United States-European Relations

1. United States-European Relations By: Austin Parker, Mohan Rajagopalan, Ashleigh Paige

2. Quotes about EU-US Relations

3. George C. Marshall about relations “It is already evident that, before the United States Government can proceed much further in its efforts to alleviate the situation and help start the European world on its way to recovery, there must be some agreement among the countries of Europe as to the requirements of the situation and the part those countries themselves will take in order to give proper effect to whatever action might be undertaken by this Government .....The initiative, I think, must come from Europe.”

4. Jean Monnet about EU-US relations • “Problems are arising that only Europe and the United States together have the resources to deal with…That we have begun to cooperate on these affairs at the Atlantic level is a great step forward. It is evident that we must go a good deal further towards an Atlantic Community. The creation of a united Europe brings this nearer by making it possible for America and Europe to act as partners on an equal footing.”

5. EU-US Relations (press release) • We are cooperating on the development of a hydrogen economy to enhance the security of energy supply, increase diversity of energy sources, and improve environmental quality. We consult closely on a broad range of energy issues. • We are jointly participating in a High Level Dialogue on Climate Change and are conducting cooperative climate change science and technology research activities. • We are cooperating closely on counterterrorism and non-proliferation. At the June 25 U.S.-EU Summit we signed U.S.-EU Mutual Legal Assistance and Extradition Agreements.

6. Trading Partners Background information

7. The EU most certainly still trades with parties outside of the union. • A common external customs tariff • This is to enact protective policies for EU nations, so as to protect their products. This way, prices can stay high, competition low, and wages and ways of life will also be protected. • A common position in international trade negotiations. • This is nearly self-explanatory. If there is no common position, then nothing can be accomplished, and the Union will be anything but a union.

8. As expressed in last Thursday’s presentation… • MEDA – EU & Mediterranean • In November 1995, A meeting was held in Barcelona between the EU and Mediterranean border countries (Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, Tunisia, Turkey and Palestine) • This once again correlates to the debate over the inclusion of Turkey into the EU

9. Continued • Results of the meeting: - There will be a formation of a security partnership. The nations agreed to control their arms and resolve conflicts with peaceful resolutions. - However, only time will tell if this will be successful and bring about some sort of “perceived peace.”

10. Continued • Trade relations will hopefully improve over the next decade. • Establish a Euro-Mediterranean free trade area by 2010 • All exports and imports will be tariff free, just as they are within the Euro-zone itself.

11. Asian/EU Relations • Asia is the EU’s 2nd largest trading partner, aside from the US • 21% of their exports are to Asian countries • In 2000, the EU exported €197.4 B worth of material to Asia. The EU imported € 318.9 B from Asia. • From the years 1995 through 2000, the total trade between the two areas grew an average of 10.5% per year • Asia, however, is still ridden with poverty - 2/3 of the world’s poor. 800 million people live on less than US $1 a day. Thirty percent of the aid sent to this part of the world originates from the European Union zone.

12. The EU and China • Political views • The EU supports China’s economic and trade reforms. • Such is the case as to how China ascended to the WTO. • They support China’s transition to an open society. • Human rights, more of a “free economy.” • The EU wants to raise interactions with/in China. • The EU wants to bring China into the world economy, by engaging China in more worldwide trade.

13. China, continued • This also relates back to China’s ascension to the WTO. • MFN status • Deals in trading and making goods competitive • EU has very competitive goods, human rights standards, competitive wages, etc. China most certainly does not have any of this.

14. China, continued • Trade between China and the EU has increased 40-fold since reforms in China began in 1978, beginning the transition to a more free, more competitive economy. • The EU’s largest trade deficit is with China at €55 B in 2003. • Again, China is the EU’s second-largest trading partner. • China is the EU’s 2nd largest export market. • The EU has invested an average of US$4.2 B in China over the past five years.

15. NAFTA and EU interaction • Mexico and the NAFTA • NAFTA was scheduled to enter into force 1 January 1994. Its purpose was to reduce and eliminate barriers to trade and investment. • NAFTA has enabled both Canada and Mexico to increase their exports to the United States: Canadian manufacturers now send more than half their production to the U.S., while Mexico’s share of the U.S. import market has almost doubled from 6.9% in 1993 to 11.6% in 2002.

