Kennard: We will have a ‘healthy debate’ on Prism and trade

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EU and US negotiators are to hold their first round of talks on a long-term trade deal that has been overshadowed by allegations of American spying on EU offices and European governments. But Washington's envoy to the EU, William E. Kennard, foresees a "healthy debate" on trade.

William E. Kennard became the US ambassador to the EU in November 2009 and will return to the US this summer. 

He spoke to EURACTIV Editor-in-Chief Daniela Vincenti.

To read a shorter version of this interview, please click here.

Prism revelations have opened the way to yet another fight between the EU and the US ahead of the launch of negotiations on what could be the trade deal of the century. Are the Prism revelations going to disrupt the relationship between the United States and Europe?

I hope not. That being said, I understand that many people here have serious concerns about this. President Obama announced after this programme was leaked and became public that we need to have a debate about this.

US Attorney General Eric Holder has offered to form working groups to discuss the extent of US intelligence activities and questions of privacy and data protection.

We will have a healthy debate about this. And we will have a discussion with EU leaders.

In fact, there was recently a justice and home Affairs ministerial in Dublin attended by our Attorney General and the number two in Homeland Security on our side. On the EU side, Commissioners Cecilia Malmström and Viviane Reding were there. They talked extensively about this [Prism].

They’re working on a way forward so that we can share more information with the Commission about what we’re doing, and they can get a better understanding of things.

But we have such a deep, broad relationship that it would be unfortunate if we allowed one issue, as serious as it is, to paralyse us across the whole range of things we're working on.

But how do you go beyond this constant divergence of views on data privacy and privacy in general? I am talking about SWIFT, for example.

Of course, we have different regimes and we have different perspectives. But there are a couple of fundamental truths here.

One is that the flow of data is absolutely essential for the functioning of our economy. Two, the flow of data is absolutely essential to protecting the life and safety of our people through law enforcement and counter-terrorism protections. So we have to find the right balance. We have to work these issues through, and the good news is we have.

We've had some very challenging issues in data privacy with the EU, and we've managed to work through them.

In the last few years, I've been involved in some of them – the TFTP [Terrorist Finance Tracking programme] SWIFT issue, and the re-negotiation of the passenger name record agreement (PNR).

And there was a period where I remember distinctly at the beginning of each of these issues where people asked me the very same question you did: is this going to mean that we just can't work together? That we'll never get through this? And we did. We worked our way through them.

And in each case we found a way to, in effect, converge our systems. The EU is concerned, under their privacy laws, about proportionality and retention of data. In both PNR and TFTP, we put those issues on the table and we found a way to work through them.

So I'm optimistic – I’m not naïve, but I’m optimistic – because  I've been there and I’ve worked through these issues with the EU. I know it's challenging, but you can find a way forward because you have to. What are we going to say: we're just not going to share data with the EU – ever?

If things go as planned, on Monday (8 July) we will start the first round of negotiations on TTIP, the Transatlantic Trade and Investment Partnership. Do the US and Europe have a different conception of free trade? Some leaders in Europe believe so.

I disagree with that fairly strenuously. When President Obama was in Berlin, he said something about our relationship with Europe that I’ve heard him say before, which is that Europe is the cornerstone for our engagement with the rest of the world. And much of what we try to accomplish in the world, we do with Europe. And that’s true of our free trade agenda.

There may be some differences at the margins. Every country has domestic sectoral issues that create domestic political sensitivities that are sometimes in conflict with a free trade agenda. But those are on the margins.

On the core issues of free and open markets, the United States and Europe are well aligned.

That's why we are able to contemplate doing an agreement of this magnitude, because our economies are already so well-integrated.

There is no economic relationship on the planet that is deeper and more integrated than the United States and Europe. We wouldn't have that situation if we had fundamental disagreements about free trade. That wouldn't be possible.

Do you think the French demands to exclude the audiovisual sector have soured the beginning of EU-US trade talks?

