European Affairs

The U.S. and the EU Must Work Together to Open up World Trade     Print
Peter F. Allgeier

Peter F. AllgeierBilateral trade disputes between the United States and the European Union receive a great deal of publicity, but U.S.-EU cooperation in liberalizing the global trading system is much more important. Although several other countries played important roles, the Doha Round would not have been launched in 2001 without the leadership of the United States and Europe. Similarly, it would not have been possible to get the floundering talks back on track in July 2004 without the efforts of the United States and the European Union.

Most countries, in fact, including some that do not always agree with us, now recognize that the European Union and the United States will have to work together if the world is to move toward freer trade. That means that we have an enormous amount of work to do. Fortunately, while we have our differences, the United States and the European Union share many of the same fundamental goals for the Doha negotiations.

The United States considers market access, broadly defined, to be at the heart of the negotiations. First and foremost, we must deal with agriculture, for which we have now established a negotiating framework. To oversimplify somewhat, the fundamental issues for the agricultural negotiations could be defined as follows: We have to agree on formulas for reducing and eliminating tariffs and for reducing domestic support for agriculture, as well as on the timescale for phasing out export subsidies. In all these areas, we have to work out how the poorer developing countries are to be treated.

The United States obviously has its differences with Europe, but we both agree that there will have to be a package that addresses these issues adequately. The European Union has begun to rationalize its farm policy by reforming the Common Agricultural Policy. That is an essential first step. But we now have to see how those reforms will apply in the Doha negotiations.

A big priority for both Europe and the United States will be to improve access for our farm products to key markets, particularly in the advanced developing countries. We share the same objective for non-agricultural products - manufactured, industrial and consumer goods.

We need to address four elements of market access in non-agricultural markets:

There should be some flexibility for developing countries, particularly for the poorest. That, however, will be extremely difficult to achieve because not all developing countries are the same. The more advanced developing countries continue to resist the idea of making distinctions among developing countries.

We must also open up market access for services, which represent the major part of Gross Domestic Product in many countries. In the United States, for example, services account for about twothirds of GDP and over 80 percent of non-agricultural employment. The services negotiations need to move forward in tandem with those covering agricultural and industrial products, and to aim at equally ambitious goals. So far, however, progress in the services sector has been insufficient.

Finally, we must use the negotiations to improve market access in the field of trade facilitation. Even if tariffs and nontariff barriers are dismantled, the entry of goods into a market can be frustrated, for instance, by customs procedures that are opaque, arbitrary or tainted with corruption.

There are other important issues that will have to be included in the final package. But Washington and Brussels agree that the main focus should be on these four major areas of market access – agricultural and non-agricultural products, services and trade facilitation. These will be the core issues of the Doha Development Agenda.

The need for U.S.-European cooperation in the Doha negotiations should not, however, lead us to overlook the importance of Transatlantic trade relations. The expansion of the European Union to 25 members in May 2004 made the Union the second largest U.S. export market after Canada last year. The 25- nation European Union is the largest supplier of U.S. imports.

The scale of investment in both directions across the Atlantic is stunning, as are sales by affiliates of European and U.S. companies in each other’s markets. Sales by affiliates of European companies in the United States amount to $2.8 trillion a year, or six times the total value of Transatlantic trade.We should make the American public much more aware of the huge number of jobs created by European- owned companies in the United States and of the enormous sales by the affiliates of U.S. companies in Europe.

The high degree of integration of the Transatlantic economy is the lynchpin of our prosperity on both sides of the Atlantic, and it means that we should work harder on two broad aspects of our relations. We should improve the management of our relationship, and we should seek ways to deepen integration further. In addition to managing our approaches to global negotiations, we should also handle our bilateral disputes better. Although these disputes concern only a very small proportion of our overall trade, they can still have an important impact on Transatlantic relations. It is extremely important that we are both seen to be complying with WTO obligations, and the United States has made strenuous efforts to do so in a number of cases.

Looking ahead, we need to consider how to strengthen our ties. The U.S.-EU summit meeting in Ireland in June 2004 agreed to conduct a dialogue with the private sector as a way to generate an agenda for the future. In the United States, we have held intensive consultations with the business community, from which a number of ideas have emerged. The European Commission and some EU member states are engaged in a similar process.We hope to put together proposals for the next U.S.-EU summit meeting later this year.

The main American aim in this regard is to coordinate U.S. and European regulatory regimes more closely. There is a fair amount of anxiety in the United States about over-regulation in Europe in certain instances, chemicals for example. Another problem, of course, is the very complicated subject of trade and security - how to find the right balance between ensuring security and allowing commerce to flow freely.

Nevertheless, I remain very optimistic that the European Union and the United States will work together over the coming years at the global level, and that we will manage our bilateral relationship in a way that leads to greater prosperity and improved competitiveness on both sides of the Atlantic.We are really going to need close Transatlantic cooperation to tackle the global problems that we shall be facing in the years ahead.

Peter F. Allgeier is the Deputy U.S. Trade Representative, responsible for supervising trade relations with Europe, the Middle East,Mexico, Canada, Latin America and the Caribbean, and negotiations in the World Trade Organization. He joined U.S. Trade Representative’s office in June 1980 as an international economist dealing with Asia, and has served in various positions under seven U.S. Trade Representatives.

 

This article was published in European Affairs: Volume number 6, Issue number 1-2 in the Winter/Spring of 2005.