16. NAFTA and the EU • Problems concerning regulation have become obstacles to the success of this trade agreement. • For instance, certain countries do not allow genetically modified foods to be sold within their borders. Controlling the sales of GM foods has proven to be very difficult, which further discourages the Europeans. • The Europeans also require more information to be present on their product labels, therefore, labeling methods will have to change. • The Europeans fear that by entering this agreement, the power of the United States will overshadow them. They fear a domination of the U.S. within the European agricultural, communication and cultural markets. • Some however believe that the NTM would be a step in the right direction for both countries. Based on a study by the European Commission, Sir Leon Brittan claims that an EU-US free trade zone would boost economic growth by as much as 1% per year. • A unified market with over 600 million consumers might be a dream for large transnational corporations lobbying for the removal of barriers to their growth and economic control.

17. NAFTA, continued Without NAFTA, global exports would have been roughly 25 percent lower; Foreign Direct Investment (FDI) around 40 percent less, and Mexico's per capita income in 2002 would have been about 4 percent lower.

18. NAFTA, continued • What does this mean for the EU? • Tradewise, NAFTA is the same thing as the EU – a reduction of tariffs, more open borders, encourages trade, etc. • A merging of sorts between the EU and NAFTA would simply integrate the most powerful nations of the world together, forming a tariff-free union.

19. NTM(TAFTA) • The European Commission (EC), now the EU launched a proposal in February of 1998 to start negotiations with the United States about creating a New Transatlantic Marketplace (NTM). The NTM would become the world's largest borderless area for goods, services, intellectual property and investment. • The New Transatlantic Agenda • December 1995 at the EU-US Summit commits the EU and the US to "progressively reducing or eliminating barriers that hinder the flow of goods, services and capital between us.” • A major proposal is to commit to removing all remaining tariffs on trade before the year 2010.

20. The EU is upset with other nations’ policies. • The EU maintains that the United States is breaching the rules of global commerce through its tariffs of almost 126 percent on imports of stainless steel bars made by Firth Rixson Special Steels Ltd. • Washington imposed the duties in March 2002, claiming the company was unfairly dumping cheap goods on the U.S. market. • The EU counters that the move violated international trade law. • Disputes over steel imports have been a regular cause of friction between Washington and Brussels throughout the 10-year life of the WTO. Last year the Bush Administration removed "safeguard" duties imposed on imported steel to protect domestic producers after they were declared illegal by the WTO.

21. WTO ruling, continued • The US is threatened with a plethora of trade sanctions after a ruling against it by a panel of the World Trade Organization (WTO). • The WTO panel decided in September that Europe and a group of seven big trading nations have the right to punish America for its failure to repeal an illegal anti-dumping law.The ruling, which backs the EU, Brazil, Canada, Chile, India, Japan, Mexico and South Korea, could lead to sanctions against US exports worth hundreds of millions of dollars. • At the heart of the dispute is the Byrd Amendment, a US trade law that requires the Government to distribute to US companies the proceeds of anti-dumping duties levied by the US on foreign firms. • The WTO panel authorized the EU and other states to impose retaliatory sanctions totaling 72 percent of the duties levied by the US. • The EU has yet to take action against the US in a major dispute over another US law that grants tax concessions to American exporters and has been found to be illegal by a separate WTO panel. • This shows that the EU will not necessarily agree with something that is not 100% beneficial to them.

22. Trade Statistics

23. EU’s Major Foreign Trade Partners, 1999

24. EU-US Investment (Historical Cost Basis) Billions US $ Source: US Dept. of Commerce

25. EU’s Major Foreign Trade Partners, 1999 (cont)

26. EU-US Trade, 1999 In U.S. $ billions

27. The Euro

28. The Impact of the Euro? • Gradual force for stability within international monetary system • Greater use in international trade transactions • Gradual growth as reserve currency • Ultimate impact depends on economic performance of euro area

29. “We welcome the launch of the Euro, an historic step that 11 nations in Europe have taken toward a more complete Economic and Monetary Union (EMU). The United States has long been an advocate for European integration, and we admire the steady progress that make this union possible. A strong and stable Europe, with open markets and robust growth, is good for America and for the world. A successful economic union that contributes to a dynamic Europe is clearly in our long-term interests.” President Clinton January 4, 1999

30. Trade Disputes

31. EU-U.S. Trade Disputes 1960-1989 • Chicken War 1962-1963 • Dispute: U.S. chicken exports were hurt when West Germany raised duties on poultry as part of its obligations under the CAP • Resolution: The United States withdrew tariff concessions on EC exports of trucks and related items. Although the chicken war is forgotten, the concessions are still withheld

32. EU-U.S. Trade Disputes 1960-1989 (cont.) • United States wine-gallon-tax system, (1963-1979) • Tax discrimination against foreign bottled spirits indirectly protected the U.S. alcoholic beverage industry. • In the Tokyo Round of GATT, the EC granted concessions on agricultural products in exchange for revisions of the wine-gallon tax.

