U.S. Spain Council: "Transatlantic Business Relations" - Address by Thomas J. Donohue

Address by Thomas J. Donohue
President & CEO, U.S. Chamber of Commerce

Coral Gables, FL
February 6, 2004

The U.S.-Spain Relationship

Thank you very much, Senator Dodd.

I'm very pleased to be here because I think the U.S.-Spain Council serves a valuable purpose and has played an important role in helping to develop what is an excellent relationship between the U.S. and Spain.

Spain has been one of our most loyal partners in the global war against terrorism and in the liberation and reconstruction of Iraq. As if anyone doubted Spain's resolve, President Aznar reinforced his country's commitment to fight terrorism in his address before a joint session of Congress on Wednesday.

Its strong commitment to peace and stability in the Middle East—and its determination to help the world overcome the scourge of terrorism—was further demonstrated last fall when Madrid was host to the Donor's Conference on Iraq.

The U.S. Chamber was proud to play a significant role in the Conference by helping to marshal support from the American business community.

It is obvious now that the Conference was a big success, lining up $33 billion dollars in commitments. Like all such pledges, now the challenge is to make sure people make good on them!

One of the driving forces behind the Donor's Conference was Ambassador George Argyros
[ARG-ER-RIS].

The relationship between Spain and the United States could not be in better hands—and Mr. Ambassador, I'd like to express the appreciation of the American business community for your outstanding leadership.

I am also pleased to see the president of the American Chamber of Commerce in Spain, Jaime Malet
[MAL-LET].

I had the pleasure of visiting with Jaime when I was in Spain in November, and I'm very impressed with the new energy he has brought to our affiliate in Madrid.

The commercial side of the U.S.-Spanish relationship is also strong—though there is plenty of room for growth.

We have in place a solid foundation—the U.S. is Spain's biggest export market outside of the European Union, and Spain is one of the 20 largest foreign investors in the U.S.

More than 500 U.S. companies are invested in Spain, attracted by the country's successful efforts to reduce taxes, privatize state-owned companies, and liberalize and deregulate the main sectors of its economy.

But U.S. firms want greater opportunities to pour more investment into Spain and to put more of their products on its shelves. Spanish companies want the same opportunities here in the United States.

During his visit to the Chamber last month, President Aznar announced his intention to present an action plan designed to increase trade and investment flows between the U.S. and Spain.

We applaud President Aznar's initiative, and I promised him that the Chamber would work with his government and the Spanish private sector to put commercial ties on par with the other aspects of the U.S.-Spanish relationship.

In particular, both Spanish and American businesses can work together to tap into the enormous and growing Spanish-speaking market in our own nation and throughout Latin America.

Latin America is a region of great interest to U.S. and Spanish companies alike. We are the Number One and Number Two investors in Latin America.

Regulatory problems and other bad policies affecting the business environment in many Latin American countries impact both U.S. and Spanish companies.

This is of electricity sector regulations in Brazil …banking regulation in Argentina …and telecom regulations just about everywhere.

What can we do about it? I've got two answers:

First, as President Aznar has said, Spanish companies will benefit tremendously if the Free Trade Area of the Americas (FTAA) is completed. The same is for other regional agreements such as CAFTA.

These agreements include rules and disciplines that will make the business environment more transparent and predictable for all of us, regardless of where a company has its headquarters.

Second, we need to band together and make common cause to lobby for better regulations today. U.S. and Spanish companies speaking with one voice are more likely to be heard in Brazil, Argentina and elsewhere in Latin America.

The Transatlantic Relationship

As we look for ways to strengthen bilateral ties, the U.S. and Spain must use their positions of economic strength and leadership to play a larger role in advancing the transatlantic relationship—the largest and closest commercial bond in the world.

Nearly three-quarters of all foreign investment in the U.S. comes from Europe. And get this, European investment in Texas alone is more than all U.S. investment in Japan! Millions of Americans owe their jobs to the affiliates of European-owned companies, and vice versa.

More than half of corporate America's foreign assets are located in Europe. All told, $1 billion in trade and another $1 billion in direct investment cross the Atlantic each and every day—and almost all of it without barriers or disputes.

Those numbers are dwarfed by mutual portfolio holdings that our pension funds and individual investors have on both sides of the Atlantic.

So, despite occasional headlines that suggest otherwise, the overall U.S.-EU economic relationship is healthy and moving more quickly toward a single, highly integrated market.

As it does, we must implement a longer-term, broader vision for the transatlantic economy.

The EU and U.S. must work together on demographic challenges, security threats, corporate governance and accounting rules, regulatory and legal reform, and many other issues of mutual concern.

U.S. companies are particularly concerned about the regulatory burdens imposed by EU legislators and bureaucrats and the governments of EU member states.

EU politicians should understand, and seriously take into consideration, that the regulations they propose and enact—such as rigid and restrictive labor laws, changes in taxation of e-commerce, and regulations on agricultural practices—have a tremendous impact not only on European businesses, but also on U.S. businesses.

These excessive regulations stifle the economic growth of U.S. firms invested in Spain and everywhere throughout Europe, which in turn threatens million of existing and potential U.S. and European jobs.

We understand that European companies doing business in the U.S.—some of whom, by the way, are U.S. Chamber members—have similar concerns about U.S. domestic policy. Chief among those concerns is our broken legal system.

