Economic Policy Program
Policy Brief
Transatlantic Marketplace
Summary: The United
States, Canada, and
the European Union are
inextricably linked through
their shared economic
principles and political
values. However, much of
the economic potential
between the European
Union and its transatlantic
partners remains untapped.
The creation of a new
transatlantic economic
partnership would increase
trade and investment, set
global standards, attract
new stakeholders, and lend
fresh impetus to multilateral
trade negotiations.
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Setting Standards Together — For a New
Transatlantic Partnership Between
the EU and North America
by Matthias Wissmann1
Oceans divide, but common
values unite
The Atlantic Ocean may separate
Europe and North America, but the
two economic areas have historically
been bound together by a unique
wealth of fundamental values and
principles. With no other region in the
world is Europe so closely linked as
with North America. Hannah Arendt2
summed this up succinctly when she
spoke of an ‘Atlantic civilization’. The
mutual recognition of basic values
such as freedom, democracy, human
rights and the rule of law still forms
the foundation of the transatlantic re-
lationship, but its continuation has too
long been taken for granted. Instead
of fostering its inherent potential with
the appropriate level of political com-
mitment and interest, the relationship
1
Matthias Wissmann is chairman of the German
Bundestag Committee on the Affairs of the European
Union and was a federal minister in the govern-
ment of Helmut Kohl. Effective June 1, 2007, Mr.
Wissmann will vacate his position from the German
Bundestag to serve as president of the German
Automotive Industry (Verband der Deutschen Auto-
mobilindustrie, VDA). The author is thankful for the
valuable assistance provided by Christoph Muhle as
his scientific assistant at the German Bundestag.
2
Hannah Arendt (October 14, 1906–December 4,
1975) was a German Jewish political theorist.
has been viewed with benign indiffer-
ence and even, in recent times, with
latent distrust.
Accordingly, European politicians
must focus once more on nurturing
and promoting the things we have in
common with North America instead
of reducing them to the traditional
bonds of common security interests.
In figures: significant joint potential
The European Union (EU), on the one
hand, and the United States (U.S.) and
Canada on the other, jointly account for
about 60 percent of global GDP, mak-
ing them the world’s two largest eco-
nomic regions. The fact that the North
American economic area is the desti-
nation for more than 25 percent of all
goods exported from the EU illustrates
its particular importance to European
exporters. The share of the two North
American countries in all EU trade in
services (exports plus imports) is even
higher, topping 37 percent. In the web
of transatlantic economic relations,
prime importance attaches to mutual
foreign direct investment; about 43 per-
cent of all inward investment in the EU
is made by U.S. and Canadian investors.
Economic Policy Program
Policy Brief
In spite of these impressive bilateral trade and investment
figures, there is still a great deal of untapped potential in
the economic relations between the EU and its transatlantic
partners. Non-tariff barriers to trade still exist in many areas
of economic activity, and their removal offers great new
scope for more competition and hence greater prosperity for
everyone on both sides of the Atlantic.
The new transatlantic economic partnership: an engine
for world trade
We should not see a new system of transatlantic economic
cooperation as in any way a means of protection from third
parties. On the contrary, its primary purpose would be to
strengthen our own business locations, and it should be
designed from the outset to allow for the subsequent acces-
sion of other parties — without such a condition its creation
would be pointless. Barriers against the emerging Asian
markets would slow down the wage growth that has already
begun in that part of the world. Globalization, instead of
being a formidable challenge with great potential rewards
for the transatlantic partners, would thus degenerate into an
ever-heavier and inescapable burden.
This is what we seek to prevent through greater transatlantic
cooperation. Like the single European market, the new trans-
atlantic economic partnership would be open in the long-
term to additional participants that were able to adopt the
prescribed standards and accede either in full or in part to the
economic area. The example of the single European market
has shown that the will to belong to this type of common mar-
ket generates strenuous reform efforts on the part of applicant
countries despite the imposition of stringent conditions.
Rather than being a fortress, such a transatlantic market
would act as a magnet. Through this magnetic attraction
for other countries, a system of Euro-American trade based
on common standards could serve as a new engine for the
world economy. Closer cooperation between the EU and
North America could establish new benchmarks in other
areas too — we need only think of efforts to protect the
global climate or cooperation in the provision of develop-
ment aid. An agreement based on these conditions would be
quite different from a free-trade agreement in the traditional
sense; only 10 to 20 percent of the negotiating agenda would
2
be devoted to the usual trade barriers such as customs duties.
