Speech before the Los Angeles World Affairs Council on March 14

Speech before the Los Angeles World Affairs Council on July 25 2002

Rockwell Schnabel
United States Representative to the European Union

Thank you very much, Maria [Hummer]. I couldn't believe it when I came in here today to find, in addition to my family who showed up, which I really appreciate, a table of friends that go back to the days in Los Angeles when we used to have lots of fun, a million laughs, and good times, while we were all building careers and doing things like that. It's amazing to find that somewhere along the line they managed to see some announcement and showed up, so I much appreciate that as well.

In the meantime, I've been on a speaking trip around the country and have been in about ten different cities, talking about [U.S.-E.U. relations], and the reason is that when I was asked to take this job by the president, he called me because originally I was going somewhere else in a different country, different job. He called me and he said, "Rock, you're the ideal guy for this job and I'm told that you have done this, this, and this, and you should consider doing it." I looked at the job and I found very few people that I could call who, first of all, could spell E.U. and, second of all, really knew anything about it, particularly out in this part of the world. Even if you go to New York and Washington, you find that there is a degree of knowledge that is rather vague and in Washington I found that a lot of people in Congress have no passports, so that probably means they haven't traveled outside of the United States to find out what the E.U. is all about.

So I spent about a month looking at [the job] and concluded that I'd like to do it because it is something incredible, and probably great. To a degree it's a secret that is going on and a lot of people in the United States must know about it because it is going to change all of our lives. By the end of this short speech I hope that you walk away at least recognizing that we've got something going on here that we need to pay attention to, because it is vitally important and is influencing everything we all do daily.

Jeanne Kirkpatrick has said the most important thing happening geo-politically in the world today is the development of the E.U. — very interesting, especially after the downfall of the Berlin Wall. The president very much agrees with that. What is happening is 15 countries coming together into a union operating in a lot of areas. I have to be very careful because there are a number of different representatives from these countries here, so whatever I'm going to say that is not correct, they're going to call me on it.

The European Union, together with the United States, constitutes 50 percent of the world's GDP while together we have 10 percent of the world's population. What I'd like to do is talk about how important it is and what is going on, including the major changes, why that matters to us, and ultimately what are we going to do about it.

But first, what is the E.U.? I know that all of you know what it is, so it will be redundant, but nonetheless I'll tell you a little bit about the background of it. It was basically built on the ashes of World War II. A lot of people say to me "Gee, do you have an embassy there? Do you have people there? Where is it located?" They don't know that this thing has been operating for 50 years under different names, but nonetheless going towards the same goal. It was put together to prevent another war and to build prosperity together. It has gone from a tariff zone to include political and economic issues as well as justice and home and foreign affair issues. You see in the daily papers that more and more of the E.U. representatives are getting involved in such things as the Middle East and what is going on in other parts of the world, where they play a major role.

The big changes are the following: The introduction of the Euro, the single currency. It's in place, it's operating, and, low and behold, it's actually selling at a premium to U.S. dollars. Hard to believe.

The next item is enlargement. It is 15countries today; ten countries are joining probably within the next year or so, so you will have a total of 25 countries with 500 million people.

The last item is the constitutional convention run by [former French president] Giscard d'Estaing, who was basically looking at the institutions of the European Union and the issue of democratic deficit — how do you get the Europeans to believe and to understand what's going on?, and how do they participate with a vote? The possibility exists that ultimately you will get a president, as we have a president, who will in effect be the spokesperson for the E.U.

The first item is the Euro. It's an historic event. It's never been done before. We had 12 of the 15 countries coming together and they now have the Euro as the common currency. It has created low inflation, low interest rates, and much more competition. You can, in effect, see the price of a product in northern Europe compared to southern Europe, and these prices are going to be evening out because of that. Basically, it is a symbol of shared sovereignty. A number of these countries have given up their sovereignty to an extent — trading in their stock, or their currency for something called the "Euro." And this happened very smoothly and most people in the United States didn't even realize what was happening. The press didn't make a big deal out of it. Even Wall Street didn't make a big deal out of it. To me, it was a huge deal. To Europe it was a huge deal, but it was done so smoothly that a lot of people basically didn't pick up on it.

The concern by people that it may become a reserve currency was something that the United States welcomes, because, of course, the United States has had the dollar which has always been, and will continue to be, in the foreseeable future, the currency. But slowly the European Euro will compete with us in that area.

The second item is enlargement. A total of ten new countries, primarily the eastern European countries that were a part of the Soviet empire, as well as the Baltics, and Malta, and Cypress, are joining, and a vote will be taken by the end of the year and most likely by the beginning of Article IV [the E.U. will] constitute 25 countries, 500 million people, and a GDP of something relatively close to the United States, probably in the $8.5 - 9 trillion area.

