[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




                   THE U.S.-EU ECONOMIC RELATIONSHIP:

                            WHAT COMES NEXT?

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                       DOMESTIC AND INTERNATIONAL
                 MONETARY POLICY, TRADE AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 16, 2005

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 109-39

                 HOUSE COMMITTEE ON FINANCIAL SERVICES


                    U.S. GOVERNMENT PRINTING OFFICE
                           WASHINGTON : 2006 
29-457 PDF

For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512-1800  
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001



                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
RICHARD H. BAKER, Louisiana          PAUL E. KANJORSKI, Pennsylvania
DEBORAH PRYCE, Ohio                  MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             MELVIN L. WATT, North Carolina
ROBERT W. NEY, Ohio                  GARY L. ACKERMAN, New York
SUE W. KELLY, New York, Vice Chair   DARLENE HOOLEY, Oregon
RON PAUL, Texas                      JULIA CARSON, Indiana
PAUL E. GILLMOR, Ohio                BRAD SHERMAN, California
JIM RYUN, Kansas                     GREGORY W. MEEKS, New York
STEVEN C. LaTOURETTE, Ohio           BARBARA LEE, California
DONALD A. MANZULLO, Illinois         DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North          MICHAEL E. CAPUANO, Massachusetts
    Carolina                         HAROLD E. FORD, Jr., Tennessee
JUDY BIGGERT, Illinois               RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut       JOSEPH CROWLEY, New York
VITO FOSSELLA, New York              WM. LACY CLAY, Missouri
GARY G. MILLER, California           STEVE ISRAEL, New York
PATRICK J. TIBERI, Ohio              CAROLYN McCARTHY, New York
MARK R. KENNEDY, Minnesota           JOE BACA, California
TOM FEENEY, Florida                  JIM MATHESON, Utah
JEB HENSARLING, Texas                STEPHEN F. LYNCH, Massachusetts
SCOTT GARRETT, New Jersey            BRAD MILLER, North Carolina
GINNY BROWN-WAITE, Florida           DAVID SCOTT, Georgia
J. GRESHAM BARRETT, South Carolina   ARTUR DAVIS, Alabama
KATHERINE HARRIS, Florida            AL GREEN, Texas
RICK RENZI, Arizona                  EMANUEL CLEAVER, Missouri
JIM GERLACH, Pennsylvania            MELISSA L. BEAN, Illinois
STEVAN PEARCE, New Mexico            DEBBIE WASSERMAN SCHULTZ, Florida
RANDY NEUGEBAUER, Texas              GWEN MOORE, Wisconsin,
TOM PRICE, Georgia                    
MICHAEL G. FITZPATRICK,              BERNARD SANDERS, Vermont
    Pennsylvania
GEOFF DAVIS, Kentucky
PATRICK T. McHENRY, North Carolina
CAMPBELL, JOHN, California

                 Robert U. Foster, III, Staff Director
 Subcommittee on Domestic and International Monetary Policy, Trade and 
                               Technology

                       DEBORAH PRYCE, Ohio, Chair

JUDY BIGGERT, Illinois, Vice Chair   CAROLYN B. MALONEY, New York
JAMES A. LEACH, Iowa                 BERNARD SANDERS, Vermont
MICHAEL N. CASTLE, Delaware          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California
RON PAUL, Texas                      BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio           PAUL E. KANJORSKI, Pennsylvania
DONALD A. MANZULLO, Illinois         BRAD SHERMAN, California
MARK R. KENNEDY, Minnesota           LUIS V. GUTIERREZ, Illinois
KATHERINE HARRIS, Florida            MELISSA L. BEAN, Illinois
JIM GERLACH, Pennsylvania            DEBBIE WASSERMAN SCHULTZ, Florida
RANDY NEUGEBAUER, Texas              GWEN MOORE, Wisconsin
TOM PRICE, Georgia                   JOSEPH CROWLEY, New York
PATRICK T. McHENRY, North Carolina   BARNEY FRANK, Massachusetts
MICHAEL G. OXLEY, Ohio



                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 16, 2005................................................     1
Appendix:
    June 16, 2005................................................    11

                               WITNESSES
                        Thursday, June 16, 2005

Hauser, Kathryn, U.S. Executive Director, Transatlantic Business 
  Dialogue.......................................................     8
Lackritz, Marc, President, Securities Industry Association.......     3
Litman, Gary, Vice President, Europe & Eurasia, U.S. Chamber of 
  Commerce.......................................................     7
Nutter, Frank, President, Reinsurance Association of America.....     5

