News Release

Peter Mandelson

No. 174/04
December 23, 2004

ANNUAL EU REPORT ON US TRADE BARRIERS SHOWS POTENTIAL FOR RESOLVING OUTSTANDING TRADE DISPUTES

The European Commission’s twentieth annual report on barriers to trade and investment in the US, released today, underlines the importance of the 2004 EU-US summit decision to define a new strategy to strengthen the transatlantic economic relationship to add new impetus to efforts to resolve these trade problems. The report includes details of the obstacles that EU exporters and investors face in the United States market.

At their 2004 summit, the EU and the US jointly committed themselves to pursuing the elimination of trade and investment barriers on both sides of the Atlantic. With this aim in mind, both sides have carried out a wide public consultation to obtain a comprehensive picture of those trade and investment obstacles which most affect stakeholders. The EU agrees with its US partner that further transatlantic economic integration is the key to realizing fully the competitive potential of both economies.

The report identifies a number of significant barriers in the US. Given the unrivalled EU-US trade and investment relationship, further US efforts to tackle these problems would be a positive development for both economies. More generally, in addition to removing trade barriers, continued EU-US co-operation will yield significant economic benefits by creating additional trade and investment opportunities. In this respect the EU-US summit decision in June 2004 to define a new strategy to strengthen the transatlantic economic relationship is an encouraging signal.

There has been some progress in 2004, notably with regard to the 1916 Antidumping Act. The EU also recognizes the passage of the American Jobs Creation Act of 2004, which repealed the FSC/ETI. However, as the repeal Act includes transitional and grandfathering provisions which appear to be WTO-incompatible, the EU requested a further WTO judgment on these aspects of the case. Retaliation, however, is to be suspended pending the outcome of the case.

Other problems remain, including the Byrd Amendment Act. In November 2004 the EU (and six other WTO members) obtained the WTO Dispute Settlement Body’s authorization to impose countermeasures on US products. The US has not yet taken action to bring its Continued Dumping and Subsidy Offset Act (the so-called "Byrd Amendment") into WTO compliance. The EU is also concerned that the new US methodology to apply countervailing duty to privatized companies is still not WTO-compatible. At the EU’s request the WTO Dispute Settlement Body [DSB] established a compliance panel on this question in September 2004. At request of the EU, the DSB has also established a panel that will examine the WTO compatibility of the “zeroing” methodology, which results in inflated antidumping margins on exporters to the US market.

Other new developments in the course of the last year have also aroused concern in the EU. In 2004 the US unilaterally withdrew from the 1992 EU-US Agreement on Trade in Large Civil Aircraft, despite the lack of any legal justification for doing so. In the view of the Commission, the US has been in breach of the 1992 Agreement for some time. It continues to subsidize US aircraft manufacturers through a number of measures including the payment of research and development costs through various government agencies, as well as direct subsidies in support of the Boeing 7E7.

In the Beef Hormones dispute, the US has still not lifted its retaliatory measures against EU exporters or taken any action to challenge the WTO compatibility of the new EU Hormones directive, which brought the EU legislation into WTO compliance.

The Commission remains concerned that a number of US national security measures that were adopted in response to terrorist threats have unnecessarily distorting effects on trade. The implementation of the Bioterrorism Act, and in particular the food-related provisions of this legislation, have far reaching implications for EU agricultural exporters. In the area of public procurement, US government continued in 2004 to award prime contracts for the reconstruction of Iraq only to companies from the US, Iraq, coalition partners and force-contributing nations.

Background

The EU and the US are each other's main trading partners (taking goods and services together) and account for the largest bilateral trade relationship in the world. In the year 2002, the total amount of two-way investment amounted to over €1.5 trillion, composed of € 889 billion of EU FDI [Foreign Direct Investment] in the US and around € 650 billion of US FDI in Europe. Including direct employment due to investment, indirect employment like joint ventures and other deals and jobs supported by trade together, the overall “transatlantic workforce” is estimated at 12 to 14 million: some 7 million workers in the US owe their jobs directly or indirectly to EU companies. In the year 2002, the total outflows of Foreign Direct Investments from the EU to the US were €45 billion (34.6% of total EU FDI), while €53 billion of US FDI flowed into the EU (61.9% of total US overseas investment outflows).

In the year 2003, exports of EU goods to the US amounted to €220 billion (22.6% of total EU exports), while imports from the US amounted to €151 billion (15.3 % of total EU imports). In trade in services, exports of the EU amounted in 2003 to €115 billion while imports from the US amounted to €109 billion.

The Report is available on the Internet at the following address:
http://europa.eu.int/comm/trade/issues/bilateral/countries/usa/pr231204_en.htm

There has also been a limited print run of the Report and printed copies can be ordered from:

Delegation of the European Commission to the United States
2300 M Street, NW
Third Floor
Washington, DC 20037
USA
Fax: (202) 429-1766

European Commission
Unit for Market Access
Directorate General for Trade
200 Rue de la Loi
B-1049 Brussels,
Belgium
Fax: (322) 296-7393