At today's G8 Summit in Lough Erne, Northern Ireland, leaders of the European Union and the United States launched negotiations for a sweeping EU-U.S. trade and investment pact. The first round of talks will take place in Washington, D.C., in July.
The EU and the U.S. have the biggest commercial relationship in the world, equal to one third of world trade.
Every day, two billion euros worth of goods and services cross the Atlantic between the EU and the U.S. Together, European and American firms hold nearly two trillion euros of investment stocks in each other's jurisdictions.
But if there is already so much trade between us, why negotiate a new EU-U.S. trade agreement?
First, despite the success of our relationship there is still a great deal of untapped potential.
Though the tariffs we impose at each other's imports are low -- about 4 percent on average -- the volume of our trade is enormous. So for every tariff we remove -- even the lowest ones -- companies will save millions of euros, money which can be reinvested for growth. When you take into account that a lot of transatlantic trade takes place within the same company, these duties can be seen for what they are -- a tax on growth. For example, car parts sometimes cross the Atlantic more than once -- as components on their first journey and then going back in the finished product -- meaning they may pay tariffs twice.
But tariffs will only be a small part of the deal. We are aiming for an even bigger package, including opening up markets for services and -- very importantly -- in public procurement. The biggest effort, however, will go into addressing those barriers that lie behind the customs border -- such as differences in technical regulations, standards and certification requirements. These technical barriers to trade are estimated to have the same effect as if we had extra tariffs of between 10 and 20 per cent per product.
For example: Rules on car safety are just as strict in the EU as they are in the U.S. -- as public safety is always our top priority. We both have the same objective -- to make cars safe for the road -- but we have different technical rules to achieve it. A car producer who wants to sell his car both in Europe and in the United States has to get it safety-checked twice. Often the company also needs to add or change certain parts to get it approved on the other side of the Atlantic. This costs time and money. If we aligned our standards, or accepted the principle that a car which is found to be safe on one side of the Atlantic, is also safe enough on the other, we could make real savings both for the producers, the regulators and ultimately for the consumers. If we do it well, we would be able to maintain the same levels of health and safety, but boost growth and create jobs with less red tape.
Second, because we are the biggest trade relationship in the world, transatlantic standards could be foundations of future world standards. This would mean that our businesses would not have the extra cost producing for a plethora of different standards around the world. And, because the same would apply to companies in other parts of the world, an ambitious transatlantic agreement would be in effect a global public good.
So I believe that it's certainly not an exaggeration to say that such a 'transatlantic economic alliance' will be ground-breaking. In short: it goes beyond anything we have done before. It could boost our economies by between 0.5 percent and 1 percent of GDP. Given that both Europe and America are recovering from the biggest economic crisis in living memory, these are the sort of gains we cannot afford to ignore. It creates jobs and growth at no significant cost to taxpayers, simply by opening up trade and investment flows.
Can we achieve it? Reaching an ambitious deal will not be easy. It will be a long haul with many ups and downs. We will also need to think of innovative ways to deal with the complex issues raised by such a ground-breaking deal. And finally, we want to do this as quickly as we can though speed should not triumph over quality.
Both sides understand the potential of this deal and its importance for our economies. We have made the commitment to move forward at the highest levels of government. And we know that, if EU and the U.S. can show that we want to open markets and resist protectionism even in this moment of crisis, it will send a powerful signal to the rest of the world about the continuing strength of the international economic order.