European Affairs

Rough Water Ahead in the Atlantic     Print Email

The outlook for U.S.-EU trade relations for the rest of 2005 is not encouraging. Some may consider this forecast unduly pessimistic, but a realistic assessment would have to include four main reasons why Transatlantic trade relations may be entering rough water.

Firstly, we must not forget that trade, in macroeconomic terms, is only a function of many more important factors, including savings and investment. And the major imbalances in the world economy, in terms of saving and investment, are not going to be easily corrected. The decline in the dollar that the U.S. Administration has clearly supported is not going to solve the problem. Each time the dollar falls; European exports and economic growth rates suffer, making it even more difficult for the United States to grow its way out of the imbalances.

Secondly, we face major difficulties in the negotiations on the Doha Development Agenda. In one respect, the United States can perhaps be congratulated for turning the Agenda into what it wanted all along - a round of negotiations on market access - as opposed to an effort to put a broader regulatory system in place in Geneva.

There is only one problem - there is not, for the time being, a Doha Development Agenda. There is a Doha Agricultural Agenda. The aim of improving market access for non-agricultural products seems to be disappearing, and there is no agreement on the way ahead. There has been no progress on services, and a number of developing countries want to limit the Doha negotiations exclusively to agriculture.

Thirdly, we face some worrying bilateral Transatlantic trade disputes. It has become a cliché that these disputes involve only two to three percent of total U.S.-EU trade. And that is fine as long as the conflicts concern obscure issues such as the U.S. Anti-Dumping Act of 1916 or the tax treatment of U.S. exporting companies, because hardly anybody in Europe has ever heard of these problems.

That is not true, however, of some of the issues we face now. Vast numbers of Europeans have strong views about the conflict over genetically modified organisms (GMOs), and many of them know about the dispute between Airbus and Boeing, which are both household names. Then there is the little fight we are going to have over pharmaceutical prices.When Europeans learn that Washington wants them to pay higher prices for their drugs because there is no price control in the United States, it is not going to be easy to explain to them why they should do so. In disputes such as these, people on both sides of the Atlantic are convinced that they are right and that God is on their side.

Fourthly, we generally agree that the key to healthier Transatlantic relations is to improve the coordination of our regulatory regimes. The only problem is that U.S. companies believe that Europe is over-regulated, while we think that the United States is under-regulated – for example on GMOs and controversial medicines such as Vioxx. Europeans tend to believe that regulatory regimes are not only a matter for bureaucrats and technicians. They reflect the values of different societies, and when those values differ, disputes about them are not easy to resolve.

Jean-Francois Boittin is the Minister-Counselor for Economic and Commercial Affairs at the Embassy of France in Washington.


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

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