The path to sustainable growth is complex, complicated and any measure proposed will have an uncertain outcome, but this is a time for responsible action not panic, said newly elected Amcham president, Hendrik Bourgeois, in an interview with EurActiv on the eve of the EU-US summit.
Hendrik Bourgeois is Vice-President in charge of European Affairs at General Electric and new chair of AmCham EU, the organisation representing the voice of American business in the EU.
He was speaking to EurActiv's Managing Editor Daniela Vincenti
To read a shorter version of the interview, please click here.
The eurozone crisis is in full swing these days. As borrowing rates for Italy reach painful highs, Paris and Berlin are attempting to fast-track rules to clamp down on future budget excesses. The US have a vested interest for the EU to address its crisis and restore growth as if not, they are afraid to be dragged into a recession too. What do you think will be the US line at today’s EU-US summit?
I don’t know what the US government can do. Ultimately, it’s up to the Europeans to get their act together to take the necessary measures to stem the crisis. As you know, there are several suggestions of what could be done- ECB buying more sovereign debt on the secondary market, Eurobonds, structural reforms, treaty changes, more macroeconomic surveillance, etc. But ultimately I think the US can only encourage and express concern.
Is business afraid of a possible double dip recession or is it overplayed?
Of course business is very much concerned. It’s obvious that we are watching this very carefully and calling upon political leaders to adopt measures that are significant, and impactful, and to swiftly stem the crisis.
Unfortunately, we’ve seen a number of European Council meetings that have proposed to adopt measures and so far the financial markets haven’t reacted positively to those proposals or measures.
There is probably a lack of appreciation of the importance of the measures that were adopted, but also the recognition that they are difficult to implement.
This is where we are. But I don’t think that there has been an impact yet on the level of investment or the commitment to invest in the Europe as a result of the crisis. That may happen in the future.
Figures released by Eurostat last week show that trade between the US and Europe is still growing though …
The trend is slightly positive but at the same time everybody knows that the economy in Europe is not going to grow significantly. Accordingly, what we need to work on at Amcham EU is to convince policy makers and politicians to adopt measures that will set Europe on a sustainable path to grow.
This path will be complex, complicated and any measure that is going to be proposed is going to be of an uncertain outcome, but the last thing we need to do is to panic. Rather, we need to carry on.
Panicking is not going to help us at all. Many if not all of our members have a huge EU footprint. We are not representatives of US investors in Europe only. We have invested years ago in Europe (50 years ago, 100 years ago for some of our members), so we are really European companies. GE for instance has 100.000 employees in Europe. As a result we are extremely committed to Europe.
Several American economists, including Paul Krugman, have fired on the EU establishment. Is it really fair to treat as naïve? Is the US panicking about Europe?
The finance markets are certainly panicking and there is a certain level of frustration, not only in the US but also in Europe, about the inability of our political leadership to take the decisions that will address the crisis.
The crisis is the unfortunate combination of two things: one hand you have a very difficult European decision making process that is not well fit to deal with crises. We are trying to solve crisis by some type of inter-governmental conference. It doesn’t work.
On the other hand you do have politicians who realise that the tough decisions that could be taken in order to address the crisis are going to be costly from a political perspective.
The combination of these factors I think is part of the reason of why we are still apparently not able to convince the financial markets.
There is opportunity in Europe and there are means in Europe to come out of this crisis. We have the tools we have the technology and the market participants…
The EU-US summit is underway in Washington. What do you expect the outcome to be from the transatlantic economic council perspective?
We have aspirations and ambitions and hopes for the technical meetings.. I’m not going to prejudge the outcome because I’m not going to participate in the summit but we have been calling upon the participants to those meetings to come up with an agenda for transatlantic jobs and growth.
AmCham EU has made a number of proposals to the transatlantic leadership and you could sum them up in 3 parts: The first part is that we believe it’s the right time to continue focusing on non tariff trade barriers.
We think that progress should continue and we need to step up the efforts, but we think there’s also an opportunity to reduce or eliminate tariff barriers, and to look at opportunities to reduce or eliminate taxes on imports and exports between EU-US.
