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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

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

CAMPBELL, JOHN, California 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin, 

BERNARD SANDERS, Vermont

Robert U. Foster, III, Staff Director 

(III)

SUBCOMMITTEE ON DOMESTIC AND INTERNATIONAL MONETARY POLICY, TRADE AND

TECHNOLOGY

DEBORAH PRYCE, Ohio, Chair

JUDY BIGGERT, Illinois, Vice Chair 

JAMES A. LEACH, Iowa 

MICHAEL N. CASTLE, Delaware 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

MARK R. KENNEDY, Minnesota 

KATHERINE HARRIS, Florida 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

MICHAEL G. OXLEY, Ohio 

CAROLYN B. MALONEY, New York 

BERNARD SANDERS, Vermont 

MELVIN L. WATT, North Carolina 

MAXINE WATERS, California 

BARBARA LEE, California 

PAUL E. KANJORSKI, Pennsylvania 

BRAD SHERMAN, California 

LUIS V. GUTIERREZ, Illinois 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin 

JOSEPH CROWLEY, New York 

BARNEY FRANK, Massachusetts 

(V)

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

(1)

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. 

2

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 twothirds 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. 

3

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 

4

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 afVerDate 0ct 09 2002 18:32 Sep 11, 2006 Jkt 029457 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 F:\DOCS\HBA167.190 HFIN PsN: TERRIE
5

forded 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 

6

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, nonU.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 nonU.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. 

7

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 

8

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 

9

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 

10

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.] 

(11)

A P P E N D I X

June 16, 2005

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