EU-US spats disguise deep rapport

Date: 26/02/1998

By Mark Turner

FROM the doom-laden press coverage of the past six months, observers could be forgiven for thinking that the EU-US trade relationship was on the point of collapse.

Explosive battles over extra-territoriality, beef hormones, data protection, airline mergers and pharmaceuticals all gave the impression of warring administrations and business leaders at each other's throats.

But while such disputes are certainly damaging and reflect growing rivalry across the Atlantic, they are but tiny ripples on the surface of the largest and healthiest trade relationship the world has ever seen.

Two-way EU-US trade flows are in the order of 250 billion ecu a year - a sum which would buy you eight Channel Tunnels, cover the cost of shooting the cinema blockbuster Titanic 1,000 times, or pay for enough chocolate bars to feed the whole Chinese population a Snicker bar every day for a year.

These flows are also incredibly diverse. The US is one of Europe's top three external trade partners in cereals, vegetables, beverages, wood, paper, metal ores, oil, chemicals, pharmaceuticals, plastics, machinery, telecommunications, office equipment, cars, aircraft, ships and iron - to name just a few sectors.

Overall, argues Trade Commissioner Sir Leon Brittan, the points of convergence are far more important than the points of disagreement. The way in which Washington and Brussels have been able to lead global trade talks jointly are “living proof”, he says, that both capitals are essentially at one on the most pressing issues of the day.

“If you look at the past year within the World Trade Organisation, very often an agreement is only possible if it is an agreement between the EU and US first, and the rest of the world decides to join in later,” says Brittan.

“That happened in the information technology agreement, the agreement on the liberalisation of telecommunications, and - most remarkably - the agreement to open up financial services. On the last case in particular the Americans had shown considerable reluctance, but were persuaded by us that they should go ahead. That made the deal possible.”

Although the high-level disputes “are not to be dismissed”, Brittan insists that they present “a jolly misleading picture of our relationship”.

Over the next few months, however, this kind of bravado will be put to its sternest test yet. The European Commission is next week expected to call for a huge overhaul of trade relations between the two blocs, which would “substantially enhance economic ties”, according to Brittan.

The Commission hopes to remove barriers in areas ranging from services, tariffs and intellectual property to public procurement, going far beyond last year's Mutual Recognition Agreements (MRAs) on medical equipment and pharmaceuticals.

Brittan claims there is so much support for his ideas that Washington and the US could even launch negotiations at their next summit in May. All of this has been greeted with some puzzlement in the US, currently more concerned with domestic issues and possible war in Iraq than a new trade initiative with Europe.

“We certainly appreciate the energy that Sir Leon is putting into this,” says US deputy chief of mission to the EU Donald Kursch, diplomatically. “It takes a lot of work to get this sort of thing done here.”

However, despite Washington's other preoccupations, Kursch says it is working on a counter-offer, which could also be ready for discussion at the summit.

“I think the areas Sir Leon is talking about are of interest to us, but with one addition,” he says. “There is a feeling in the US that the agriculture and food sector needs a certain amount of change. But we have not come back with a formal proposal yet.”

The trouble is that the US Congress, under growing pressure from the American labour movement, is unlikely to leap into a new transatlantic trade agreement only a couple of months after rejecting fast-track talks with the Americas.

Kursch is relatively confident that if the two sides agree a “balanced package” it could get Congress support, but he is strongly aware of labour union concerns.

Brittan also accepts that senators and congressmen may not be as open to his proposals as the administration.

“The administration is as committed as ever to opening up trade and to working with us bilaterally and multilaterally,” he says. “But I think that there is less appetite for free trade in Congress, as you clearly saw with the fast-track vote.”

Nevertheless, Brittan insists that he has won support from all sectors of the US policy-making machine. “I have been talking to many people about these ideas; officials are not operating in isolation. Otherwise, we would not have got anywhere near as far as we have at the moment,” he says.