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Transatlantic Co-operation
I would like to thank Richard [Fursland], Michael [Maibach] and Peter [Hunt] for inviting me to join you today. I had the pleasure of meeting many of you a few weeks ago in Washington at the Leadership Awards ceremony of the European-American Business Council. It was an honour to receive this distinction with SEC Chairman Chris Cox. As many of you know, I believe our transatlantic partnership is particularly important in the borderless world in which we now live. Indeed I believe that transatlantic relations, because of our close ties and common values, are the very laboratory of globalisation.
Transatlantic cooperation has come a long way and has gained momentum in the past eighteen months or so. Americans listen to Europeans and vice versa. This is obvious now. It was not so obvious in the past... This change of attitude is certainly due to the need to deliver global solutions to global problems. What was considered unthinkable five years ago has now become reality:
- We have solved the issue of the deregistration of foreign issuers in the US – so those issuers who want to leave US markets are free to do so and are not prey to the Hotel California syndrome: "You can check out any time you like but you can never leave". Remember?
- We are about to deliver on accounting. The SEC will accept accounts prepared using IFRS. They are even thinking of allowing their own issuers to use IFRS. So we could all speak the same language one day. Speak of reducing red tape and burden on firms. This is probably as good as it gets. Now it is for the EU to accept US GAAP without reconciliation. It is my firm intention to deliver our part of the deal.
- We are also making fast progress on auditing. The idea is that we co-operate and rely on each other for the oversight of auditing firms.
- We also have very ambitious plans for cooperation on securities regulation. We want to rely on each others' regulation, enforcement and oversight to allow exchanges and broker-dealers to operate on both sides of the Atlantic. Not an easy task, but an inevitable one in times of dematerialised and borderless markets.
Of course, the success of our cooperation is the result of many factors. Market forces, financial innovation, regulatory reform and elbow grease. It is also due to your ongoing call for reform. And your unqualified support to our work. I am also conscious of the sterling efforts made by a number of key individuals on both sides of the Atlantic to get the momentum going behind mutual recognition. We owe it to the hard work of all to ensure that this momentum carries through the changes that will take place in personnel in both the US and EU.
This good cooperation will not be affected by the financial turmoil. On the contrary. The EU and the US have already successfully overcome a number of hurdles together and we need to continue on this road. If the turmoil has shown something it is that our markets are intertwined. I won't enter the very entertaining discussions of prestigious academics on whether or not certain world economies can be "de-coupled" from the turmoil. At this stage this is to me a bit like discussing the sex of angels. But what is abundantly clear is that our financial markets are intrinsically intertwined. Just look at how quickly the problems in the US sub prime market spilled over to Europe. The extent of the losses being recorded in EU financial institutions shows how interdependent our financial markets are. Working together, finding common solutions is the only sensible way forward.
If people needed any convincing about how important Europe and the US are to each other let me quote a couple of statistics from a recently published study on the Transatlantic Economy:
- In 2006 Europe accounted for 59% of US foreign direct investment;
- US assets in the UK are the largest in the world totalling $2.3 trillion. In second place another European country, the Netherlands;
- In my own country, Ireland, Corporate America's investment position in 2006 was $83 billion. This was larger than America's total investment stakes in the much talked about BRICs i.e. Brazil, Russia, India and China;
- For its part the US remains the favourite investment destination for EU investors. No other region in the world invests as much in the US. In 2005 EU investment in the US totalled €29bn versus a total investment of €8bn in China and India.
I could go on. But you get the picture. Money talks as they say. And the size of our investments and interests in each other's economy should have people shouting in the streets. Shouting for joy for the investment, jobs, technology that our interdependence represents.
The global dimension of the Single Market
The transatlantic relationship illustrates how important external cooperation has become for the Single Market. When we started thinking about the Single Market we were only concerned about the relations between Member States. The idea was to facilitate the free movement of people, goods, services and capital. Obviously this is still important today. The Commission has just published a big Review of the Single Market a couple of months ago, acknowledging that we are not quite there yet and that there is no such thing as the "completion of the Single Market". Not any time soon at least. It is important that we continue our efforts for the benefit of our businesses and our citizens. Today, when we have just celebrated the 50th anniversary of the beginning of our European endeavour, the external dimension of the Single Market has become at least as important as the internal one. One could almost say that the internal dimension of the singe market is important because of its external dimension. Think of those who are afraid of globalisation. Of the siren calls for more protectionism. I can understand the concerns of many citizens. But protectionism and new age colbertism are not the answer. The answer is the Single Market. Europe should not fear globalisation. It should shape it. With half a billion people our market is the world's largest exporter and importer. We have a more than 50 year experience of making rules which are compatible between different cultures, different legal systems, and different countries. This is our very unique know-how. Just think of the innovative and modernised regulatory and supervisory framework that has been set up over the last 15 years or so in areas such as financial markets, industrial product standards, environmental policy or telecommunication. Increasingly it is recognised that modern regulatory systems that can adapt to changing priorities can create a competitive advantage. In Europe we have learnt from how legislation is formulated in the US. Our Better Regulation approach owes much to the example set by the US in this regard.
A new approach to the Single Market
I have given you the global picture. But as I said earlier, the Commission has published its review of the Single Market last November. So before I finish – or should I say before I finish you of famish - I would like to say a few words about that. The diagnosis is that we are doing well but we could do a lot better. As far as my own portfolio is concerned, there is a clear shift to new priorities. I would highlight four:
First a shift to services. They account for 70% of EU’s GDP. Work is in full swing to transpose the Services Directive into national legislations by the end of next year. It will open service markets, improve legal certainty for businesses and consumers and do away with many administrative barriers.
Second a shift to the cross-border provision of retail financial services. For instance, we have asked industry to come up with a code of conduct to facilitate switching bank accounts within the same Member State. And we have also made it clear to industry that there should be no discrimination on the basis of nationality or residency when customers apply to open accounts cross-border.
Third a shift to responding to the needs of SMEs. For the EU economy to grow we need to let small firms grow big – as it is successfully done in the US. The European Private Company Statute which I shall present later this year will hopefully help improve the situation.
Fourth a shift to evidence-based policy making: We work hardest in those areas which can bring the biggest direct benefits to businesses and consumers. Basing ourselves on evidence of how markets work.
I hope I have provided some food for thought while depriving you from real food, and nourished you – intellectually at least... And for those of you still alive, I am looking forward to hearing your views and answering any questions.