Oh no, we're still optimistic and we’re still engaged. I think you know well that in the months and days leading up to the vote of the Council on the negotiating mandate for the Commission, we made clear our view that we would like the negotiators to come to the table without carve-outs and red lines or constraints of any kind.

So that was the spirit that got us to this point. The whole effort that led to the TTIP through the High-Level Working Group on Jobs and Growth, where DG Trade [European Commission] and USTR [US Trade representative] made a recommendation to the heads of state that we should launch negotiations, made very clear in that final report that we should put everything on the table.  

There's a very important reason to do that. Our relationship is so mature that in order to solve some of the long-standing trade disputes, we're going to have to bring creative, innovative thinking to those problems.

And to carve out whole industries makes it difficult for our negotiators to address those problems in new and creative ways. If we want to have an ambitious and comprehensive agreement, we have to put everything on the table.

I'm actually pleased that we are going to begin these negotiations on July 8th with as few constraints on our negotiators as we have.

If you've followed this trade relationship for many years as I’m sure you have, there are a lot of difficult issues that could have made their way into a Council mandate, like agriculture or services or government procurement—lots of issues on both sides— that are sensitive.

But we're only talking about one right now. 

We know what the carve-outs are on European side, but we know less about the possible carve-outs on the US side. Is Washington thinking of carve-outs?

I think it's too soon to tell. The negotiations haven't even begun yet. I'm pleased that leading up to this point we haven't had calls on our side to carve out whole industries or whole sectors.

The United States Congress has been quiet on this. US industry has been fairly quiet on this. No industry has said, ‘We don't want our issue considered in the negotiations.’ So we should feel good about that, that there's enough political momentum behind this that the negotiators will have a fair amount of flexibility to negotiate a broad and comprehensive agreement. That's good.

Maritime cabotage, financial services, defence, tobacco, public procurement have been flagged as being sensitive sectors for Washington. So the US is basically saying that as of now, you’ll come to the table next week without any carve-outs?

That’s right. All issues are on the table, as far as we’re concerned. All of our issues are on the table.

There is a feeling, though, that we there will be some tensions. Commissioner Karel De Gucht said it will be a ‘living’ agreement, meaning the initial agreement will be a framework to build upon. What would be a ‘living’ agreement?

Well, when Karel De Gucht and Mike Froman [the US Trade representative] talk about a "living agreement,” what they're referring to is a framework for resolving problems that arise in the future.

You know, oftentimes trade agreements solve legacy issues. But in our case the greatest upside of an agreement is to find a way to bring our regulatory systems together so that when problems arise, particularly involving new technologies where you don't have a legacy of regulation, you can find a way to resolve those conflicts between the US and the EU systems before those regulations are even crafted.

It's particularly true of new technologies, where you're trying to come up with a regulatory regime for nanotechnology, for example, biotechnology or new pharmaceutical products or agricultural products.

When they speak of a living agreement, they talk about a framework for bringing people together early on. And we've had some success in doing that.

Under the auspices of the Transatlantic Economic Council [TEC], we were able to bring standard-setting agencies on both sides of the Atlantic together to come up with standards for electric cars. If we can do that more comprehensively across more sectors, it will be great for both of our economies.

Will this framework more likely look at future industries, rather than old, established sectors?

If we do this right, we'll do both. We'll resolve some difficult legacy issues, but we'll also be able to establish a framework for solving problems as they arise.

You have been a regulator before, and as you pointed out, regulatory convergence is crucial. But it can also be a difficult exercise …

They're difficult people. (laughs)

What’s the best way to work together? If you were in front of regulators in America, how would you explain a good modus operandi for sustainable cooperation?

We're all doing some hard thinking about how best to do that. We don't yet have the roadmap on how that gets done.

That's what this negotiation is all about: coming up with the answer to your very good question.

But as a former regulator myself, having understood a bit about how the regulatory mind-set works, the most important thing we do is give the regulators space and time to come together and solve technical problems.

We have independent regulators in the United States who can't be told what outcomes to produce. The best we can expect is that they understand the importance of transatlantic regulatory convergence and will work together to solve problems.