33. EU-U.S. Trade Disputes 1960-1989 (cont.) • Steel Voluntary restraint agreements, (1982) • EC shipments of subsidized and dumped steel to the U.S. market added to the woes of U.S. steel producers • Instead of countervailing and antidumping duties, the United States and EC negotiated a VRA that effectively curbed EX steel exports to the United States.

34. EU-U.S. Trade Disputes 1960-1989 (cont.) • Technical Standards, • The United States expressed concern about the exclusion of U.S. firms from the EC standard-setting process • CEN and CENELEC, two quasi-public standards, boards, will accept comments from ANSI the U.S. Counterpart

35. EU’s Stance on Genetically Modified Foods

36. Genetically Modified Food • Genetically modified foods are food products containing some quantity of any genetically modified organism (GMO) as an ingredient. • Mainly to increase the mass of food to feed more people. • Controversy surrounding these foods is whether they are safe or not.

37. EU Legislation Regarding Genetically Modified Foods • EU legislation on GMO’s in place since early 1990’s. • Certain conditions must be met before being allowed to develop, market, or use a GMO or food product derived from GMO’s. • Legislation created for two reasons: • To protect health and the environment • To ensure the free movement of safe and healthy genetically modified products in the EU.

38. EU Legislation Regarding Genetically Modified Foods • Regulation of research and industrial work involving GMO’s; Must take place in a closed environment in which contact with the population and the environment is avoided. • Regulation on deliberate release of GMO’s into the environment • Application process for authorization of a company to place a GMO product on the market. • Regulation of intentional and unintentional movements of GMO’s between EU and third world countries.

39. Labeling and Traceability • EU imposed labeling and traceability procedures apply to all genetically modified foods. • Traceability refers to the ability to trace products through the production and distribution line. • Labeling informs the consumer that the product they are buying contains GMO’s.

40. GMO’s on International Level • EU regulatory system for authorizing GMO’s is in line with WTO rules. • EU joined the Cartagena Protocol on Biosafety in Sept. 2003 (a.k.a. “UN Biosafety Protocol”). • Purpose of UN agreement is to establish common rules to be followed in transboundary movements of GMO’s in order to ensure the protection of biodiversity and human health on a global scale.

41. US vs. EU Regarding Antitrust, Mergers, and Acquisitions

42. EU Stance on Antitrust • Illegal for businesses to collude with each other to fix prices or carve up markets between them. • Companies having a dominant share in a particular market may not abuse its market power to drive out competitors. • Large companies cannot exploit weaker negotiating position of its smaller customers and suppliers. • Companies are fined for failing to adhere to these guidelines, however, some exceptions are allowed.

43. Exceptions • Companies can be allowed to cooperate in developing technical standards if the end-result is an agreed single standard for the market as a whole. • Smaller companies can be allowed to cooperate if this strengthens their ability to compete with larger ones. • Some types of cooperation need specific Commission approval, but others are covered by rules on blanket exemptions. The overriding consideration is whether consumers will benefit.

44. EU & Mergers • The Commission can ban mergers between two large companies or takeovers/acquisitions of one firm by another in these cases: • If the enlarged company would dominate the market and be able to squeeze out competition from other firms. • If a merger would leave so few players in the market that innovation would be stifled. • Or, if price competition or consumer choice would be significantly reduced.

45. EU & Mergers • Commission generally only scrutinizes large, cross-border mergers. • Unless more than 2/3 of their combined sales is in a single EU country, companies must clear their mergers and takeovers with the Commission if they have a combined EU turnover of more than 250 million euros and a worldwide turnover of more than 5 billion euros. It makes no difference where they are headquartered. • Mergers between major US-based corporations or other multinationals are a matter for the Commission if the companies concerned exceed the EU turnover threshold.

46. Similarities in US & EU Competition Policies • Both agree primary benefit of any merger is the potential to generate efficiencies. • Competition laws of both US and EU seek to maximize consumer welfare by promoting allocative efficiency through effective competition. • Both are also concerned about whether the increase in market concentration due to a proposed merger would create conditions conducive to anticompetitive behavior.

47. Differences in US/EU Mergers • Role of lobbying is more important in EU than U.S. • European Commission is responsible for creating a common integrated market in addition to promoting competition. • This additional objective at times has affected its analysis of vertical restraints and vertical mergers. • Competitors play larger role in merger review process in Europe. • Competition authorities in U.S. traditionally view competitor complaints about a proposed merger with some skepticism.