The current tariffs between the US and EU are low, however in light of the extremely important volume of trade, even small reduction or total elimination of small tariffs would generate significant saving for obvious reasons.
What is the target? How low do you want them to be?
Zero. But we know this is not going to happen overnight. If it was easy it would have already been done by now. Neither the US economy and EU economy are doing well, and neither of these economies is going to improve significantly, and so we believe now is the time to start addressing the hurdles that people have been coping with in the past.
That’s in the agenda for jobs and growth, what are the other points?
The other thing we are pushing for is to create a regulatory cooperation. That means ensuring that there is greater harmonisation between regulation that are adopted in the US and regulations adopted in the EU.
Electric vehicles. We are working towards common standards for the plugs for electric vehicles . The health care sector is another example. Before bringing a health care product on the market, a manufacturer needs to comply with sometimes different set of regulatory requirements on both sides of the Atlantic, to ensure that the product is safe and addresses basic safety concerns.
Each partner may have different sets of regulations but at the end of the day these regulations are designed to address similar concerns and there shouldn’t be a reason for those regulatory standards to be different, because we do have the same type of expectations in the US and Europe of what patients require in terms of safety.
Going back to electric vehicles: that has been on the agenda for some time. If the EU and the US don’t get their act together China will be setting the standards for the rest of the world. A delay in action can hamper competitiveness both in the US and Europe. What does it take to move forward quickly?
Because it is complicated: there are technical issues; there are vested interest and commercial issues at stake. But I don’t think the situation is blocked. We expect that a letter of intent is going to be signed in Washington this week.
What will the letter of intention say?
We are hoping there will be a common plug between charging stations and the electric vehicles so that a manufacturer of the charging station in Europe uses the same technical standards of the manufacturer of the US in order to ease the sale of European vehicles in the US without the need of being adapted to the US market and vice versa.
Are we going to use a common standard as of 2012? 2013?
We may have an agreement possibly in 2012. That would give an impetus to other sectors to demonstrate that things are working.. If we can achieve this, the transatlantic partnership will achieve something that the internal market in EU has still not achieved, because we still have different plugs here in Brussels than we have in the UK for instance. The symbol of this would be quite important for other sectors.
Another area where you believe the transatlantic can move forward?
There is space for improvement by creating a regulatory framework for open investment. This does not only facilitate investment on both sides of the Atlantic—as we both have a reasonably strong track record in facilitating investment from abroad--but it’s also advocating a common approach on the conditions that third countries should adopt to facilitate investment.
Research demonstrates that when a company invests abroad it actually creates jobs in its domestic markets. What is important for investors is to have a transparent regime, the rule of law, predictability, trying to reduce restrictions and avoid discrimination in terms of nationality.
Today, companies that want to make investments in a country may need pre-approval simply based on the nationality of the investor. Sometimes certain countries will have the tendency to define specific economic sector of strategic importance, simply for protectionist purposes.
In a time of crisis the last thing we need is protectionism, and part of the solution to the financial and economic crisis is to keep the system open in order to address the challenges posed by the crisis.
When I talk about the system it’s not only free trade in goods and services, it’s also free movement of people and of workers, capital, and the deployment of ideas and innovation.
About innovation: Chinese companies are setting up shop in Europe to precisely benefit from that pool of engineers and technicians that can boost their tech industry. Do you see a trend with American companies set up here to boost more R&D and innovation?
I wouldn’t say we are boosting. We are definitely not reducing investments in R&D. There are various elements here. I think Europe has a lot to offer. First of all, there is a strong intellectual property right system which is a key incentive for innovation and which facilitates investments, research and development.
This is of key importance also when there is a transatlantic debate going on because innovators in Europe and in US both need strong IPR systems in order to create the right incentives and certainty of returns on investments. Advocating for a strong IPR system on a global basic is of key importance.
Secondly, I think Europe has a wealth of talent in terms of engineering capability. We are pretty good engineers. Look at Germany, or other countries, the Nordic countries for example. So there is the human capital in Europe that makes Europe attractive to continue to invest in R&D. And last but not least we have a significant support of the public authorities that create incentives for us to invest and continue R&D activity in Europe.
