May 20, 2016
(as prepared for delivery)
It is a pleasure to join all of you today. Let me begin with a “thank you” to the superb team at AmCham. Your excellent work to promote the interests of American companies in Bulgaria is vital to their success. Although I am a few months late, I do want to congratulate the AmCham on its 20th Anniversary. I am really sorry I missed the celebration, which I understand was the hottest ticket in town.
So, congratulations to Krasi and to Valentin and to all of you – in the 20 years since the AmCham was founded – according to President Plevneliev, a group of visionaries over some margaritas came up with this brilliant idea – the AmCham has become Bulgaria’s premier business organization and a valued partner for all of us at the U.S. Embassy. The strong commercial partnership that we have built with Bulgaria over the past 25 years would not be the same without this vision and without your energy. Let’s give the AmCham a round of applause – you all deserve it!
Let me start by saying that promoting economic growth is one of my top priorities as U.S. Ambassador to Bulgaria. Indeed, in his letter of instruction to me, President Obama stated: “Our security and prosperity are inextricably linked with those of other countries and people around the world. To strengthen both our national and global economies, we must expand trade as well as financial and scientific cooperation…”
I will do everything in my power to advance this objective, and I want to work with all of you to do so.
Expanding our commercial partnership is important for our businesses, but it is also important to the people of Bulgaria as well. With economic growth come rising incomes and prosperity for all levels of society. And, such growth could also help stem Bulgaria’s demographic decline. We want to see young people stay in this country, and those who have left should feel optimistic about this country’s future to return, start new businesses, and help shape this country’s future.
Every one of you represents an American success story. Your businesses are the building blocks of our commercial partnership and of our two countries’ prosperity. In my three months in Bulgaria, I have had the pleasure to join some of you as you celebrated key milestones – opening new facilities, expanding your operations, or profiling technological innovations. Each time, I was impressed by your success, and each time, I was reassured that the foundation of our commercial and investment partnership is strong.
But that foundation has also required the active engagement of the AmCham and its committees, which have not been shy about raising the difficult issues with the Bulgarian government. You have had an ongoing dialogue with the government about the business climate, transparency, and reforms in various sectors of the economy.
I know that the AmCham joined other business chambers to highlight for the government the need for additional judicial reforms in a January letter.
It is clear that these discussions and advocacy are yielding results. Just ask our two U.S. thermal power plants! In addressing this long-standing dispute, the government had to make some tough – unpopular – decisions. But, in making those decisions, the government also sent a powerful message to investors, domestic and foreign: Bulgaria honors its agreements, and it is committed to reforming its business climate. All of you helped contribute to this successful outcome.
You are also making a difference in the regulatory environment: the Bulgarian government has just made it a law that every proposed regulation must first undergo a regulatory impact assessment to determine its economic consequences before the measure can be considered by parliament. This is huge. Again, AmCham can take credit. In late 2014 the AmCham partnered with our Embassy and others to organize a conference to advance this objective. Congratulations!
Let me now turn to the broader context of these successes and the U.S.-Bulgarian partnership. Although the United States and Europe face a multitude of challenges, let me use President Obama’s words to underscore just how important and successful our trans-Atlantic partnership has been. In his “Address to the People of Europe” in Hannover last month, President Obama said:
“Consider what we’ve done in recent years: Pulling the global economy back from the brink of depression and putting the world on the path of recovery. A comprehensive deal that’s cut off every single one of Iran’s paths to a nuclear bomb – part of our shared vision of a world without nuclear weapons. In Paris, the most ambitious agreement in history to fight climate change. Stopping Ebola in West Africa and saving countless lives. Rallying the world around new sustainable development, including our goal to end extreme poverty. None of those things could have happened if the United States did not have a partnership with a strong and united Europe. That’s what’s possible when Europe and America and the world stand as one. And that’s precisely what we’re going to need to face down the very real dangers that we face today.”
From global challenges to those closer to Europe, the United States and its European partners are standing shoulder to shoulder. We recognize that Europe is facing multiple threats and challenges, and we are committed to join Europe to address them. In the face of these challenges, some in Europe have begun to question the viability of the post-World War II institutions that have been so tremendously successful in anchoring the continent’s progress, peace, and security. Again, as President Obama said in Hannover: “your accomplishment – more than 500 million people speaking 24 languages in 28 countries, 19 with a common currency, in one European Union – remains one of the greatest political and economic achievements of modern times.”
And this is why President Obama has been unequivocal about Brexit. During his recent trip to London, President Obama said: “The United States wants a strong United Kingdom as a partner. The United Kingdom is at its best when it’s helping to lead a strong Europe.
In the 21st century, the nations that make their presence felt on the world stage aren’t the nations that go it alone but the nations that team up to aggregate their power and multiply their influence.”
