The Transatlantic Relationship: Innovation and the Transatlantic Partnership

The Transatlantic Relationship: Innovation as a Key Component to Strengthening the Transatlantic Economic Partnership

Mr. Angelos Pangratis, EU Delegation
to French American Chamber of Commerce of Washington DC

Washington D.C., April 21, 2010

Innovation in the current economic context

Our discussion today takes place against the backdrop of the worst economic crisis in decades. While it is true that trade fell off a cliff last year, things could have been much worse. The existence of a multilateral system – and, in particular, the role of the G20, played an important role in creating a coordinated action.

We are now facing the challenges to end the stimulus, while supporting sustainable growth. The focus must be on “exiting” the stimulus into a new economy – a green economy. Accomplishing this demands increased policy focus on innovation.
In addition we are facing structural changes, such as globalization, climate change and aging populations, which all are big challenges that increase the need for a strong focus on innovation.

Europe 2020 a new economic strategy

To put the innovation strategy in a broader context, the Commission in March issued its Communication on the Europe 2020 strategy, laying out its vision on how the EU can achieve a more sustainable, smarter and greener economy in the next 10 years. Europe 2020 is about an open Europe in a globalized world, where a rules-based international framework is the best way to exploit growth and employment opportunities.

The biggest challenge as we emerge from the economic downturn is to address Europe’s structural weaknesses. We need to do this against a backdrop of increased competition from developed and emerging economies and against the challenge of climate change, which requires drastic action.

However, these challenges also provide an opportunity to put the EU on a more sustainable growth path for the future. To that end, the Europe 2020 strategy highlights three priorities: smart growth, green growth, and inclusive growth.

To guide efforts and steer progress, the strategy sets out five goals:
• 75% of the population aged 20-64 should be employed
• 3% of the EU’s GDP should invest in R&D
• The “20/20/20” climate/energy target should be met. As a matter of fact EU is considering a target of 30 percent reduction of greenhouse gases to be met by 2020.
• The share of early school leavers should be under 10% and at least 40 % of the younger generation should have a degree or diploma
• 20 million less people should be at risk of poverty

Current innovation instruments and the future of European innovation policy

The 7th framework program supports a wide range of European participants, including private companies, public organizations, individual researchers, as well as researchers and organizations outside the European Union. The program runs from 2007 to 2013, with a total budget of €50.5 billion.

The Competitiveness and Innovation Framework program (CIP), which aims at small and medium enterprises (SMEs), provides support for innovators through financial and services support. The program runs from 2007 to 2013 with an overall budget of €3621 million.

To provide a strategy for how to go forward with the research and innovation parts of the Europe 2020 agenda, the Commission is planning to release a Research and Innovation Plan this coming fall.

As a part of the work to put together these new ambitious policies to foster innovation, a public consultation on community innovation was held late 2009.

The plan will refocus research and innovation policies very clear on the three orientations:
• Refocus research and innovation towards the grand challenges for the future such as: energy security, food security and an aging population.
• Recognition of a weakness – We are not good enough in putting innovations into the market. A strong science base is not enough in its own; we must be able to put inventions into products and services.
• A wider concept of innovation – stressing other forms of innovation less related to research spending such as business models, and innovation in the big service sector.

Trade and the Transatlantic Economic Council

The European Trade policy has three dominant orientations: 1) delivering on what negotiations we have started – or in the case of Singapore and other Asian countries – are about to start; 2) identifying trade-opening initiatives for sectors of the future (clean tech / high-tech products and services and on international standardization; 3) strengthening strategic relationships with key partners such as China and the US.
For all the talk of the dawn of a Pacific Century the Transatlantic relationship remains the foundation of the global economy. The EU and the US are each others’ most important trade and investment partners. Total commercial exchanges reach €3 trillion annually, and more than 14 million workers depend on it. Two thirds of our commercial relationship consists of investment (the total investment stock in both markets is around €1 trillion and Europe alone accounts for 71% of America’s inward investment stock).
The Transatlantic economy is so huge it is inevitable that trade disputes arise from time to time. However our trade disputes represent less then 2% of the value of our total trade. A great majority of our trade flows unimpeded.
Our markets are highly integrated and tariffs are relatively low. So the remaining irritants and barriers in the transatlantic market are regulatory in nature, and therefore also more difficult to solve.
Better upstream coordination is a major objective in our trade relations with the US administration. This is a key tool for dispute prevention.
This is where the Transatlantic Economic Council (TEC) can provide important added value. We see it as the main vehicle in our economic relations with the US.
In our view TEC needs three legs: a) strategic horizon, b) regulatory dialogues/convergence, and c) specific deliverables.

Transatlantic Innovation Action Partnership

Innovation is an important part of the TEC and the fourth TEC-meeting agreed to establish a new U.S. innovation Action Partnership to accelerate the efforts to spur growth, productivity and entrepreneurial activities by sharing best policy practices and identifying steps that will improve policy environment for innovation. This is not only to complement the current regulatory cooperation, but to embrace new areas of cooperation.

While the TEC as we know it today works on better mutual recognition of exciting regulation, the Transatlantic Innovation Partnership will target future innovation such as electric cars, nanotechnology, and bio-based products, which calls for new regulations and standards.

Both the European Commission and the US organized broad and transparent stakeholder consultations. The European Commission organized a workshop last January and analyzed all the input received.

The stakeholder consultations did not only suggest specific technology areas and industry sectors such as nanotechnology, Energy, Health IT, ICT, and raw materials, but they also stressed the importance of innovation policy exchange through policy learning/sharing of best practices and the harmonization and development of new standards.

Both sides agreed that the Action Partnership will not duplicate ongoing sectoral dialogues. Three priority areas – nanotechnology, raw material, and bio-based products – have been indentified as not sufficiently addressed by existing cooperation.

First, nanotechnologies are addressed as a subtopic of the regulatory dialogues on chemicals (ENTR), consumer product safety (SANCO), and in joint collaborative R&D projects (RTD). Still there is an unleashed potential to promote mutual understanding of the benefits nanotechnology can deliver and the potential risk for health, safety, and environment.

Second, a sustainable and secure access to essential raw materials is of vital interest to Europe and the U.S. – an area with opportunities for cooperation within a range of fields including trade and research.

Last, the EU and the U.S. have both placed innovation for a greener economy at the heart of their political agenda, a process where bio-based products play an important role. Cooperation in this field would build on existing linkages (EC-US task force on biotechnology Research and in coordination with relevant activities under the EU-US Energy Council).

The U.S. and EU face many of the same challenges and opportunities; increasing mutual learning and understanding on innovation policy is something both sides will greatly benefit from.

The European Innovation Scoreboard is an instrument developed under the Lisbon strategy. It provides comparative assessment of the innovation performance of the EU member states and some other nations including the United States. To promote greater understanding and transparency and to provide a more solid basis for further activities on innovation issues, efforts to create joint innovation metrics including methodology and joint surveys present a great opportunity.

The European Commission and the United States Department of Commerce are currently working towards an agreed work program with a list of clear expected deliverables for the Innovation Action Partnership.