                                APPENDIX

Prepared statements:
    Biggert, Hon. Judy...........................................    12
    Hauser, Kathryn..............................................    14
    Lackritz, Marc...............................................    24
    Litman, Gary.................................................    37
    Nutter, Frank................................................    44

              Additional Material Submitted for the Record

Hon. Deborah Pryce:
    Charts.......................................................    53
    Questions submitted to all witnesses.........................    55
    Responses from Gary Litman...................................    58
    Responses from Kathryn Hauser................................    61
    Responses from Marc Lackritz.................................    63
    Responses from Frank Nutter..................................    64
    Obstacles to Transatlantic Trade and Investment paper........    65

 
                   THE U.S.-EU ECONOMIC RELATIONSHIP:
                            WHAT COMES NEXT?

                              ----------                              


                        Thursday, June 16, 2005

             U.S. House of Representatives,
         Subcommittee on Domestic and International
             Monetary Policy, Trade and Technology,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:00 p.m., in 
Room 2128, Rayburn House Office Building, Hon. Deborah Pryce 
[chairwoman of the subcommittee] presiding.
    Chairwoman Pryce. The hearing of the Subcommittee on 
Domestic and International Monetary Policy, Trade and 
Technology will come to order.
    I want to thank you for being here today to discuss the 
U.S.-EU regulatory dialogue, and just say that we are under the 
gun because there will be an almost 2-hour series of votes 
beginning any time now, and so we thought we had better begin. 
One of our witnesses isn't even here yet because of some 
traffic snarls and there was a road closed, but we will proceed 
and try and play it by ear if that is agreeable to all.
    U.S. and EU financial regulators have been engaging in a 
dialogue for the past 3 years. They are scheduled to meet again 
at the end of this month to discuss current and potential 
regulatory conflicts. This timely hearing, this one we are 
having today, will allow the members of the subcommittee to 
hear from industry witnesses in highlighting areas of 
improvement needed in the U.S.-EU dialogue in trade convergence 
and access to capital.
    Just yesterday, Secretary Snow called upon European 
governments to proceed with free market reforms and warned 
against imposing tough new regulations that would inhibit the 
ability to make financial markets in Europe more efficient and 
move capital around more easily.
    I concur with Secretary Snow's comments, and hope to hear 
from our witnesses today their thoughts on creating a U.S.-EU 
free trade agreement and increasing dialogue between the U.S. 
Congress and the European Parliament.
    In addition to the informal meetings held by members of the 
European Parliament and members of the Financial Services and 
International Relations Committees, the Commission released 
last month a green paper calling for the creation of a 
Transatlantic Parliamentary Assembly in which the U.S. Congress 
and the European Parliament would meet formally.
    Given the strong trade and services shared by the U.S. and 
the EU, I would appreciate hearing from our witnesses on the 
benefits and detriments of such an assembly, and even if it is 
a possibility, given the strong recent rejection by France and 
the Netherlands of a constitutional treaty.
    Many of the nations in the European Union enjoy a 
reputation of aggressive growth, of being countries that are 
economically dynamic, adopting market-oriented policies and 
encouraging the mobility of international capital.
    Trade and services between the U.S. and the EU is nearly 
two-thirds of the world total. The charts that you see here on 
the floor of the committee room show the relationship of Europe 
and the U.S. As you can see in the graph entitled ``America's 
Major Commercial Arteries,'' total transatlantic trade is lower 
than total trade with NAFTA or the Asia Pacific region. 
However, the transatlantic total foreign affiliate trade sales 
figures is the most significant sign that our relationship with 
Europe remains economically our most important.
    The quantity of dollars exchanged in transatlantic foreign 
affiliate sales is more than those of the other three 
groupings--Asia Pacific, NAFTA, and Latin America combined--at 
$2.8 trillion.
    The written testimony submitted by Ms. Hauser from the 
Transatlantic Business Dialogue also gives figures in support 
of these graphs. Her statement is that in 2003, 4.2 million 
jobs were created in the U.S., in European affiliates, and 3.2 
million were created in the EU by U.S. affiliates. These 
numbers show the strength of the transatlantic relationships 
and the need for the continuation of growth and ties across the 
Atlantic.
    Recently, in light of political failures in the European 
Union, some have been pointing to China as a new outlet for 
U.S. trade and investment. The second graph, which compares 
U.S. foreign direct investment in China and Europe, shows that 
although investment in China did increase in 2004, the 
transatlantic direct investment relationship still 
significantly overshadows the increases in other regions. From 
2003 to 2004, U.S. foreign direct investment in China increased 
over $4 billion. However, this pales in comparison with the 
increase of over $30 billion from U.S.-borne direct investment 
in Europe for the same period.
    With this evidence, it is clear that a strong working 
partnership between the U.S. and Europe remains crucial to the 
global economic development and stability. The two partners 
must continue to work towards a barrier-free transatlantic 
market.
    I thank the witnesses for being here today. And I hope I 
did not read this too fast. I yield back the balance of my time 
and welcome our panel.
    Mr. Mark Lackritz is the president of the Securities 
Industry Association. SIA brings together the shared interest 
of nearly 600 securities firms, including investment banks, 
broker dealers, and mutual fund companies.
    Ms. Kathryn Hauser is the U.S. executive director for 
Transatlantic Business Dialogue. TABD was established to help 
develop a barrier-free transatlantic market which will serve as 
a catalyst for global trade liberalization and growth.
    Mr. Gary Litman is the vice president, Europe and Eurasia, 
within the U.S. Chamber of Commerce. The Chamber, which was 
started more than 90 years ago, today represents more than 3 
million businesses, with 830 associations and 90 chambers 
overseas.
    Mr. Frank Nutter is the president of the Reinsurance 
Association of America. RAA has represented the interests of 
property and casualty reinsurance professionals in the U.S. 
since 1968, working effectively to build an understanding of 
the regulatory issues among its industry and government.
    We welcome the witnesses to the hearing today. Without 
objection, your written statements will be made a part of the 
record. You will be recognized for 5 minutes to summarize your 
testimony. And we will begin with Mr. Lackritz.

