EU looks to future at transatlantic summit

Date: 25/05/2000

Next week's US-EU summit will be the last before this November's American presidential elections. While discussions on topics such as the new cyber-economy will dominate the proceedings, Union leaders' thoughts are inevitably turning to what impact the new US administration will have on transatlantic relations. Simon Taylor reports

WHEN Bill Clinton flies into Lisbon for next week's EU-US summit, he will be greeted warmly by the Union's team. But behind their smiles, they will have one thought on their minds: namely, what kind of US administration they will be dealing with after the presidential elections in November.

Although the summit will demonstrate how EU and US interests have converged since Clinton entered the White House in 1992 by focusing on attempts to harness the potential of the cyber-economy to boost growth and job creation, the Union's leading lights will be wondering if they will be welcoming George W. Bush or Al Gore in future.

Although the US political system means that differences between administrations are usually more to do with presentation than substance, the results of November's vote will have a clear impact on the EU's global interests over the next five years.

Commission trade experts are already admitting that they will probably find it easier to achieve their key objective of launching a new round of world trade liberalisation negotiations with a pragmatic Bush administration rather than with Gore, who has run up a huge political debt to environmental groups and labour unions like the AFL-CIO.

Despite Trade Commissioner Pascal Lamy's careful positioning of himself and the Commission as leading proponents of globalisation with a human face, the EU knows that the biggest battle in its attempts to get a new round off the ground will be with developing countries.

They see the world's wealthiest nations' mantras about linking trade to labour and environmental standards as the biggest smokescreen for protectionism since the Union dreamed up the Common Agricultural Policy.

Ask Commission officials to name the single event responsible for the collapse of the trade talks in Seattle last year and they instantly cite Clinton's comments about imposing trade sanctions on countries which broke labour standards. After that, there was about as much chance of developing countries signing up to a deal as top US trade official Charlene Barshefsky winning a prize for conference chairing.

But despite the criticisms of Washington, the EU's biggest nightmare would be if the US - with all its political and economic power and its enviable unity of purpose compared to the fragmented Union - disengaged itself from international fora like the World Trade Organisation as some siren voices on Capitol Hill are urging.

Despite the battering the EU has received in numerous WTO cases over recent years, its behaviour over recent trade rows has shown that the Union is anxious to maintain as much political support in the US Congress for the current multilateral system as possible.

This explains the Commission's softly-softly approach over a WTO ruling which is bound to be discussed at the summit: the potentially explosive issue of the special tax breaks for US companies - Foreign Sales Corporations (FSCs) - estimated to be worth a massive €4 billion in tax savings a year.

After years of being pilloried in the US for foot-dragging over changes to its banana import system and the ban on hormone-treated beef, the EU finally had the chance to go for the jugular.

Instead, the Commission has responded with sympathy and patience in the knowledge that an all-out trade war would push an already WTO-sceptical Senate and Congress over the brink.

At the very least, it would have cost Clinton vital political support in his bid to get China into the WTO, which he hopes will be his crowning trade achievement as he bows out as president.

Lamy admitted as much shortly after the WTO had delivered its damning verdict on the FSCs. "Of course, we are satisfied with the result as it condemns a practice we think results in a major distortion of international trade. But we are not trumpeting victory from the rooftops, because we do not want to make implementation more difficult for the US by raising the stakes publicly," he said in a speech to the American Chamber of Commerce.

Unfortunately for Lamy and the rest of the Union, Capitol Hill has not been quite as willing to play ball in the interests of multilateral trading rules. A bill which has just been approved by Congress will force the reluctant administration to apply more than €200 million in sanctions approved by the WTO in the banana and hormone cases to an entirely new set of imports from the EU, effectively doubling the damage done by the penalties.

Nevertheless, because a new WTO round is unthinkable without an injection of major US political support, the Union will keep Washington sweet.

But the transatlantic relationship goes beyond the high-profile trade spats which, in money terms, are often little more than blips on the radar image of a 2-trillion-euro financial relationship.

The EU delegation at next Wednesday's (31 May) summit in Lisbon will also be contemplating what impact a new administration might have on the US' role in the world, especially now that the Union's fast-developing security and defence policy means that it might be able to shoulder more of the burden of maintaining peace and stability on its doorstep.

Despite the fact that George W. Bush comes across as one of the majority of Americans who do not own a passport and have never travelled abroad, the governor of Texas has one of the US' canniest foreign-policy expert advisors in the form of Robert Zoellick, former chief aide to Bush senior's Secretary of State James Baker and ex-deputy chief of staff at the White House.

Zoellick has already visited Brussels to meet Patten and Lamy's staff to discuss future transatlantic trade and security issues. Fortunately for the EU, he is a firm believer both in the WTO as a multilateral forum and in the Union developing an independent military capability.

In an interview in the French newspaper Le Monde last year, he warned that treating the trade body as a sparring ground for teams of expensive lawyers risked further undermining the WTO in some US circles. "The most serious thing is that certain European actions reinforce the group in the US which is most opposed to the WTO," he warned.

Zoellick also dismissed suggestions that the US was unwilling to see the EU develop the ability to use military force to react to crises independently of NATO. "The irony is that the Europeans have got Congress' state of mind totally wrong," he said. "I can assure you that most people on Capitol Hill are absolutely in favour of European defence. They would prefer to see Europe take care of Kosovo on its own rather than see the US get bogged down there. The last thing they want is to have to spend money to maintain a large infrastructure in Europe - or in Asia, for the same reasons."

As if to underline the US' desire to leave the Europeans to manage affairs in their own backyard, Bush Jr has already indicated that he is sympathetic to pulling US troops out of Kosovo altogether by July 2001.

Far from fearing Union success in giving itself independent military muscle, Zoellick articulates the fears of the US state department if the EU fails to achieve its ambitions. "We could find ourselves in the worst possible situation. On one side, in Europe, you have rhetoric which lets you think that there is European defence when it is not yet ready and, on the other side, in the US, representatives who believe the European talk and who want America to disengage."

By concentrating on the common ground between the EU and the US over the new growth opportunities offered by the cyber- economy, the summit may well turn into a transatlantic love-in.

But the political dynamics in Brussels and Washington mean that the more taxing questions about transatlantic relations raised by Bush's right-hand man will be at the top of the agenda before very long.

Major feature. The forthcoming US-EU summit will be the last before November's American presidential elections. While discussions on topics such as the new cyber-economy will dominate the proceedings, Union leaders' thoughts are inevitably turning to what impact the new US administration will have on transatlantic relations.