One could wish that those public measures would be more important than they are today and there is always room for improvement. Amcham EU has been advocating for a greater amount of public intervention in terms of facilitating the procedures and making applications for R&D funds more efficient.
For instance, if you look at the proposal for the new multi annual financial framework there is a significant envelope dedicated to research and development and our hope is that when the long and tedious negotiation process on the budget will end, this envelope will still be there to encourage R&D and innovation in Europe.
Are you advocating also for an EU-US innovation initiative?
That’s not in the agenda, but the TEC has intellectual property rights as a key part of its agenda and insuring that there is an ongoing dialogue on the transatlantic front to promote intellectual property rights and to ensure that on the global basis we continue to support a robust IPR system.
Both the US and the EU realise that one cannot be pennywise and pound foolish in this situation. If you reduce IPR protections for purposes of getting access to a specific technology, you create disincentives for investors and companies to invest which result in the longer term to an overall reduction of innovation. That’s something I think both sides want to avoid.
Next year is the 20th anniversary of the single market. The EU has pushed 12 initiatives to finalise it with the Single Market Act. Which of these areas matter the most?
First of all, we need to safeguard the benefits of the single market. Amcham EU has been a historic champion of the single market. Paradoxically we have been greater champions of the single market than some European companies.
Last year we have seen some worrying developments in this area. The former Danish government, for example, had introduced plans for intra EU border controls. The current Danish government has decided to abolish those measures. This is something that we obviously applaud.
We need to maintain an open single market as this has been a source of attraction for US investors. That’s what has made Europe an attractive place to conduct business and Europe will continue to be attractive for us and other investors and for European companies to do business to the extent we can maintain a strong and robust single market.
On the other hand we also think there is an opportunity to deepen and widen the Single Market because the Single Market is not finished. The job is not done. The Single Market Act which you refer to, consist of 12 areas of focus, all of these things are fine but we think the services market for instance is key for the European economy and for our members. Nine out of the 10 new jobs that are created in Europe today are in the service sector just to give you an example, and the European services directive hasn’t been fully implemented yet so there is still a lot of room for improvement.
Public Procurement is another example of where improvement can be made as the level of cross-border public tenders is insufficient. I refer to the participation of suppliers in a public tender that are not located in the country where the contracting authorities is issuing the tender. That percentage is really low and so we need more agile public procurement rules and more flexible regulations that really encourage a truly pan European public procuring market.
This, the single market, is of critical importance in connection with the eurozone crisis - to comeback to your first question – a significant breakdown of the system within the eurozone countries could well affect the single market as well, since such a breakdown could generate protectionist reflexes within the EU. We need to be very careful about that and safeguard the Single Market.
Last question: You will lead Amcham for two years, what do you want your legacy to be?
I don’t know what my legacy will be, but I can tell you what are my ambitions are.
Two things: first , I would like to ensure that Amcham EU is, more than it is today, recognised as an institutional discussion partner with the EU Commission, Council and with the European Parliament.
Amcham EU is very effective at addressing concrete policy or regulatory issues but I think we can play a bigger role in shaping and impacting horizontal policies that are also of great importance and have impact on our members--for instance: the EU budget, cohesion policy, innovation policy.
That has been historically I think a bit of a challenge for the organisation because it is a member driven organisation. Meaning the drivers of the activities, and the outcome of Amcham EU work depends on the ability of its members to identify immediate business concerns for which effort must be undertaken. But my sense is that this organisation deserves a stronger voice and impact of these horizontal issues.
The other point that I’m keen on changing and or improving is the internalisation with policy makers, decision makers and politicians in Brussels that we are not only representing the interests of the US private sector in Europe.
Of course our members are companies that are ultimately controlled by US parent companies but our members are also European companies with very important European footprints.
I don’t think we can downplay at all or minimise the importance of our American roots because that’s something that gives us strength and added value at the policy level but at the same time I think there is an insufficient recognition and realisation that we are also part of the European economic fabric and that we have significantly long term vested interest in the European economy and therefore in the outcomes of the European policy making.