Clinton man who’s still taking care of business in Europe

Date: 16/07/01

Former US Ambassador to the EU Stuart Eizenstat has moved to the private sector, but he is still a key transatlantic player. He tells Craig Winneker that EU-US relations are healthier than headlines suggest

FOR a guy who returned to the supposedly cushy private sector six months ago, Stuart Eizenstat has a lot of government work on his hands.

In fact, his itinerary this week in Brussels - his first visit as the new head of US law firm Covington & Burling's international practice - has been positively ambassadorial. Meetings with Competition Commissioner Mario Monti and trade director-general Peter Carl. Lodging at the US ambassador's official residence in Uccle, courtesy of the current occupant, Richard Morningstar. A posh dinner or two.

Still, Eizenstat - well-known in Europe as the former US ambassador to the EU and a key player in several disputes that have become transatlantic hot-potatoes, including the Kyoto protocol, the Foreign Sales Corporation (FSC) tax scheme and the Helms-Burton bill - definitely has the meter running.

His tête-à-tête with Monti on Monday was more than just a chance to catch up with an old sparring partner; it was a business opportunity. Eizenstat was one of several former US officials with Brussels experience - including ex-Federal Trade Commission chairman Robert Pitofsky - who were hired by GE in the doomed effort to convince EU competition officials to approve the company's proposed merger with Honeywell.

But even though he was on the GE payroll, Eizenstat doesn't agree with those in the US who accuse Monti of blocking the deal to help European companies. "The criticism that has come from some quarters in Washington against Monti, that he acted in a protectionist way, is completely incorrect," he said. "I don't think that was a factor in the least. Some of the competitors who complained about the deal were American. I think he acted in complete good faith."

Nevertheless, Eizenstat says he told the EU competition tzar that the GE-Honeywell drama showed the need to boost transatlantic cooperation in anti-trust cases. With more advance consultation - or "substantive convergence" in diplomat-speak - there will be less room to second-guess decisions and more likelihood that regulators on both sides will reach the same conclusions.

This, Eizenstat argues, goes for a whole range of EU-US problem areas. And in the opening months of the Bush administration, there have been several. "Some of the unilateralism in the beginning of the administration was unfortunate," Eizenstat says. "I think that's going to be rectified."

Still, Eizenstat argues that the transatlantic relationship is better than the headlines suggest. US Trade Representative Robert Zoellick and his EU counterpart Pascal Lamy "talk constantly" and have much stronger working ties than were evident during the Clinton administration. Eizenstat says this is key to keeping the simmering FSC dispute from boiling over.

It's something he knows a little about as one of the architects of the €4-billion tax scheme, declared unfair by the World Trade Organisation in an interim report earlier this month. If the WTO confirms in its final ruling later this year that the US system violates trade rules, Eizenstat expects Washington will appeal. "It buys us until the end of the year," he says.

Among the other options being considered by the administration is a more "radical transformation" of the law, which might be hard to get past Democrats in Congress, or retaliatory WTO complaints "against EU tax systems which are just as vulnerable".

But no matter what the outcome he says the idea that the Union could impose €4 billion in sanctions against the US if it wins in Geneva is "far-fetched". In fact, since FSC is a worldwide regime, Eizenstat says it will be tricky for the WTO to determine how much it has hurt Europe, and thus the appropriate level of punitive sanctions. "How do you know that a particular American export trumped a European export because of this tax break?" he asks, claming it is possible that even after finding that the FSC is illegal the WTO could determine that it nevertheless did zero damage to the EU.

Still, the dispute "has the potential to roil the waters in ways that we haven't seen for years". The key is to "fend off the hotheads who are itching for a fight on this".

Despite the trouble-signs, Eizenstat says there's no reason to worry that EU-US relations are damaged beyond repair. "I have never heard a month in which people didn't say that the US-EU relationship was headed for a rocky period. We have an exceptionally healthy relationship."

But in his new, more lucrative, role - he started work this week with Covington & Burling after taking some time to work on a book about his negotiations for Holocaust reparations - it's a safe bet that Eizenstat hopes the transatlantic relationship isn't too healthy.

Interview with Stuart Eizenstat, former US Ambassador to the EU.