It's a very difficult club to join, it requires all sorts of things in order to join and it takes a lot of time. Recently, Myra and I were in Budapest for a visit with the leadership. Those people can't wait to get in. Why? The experience of smaller European countries who have joined the European Union has been very, very good. If you look at the economies of Ireland, Spain and Portugal you will find that those countries are doing exceptionally well. If you travel to Spain or to Portugal you can see that things are blooming, and those countries that I mentioned, the ten, that are waiting to get in and are looking forward to participating in the growth that they anticipate by joining the Union.

[number three is] the constitutional convention. Let me touch on this for a moment. As I mentioned, it is Giscard d'Estaing, the former president of France, who is the leader of this convention. They expect in a year or so to come up with a document that will in effect spell out some of the ways to run this European Union, including how and who are the people that will be running it, and the issue, as I mentioned, of how do you potentially get president who represents the people. Who will that be? And how will that person be elected ? — how will she be elected, in other words. It just seems to me that the younger people, particularly, look at me as the older generation that's on the way out. It is really the people in their 20s and 30s who are running this thing and those are the people that recognize that what is happening there is very, very powerful and a lot of them relate to it. I talk to people in Holland, for instance, that are in the universities, and people who say, "Yes. I'm basically a European." They all speak the language, not just in Holland, but all throughout Europe. English, of course, is the number-one language wherever you go, which makes it easy for us. Even in Brussels, where French used to be an extremely important language, today English is used most of the time in these institutions even though everything is translated into the languages of the membership.

Kissinger said one time, "You know, what I never know about Europe is, who do you call when you want to get to Europe?” When you call the United States, there's one guy that you can call and you know who it is and you pick up the phone and call him. In Europe, you don't know. I was at a summit recently in Washington where the U.S. and the E.U. met and on one side of the table we had our team and the president was in the middle and there was no question who was running this meeting. Guaranteed. On the other side were four spokesmen. They were valued people who had leadership positions in the E.U. and they were discussing different issues and different places. They were very, very sharp people, but there wasn't a person that spoke on behalf of the European Union. This issue may be resolved, as I mentioned, at the end of the constitutional convention.

Why does all of this matter to us? To you and me in Los Angeles? I met with the major newspaper here in town this morning, and they don't do a lot of writing about that necessarily. I was told, "Well, you know, yes, we know what is going on, but the issues of importance to our society once they get past the issue of just talking about trade, which is really a business thing, then we will probably be paying more attention to it." The fact of the matter is, the Europeans decided when they got together in Lisbon two years ago that ten years from that date they wanted to be the single most competitive economy in the world. They have a goal and they have a set of rules that they are pursuing to get to that goal. What we read about is that it is complex and nobody really understands what's going on. But little by little, it is happening. And when they recently had a visit in the United States of the equivalent of the U.S. secretary of finance he was received at the very highest levels talking about the financial integration of Europe. [That is something] you need to have, you must have, in order to operate a system that will attract companies and provide the capital to do that. This gentleman has an agenda, it was a five-year agenda, he is half-way through that agenda and is convinced that he will get there at the end of the day. It doesn't mean it's easy, but it's happening. So you find liberalization going on in Europe in areas such as financial services, as energy, telecommunications, and transportation.

We support a strong Europe. No question about. Somebody asked me the other day, a reporter in Spain asked me, why would you (the United States) support something that's going on here that is creating a competitor for you? The fact is of course that if Europe is strong and safe it is very helpful to our companies and to all of the world. If together we constitute 50 percent of the world's GDP and we have a third of the people in the world living in abject poverty, and we recognize that we have morally a reason to address that issue and we are the richest in the world, we need to do something about it. The fact is that we have at our meetings with the E.U. addressed the issue of world poverty, which, of course, is also directly linked to terrorism, the number one point on the agenda in Washington today. We are, as the president said, at war.

