needs to be decided on a case by case basis. Compliance and conformity assessment is another area that requires close collaboration between regulators. This applies to both, existing and new technologies and products. The answers to difficult questions on how to address regulatory divergence are still outstanding, but both sides are committed to find solutions. Business is required to feed ideas into the process in order to facilitate the development of modalities that Mike Froman, White House, Ángel Gurría, OECD, Jean-Luc Demarty, European Commission reduce barriers to trade on a sectoral basis.

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Asked about the final recommendations of the High Level Working Group, Mr. Froman responded that there was an overemphasis on the report. The current phase should not be considered as pre-negotiations; instead the ongoing discussions are vital to develop answers to the difficult questions. Otherwise the two sides risk entering tedious negotiations that are potentially difficult to be concluded. The timing of the report’s publication is therefore less relevant than its substance.

Incoming TABD Co-Chair Hans Stråberg agreed that support from corporations operating on both sides of the Atlantic is crucial to advance transatlantic trade. From his experience as CEO of an appliance company he is well aware of the difficulties related to different sets of regulations. At the same time he noted that the EU and U.S. systems had equal goals in terms of safety; this should facilitate common ground. Approaches such as ‘tested once, accepted everywhere’ should be pursued at a transatlantic level.

Tim Bennett, TBC’s new Director General, thanked the government guests for their comprehensive outline of the challenges ahead for a transatlantic trade deal and added that the TBC will be working in sync with the administrations to provide viable solutions, particularly with regard to regulatory barriers. At the same time tariffs need to be tackled in order to provide for the freest possible transatlantic marketplace.

TABD members emphasized that intellectual property rights (IPR) has to be a vital component of an EU-U.S. trade pact. A strong IPR chapter is essential given that IP-intensive industries are linked to 35% of U.S. GDP. Any transatlantic agreement should reflect a shared commitment to robust protection of all forms of IP, including patents, trademarks, copyright and trade secrets. Third country concerns such as compulsory licensing, local content requirements, calls for IP “flexibilities”, state-sponsored IP theft and theft of trade secrets, are particularly important aspects that should be addressed at a transatlantic level. At the same time capabilities and aspirations need to be balanced. The recent ACTA experience indicates the limitations of the desire for a strong IP chapter. Mike Froman responded that IP confirmed the strong common interest vis-à-vis third countries. IP issues with each other would however be challenging to tackle and the economic benefits are debatable. There is no need for a big IP chapter to make this a solid FTA.

In conclusion the government guests welcomed the active role of the TBC/TABD in the process to launch negotiations. It is crucial that business holds government accountable and pushes for progress. A transatlantic trade deal will be a game changer in the global economy, particularly with its impact vis-à-vis third countries. In this context the EU in particular has shown willingness to be flexible and is ready to move ahead.

Special Session with Ángel Gurría, Secretary General, OECD

Ángel Gurría recognized the importance of the transatlantic economy which accounts for almost 50% of global GDP. A better understanding of the obstacles to transatlantic trade is central to enable regulators to reduce them. The OECD initiative to measure trade flows in value-added terms is an attempt to better map the benefits of free trade. It shows that most gains occur where knowledge is injected to products, i.e. mostly in the EU and the U.S. The Secretary General noted that Doha did not succeed partially because the benefits such as job creation

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due to trade were not clearly portrayed. The failure of the Doha Round may have triggered more pragmatism among transatlantic negotiators, and the benefits of an agreement of this scale should be freed swiftly. Both these developments provide amicable circumstances for a trade agreement which could turn out to be game changer in the international trade system. Mr. Gurría advised to advance discussion as much as possible without raising too high expectations.

The uneven and hesitant recovery is a cogent argument in support of the launch of negotiations. While the world counts for the U.S. not to go over the fiscal cliff and to address budget cuts, the EU is not yet out of the critical phase either. In Europe a whole range of new institutions have been created to fill gaps and address the newly arising challenges. Continuously high unemployment rates (12% in the EU) do not leave room for complacency. Instead structural changes are badly needed in areas such as fiscal, innovation, education, R&D policy.

The Secretary General further referred to the institutional changes in the global economy. In a rapidly changing world these changes ought to be reflected in the institutional framework. In this context also addressed a potential EU exit of the UK which he does not consider as viable option. Prime Minister Cameron’s move to allow for a referendum only in several years from now leaves sufficient time reconcile the British and EU’s stances.