And they have an incentive to do this because, particularly in an era of austerity and shrinking government budgets, if European and US regulators can find ways to work more effectively together there are ways that we can save a lot of money on both sides of the Atlantic.

There are examples of that. For example, a lot of products have to be tested in order to ensure their safety to the public.  In many sectors they have to be tested twice, once in the US and once in the EU. If we can find a way to mutually recognise the testing on both sides of Atlantic, it makes things a lot easier. There are a lot of standards, mutual recognition, equivalent outcomes, negotiated rule makings…

There are all sorts of tactics people use to come up with consistent standards. The FAA [Federal Aviation Administration] does this with airline safety, because we have to ensure the safety of air travel. Neither the FAA nor the European Commission has the resources to go inspect every airport maintenance facility in the other's jurisdiction, so they have enough confidence in the outcomes that they recognise the certifications on both sides of the Atlantic. It's reciprocal recognition.

That's the great thing about this negotiation: our regulators fundamentally respect one another because we both have very mature, well-developed regulatory systems that produce good outcomes.

When you travel to the United States, you're not worried that a car you get there won’t be safe, or that food you eat there will not be safe, or if you go to a pharmacy and get medicine, that it’s going to be harmful.

There's a huge amount of trust, not only among regulators but among the general public. So that's a great basis on which to begin some of these discussions.

What I urge people to do is to focus not on regulatory processes but regulatory outcomes. Close is good enough in many cases, or rough equivalents should allow us to mutually recognise our systems.

We're not starting from zero. There are a lot of areas where we've done this in the past.

In President’s Obama first mandate much was said about the pivot to Asia. With TTIP and Obama’s visit to Europe for the G8 and then Berlin, would you say that pivot to Europe is overshadowing the pivot to Asia?

Well, first of all, I think there was a lot of misunderstanding about the so-called pivot to Asia, which we refer to now as a re-balancing in line with the re-balancing of the world economy, really.

There's a shifting of more growth and economic activity to that region of the world. But we don't think of the pivot as being a shift away from Europe.

We think that Europe is in the process of shifting more of its attention to Asia as well.  We think that developed markets in the West necessarily will have to spend more time engaging with Asia.

So we think of this as a pivot with Europe to Asia as opposed to away from Europe.

Joining forces in order to control Asia?

No, in order to support our economies. In the next 25 years, there will be more economic growth coming from Asia than there will be from Europe and the United States. Most European and American companies are now aggressively investing and doing business with Asia. So it makes sense that their governments are also focused on that region. There are important geopolitical challenges that the world is facing in Asia in places like the South China Sea, for example.

And so it's important for those of us who want to ensure that, as Asia grows, there are opportunities for the United States and Europe. We have to be there.

And Europe is there. The EU negotiated in the last few years a free trade agreement with Korea and with Singapore. So this is not to the exclusion of Asia.

But I do think that the TTIP is a very important presidential initiative. What the Obama administration is attempting to do is to negotiate very large bilateral trade agreements, one anchored in the Pacific and one anchored in the Atlantic.

And that will be a tremendous accomplishment for this administration. Somebody told me once that with the TPP we pivoted to Asia and with the TTIP we're pivoting to Europe. So, this is a pirouette. But it makes a lot of sense.

Climate change. UNFCCC talks by 2015: What is Obama going to do to make that happen? Europeans are still very disappointed about Copenhagen …

Look, we all had hoped for more at Copenhagen. President Obama had hoped that we would have gone to Copenhagen with climate change legislation passed and signed in the United States—but unfortunately, it didn’t happen. Politics around these issues are hard in the United States.

But I hope you recognise that the President remains very committed to making progress on this issue, and he has. He gave a very important speech just this week on climate change— you should take a look at that.

But here’s the good news: our emissions are going down. Our emissions are going down at a rate that's faster than Europe's. Our emissions are at 1994 levels right now.

This caricature that the US doesn't care about climate change or that we're not doing anything about climate change is simply wrong. Not only are our emissions going down at a dramatic rate, but our economy is growing.