  STATEMENT OF MARC LACKRITZ, PRESIDENT, SECURITIES INDUSTRY 
                          ASSOCIATION

    Mr. Lackritz. Thank you, Madam Chairwoman.
    Let me begin by thanking you for holding this hearing, and 
expressing our appreciation for your continued interest in the 
U.S.-EU financial services and markets dialogue.
    My testimony today will make the following points: First, 
the EU focus on harmonization and implementation is critical 
now to the success of the Financial Services Action Plan, or 
FSAP. Second, the progress in accounting convergence is a key 
building block in the development of the transatlantic capital 
markets. Third, continuing robust SEC and Committee of European 
Securities Regulators dialogue is essential for transatlantic 
capital markets convergence. And finally, the reduction of 
global trade barriers in financial services should be a key 
area of cooperation between the U.S. and the EU.
    The transatlantic relationship is extremely strong, and 
while there will be, inevitably, disagreements in any close 
relationship, the political and economic ties between our two 
regions will only grow deeper over time. We have repeatedly 
urged the establishment of a U.S. Treasury Attache in Brussels, 
because Treasury's presence in Brussels would advance the 
important U.S.-EU financial sector dialogue, and would 
facilitate positive cooperation on a pro-growth agenda, such as 
the WTO Doha Development Round. And we would respectfully urge 
the subcommittee to support a Brussel's Treasury Attache.
    The legislative phase of the Financial Services Action 
Plan, or FSAP as its acronym would be pronounced, is now 
officially concluded. These measures must now be transposed 
correctly and effectively into national law and regulation, 
which is possibly an even more challenging task. We believe the 
European Commission should, for the time being at least, 
strongly resist proposing new financial services legislation, 
and instead focus on ensuring that FSAP is implemented and 
enforced as intended. For example, implementation is crucial 
for three critical measures with huge market implications: the 
markets in financial instruments directive, the transparency 
obligations directive, and IAS 39.
    In addition, SIA is monitoring closely the transposition of 
the Basel II requirements into EU law. Their proper 
implementation and enforcement and their application and 
practice will be critical to FSAP's success and the global 
financial markets integration.
    This past April, the U.S. and the EU announced a new road 
map describing the steps needed to eliminate the U.S. GAAP 
reconciliation requirement for foreign and private issuers that 
use international financial reporting standards. As early as 
possible, between now and 2007, we need to eliminate those 
barriers and reconcile those accounting standards.
    We commend the SEC for working with the European Commission 
to develop this road map, this extremely positive step toward 
transatlantic financial market convergence, and we hope that 
against the backdrop of this road map, the EU will make full 
U.S. GAAP an equivalent determination. But we have some reasons 
for concern. The Committee of European Securities regulators 
recently published draft technical advice for the European 
Commission that held that U.S. GAAP was generally equivalent to 
IFRS, but they also published a list of additional remedies 
that a U.S. issuer utilizing GAAP would have to make. As a 
result, a U.S. firm would have no choice but to keep two sets 
of books to ensure that it has identified all possible 
significant discrepancies between the two sets of accounting 
standards. And unfortunately, we expect that some U.S. 