Legal Reform/Global Forum Shopping

The U.S. tort system drains $233 billion dollars out of our productive economy every year.

The numbers of class action lawsuits at the state and federal levels are exploding.

Asbestos litigation alone has bankrupted some 70 companies and cost 70,000 jobs, and the lawyers are now targeting any company anywhere that ever used, installed, sold or distributed asbestos.

We see the trial lawyers continually on the prowl for new kinds of lawsuits covering areas such as obesity and mold.

And with hundreds of billions of dollars in outrageous fees, a small group of trial lawyers has worked to elect candidates, pass legislation and get judges put on the bench – all in opposition to legal balance and reform.

U.S. courts have become a magnet for foreign plaintiffs and an increasingly internationalized trial bar.

They come to the U.S. to take advantage of our jury system, our liberal discovery rules, our penchant for punitive damages, and our frequently outlandish awards.

They come to use our anti-trust laws even when the conflict involves entirely foreign conduct.

And in growing numbers, they are coming to invoke our Alien Tort Claims Act – signed into law by none other than President George Washington – with the goal of extracting money from international companies that operate in countries with harsh or repressive governments.

If this trend is not halted, a flood of litigation could be unleashed – and it could lead to almost anything, including attempts by foreign plaintiffs to enforce European laws against multinational companies in U.S. courts.

The Chamber has launched a campaign to combat global forum shopping. For starters, the Chamber's own law firm—the National Chamber Litigation Center—is participating in three global forum shopping cases now before the U.S. Supreme Court.

While in Davos, Switzerland, for the World Economic Forum last month, I announced the creation of the Coalition to Curb Global Forum Shopping.

Next month, the coalition will hold its first meeting to begin plotting a strategy for raising awareness and convincing courts to show restraint in interpreting laws with extraterritorial elements.

We also plan to examine the possibility of amending current laws or negotiating a multilateral agreement to get a handle on this issue.

Elsewhere in legal reform the Chamber and our Institute for Legal Reform are making good progress.

Class action reform has passed the House and has a good chance of clearing the Senate, possibly as early as this month. Senator Dodd has been a big help in this effort.

We're working within the business community and on Capitol Hill to craft a legislative solution to the asbestos litigation crisis.

We're beginning to win reforms in the most trial lawyer-friendly jurisdictions through lobbying and communications campaigns in the states.

We're heavily involved in voter education to help determine what kind of judges sit on state Supreme Courts.

And the Chamber's own law firm – the National Chamber Litigation Center – has helped win important cases that have reined in excessive punitive damages.

Corporate Governance

Corporate governance and accounting reforms with unintended consequences also pose a great challenge to the transatlantic commercial relationship.

For instance, foreign-owned firms trading in U.S. markets were faced with having to break their home-country laws in order to obey our new corporate governance and accounting laws.

The Chamber was successful in ironing out potential contradictions in the rules, but other provisions of Sarbanes-Oxley have damaged the business environment.

We have to be for strong enforcement of existing laws without creating enforcement competition in which the simple launch of an investigation deflates market capitalization, destroying good companies along with the bad.

Companies on both sides of the Atlantic need predictable enforcement regimes as well as predictable rules.

As it has since the earliest draft of the Sarbanes-Oxley legislation, the Chamber will continue to work with Congress, the SEC, the Public Corporate Accounting Oversight Board, and the stock exchanges to ensure that good intentions don't produce bad results—and that foreign-owned companies aren't put at a disadvantage.

Conclusion

Ladies and gentlemen, the U.S.-Spain relationship is a special one. We work together on many fronts for the benefit of the citizens of both countries. We are good friends and trusted allies.

Spain is a leader in Europe. Economic growth there is setting the pace for the continent.

The openness of the economy, the sophistication of the companies, and the great improvements to the infrastructure have made Spain a model for Europe and beyond. That's why more than 500 U.S. firms have gone to Spain, and I predict more are on the way.

The business communities of both our nations should take advantage of these close ties and build upon them.

Let's work with one another to convince Washington lawmakers, policymakers in Brussels, and EU politicians to remove the impediments to growth and to spur the creation of jobs through laws and regulations that are fair and based on common sense.

There is no shortage of excuses some will offer as to why we can't move forward—EU enlargement, negotiations for a Constitutional Treaty, the selection of a new and enlarged College of Commissioners, and the elections here in the U.S.

But these events should encourage—not dissuade us. Let's follow the examples of leaders like President Aznar, who last month at the Chamber—and again before the U.S. Congress on Wednesday—proposed the creation of an economic, financial, and trade zone between the U.S. and the EU by the year 2015.

Remember, in many ways we are one business community in one integrated market—and we should join forces to protect and advance our mutual prosperity.

The U.S. Chamber is ready to use all the influence at its disposal to strengthen and expand the transatlantic partnership—which is absolutely critical to prosperity and progress throughout the world.

Whether we are in business or government, education or the arts, let's all work together to put these strong ties to noble use—to continue to fight terrorism, to rebuild Iraq, to spur economic growth throughout Europe and across the Atlantic, and to provide the leadership the global community so urgently needs if it is to live in peace and in plenty.

Thank you very much.