July 25, 2016
By Hendrik Bourgeois, General Counsel Europe – Government Affairs & Policy Europe, GE
From our founding 140 years ago by Thomas Edison, GE has been at the forefront of innovation. From the first incandescent light bulb to the first voice radio broadcast, from jet engines to x-ray machines, high efficiency gas and wind turbines, and now to the Industrial Internet, GE has sought to innovate solutions to the world’s most pressing problems—including the need for reliable energy, clean water, affordable healthcare, and safe transportation. While founded in the United States, GE is today also proud to be a European company. GE has over 100,000 employees in Europe, more than 120 manufacturing sites in Europe, achieves over € 23 billion in sales revenues in Europe, and it has located the global headquarters of a significant number of its businesses in Europe (these include those of GE Renewables, GE Oil &Gas, GE Grid Solutions, and GE Power Services).
GE achieved such remarkably strong European presence and success without having the benefit of a well- functioning, ambitious and comprehensive trade and investment partnership agreement between the EU and the US. Yet GE has been a strong advocate of the need to conclude such an agreement, to the same extent as a significant number of European based companies with a deep economic footprint in the US, including for example Siemens, Airbus, and BMW. There are many reasons why even companies like GE, who stand to benefit less in terms of direct market access from the initiative than for instance SMEs, care deeply about TTIP.
First, TTIP will further increase our ability to do what we already have done so well: better accessing our respective markets as export destinations (and as sources of imports of inputs) to help support thousands of jobs in the US and EU, and also the thousands of SMEs that form our supply chain across many States in the US and many countries of the EU. And access to markets is only part of the story. Competing transatlantically also means being able to service our products, finance our customers, innovate across our borders, attract and retain top talent, and help our customers improve their efficiency by analyzing the data derived from their installed base. To this end, an increased ability to move people, capital, technology, and data are also critical elements of our transatlantic successes.
But second, and perhaps more importantly, TTIP holds the promise of setting the standard for global trade and investment protection rules. One of the most fundamental misconceptions of TTIP is that it is just about “opening the EU economy” or allowing EU firms to “better access the US market”. In fact, both the EU and US economies are already some of the most open in the world. Significantly, to the extent the two largest and most open economies in the world agree on those rules, TTIP will de facto set and raise the standards of global trade for the future, because joint US/EU benchmarks will provide strong incentives for other countries to follow. A related misconception is that there is little cost to doing nothing. In fact, failure to advance TTIP and their high standards around rule of law, level playing fields, IP protections, transparency, SOEs, environmental protections and other matters will cede the field to other trade blocs and multi-lateral trade architectures that are far less protective of these values, and which will not create the environment conducive to success for US and EU companies. The stakes are therefore high.
By and large, and certainly relatively speaking, transatlantic firms compete and operate globally under high (either US or EU) standards. GE, like many multinationals, doesn’t discriminate in its labour and employment practices, workplace safety rules, adherence to environmental rules, transparency and competition law standards, etc. based on where we engage in commercial or industrial conduct. We strive to adhere to these standards in a uniform manner, wherever we do business, even in countries where from a formal perspective high standards either do not exist or are not enforced. This means that we often compete with firms who do not operate under the same standards, and we occasionally lose business or operate at higher costs because of this: we often compete with state owned enterprises that enjoy special advantages, or for example with firms that invest less than we do in workers’ safety, emission reduction programs, or in anticorruption compliance resources. Herein also lies the importance of a successful TTIP agreement for transatlantic firms like GE, as a successful agreement would create a more level playing field, projecting on a global scale Western values – which are increasingly under threat –of market based economy, protection of property rights, democracy, and the rule of law.
Recently, EU Commissioner for Trade Cecilia Malmstrom illustrated this point very convincingly when she spoke at the OECD Integrity Forum in Paris. In her speech, the Commissioner explained that the EC will aim to include ambitious anti-corruption provisions in future bilateral trade agreements, starting with TTIP. This could ultimately result in anti-corruption commitments in future EU and US bilateral FTAs to enact legal tools, targeting the demand and supply side of corruption, covering all matters covered in the trade agreement, and increasing transparency and reporting. Leaving aside the moral and ethical drivers, companies like GE that operate under the strict requirements of the US Foreign Corrupt Practices Act or the UK Bribery Act in any event, have a clear and obvious strategic advantage in ensuring that strict anti-corruption standards are adopted and adhered to on a global basis.
Another example would be the establishment of much-needed rules for government procurement in TTIP. Unfair government procurement processes can significantly undermine market access for infrastructure companies like GE, whose clients are often governments or government-controlled companies, such as airlines and utilities. For instance, ambiguous procurement guidelines can effectively prevent transatlantic companies from bidding. A TTIP requirement of transparent and timely publication of tenders, assurance that technical specifications focus on performance and functional requirements rather than descriptive characteristics like a particular design, and requirement that tenders be treated fairly, impartially and confidentially, would help level the procurement playing field on a global scale.
TTIP is facing strong headwinds in Europe, to a significant extent because of a misplaced fear that it will lead to the lowering of European standards. This is exasperating for many transatlantic firms competing on a global basis. The reality is not only that in many areas US standards are higher than European ones (for instance for medical devices or automobile emissions), but that US and EU standards of trade and investment are often both very similar and much stronger than those of other regions in the world.
Many TTIP opponents disregard this fact and make exaggerated claims of differentiation. In a way, this is unfortunately not surprising, as this happens often among communities that are very closely related: to see oneself too much reflected and mirrored in a close neighbour threatens the sense of self, and one’s own perception of superiority. Failing to achieving this partnership agreement would therefore constitute a painful and unfortunate missed opportunity of raising global standards of protection for consumers, workers, the environment, and health & safety, all for the wrong reasons.
Hendrik Bourgeois is General Counsel Europe – Government Affairs & Policy Europe at GE. GE is a member of the American Chamber of Commerce to the EU.AmCham EU Trade