companies will find it cost effective to delist, thus denying 
themselves access to EU capital markets.
    The growing linkages between the U.S. and European markets 
may result in regulations spilling over from one jurisdiction 
to another. For that reason, we applaud the new discussions 
between the U.S. SEC and CESR, the Committee of European 
Regulators, to achieve regulatory convergence in the 
transatlantic capital markets.
    Our firms face regulatory frameworks in the U.S. and the EU 
that are largely geographically based and don't adequately 
reflect the global nature of the industry. Consequently, we 
urge regulators to view this dialogue as more than just a way 
to solve problems, but rather as a forum to engage in a broad, 
visionary, forward-looking agenda, in concert with industry. We 
believe this so strongly that we are working with a number of 
other trade associations on a project that will compare and 
contrast U.S. and EU rules in equity and related derivatives 
markets, evaluate the substantive differences, and propose ways 
such differences might be accommodated, mitigated, or perhaps 
removed altogether. We look forward to sharing the conclusions 
of our study and work with the subcommittee when they are 
available.
    We would also urge U.S. and EU negotiators to provide joint 
leadership to achieve commercially meaningful WTO financial 
services commitments from developing countries in the Doha 
Round going on now.
    I would like to take this opportunity to discuss briefly 
our model schedule for the WTO agreement. This schedule 
provides a template to pursue new market opening commitments in 
the Doha Round. More importantly, it reflects the business 
models of our companies, and it embodies five core principles: 
First, our firms should be permitted to establish or expand a 
commercial presence. Secondly, our firms should be permitted to 
provide cross-border services to sophisticated investors. 
Third, our firms should be afforded national treatment. Fourth, 
regulations should be developed, adopted, and enforced in a 
transparent, nondiscriminatory manner. And finally, there 
should be adequate exceptions, regulatory safeguards and 
potential carveouts, with the exception for measures 
restricting payments and transfers.
    Finally, we believe that the June 20 U.S.-EU Summit is an 
ideal forum, and time to call on both sides to view with more 
urgency steps toward transatlantic regulatory convergence. This 
is a unique opportunity, Madam Chairwoman, to reenergize the 
alliance and commit it to tangible goals. It should not be 
missed.
    We will continue to work with the U.S. and EU on a positive 
economic agenda for growth, including transatlantic regulatory 
convergence, and a reduction and elimination of barriers based 
in third markets.
    I might add I think in financial services, and particularly 
in the securities industry, we see opportunities in trade, we 
see opportunities in open markets, we see opportunities for 
both Americans and our U.S. firms and investors overseas, and 
we want to open those opportunities and create those markets.
    So we look forward to working with you, Madam Chairwoman, 
the subcommittee, the Congress, and the Administration to 
create the best possible foundation for global economic capital 
markets, economic growth, and new opportunities for us all. 
Thank you very much.
    Chairwoman Pryce. Thank you very much.
    [The prepared statement of Mr. Lackritz can be found on 
page 24 of the appendix.]
    Chairwoman Pryce. Since I am the only one who will miss 
votes if we continue through this, I think we are going to 
proceed with testimony, and then perhaps adjourn. So we will go 
in order of folks who got here first.
    Mr. Nutter.