Our partnership with the EU is strong. And it is indispensable. Bulgaria is a vital member of this Trans-Atlantic partnership. This is why we recently welcomed to Sofia Deputy Secretary of State Tony Blinken. As he stated both publicly – and privately in his meetings with the government – the goal of his visit was to reaffirm our bilateral partnership and to strengthen our cooperation across the key areas that underpin this partnership. Economic and energy cooperation was at the top of his agenda in all his meetings, and he urged Bulgaria’s leaders to continue the progress on reforms.
During his press availability alongside Foreign Minister Mitov, Deputy Secretary Blinken gave an excellent summary of why the Obama Administration has been working so hard to strengthen the Trans-Atlantic commercial relationship and advance negotiations of the Trans-Atlantic Trade and Investment Partnership (TTIP):
“Trade is happening one way or the other. The question is, who is going to set the rules? Who is going to shape the way that trade happens? And if we are doing it together , we are going to do it in a way that sets the highest standards – for protecting workers, for protecting the environment, for protecting intellectual property, for having transparency. That is the strength of the agreement that we have already reached in Asia that covers 40 percent of world GDP. That will be the strength of the T-TIP agreement when we reach it in Europe. It will be a race to the top so that our workers and our people not only benefit from trade, but are protected at the same time. It’s going to remove barriers to trade, and it’s going to remove red tape and bureaucracy, simplify procedures. And what that means is, as well, more investment will come here to Bulgaria. More investment means more jobs. It means more growth for the economy. Everyone can be lifted up together and, again, with the highest standards, not the lowest standards. That is the potential. Now, in any of these agreements there are very difficult, complicated issues to work through. And in addition different countries have national priorities, national concerns. They have to be reflected somehow and protected in the agreement. And in any negotiation, as the agreement is being negotiated, different counties take different positions, as a matter of negotiation, that don’t wind up in the final product.
But we have, as we have already demonstrated in Asia, an agreement that is lifting everyone. We have the potential here with T-TIP in Europe to do exactly the same thing.”
In short, we have in TTIP the best opportunity in a generation to build upon the U.S.-EU economic relationship. We already trade extensively and invest heavily in each other’s economy. But we can make it easier. We can make sure that small business owners from Sophia West Virginia to Sofia Bulgaria can reach across the Atlantic to find new customers and sell more. We can reduce the number of forms that are required at the border. We can reduce unnecessary hurdles. And we can set an example for emerging economies that modern trade requires strong labor and environmental standards and you don’t have to sacrifice standards to do so.
But what does this mean for Bulgaria specifically? Nearly $2 billion worth of goods and $1 billion worth of services are currently traded across the Atlantic between the United States and Europe every single day. The U.S.-Bulgarian trade is clearly much smaller, but in some areas we have seen tremendous growth: we have seen a 400% increase in U.S. chemical exports to Bulgaria over the last two years, and a 100% increase in medical equipment sales. Again, these successes are your successes – Congratulations!
We have also seen growth in Foreign Direct Investment, with American companies leading in sectors such as Information Technology, energy, electronics, and automotives. In the last few years, there has also been an increased focus in software development, business process outsourcing and building services for technical maintenance.
TTIP aims to make your work easier, and it should – in particular –
have a positive impact on our small and medium enterprises (SMEs). According to a study published by the European Commission, SMEs stand to benefit the most from TTIP. In Bulgaria, 87% of all exporters to the United States are SMEs, accounting for nearly 40% of total goods and services bound for the United States. And, the Bulgarian Academy of Sciences has done some research that estimates TTIP will increase Bulgarian exports by 7.7%, and likewise will increase domestic labor productivity (measured as GDP per capita) by 6.8%.
TTIP would provide these benefits in a number of ways. For example, it could make the exporting process even easier. I mean, after all, SMEs by definition do not have the manpower to dedicate to figuring out all the complicated paperwork, duties, VAT regulations, varying and duplicative safety standards and myriad other issues that have to be considered for a product to be exported.
Let me give you an example. One of the biggest complaints small businesses have about exporting is the need to file reams of paperwork, and even then there is uncertainty because the manufacturer is never sure how a product will be classified by customs agents in the U.S. or in Europe. This classification in turn affects customs duties.
Advanced electronic filing of paperwork and advance rulings on customs classification and valuations would eliminate the uncertainty in this process.
SMEs typically ship in smaller quantities, meaning lower total values of shipped goods. Currently, the EU de minimis for customs duties is 150 euro and in the U.S. it is $200. When you think about it though, EU citizens arriving in the U.S. by plane are, in most cases, able to bring in up to $800 worth of duty free goods as accompanied baggage. So why are we levying duties on small shipments and letting carried goods sail through? In TTIP, we could agree to waive tariffs and other trade-related fees for all shipments that come in under an agreed-upon value.
Speaking of tariffs, there is a perception here in Bulgaria that tariff rates are already relatively low and, therefore, reducing or abolishing them would have little effect on U.S.-Bulgaria trade. However, according to a study published by the Institute for Market Economics (IME), 50 percent of Bulgaria’s exports to the U.S. are subject to tariffs and, of these, 40 percent are taxed at an above average rate. IME concludes, therefore, that the direct positive effect of the anticipated abolition of tariffs will be especially pronounced for 40% of Bulgarian exports to the United States.
