Date: 13 May 2008
 
Panellists: James Elles, MEP and member of the Delegation for Relations with the US
Daniel Hamilton, Director of the Center for Transatlantic Relations at the School of Advanced International Studies, (SAIS), Johns Hopkins University
Fabio Pammolli, President, Center for the Economic Analysis of Competitiveness, Markets and Regulation
Francisco Gaztelu Mezquiriz, Member of the Cabinet of EU Commissioner Günter Verheugen
 
 
The purpose of the conference was to discuss the ways in which regulatory issues were affecting EU-US trade and investment. The conference coincided with the Second Meeting of the Transatlantic Economic Council (TEC) between the US and the EU, where top level officials from both parties met to discuss regulatory cooperation on issues affecting trade and investment.
 
The event began with a presentation by Daniel Hamilton, who described EU-US economic relations as “the most important trade relationship in the world” noting that transatlantic dealings represent a $4 trillion economy providing more than 14 million ‘insourced' jobs.
 
Despite the fact that the media often focuses on the importance of emerging markets, Hamilton pointed out that US assets in Ireland (which exceed $83 billion) are greater than US assets in Brazil, Russia, India and China combined. In view of this, he argued, the most important aspect of EU-US relations involved investment, and that because of the large scale of FDI flows, small improvements in regulatory convergence could have considerable effects on transatlantic capital flows. Hamilton used the example of the Open Skies Agreement to describe the possible effects of regulatory convergence, which, if completed, would have positive economic effects for both parties that are equivalent to completing the Doha Round.
 
Fabio Pammolli then took the floor and presented his new book entitled “Innovation and Industrial Leadership: Lessons from Pharmaceuticals”. Pammolli argued that pharmaceutical R&D was becoming more concentrated globally, and that certain pricing strategies in the EU were reducing the incentive for firms to undertake large scale investment in Europe. In addition to this, both labour and capital productivity were lower in the EU than in the US and this was reducing the incentive for US firms to invest in the EU. If this trend continues, Pammolli argued, the EU would become less of a hub for innovative R&D, and more a place for manufacturing.
Pammolli also noted that although the US pharmaceutical market was much more productive and competitive, than the EU market, product life cycles were generally shorter and the prices consumers paid for products were higher. In the EU the opposite was the case he suggested: productivity was lower, the market was more stable, product life cycles were longer and prices to consumers were lower.
 
In addition to this, Pammolli's presentation showed that price convergence for pharmaceuticals was taking place within the EU. Interestingly, Pammolli suggested that this price convergence was not a result of the EU's internal market but rather due to a combination of parallel trade and the external reference pricing schemes of member states.
 
He concluded by offering four recommendations for the EU to improve the long term competitiveness of its pharmaceutical industry: restructure health financing; facilitate investment by improving regulatory convergence between the EU and US; improve the competitiveness of EU R&D; and create a pricing strategy that is competitive for both producers and consumers.
 
The third speaker was James Elles, MEP who suggested that the TEC needed stronger commitment from politicians and the business community on both sides of the Atlantic. Ellis argued that the TEC could learn from the development of the European Single Market (ESM), stating that one of the primary reasons why the ESM was achieved was because it received support from the top management level of firms. Ellis believed that nurturing this support should be the next objective of the TEC.
 
The final speaker of the evening was Francisco Gaztelu Mezquiriz, who came directly from the actual TEC meeting to inform the audience of its outcome. He spoke positively about the meeting, stating that constructive dialogue had taken place between the US and the EU on issues such as poultry pathogen reduction treatments, the EU REACH Directive, accounting standards, and securities trading. Gaztelu Mezquiriz did concede that the TEC meeting had been light on actual commitments from both sides but felt that this was primarily a factor of the current political situation in the United States.
 
Daniel Hamilton concluded by stating that it might be another year before the political situations on both sides of the Atlantic allow for significant political dialogue at the TEC. But this time could provide an opportunity for think tanks like CEPS to continue to examine transatlantic regulatory barriers, he argued, so that when the political climate was ripe for negotiation, the relevant issues will already have been examined, and a constructive framework for discussion can be developed.