U.S. Embassy Tallinn January 6, 2014
(Insights delivered at the EU Representation House in Estonia)
Good morning. It’s a pleasure to participate in this seminar and I want to thank the European Commission’s Representation in Estonia for inviting us to co-host the event. It’s encouraging to see the interest in this topic and an honor to share the stage with Signe Ratso, the Director of DG Trade.
The Transatlantic Trade and Investment Partnership Agreement -- T-TIP -- is without a doubt President Obama’s most important economic policy initiative with Europe. Its potential to grow a trading relationship that already encompasses 40 percent of the world’s GDP is substantial and clearly worth the joint effortsthat this will take.
While I am unable to match Signe’s level of expertise as a trade negotiator, I would like to share the insights I’ve developed while promoting growth in the Estonia-U.S. commercial relationship to talk about elements I believe are most important for Estonian companies. I also want to offer some success stories in the bilateral relationship -- stories of Estonian start-ups successfully entering the U.S. market and American companies investing in Estonia.I sometimes worry that Estonians don’t fully appreciate how successful andcompetitive they’ve become. It’s important to highlight these successes both to inspire future entrepreneurs and to overcome any misperceptions about Estonia’s ability to prosper in global markets.
Overall Impressions about Estonia
I have served many places around the world including Bulgaria and Hungary. Estonia is – bar none -- the most entrepreneurial country I have worked in and the one that most closely resembles the U.S. in its business environment. Estonian entrepreneurs are creative, willing to take risks, willing to fail and then ready to start again. What seems common in Estonia is actually fairly unique and a national competitive advantage. It fits well with Estonia’s commitment to personal freedoms, human rights and a vibrant free-market environment that will benefit from – in the context of TTIP - liberalized trade.
Why T-TIP Matters
Now – on to the question of why T-TIP matters. Signe eloquently captured the perspective from the EU. I would like to add the U.S. perspective.
When the negotiations launched lastJuly, both the US and the EU agreed that the Transatlantic Trade and Investment Partnership Agreement must be an ambitious, comprehensive, and high-standard trade and investment agreement that offers significant benefits in terms of promoting U.S. and EU international competitiveness, jobs, and growth.
The EU is already our largest trading partner, with $2.7 billion worth of goods and services trade flowing between us each day, and nearly $4 trillion invested in each other’s economies. More than 13 million jobs in the United States and EU already depend on the U.S.-EU economic partnership, and T-TIP will result in more trade, more jobs, and more opportunities, including for small businesses in both regions.
It’s also about strengthening the entire transatlantic relationship, which has long been a strategic partnership. By strengthening our economies together, the United States and the EU will be better able to address today’s most urgent global challenges.
T-TIP can also set high standards and pioneer new rules for the global trading system.The United States and EU have some of the most advanced regulatory systems in the world, and T-TIP will build on our shared commitment to strong protections in the public interest. T-TIP seeks to bridge divergences between our regulatory systems to prevent bureaucratic obstacles from undermining good public policy.
For the U.S., our specific T-TIP goals are clear. We want to see a further opening in EU markets, increasing the $458 billion in goods and private services the United States exported in 2012 to the EU, our largest export market. We also seek to strengthen rules-based investment to grow the world’s largest investment relationship. The United States and the EU already maintain a total of nearly $3.7 trillion in investment in each other’s economies.
We seek to eliminate all tariffs on trade and tackle costly non-tariff barriers that impede the flow of goods, including agricultural goods and improve market access on trade in services.
We seek to significantly reduce the cost of conflicting regulations and standards through greater compatibility, transparency, and cooperation, without sacrificing our high levels of health, safety, and environmental protection.
We seek to develop rulesand new modes of cooperation on issues of global concern, including intellectual property, state-owned enterprises and discriminatory localized barriers to trade.
And finally, we seek to promote the global competitiveness of small- and medium-sized enterprises.
Need a Cooperative Effort to Promote T-TIP
TTIP is clearly a major undertaking.With our years of trade cooperation, tariffs are already low. The largest challenges left are non-tariff barriers – many of them sensitive -- that have been historically hard to address. But the work with the European Commission over the past year gives us confidence that we can make substantial progress on difficult issues, including some that have defied solution for many years.
Turning to the private sector, weare dependent on your help to ensure we are focusing on issues that will truly make a difference. We will need your continuous input in helping us to prioritize our activities on those areas that will have the most beneficial impact on our consumers and business.
Both the U.S. and the EU have sought early engagement with businesses, consumers, regulators, and trade agencies to create a negotiating environment supportive of a successful outcome. There has been the recognition that the bureaucratic framework must move at the same speed as business if we’re serious about supporting entrepreneurship and innovation.
For the U.S. Embassy, T-TIP is one of our highest priorities. We are working to ensure that Estonian understands our commitment to a successful agreement and that Washington hears any concerns about the process or the goal. We also turn to the business community to help us build support for TTIP and give us the opportunity to address your concerns.
Why T-TIP Matters for Estonia
I’ve talked about the U.S. interest in TTIP. Let me now spend a minute on why I think TTIP matters for Estonia.