 STATEMENT OF FRANK NUTTER, PRESIDENT, REINSURANCE ASSOCIATION 
                           OF AMERICA

    Mr. Nutter. Thank you, Madam Chairwoman.
    We appreciate the opportunity to appear before the 
committee. The Reinsurance Association, as you mentioned, does 
represent domestic licensed U.S. reinsurance companies.
    Reinsurance is effectively the transfer of risk of 
insurance companies to other insurance companies; the insurance 
of insurance companies, if you will.
    Regarding the role of the European Union in the global 
reinsurance market, let me put this in perspective. Reinsurance 
is largely a non-U.S-based market. Five of the top 40 
reinsurers in the world are U.S. companies, two in the top 10. 
Ten of the top 40 reinsurers of the world are European based, 7 
of the top 10. And Bermuda, which has really risen as a large 
and a significant reinsurance market, 12 of the top 40 are 
based there.
    U.S. reinsurers write approximately $35 billion a year in 
reinsurance, but U.S. insurance companies purchased in 2004 $74 
billion of reinsurance largely from non-U.S. sources.
    Let me emphasize the valued role that the non-U.S-based 
market represents. If you look at the premiums ceded by U.S. 
insurance companies for U.S. risk, 47 percent of that is ceded 
to companies that do business here without an establishment. If 
you add the U.S. subsidiaries of foreign reinsurance companies, 
the market share is 80 percent going to the non-U.S. market.
    In the European Union, U.S. reinsurance companies largely 
do business through local establishments, but in the U.S., the 
State regulatory system offers options to both U.S. and non-
U.S. companies: First, they may be licensed in the State where 
their client is domiciled. Second, they may be accredited by 
that State. Third, they may be licensed in another U.S. State 
and do business through a system of recognition of the other 
State. And the fourth option is a company may choose not to 
have any license in the United States at all, but do business 
through a trust fund or by posting security or collateral for 
their obligations.
    Some in the U.S. have suggested that this fourth option is 
perhaps an impediment to trade. The market share statistics 
that I mentioned alone would suggest that is not the case. 
Again, non-U.S. based companies write 47 percent of the U.S. 
market, without any establishment here. And those with 
subsidiaries in the United States have added to that 80 percent 
of the U.S. market. It is hard to see how the system provides 
an impediment to trade.
    This system of licensing in the United States, or 
collateral, is really designed to protect consumers. U.S. 
buyers, the insurance companies themselves, have uniformly 
endorsed the current system that is in place. They believe it 
provides them access to non-U.S. markets, a highly competitive 
market; that it is not a trade barrier, but in fact it is just 
exactly the opposite; it facilitates international trade. And 
if there is any cost associated with accessing these non-U.S. 
markets, it is in the view of the buyer a cost worth bearing.
    The National Association of Insurance Commissioners has 
actively been addressing issues associated with how insurers 
and reinsurers do business in the United States. They set up a 
task force in March of 2004 and gave them specific guidance 
about looking at the regulation of reinsurers in other 
countries, whether or not U.S. judgments are enforced in other 
countries, and whether international accounting standards would 
apply to these companies.
    Just last week, in June of this year, two alternatives from 
that group's discussions were presented to the NAIC for further 
consideration, and we will know more about that during the fall 
of this year.
    But let me conclude, Madam Chairwoman, with a comment that 
the non-U.S--particularly the EU-based reinsurance market--is a 
valued asset to U.S. insurance and reinsurance companies. It 
has been a productive relationship and one that we all should 
encourage and find ways to make sure we facilitate open and 
free trade.
    Thank you.
    Chairwoman Pryce. Thank you very much.
    [The prepared statement of Mr. Nutter can be found on page 
44 of the appendix.]
    Chairwoman Pryce. And Mr. Litman.