With regard to financial services in a transatlantic agreement, the Secretary General emphasized the critical importance of this sector in a transatlantic agreement. The value-added approach shows that more than 50% of content is made up of services. In past conventional measures it was falsely noted at 25%. Financial services are one the most integrated industries with regulators and supervisors advancing on largely common ground. Even though pieces of legislation bear different names, they often tackle the same issues with similar policy responses (e.g. capital requirements).

In his closing remarks, Mr. Gurría offered his help to facilitate transatlantic negotiations which would come at a crucial time for the world economy. The OECD’s close cooperation with the WTO, FAO and ILO could provide useful channels to advance the discussion.

Internal Session

Out-going Co-Chair Jürgen Thumann welcomed the positive outlook from the European government guests. The U.S. side seemed positive in principle but maintained some caveats regarding some of the thorny issues. TBC should continue to provide concrete input to both administrations, ideally in sectors that are in a position to develop joint proposals and that yield substantial benefits, e.g. accounting. The OECD’s initiative on measuring trade in value added could be a useful tool to assess industries that provide for most economic benefits. Sectors which pose major challenges could be considered to be left aside in order to avoid slowing down overall progress.

The timeframe was noted as a defining factor with elections of a new EU Parliament only 16 months away. With regard to outreach to legislators on both sides of the Atlantic, further confidence building measures are essential to avoid backlashes at an advanced stage of negotiations.

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As a possible action item it was suggested that the TBC prepare a short paper for submission to the EU Commission and the U.S. Government which would contain concrete suggestions from our member companies on what are the most important regulatory and standards issues to address in a negotiation and thoughts about how to address those issues. Mutual recognition agreements are a possible outcome. Since this has been achieved in one of the most contentious transatlantic sectors, that is aviation, this objective ought to be viable in other areas as well. Even though Co-Chairs Jim Quigley, Hans Straberg and TBTs are often raised as key obstacles Jürgen Thumann to trade, the importance of tariff elimination should not be disregarded. In various sectors merchandise trade consists of intra-company transfers, hence full tariff elimination would provide for substantial economic gains.

In terms of press coverage, there seems to be more coverage on the European side. A push for more communication in the U.S. in order to boost interest in a transatlantic trade deal would be helpful to advance the process. Benefits to the U.S. should be highlighted with the business sector in the U.S. being encouraged to be more public in its support.

Tim Bennett shared his vision for the newly formed Transatlantic Business Council and highlighted the crucial role of the TABD component of the organization. CEOs and senior executives of transatlantic corporations have an important role to play in TBC, and can help drive momentum as negotiations for a trade deal take shape. The unique structure of the TBC allows for a combination of strong business message to policy makers as well as substantive input through the working groups. Tim referred to a number of high level meetings in Washington and Brussels during which officials welcomed the new organization and were looking forward to input from this truly transatlantic association. A TBC Board Meeting is planned for February 22 in Washington at which a number of remaining organizational issues such as the committee structure will be defined. Members are urged to support recruitment efforts to broaden the membership base. Overall the organization is in an excellent position to provide support to the ongoing negotiations.

In his closing remarks, longstanding U.S. co-chair Jim Quigley thanked Jürgen Thumann for his outstanding support of the transatlantic cause. Following almost five successful years of Tim Bennett, Transatlantic Business Council strong leadership Mr. Thumann passed on the European co-

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chairmanship to his successor Hans Stråberg. Mr. Stråberg emphasized that he has big shoes to fill in his new role. He acknowledged the opportune time for transatlantic relations with negotiations for an EU-U.S. trade deal about to be launched. He noted the strongly supportive role of Swedish industry for such an agreement, and open markets and free trade in general. In his new role Mr. Stråberg will be supported by Niklas Bergström, Director EU and International Affairs, Confederation of Swedish Enterprise. The meeting ended with strong support for the incoming co-chair and great thanks the hard work and dedication of out-going co-chair Jürgen Thumann.

ACTION ITEMS:

 Provide sectoral proposals for regulatory cooperation:

√ TABD submitted input to the four EU/US consultations and continues to support joint sector specific submissions and cooperation.

 Send letter to EU and US government officials to outline objectives for regulatory cooperation

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