Instead, we could grasp the opportunity to secure worldwide
acceptance and application of our standards.
A new transatlantic economic partnership would have the
potential to be a force for good beyond its own confines
and thus lend fresh impetus to the multilateral trade nego-
tiations. For this reason, such cooperation must not be, in
any respect, an obstacle to the multilateral Doha Round,
let alone as a substitute for the Doha process. On the con-
trary, the latest talks between EU and U.S. representatives
have opened a new window of opportunity for a successful
conclusion of the multilateral negotiations on trade liberal-
ization. In the long run, a system of transatlantic economic
cooperation could become a trailblazer and pacemaker for
the further development of free world trade beyond Doha.
From vision to reality: kick-starting a new transatlantic
economic partnership
Numerous examples can be cited in support of the thesis
that the creation of a new transatlantic economic partner-
ship would create new opportunities for increased growth
and hence more jobs. Recent studies3 indicate, for instance,
that a fully open aviation market — the most recent agree-
ment can be no more than the first step in this direction
— would increase the output of the relevant industries by
nine billion dollars a year. Likewise, harmonization of the
securities market holds the promise of a 60 percent reduc-
tion in transaction costs4. Divergent standards apply in
many other fields, to the detriment of both sides. The most
prominent examples are technical requirements in the auto-
motive industry, the lack of coordination in the fight against
corruption and in the protection of intellectual property,
provisions of anti-trust legislation and energy policy, rules
governing the supervision of stock exchanges and interpreta-
tions of the concept of liability.
The case of the common aviation market
The most recent breakthrough in the negotiations on a joint
3
Cf. D. Hamilton and J. Quinlan. Transatlantic economy 2006 — Annual survey of jobs,
trade and investment between the U.S. and Europe. Center for Transatlantic Relations,
Johns Hopkins University, 2006.
4
Cf. D. Hamilton and J. Quinlan. Opening Transatlantic Markets, appeared in:
Frankfurter Allgemeine Zeitung, Nov. 30, 2006.
Economic Policy Program
Policy Brief
aviation agreement between the EU and the U.S. is a wel-
come and important signal for the development of trans-
atlantic economic relations. Existing rules did not permit
foreign airlines to offer flights between the United States
and third countries, but did allow U.S. airlines to fly be-
tween EU countries and third countries. The new agreement
puts an end to this unequal treatment. The long overdue
replacement of the multitude of bilateral agreements with
a Europe-wide solution will eliminate structures that cause
market distortions. Reaching a joint agreement is therefore
an important first milestone setting the course for the future.
Swift implementation of the agreement must be followed as
quickly as possible by further steps towards a genuine com-
mon aviation market.
The case of the automotive industry
The provisions applicable to the automotive industries
on either side of the Atlantic are often cited as a striking
example of the adverse effects of inadequate cooperation
in the field of regulatory policy. The EU must ensure that
companies in one of Europe’s most important industries
have the best possible conditions for transatlantic trade.
Within the EU itself, manufacturers already have to comply
with more than 90 directives governing the construction
and operation of motor vehicles, particularly with regard to
safety and environmental protection. On both sides of the
Atlantic, divergent and costly authorization and test proce-
dures constitute additional obstacles to the development of
new technology. Accordingly, mutual acceptance of regula-
tory measures can generate enormous growth potential for
automotive companies.
The case of hedge funds
Uniform treatment of hedge funds, which already adminis-
ter a worldwide total of more than one trillion euros, must
become one of the main objectives of the new transatlantic
economic partnership. The main focal point of such efforts
should not be the regulation of these funds, so much as the
improvement of transparency that investors need. Moreover,
in order to minimize the risk posed to the entire finan-
cial system when highly speculative hedge funds run into
trouble, it is very much in the general interest that hedge
funds are centrally and uniformly registered. With the aid of
the International Monetary Fund and the national super-
visory authorities, answers must be found to the following
questions: Which hedge funds should publish data? What
precise details should be disclosed? Who should collect the
data? Should the procedure be voluntary?
The case of intellectual property rights (IPRs)
The EU and North America have a common interest and an
obligation to establish effective safeguards against counterfeit
goods and piracy within and outside their own borders. A
firmly-enshrined right to intellectual property is essential, not
only as a means of bolstering corporate confidence and en-
hancing the commercial potential of creative innovations, but
also as an important framework for the creation of a favorable
investment climate and, therefore, for economic growth.