 STATEMENT OF GARY LITMAN, VICE PRESIDENT, EUROPE AND EURASIA, 
                    U.S. CHAMBER OF COMMERCE

    Mr. Litman. Thank you, Madam Chairwoman. The U.S. Chamber 
of Commerce also greatly appreciates this opportunity to 
discuss the U.S.-EU economic relationship before the Summit 
next week.
    The future of our relationship is on the minds of many 
businessmen. In fact, on Monday we will be releasing the 
results of a joint survey with the European Chambers of 
Commerce. The survey will show that an overwhelming majority of 
our members look to the European market with great expectations 
and a huge desire to do more business with Europe.
    American and European companies also share frustration 
about regulatory restrictions, and that is a major part of our 
written testimony.
    I would like to make just three points relevant to today's 
hearings:
    First, as you made it clear in your opening statement, the 
market that the U.S. and Europe form together is unique. There 
is none other that has similar depth and degree of integration. 
That is why the Transatlantic Business Dialogue, represented by 
Kathryn Hauser, can exist. We can't have a similar dialogue 
with anybody else in the world. And that is a vital institution 
of a bilateral relationship. If you are an entrepreneur in the 
United States today, you operate in this market that stretches 
from California to Poland. When you want to introduce a new 
product or service, you can count on greater access to all the 
consumers in this enormous market, you can expect competition 
from any part of this market based on quality, not cheap labor. 
You can expect to get financing from an American or European 
source. And you may plan to exit this business by selling to an 
American or European firm. This is a reality borne out by 
statistics. We don't have any other economic relationship that 
offers the same degree of integration. It is based on shared 
values, business practices, consumer expectations, supply 
lines, and frequently shared sets of shareholders.
    Second, what we would like the Summit to do is to recognize 
the reality of the transatlantic market and call upon agencies 
and other regulatory bodies to stop acting as though the impact 
of their activities stops at their jurisdictional boundaries. 
The Summit can send a strong signal that we together are intent 
on keeping this market as a worthwhile place to invest, 
innovate, and generate high-paying jobs. No secret that the 
U.S. and EU regulators, and occasionally legislatures, ignore 
each other until there is a glaring problem. As a result, 
companies face the cost of compliance, and the governments are 
constantly teetering on the verge of regulatory divergences 
spilling over into politics. If that continues, as a 
businessman I may now be better off developing my new product 
line outside of this high-cost and potentially fractured market 
and supply it from a third place.
    So what can we do? We in the Chamber think that it is time 
for the Summit to call for negotiations of an agreement on 
regulatory cooperation. We think that this agreement should be 
not about tariffs, it should be about the principles of 
regulations, it should be about the cornerstones of how we 
proceed about our regulatory process.
    We can, for example, begin by accepting each other's impact 
assessments and cost/benefit analyses of proposed regulations. 
This will require a negotiated agreement on methodology, on the 
definition of sound science for regulatory purposes, and on 
some form of dispute resolution panel. If such an agreement is 
negotiated, then Congress would be able to oversee how the 
agencies follow the mandate to avoid regulatory collisions. We 
suggest that the Members of Congress should begin asking 
regulators why they fail to accommodate shared transatlantic 
economic interests in going about their business.
    And the third and final point I would like to make is that 
we should begin to take Europe seriously as a negotiating 
partner. What I mean by that is that we can no longer say that 
because there is no single phone line in Europe, or because 
there is some hiccup in constitutional reform, Europe is not a 
worthwhile negotiating partner on regulatory cooperation. 
Europe has come a long way from the rubble of the Second World 
War to providing prosperity comparable to ours. EU institutions 
that we complain about a lot, and legitimately, have managed 
over the last 10 years to negotiate regulatory convergence over 
25 very disparate and very entrenched regulatory regimes within 
EU. They managed to sustain waves of enlargement and they 
managed to introduce a single currency. It is a good partner. 
We can negotiate with them. We shouldn't waste any more time.
    And as OCDE's study from last week shows, every year we are 
losing 1 to 3 percent of GDP per capita in transatlantic 
regulatory--in the cost of transatlantic regulatory 
discrepancies in product regulations alone. We should move 
ahead and the Summit should be the starting point.
    Thank you.
    Chairwoman Pryce. Thank you, Mr. Litman.
    [The prepared statement of Mr. Litman can be found on page 
37 of the appendix.]
    Chairwoman Pryce. And Ms. Hauser, if you have caught your 
breath, you may proceed. Thank you.

