U.S.-European Trade Relations: Issues and Policy Challenges

The Congressional Research Service, a department of the Library of Congress, conducts research and analysis for Congress on a broad range of national and international policy issues. Some of the CRS work is carried out specifically for individual members of Congress or their staff and is confidential. However, there is also much CRS compiled material which is considered public but is not formally published on the CRS website.

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In some cases hyperlinks allows you to access all versions of a report, including the latest. Note that many reports are periodically updated.The United States and European Union (EU) share a huge and mutually beneficial economic partnership. Not only is the U.S.-EU trade and investment relationship the largest in the world, it is arguably the most important. Agreement between the two economic super-powers has been critical to making the world trading system more open and efficient. At the same time, a confluence of old and new trade disputes, entailing U.S. retaliation and EU threats of counter-retaliation have increased trade tensions in recent years. A final ruling issued January 14, 2002 by the World Trade Organization (WTO) against a U.S. export tax benefit figures prominently in current trade disputes, along with the EU’s failure to approve pending applications for new biotechnology crops and the possible imposition of U.S. steel restraints in March.

Resolution of U.S.-EU disputes has become increasingly difficult in recent years. Part of the problem may be due to the fact that the U.S. and the EU are of roughly equal economic strength and neither side has the ability to impose concessions on the other. Another factor may be that many bilateral disputes now involve clashes in domestic values, priorities, and regulatory systems where the international rules of the road are inadequate to provide a basis for effective and timely dispute resolution.

In order to build a smoother relationship, Brussels and Washington may have to resolve a number of these disputes and avoid an outbreak of new disputes this year. The agreement to launch a new round of multilateral trade negotiations at the WTO trade ministerial held last November in Doha, Qatar has facilitated this effort. An increased desire for U.S.-EU cooperation in the wake of last September’s terrorist attacks could also spill over to help moderate trade frictions.

But the two sides must now deal with the fall-out from the fin al WTO ruling that the U.S. offshore Foreign Sales Corporation (FSC) scheme is an illegal subsidy. Europe has until the end of April, 2002 to decide whether to impose retaliatory tariffs against what could be several billions of dollars of U.S. exports or to reach a negotiated settlement. This dispute, combined with continuing controversies over a 1916 U.S. dumping law and an upcoming February decision by the Bush Administration on imposing tariffs to protect U.S. steel producers, has the potential for re-igniting transatlantic trade tensions.

The major U.S.-EU trade and investment policy challenges can be grouped into six categories:

(1) avoiding a ‘big ticket’ trade dispute associated with tax breaks for U.S. exporters;
(2) resolving longstanding trade disputes involving protection for domestic producers of airplanes and steel;
(3) dealing with different public concerns over new technologies and new industries
(4) fostering a receptive climate for mergers and acquisitions;
(5) strengthening the multilateral trading system; and
(6) reaching understandings on foreign policy sanctions that have a trade impact.

• Primary Source

Federation of American Scientists (FAS): Congressional Research Service [CRS] Reports https://fas.org/sgp/crs/index.html

EveryCRSReport.com https://www.everycrsreport.com/

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