And why is this important? Eliminating duties will result in savings for consumers in the checkout line and in additional investment resources to grow businesses, build new factories, hire new employees, invest in modern equipment, buy the latest software – all to the benefit of both of our economies.
Let me also briefly address something that is important to all of us – consumer protection. We all want to ensure that consumers have access to the highest quality, safest, and most effective products available.
But we also want to ensure that these products are delivered at a cost that the consumer can afford. Our respective regulators have put in place standards, labeling requirements, safety thresholds and the like to ensure that we protect our consumers, our workers and the environment. But often times the approach our respective regulators take is slightly different such that businesses are required to make two different products or forgo one market in favor of the other.
Where possible, we should seek to align existing regulations and cooperate going forward as we develop new ones. We should avoid inadvertent differences that do not result in better protection but merely add unnecessary costs. Let me give an example. Our pharmaceutical regulators have the daunting task of making sure the drugs that our consumers purchase either over the counter or by prescription are safe. This is obviously a good thing. However, do we really need to have our inspectors conduct numerous, oftentimes redundant, inspections of manufacturing plants in each other’s markets when both sides already have rigorous systems for ensuring drugs are produced safely? Wouldn’t it be better to have our scarce human resources, our inspectors, focused on countries where we know there are problems? So why not agree, through TTIP, to have inspections mutually recognized?
There is another area where this concept of alignment also comes into play, and that is in maintaining a free and open internet while protecting intellectual property rights and ensuring privacy protection. And this, in turn, goes to the very heart of innovation itself. For where is the most innovation occurring, not only in Europe and the United States, but around the world? Online. Digital trade of goods and services is an enormous part of our economic relationship. According to a study done by Cisco, Western Europe had 1.9 billion internet-connected devices in 2014, and this will rise to 3.5 billion in 2019.
This is why we are working closely with the European Commission on a number of issues that are critical to the continued growth of online commerce, including the Digital Single Market. I know that this is of particular interest to many in this room given the number of companies that outsource back office operations and other functions to very capable Bulgarian subsidiaries. We need to avoid at all costs localization requirements that would require companies to put servers and other infrastructure (and the staff to maintain them) in every market they serve. That idea just doesn’t fly in this era of cloud computing and digital trade.
Let me also touch on one of the more controversial topics: agriculture. There are those in Europe, and here in Bulgaria as well, who are stoking fears that U.S. agricultural exports will overwhelm European markets. Or that the United States will force the EU to lower its food safety standards. Or that we will force EU consumers to purchase food containing biotech products. None of these could be further from the truth. Let me dispel some of these myths.
First, according to customs data, U.S. worldwide agricultural exports reached over $169 billion in 2015, but only $16 billion of those exports went to the EU. Meanwhile, EU agricultural exports to the U.S. have soared – from about $6 billion in 1995 to over $21.6 billion in 2014. That indicates there is a genuine problem with market access for U.S. agricultural products in Europe.
Second, many here in Europe have the mistaken belief that American agriculture is dominated by “factory farms.” Well, that’s just not true. 96 percent of crop-producing farms in the United States are family owned. And, family farms represent 87 percent of our agricultural production. The size of farms in the United States has hardly changed in the past 30 years.
Third, neither the United States nor the EU has any interest in lowering standards for food safety. What we share is a belief that consumers benefit from increased choices on the grocery shelf and want to be assured that what they are buying is safe. Consumer preferences for safe, healthful, and nutritious foods are already driving intense competition in U.S. and EU food markets. In fact, more agricultural trade between the United States and the EU benefits not only our two regions but, by basing food standards on science, we can set standards for safety and nutrition that other countries will follow. This should not only provide a model for food safety in third countries, but should also make it easier for businesses in both the EU and the United States to compete in those markets, and for those third countries to compete in ours. When we raise the bar, whether it’s on food safety, environmental protection, or consumer protection, it’s not just the United States and the EU that wins – the world wins.
The thirteenth round of the negotiations wrapped up in New York at the end of April and I am sure there will be more rounds to come. Again, I quote President Obama who, at the outset of these negotiations said, “There are going to be sensitivities on both sides. There are going to be politics on both sides. But if we can look beyond the narrow concerns to stay focused on the big picture – the economic and strategic importance of this partnership – I’m hopeful we can achieve the kind of high-standard, comprehensive agreement that the global trading system is looking to us to develop.”
He’s right, of course. TTIP is the best opportunity we have reinforce the economic foundation of the world’s most important political and security relationship – the one on which global prosperity and stability depend. We can ensure that the United States and the EU continue to provide the preeminent economic model for the global community.
Three weeks ago, President Obama spoke to the people of Europe about the challenges threatening our Trans-Atlantic community and the future we can build – and are building – together by standing by our values and each other. I am proud to have this opportunity to work with all of you on building that future.