     STATEMENT OF KATHRYN HAUSER, U.S. EXECUTIVE DIRECTOR, 
                TRANSATLANTIC BUSINESS DIALOGUE

    Ms. Hauser. Thank you very much, Madam Chairwoman. I 
appreciate the opportunity to appear before you.
    This weekend the chief executives of the Transatlantic 
Business Dialogue, who are CEO's of American and European 
companies, will meet here in Washington. The key element of the 
agenda is to meet with senior-level officials from the U.S. and 
the EU who will be participating in the Summit for the 
``dialogue'' which is at the heart of what our organization is 
all about. And the key issue on their minds is the same one 
that is on your mind: What comes next in the U.S.-EU 
relationship?
    In preparation for the meeting this coming weekend, the 
CEO's issued a report in April that outlines our 
recommendations to the leaders before the Summit. The 
recommendations cover a range of issues, but primary among them 
is the need for a comprehensive political framework and new 
approaches to regulatory cooperation to deepen the very broad 
and deep transatlantic trade and investment relationship we 
have, while also promoting innovation, competitiveness, and job 
creation. So let me just focus on two of these key points.
    The first is that we really need to harness the power of 
the U.S.-EU annual summits. At some times in our history, we 
have had meetings twice a year, we are now at a point where we 
have one Summit each year. And economics only made its way onto 
the agenda a year ago. Given the depth and breadth of our 
economic and investment relationship, it is imperative that the 
leaders place economic issues at the top of the agenda rather 
than as an afterthought.
    We also strongly encourage the Summit leaders to build on 
what they did last year in Ireland and make it mark the 
beginning, not the end, of a process to increase political 
engagement across the board for the Summit. We believe only 
with the leaders' involvement, can we spur the economic and 
regulatory reforms in both markets and leverage the job 
creation and economic growth potential that still remain to be 
seen in our marketplace. And nothing less, we believe, will 
provide the impetus to do this than having a stronger political 
engagement from the leaders.
    Now, as for improving regulatory cooperation, we place this 
issue at the very heart of the recommendations of the 30 CEO's 
who participate in the TABD. And we want to see more rapid and 
realistic progress than has been evident in recent years.
    Despite all of the effort on both sides of the Atlantic for 
many, many years, transatlantic regulatory cooperation is still 
underdeveloped and falls far short of the impetus needed to 
substantially expand trade investment and innovation. There 
have been initial steps taken with the 1998 guidelines and with 
the 2004 road map, but the problem is, there is no political 
ownership of these agreements. And as you know from your 
experience in Washington, without ownership there is no 
political drive pressing for results. So without clear lines of 
accountability, there is no mechanism for providing credit 
where there have been successes, criticism where there is 
failure, or political imperatives for action.
    Now, we certainly applaud the efforts of regulators in a 
few specific sectors, and financial services is really to be 
commended here because of the work you have done to initiate 
bilateral discussion of specific regulatory issues.
    Overall, however, the initiatives are often fragmented and 
lack transparency. There do not seem to be any reporting 
requirements that would allow stakeholders and others to follow 
these individual processes and submit informed opinions. And as 
Gary had mentioned, too often regulators develop and implement 
rules, regulations, and requirements on business in relative 
isolation.
    Since the regulators in the U.S. and the EU are subject to 
entirely separate legal mandates and legislative oversight, 
particularly when you add in the regulators of the 25 member 
States, it is very difficult for both business and the 
administrations themselves to ensure that their concerns are 
heard.
    We certainly, as businesses, respect that sovereign 
prerogatives and legislative mandates must be taken into 
account, but we are concerned that if the regulatory process 
continues on an independent course on both sides of the 
Atlantic, without regard to the impact on the transatlantic 
market, divergent approaches are going to emerge which will 
only be to the detriment of global business.
    Now, recent regulatory actions in the U.S. with Sarbanes-
Oxley or in the EU with the REACH Directive have highlighted 
the need for regulators on both sides to take a look at the 
indirect or direct impact of their legislation on the other's 
market. But we are also concerned that the current informal 
dialogues among regulators are taking place independently of 
one another, and that there is no mechanism for sharing 
information among them. Financial services is doing its thing 
over here, the pharmaceutical industry is doing its thing over 
here, and so on. There is no way for anyone to share 
information horizontally. We think it is very important now 
that we try and bring this issue forward so we can learn from 
one another's experiences.
    And that is why the TABD has proposed creation of what we 
call a Transatlantic Regulatory Cooperation Forum. We want to 
bring together American and European regulators, 
administrators, and supervisors from sectors representing 
significant transatlantic trade and investment.
    Chairwoman Pryce. Could you sum up, because your time is 
expired and I am going to miss another vote if you don't.
    Ms. Hauser. Certainly. So the Regulatory Cooperation Forum 
would help us get a better handle on what is going on where 
businesses don't have a ready avenue to find out what is going 
on in the individual sectors. We think it would make a major 
contribution towards building the transatlantic marketplace.
    Chairwoman Pryce. Thank you very much. And I am sorry to 
have to have hurried any of you.
    [The prepared statement of Ms. Hauser can be found on page 
14 of the appendix.]
    Chairwoman Pryce. We are going to hold the record open for 
30 days and to save everybody a couple of hours here, adjourn 
the meeting. And I have questions for all of you. I will submit 
mine in writing and give the other members an opportunity to do 
that. They will all be made part of the record.
    I very much appreciate your going along with this quick 
version of our hearing, but I think it is the wisest way to 
proceed.
    And, with that, we are adjourned.
    [Whereupon, at 2:30 p.m., the subcommittee was adjourned.]