The case of environmental protection
In these times of global warming and increasingly frequent
environmental disasters, a common position on the protec-
tion of the environment is becoming ever more important. A
uniform approach to climate protection and emissions trad-
ing is vital. Even if the U.S., the greatest producer of CO2, is
not ratifying the Kyoto Protocol at the federal government
level, there have nevertheless been noteworthy initiatives
in this domain on the part of the State governments. With
Canada having already signed the Kyoto Protocol, it is im-
portant for us to embrace these moves in the United States
and treat them as the foundations of a common initiative for
the protection of the global climate.
The EU-U.S. summit
The EU-U.S. summit on April 30th was a real success. It was
the right time to commit to first steps towards the creation
of a new regulatory framework. One of the main results was
to establish a Transatlantic Economic Council. From now on
Günter Verheugen (on the EU side) and Allan Hubbard (on
the U.S. side) will be responsible for supervising the proj-
ect and reporting on its progress. This is necessary because
real reductions in bureaucracy and trade burdens are only
achievable through strong and sustained guidance.
On the basis of this new agreement, reports compiled before
the end of 2008, if possible, will assess the cost impact of
3
Economic Policy Program
Policy Brief
current barriers in each area of economic activity so that
conclusions can subsequently be drawn about the benefits of
their removal. The ambitious aim must be to create a level
playing field between the EU and the U.S. with regard to all
significant legal standards by 2015.
An integrated transatlantic market would not be intended in
any way as a rejection of the Doha Round of trade talks, but as
a complement to the multilateral system of the World Trade
Organization (WTO). The transatlantic partnership should
be expressly open to all countries that share a belief in the
promotion of free trade and investment. For this reason, at
the same time as talks are held between the EU and the U.S.,
Canada should be brought into the negotiations with the aim
of rapid accession to this uniform framework.
“An integrated transatlantic market
would not be intended in any way as
a rejection of the Doha Round of trade
talks, but as a complement to the
multilateral system of the WTO.”
This partnership could jointly set global benchmarks.
Europe and North America stand on a firm foundation of
common basic values, derived from antiquity, the Judaeo-
Christian tradition and the enlightenment. This common
Atlantic civilization is what distinguishes relations between
these two regions from any relationship between other
regions of the world. This is one of the reasons why North
America and Europe need no third party to remind them of
what they have in common, and their awareness of this com-
mon heritage is the best argument for the avoidance of pro-
tectionism and for maintaining openness to third countries.
The opportunity to set global standards is there for the
taking, not only in the economic sphere or in the realms
of security, consumer protection and the environment,
but also over a far wider spectrum of activity. The triad
of market economics, democracy and human rights is at
the heart of our common transatlantic civilization. The
respect for individuals and the rights that derive from these
values distinguish the EU and the U.S. sharply from other
economic areas of the world. Their existing combined
economic strength gives them opportunities to win
worldwide acceptance for these ideas. A new transatlantic
economic partnership is the right instrument for the pursuit
of that objective.
About the Economic Policy Program
The Economic Policy Program is an initiative of The
German Marshall Fund of the United States (GMF)
that promotes cooperation between the United States
and Europe on domestic and international economic
policies as vital instruments of global prosperity,
especially for the poor and those affected by shifts in
the world economy. At the heart of the Economic Policy
Program is our trade, agriculture, and development
work, which leverages GMF’s unique position as a
nonpartisan, transatlantic public policy institution with
access to opinion leaders and policymaking processes
on both sides of the Atlantic and in key developing
countries. In partnership with the William and Flora
Hewlett Foundation, among others, these activities
seek to move forward, through research and dialogue,
a pro-development trade agenda that fulfills the
promise of the WTO’s Doha Round and the UN’s
Millennium Development Goals.
The German Marshall Fund is a nonpartisan American
public policy and grantmaking institution dedicated
to promoting greater cooperation and understanding
between the United States and Europe. GMF does
this by supporting individuals and institutions working
on transatlantic issues, by convening leaders to
discuss the most pressing transatlantic themes, and
by examining ways in which transatlantic cooperation
can address a variety of global policy challenges.
In addition, GMF supports a number of initiatives to
strengthen democracies. Founded in 1972 through
a gift from Germany as a permanent memorial to
Marshall Plan assistance, GMF maintains a strong
presence on both sides of the Atlantic. In addition to
its headquarters in Washington, DC, GMF has seven
offices in Europe: Berlin, Bratislava, Paris, Brussels,
Belgrade, Ankara, and Bucharest.