Firm allies, but bitter competitors

Date: 03/04/1997

By Mark Turner

EUROPE and North America are, as Oscar Wilde once quipped, two continents separated by the same language.

In the dying throws of the 20th century, that remains as true as it ever was - but the language that both unites and divides them is that of the free market and global capitalism.

EU-US relations have ridden a roller-coaster this century as Europe's colonial overlords plunged from global mastery to lowly aid recipients, then rose again to vie for the world's number one spot.

Over the same period, their American cousins climbed inexorably to superpower status, only to discover that with world-wide dominance came domestic political turmoil and accusations that the US administration was too preoccupied with its global role to tackle problems at home.

As the new millennium dawns, both sides of the Atlantic find themselves competing on an increasingly equal footing for the lion's share of global riches. Only this time they both face a major competitor in Asia.

The European Union and North America are thus in the paradoxical position of being firm allies - in the face of Oriental inscrutability and Islamic bellicosity - and bitter competitors at the same time.

The ongoing dispute over the US' Helms-Burton law, which penalises European companies trading in Cuban expropriated property, is just the most high-profile example of a vast range of transatlantic spats which pepper mutual relations.

Beef hormones, bananas, grain, semiconductors - these issues and others have captured headlines in newspapers on both sides of the Atlantic.

The disagreements have now, however, moved away from the realm of unilateral declarations and threats of trade sanctions and into the international arena of the World Trade Organisation.

In an era when the free market determines all, it is the WTO - and not the United Nations - which is set to regulate transatlantic political relations in the 21st century.

Nevertheless, it is also clear that more traditional diplomacy - under Chatham House rather than Davos rules - has some way yet to run.

Key challenges - NATO expansion, the Middle East peace process, Turkey's place in a secular Europe, Bosnian reconstruction - will continue to be the butter of EU-US relations to garnish the industrialists' bread.

And although Euro-American relations have, as a rule, been cordial, some cracks are appearing as Europe grows in confidence.

The EU's recent condemnation of Israel's Har Homa housing project flew in the face of American support for Tel Aviv; French demands for a European leader for NATO southern command ruffled some very senior feathers in the Pentagon; and European Christian Democrats' harsh words for Turkey in March had the US hopping with anger.

No one doubts that in broad terms, both commercially and politically, Europe and the US are still natural allies. “As far as political affairs are going, we are very pleased with our relationship with the European Union right now,” says US ambassador Vernon Weaver.

No one doubts either that the US still very much calls the shots in international politics, with Europe a favoured but lesser partner. But as the threat of global war diminishes, and money rather than territory becomes the goal of world leaders, it is clear that the traditional balance of the alliance is changing.

The recently established Transatlantic Business Dialogue (TABD) attempts to reflect the increasingly complex interrelationship between politics and commerce with its 'quad' of business leaders and politicians from the United States and the EU's 15 member nations.

Although many executives may not yet have heard of it, the TABD has helped put pressure on both Brussels and Washington to dismantle regulatory obstacles to trade.

It has also paved the way for mutual recognition agreements in telecoms, medical devices and pharmaceuticals, fostered contacts between small and medium-sized enterprises, and helped forge joint strategies in areas such as electronic commerce.

In so doing, it has attracted a certain degree of envy from Canada, which is pushing strongly for a similar deal this year.

But TABD or no TABD, Euro-American business is booming, with corporate megaliths leading the way in a frenzy of transatlantic mergers.

Deutsche Telekom and the Sprint Corporation, and British Airways and American Airlines, are just two examples of the growing trend for European companies to search for - and find - partners in the US.

As markets become increasingly open, more 'mega-mergers' are inevitable, bringing with them increasingly knotty problems for regulators on both sides of the Atlantic.

US acquisitions have increased tenfold over the last decade, while spending by European companies in the US reached almost 60 billion ecu last year.

In response to growing pressure, the EU and the US are looking to agree a revamped transatlantic competition deal within a few months which would clarify their respective roles in vetting cases, although they have left the issue of mergers and joint ventures for another day.

Recent years have also seen a steady rise in EU-US trade flows, characterised by a growing trade surplus for the Union - except in the most promising high-technology sectors - since 1993. European trade has been helped in no small way by a strengthening dollar and an apparent American disinterest in keeping its value down.

That relative lack of concern has also been evident in Washington's attitude to Europe's single currency debate.

Aside from slight bemusement at the painful consequences of trying to meet the Maastricht convergence criteria suffered by France and Germany, US treasury officials have treated the EU's bitterest controversy with a self-confident disdain.

That could be a grave mistake. If Europe's EMU enthusiasts are right, the emergence of a super-currency backed by the clout of the world's largest trading bloc could pose a serious threat to the dollar's dominance.

With a financial tool that accurately reflects its commercial power, the EU will pull some serious rank in the Group of Seven and the International Monetary Fund, argues European Monetary Institute President Alexandre Lamfalussey.

Until that happens, however, American binoculars will remain focused upon NATO expansion and the related process of EU enlargement. Shoring up European stability is US President Bill Clinton's major foreign policy goal. While it has - on a public level - avoided meddling in the debate over European integration, Washington has made its displeasure clear behind the scenes at any threat to that process.

All of which sets an interesting scene as the curtain prepares to drop on the 20th century.

Clinton's second administration will be an interesting one for the Europeans. The new foreign affairs team, led by Madeleine Albright (who recently discovered her European roots), seems to herald a less confrontational era but whether it will be a more productive one remains to be seen.

Perhaps those on both sides of the Atlantic may even stop scrabbling for Chinese contracts and set about building a firm western liberal alliance in the new era.

Instant communications have already made the Atlantic Ocean virtually irrelevant in geographical terms. How its symbolic significance develops will be one of the most important political puzzles of the new millennium.