                            A P P E N D I X


                             June 16, 2005

[GRAPHIC] [TIFF OMITTED] T9457.001

[GRAPHIC] [TIFF OMITTED] T9457.002

[GRAPHIC] [TIFF OMITTED] T9457.003

[GRAPHIC] [TIFF OMITTED] T9457.004

[GRAPHIC] [TIFF OMITTED] T9457.005

[GRAPHIC] [TIFF OMITTED] T9457.006

[GRAPHIC] [TIFF OMITTED] T9457.007

[GRAPHIC] [TIFF OMITTED] T9457.008

[GRAPHIC] [TIFF OMITTED] T9457.009

[GRAPHIC] [TIFF OMITTED] T9457.010

[GRAPHIC] [TIFF OMITTED] T9457.011

[GRAPHIC] [TIFF OMITTED] T9457.012

[GRAPHIC] [TIFF OMITTED] T9457.013

[GRAPHIC] [TIFF OMITTED] T9457.014

[GRAPHIC] [TIFF OMITTED] T9457.015

[GRAPHIC] [TIFF OMITTED] T9457.016

[GRAPHIC] [TIFF OMITTED] T9457.017

[GRAPHIC] [TIFF OMITTED] T9457.018

[GRAPHIC] [TIFF OMITTED] T9457.019

[GRAPHIC] [TIFF OMITTED] T9457.020

[GRAPHIC] [TIFF OMITTED] T9457.021

[GRAPHIC] [TIFF OMITTED] T9457.022

[GRAPHIC] [TIFF OMITTED] T9457.023

[GRAPHIC] [TIFF OMITTED] T9457.024

[GRAPHIC] [TIFF OMITTED] T9457.025

[GRAPHIC] [TIFF OMITTED] T9457.026

[GRAPHIC] [TIFF OMITTED] T9457.027

[GRAPHIC] [TIFF OMITTED] T9457.028

[GRAPHIC] [TIFF OMITTED] T9457.029

[GRAPHIC] [TIFF OMITTED] T9457.030

[GRAPHIC] [TIFF OMITTED] T9457.031

[GRAPHIC] [TIFF OMITTED] T9457.032

[GRAPHIC] [TIFF OMITTED] T9457.033

[GRAPHIC] [TIFF OMITTED] T9457.034

[GRAPHIC] [TIFF OMITTED] T9457.035

[GRAPHIC] [TIFF OMITTED] T9457.036

[GRAPHIC] [TIFF OMITTED] T9457.037

[GRAPHIC] [TIFF OMITTED] T9457.038

[GRAPHIC] [TIFF OMITTED] T9457.039

[GRAPHIC] [TIFF OMITTED] T9457.040

[GRAPHIC] [TIFF OMITTED] T9457.041

[GRAPHIC] [TIFF OMITTED] T9457.042

[GRAPHIC] [TIFF OMITTED] T9457.043

[GRAPHIC] [TIFF OMITTED] T9457.044

[GRAPHIC] [TIFF OMITTED] T9457.045

[GRAPHIC] [TIFF OMITTED] T9457.046

[GRAPHIC] [TIFF OMITTED] T9457.047

[GRAPHIC] [TIFF OMITTED] T9457.048

[GRAPHIC] [TIFF OMITTED] T9457.049

[GRAPHIC] [TIFF OMITTED] T9457.050

[GRAPHIC] [TIFF OMITTED] T9457.051

[GRAPHIC] [TIFF OMITTED] T9457.052

[GRAPHIC] [TIFF OMITTED] T9457.053

[GRAPHIC] [TIFF OMITTED] T9457.054

[GRAPHIC] [TIFF OMITTED] T9457.055

[GRAPHIC] [TIFF OMITTED] T9457.056

[GRAPHIC] [TIFF OMITTED] T9457.057

[GRAPHIC] [TIFF OMITTED] T9457.058

[GRAPHIC] [TIFF OMITTED] T9457.059

[GRAPHIC] [TIFF OMITTED] T9457.060

[GRAPHIC] [TIFF OMITTED] T9457.061

[GRAPHIC] [TIFF OMITTED] T9457.062

[GRAPHIC] [TIFF OMITTED] T9457.063

[GRAPHIC] [TIFF OMITTED] T9457.064

[GRAPHIC] [TIFF OMITTED] T9457.065

[GRAPHIC] [TIFF OMITTED] T9457.066

[GRAPHIC] [TIFF OMITTED] T9457.067

[GRAPHIC] [TIFF OMITTED] T9457.068

[GRAPHIC] [TIFF OMITTED] T9457.069