The U.S. and Estonia have a robust trading relationship and one that is primed for further expansion. Bilateral trade in goods and services exceeded 700 million dollars in 2012.U.S. Foreign Direct Investment has grown 72 percent since 2010 to almost half-a-billion dollars while Estonian FDI in the U.S. has increased five times as compared to 2010 and now stands at almost 100 million dollars.
Hidden in those numbers are some major success stories. For example, Molycorp, the U.S. rare earths processor, and Eastman Chemical have major facilities in NE Estonia and their investments continue. Molycorp just built a new testing facility that brought additional high-skilled jobs to Sillamae. Here in Tallinn, Flir Corporation, maker of infra-red imaging devices sold around the world, is also increasing its investment. I am especially pleased that the American Chamber of Commerce in Estonia now represents more than 130 firms and is the biggest foreign trade organization in the country. .
While interest in the different TTIP chapters will vary between countries, let me focus on a few that will likely have the most post impact for Estonia.
T-TIP and SMEs
With the possible exception of Eesti Energia - Estonia is a country of small and medium sized companies, or SMEs. Many people are surprised to learn that the majority of employment in the U.S. is also tied to SMEs. Both the U.S. and EU have recognized the need to include SMEs as a separate negotiation issue under TTIP because of the unique way in which they operate and the extra help needed in order for them to successfully compete in aglobal marketplace.
The goal of the TTIP SME Chapter is to strengthen, further formalize, and expand upon existing U.S.-EU cooperation in areas such as access to finance, entrepreneurship, standards, and IPR, and to establish ongoing projects to enhance the trade and investment opportunities of U.S. and EU SMEs, in the transatlantic market and beyond.
In December 2012, the U.S. Commerce Departmentalso signed a Memorandum of Understanding (MOU) with the EU Commission aimed at improving SME cooperation. Specifically, the MOU promotes joint networking opportunities, website sharing, and cooperation on business events all aimed at helping SMEs grow their businesses. We encourage you to consider getting involved with the initiative to help T-TIP be a catalyst for increasing market access for SMEs.
E-Commerce and E-stonia
E-commerce is also a crucial part of the agreement and an area that can create new opportunities for Estonian entrepreneurs. With this audience, there’s no need to explain the success of the ICT sector in Estonia. As home to Skype and a vibrant start-up ecosystem, there are already strong ties between the technology ecosystems in the U.S. and Estonia. This is an area where our Embassy has focused considerable attention over the last few years -- specifically helping Estonian tech firms enter the U.S. market. We recently hosted an event on this topic in cooperation with Techopol and work collaboratively with Enterprise Estonia on the same issue. I’m also very proud of the Estonian-American Innovation Award – which recognizes successful Estonian innovation thatalso includes a U.S. nexus. On January 23, we will announce the third winner of this annual award. The first two were Grabcad and Zeroturnaround both now operating in Estonia and the U.S.
I know there are some sensitivities regarding Estonian firms moving to the U.S. – but successful Estonian companies in the U.S. benefit both economies. By entering the U.S. market, companiesgain access to a much larger customer base and easier access to venture capital. This has allowed Estonian firms to expand their operations and hire more staff in both the U.S. and Estonia. The most common structures use Estonia for research and development, design and programming while focusing their U.S.-based efforts on marketing and finance.
Just a few examples:
• Grabcad: Grabcad is the world’s largest crowd sourcing platform for mechanical engineers. It is now headquartered in Boston but has its main programming team here. Grabcad recently conducted a jet engine bracket design competition with General Electric. The results were so unexpectedly successful that GE is sponsoring a film about the competition.
• Erply: Erply is another great example. The company developed a point of sale system and back office solution for SMEs and ultimately opened an office in NY to reach the U.S. retail market. Their client base continues to grow exponentialy, creating new jobs in both countries.
And it is not just “technology” companies who are succeeding, but also those that have created parts of Estonia’s e-governance system like Datel, which signed its first U.S. government procurement contract in the U.S. this past June - and Guardtime.
Technology companies face all the challenges of SMEs with some additional concerns in the areas of intellectual property and flow of services – all issues TTIP hopes to address
Not Just Tech, Manufacturing as well
There is obviously more to the Estonian economy than technology firms. There are also companies making quality products that are exported around the world.A perfect example is EstoniaPiano making world class grand pianos and exporting the great majority of its production to the U.S. -- Bole Floor and Formin Paldiski has developed a unique process to cut wood along its natural curves, increasing the yield of each tree. Click and Grow is another great example. The “smart pot” company makes their products here in Estonia and exports to the US. President Ilves presented President Obama a Click n Grow plant as his official gift when they met last August for the Baltic Summit.
The ultimate goal of T-TIP is to create new opportunities for U.S. and EU exporters by further eliminating tariffs and, as I noted earlier, reducing the obstacles raised by differences in regulations and standards.
Thank you again for the opportunity to join you today. We’ll be looking for your input and support in ensuring TTIP addresses the issues important to you and is concluded expeditiously. I’m happy to answer any questions you might have today or any time in the future.
Why T-TIP Matters for Estonia: Insights from the U.S. Ambassador to Estonia