We are exploiting new ways of capturing energy with shale gas in ways that are cleaner than coal. We're actually exporting more coal now to Europe than ever before. Our dependency on conventional fossil fuels is the lowest it's been in 30 years right now.

So this notion that Barack Obama's not doing anything on climate change is just wrong. And it's not just shale, either.

It’s because he put in place some very stringent emissions standards for automobiles, and he's going to do the same thing with industrial production. We did this two years ago—we did our fuel efficiency standards— and Europe is still struggling with this. At the last Council meeting, they pulled it off the agenda.

So I get a little frustrated when people say to me, the US, ‘you have to lead on climate change, you haven't done anything.’ Read the statistics. It's really compelling, what we're doing.

You are about to leave Brussels after more than three years as Ambassador to the EU—you have made a difference, many have said. What do you think your legacy will be?

It's not what I have done individually. It's what the Obama administration has done as a whole.

First of all, I had the good fortune of being sent here by a president who is very popular in Europe, not only because his policies in foreign and economic policy tend to align more closely with what leaders here themselves would like to accomplish, but also he is very popular for who he is as a person.

I arrived here at a time when many people in the world were craving new American leadership, and they got that leadership in Barack Obama.

We have, during the first term of the administration, re-engaged with the world. We, under the president's leadership, have been able to, I think, restore a lot of respect for American leadership in the world.

And I've been the prime beneficiary of that by representing him here. Doors were open for me. They wanted to hear from Barack Obama's representative.

I think the biggest legacy was this re-engagement with the rest of the world, which is really significant.

There’s a perception in America that they don’t know who to talk to when they talk to Europe. Do you feel that this is still there? When we talk about European leadership, I’d like to know what Americans see. Do they see Merkel? Do they see Barroso?

Well, there are 300 million Americans – so there are a lot of different views. I think that this notion that Americans are frustrated because they don’t know who to call – I think it’s really overly simplistic.

First of all, you don’t hear it in the US – you only hear it here. In some ways, I think it reflects Europeans’ perception of their own situation.

When you talk to people in Washington about the EU, for example, you know there’s not one number to call for Europe. Henry Kissinger didn’t even say that – I don’t know why they keep quoting him as saying that. It’s a famous misquote. He actually told Cathy Ashton when they first met, “I don’t know why people keep saying I said ‘we only have one number to call in Europe,’ I never said it!”

It’s a complicated place, and sophisticated people understand that in no complex government system is there only one number to call. We have one head of state, but if you have a complex problem in Washington – and I’ve worked there my whole career – even if you can call the President of the United States, it’s probably not going to solve your problem.

We have an independent judiciary, an independent branch of Congress, we have independent regulatory agencies. It’s an oversimplification of how governments work, and I wish people would stop asking this question.

Does Europe have the right leadership to engage with President Obama?

Let me answer it this way. I think we recognise, and the president has said this— he said this in the depths of the Euro zone crisis – that the EU is a complicated construct.

It's now 28 countries that organise themselves around a series of treaties where they delegate sovereignty to a central organisation. We understand that that sort of consensus decision-making doesn't lend itself to one person setting all the rules.

That's just the way it is, and we adjust to it. It's not fair to say that we are frustrated and that we're craving something different. That's reality.

The EU is the most complex multilateral institution that has ever existed on the planet, and it's young. It's still evolving. I think it's a little unfair to criticise the EU and say that we want an exact analogue for our president, because that's not realistic. That's not what the EU is.

And a big part of my job and that of any ambassador who has this post is to help translate that reality to the US government. One of the most delicate aspects of my job is ensuring that we can collectively, as a government, craft policy to accomplish our interest, understanding that the EU is important but the member states are also important. The EU makes decisions both in Brussels and in the member states. And we're always calibrating how we can best get things accomplished given that reality.

First of all, it's not in our interest to criticise this structure and crave for something different because it's not the nature of it. It's not a federal system. Maybe one day it will be, but it'll be a long time if it ever gets to that point. In the meantime, as it evolves, we have to figure out how best to interact with these institutions.

>> Read a related news article here.

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