One point that I wanted to make which is very important, and a lot of people in the United States don't fully recognize it, is that the Europeans love regulation. When I was in Washington I was on a committee headed by the vice president where we looked at every new rule and regulation, and its this effect the economy. Is it really good? Is it really something we need? The Europeans like rules and regulations and standards and it's not just the bureaucrats. So they write them by the truckload. Eighty thousand pages of regulations since 1957. What we, as corporate America, need to do is to be a participant in that process. For companies that are sitting around here today, you must get involved and when they're writing a new rule affecting your industry in Washington you go and testify. The system is transparent, anybody can go. In Europe, it's not quite the same way. I'm not sure whether the gentlemen representing those countries [here today] would agree with that, but that is an opinion that I hold fairly strongly because I have seen it firsthand. Lobbying in Europe is not recognized quite the same way it is here. It is a profession that is practiced in Washington a great deal and the lobbying profession in Brussels is growing by leaps and bounds. By the way, General Electric moved their [European] headquarters to Brussels in order to be close to the source. They wanted to be sure that nothing got on the books that would conceivably, or could conceivably, keep their products out of one of the most important markets in the world. So we need to get into the act and we need to help reduce the regulatory burgeoning, which is seen in Europe as a problem. What we need is more consultation with the appropriate parties, we need transparency and impact assessment. I'll never forget sitting around that table in Washington, thinking what does this new rule do? How many people does it really put out of business?

What about [global warming] Kyoto? Why did we decide to do something different than the Europeans? We could see that there was a case. We needed to do something about global warming, absolutely, but we had a different approach. Our approach was let's find a way to do it so as to not impact employment across the board and not create problems for the economy. If you sit down with heads of European companies, which I do frequently, they will tell you themselves they like the fact that the United States is pursuing a different direction, even though ultimately we hope to achieve the same thing. So getting involved is what's important.

The chemical industry recently recognized that the Union was going to be writing a lot of new rules looking at the entire chemical industry, which is $8 trillion worth of exports. The three heads of the three major chemical companies in the United States came by to see us, they were going to put together a team and get involved in the process before these laws were on the books, at which time it becomes much more difficult to do anything about it.

Lastly, I want to mention the global partnership. If you read about the E.U.-U.S. relationship, virtually every day there is something wrong. People are beginning to wonder whether in effect we're friends or whether we're going on different paths. The fact is we are members of the same family. The problem is that we [don’t have the] common enemy we used to, so we have quarrels within the family. [for example] steel is a huge problem that came up but little by little it's being handled. These are professional people. They recognize that they have a disagreement with us. They voice their opinion and the steel thing is off the front pages today. The Europeans didn't retaliate, or haven't so far, because they recognize that ultimately the last thing we need today is a trade war. We have enough problems; we don't need trade wars. So it is being handled by the professionals and we don't read about steel very much anymore.

So the global partnership, the transatlantic relationship is vitally important. Right from the very top I've talked to the president about it. I talked the other day to the secretary of commerce who is very much engaged in this subject where we bring U.S. and European companies together and we have dialogues about problems and issues. At the end of the day, with all of the business we do with Europe which is about $1.3 trillion a year, it is only one or one and one-half percent of the time that we have issues which end up in the press.

On the positive side, the Europeans have been extremely helpful in the fight of post-9/11, in the fight against terrorism, and across the board we agreements with them. We have law enforcement agreements and all of those things don't end up in the press very much but they're very, very important today when we are fighting something that we have never fought before and we don't even totally know or understand how to fight it.

So, as I mentioned, 50 percent of the world's GDP. The poverty issue is high on the agenda. Some people didn't recognize that, but on the Bush agenda as it was in previous administrations, this is recognized as a major problem and there are people who are constantly getting together, whole departments, to talk about issues such as sustainable development. On that subject is South Africa when the world comes together and says, "How can we best help those people that are not participating in the world's economies today and are living on $2 a day, of which there are 2 billion in the world, as I understand it. That's a third of the total people.

In conclusion, the point I'm making is that you have to be aware of what's going on in the E.U. If you're in business you have to be aware, if you're not in business you have to be aware because we find, and I don't know the numbers, but in Los Angeles itself there are thousands of people employed by either companies owned by Europeans or by companies that are selling into the European market. So that in and of itself should alert the politicians representing those people because it brings it right home. But apart from that, just on the scale of what is going on in the world, you need to know this. This train is out of the station, it is traveling at 60-70 miles an hour going to 250. If you don't join or get on the train you do it at your own peril, in my judgment.

There are huge changes going on in Europe, and one might consider the thought that maybe Europe as a group of countries could be a superpower in the next 10-25 years. We have issues trade wise out there when you look at what goes on in China and India, but it is for the generation that comes after ours that those problems will be there. So somewhere along the line could you bring the European Union together with the United States and have a free trade zone? That's a possibility, but in the meantime we need to work on the issues, and the poverty issue is a very important one. As global partners we need to work on that, we need to work on fighting terrorism and we need to work on global prosperity because a strong Europe and a strong United States will be very positive for the world and that is what we should be working on.

I appreciate your attention. I think the opportunities in Europe are great for financial institutions or for anybody who has anything to sell or wants to do business over there. So thank you so much, and if you have any easy questions I would be delighted to stay up here for a while.