EU/US Summit

December 17, 1998

It is ironic that in the midst of volatile economic times, the two strongest and least affected economic powers seem nearing a trade war. Full-page advertisements have appeared in American newspapers decrying the European Union as destroying America's agricultural markets, devastating America's steel industry and threatening the credibility of the global trading system as governed by the World Trade Organization (WTO). Lastly, it is said that we have not shared the burden of accepting trade from other nations in economic difficulty.

These allegations are without foundation. Unfortunately they are being fostered by interest groups which have always been and remain protectionist. These are the facts:

• In agricultural trade, the United States has always had a surplus with the EU. In bilateral trade, the United States and the European Union are each others best customers.
• As for steel, since the beginning of 1998 US steel mill imports from the world rose by 12.3 percent while world imports into the EU, a traditional exporter of steel, rose by 56 percent. The latest data shows EU steel imports from the world running at 77 percent above 1997 levels. EU imports from Southeast Asia in steel have increased by 740 percent this year. EU exports of steel to the US have fallen by 10.5 percent in the first five months of this year. EU steel exports to the US are in many cases affected by anti-dumping and anti-subsidy cases filed by the US steel industry.

The recent US trade deficit is not the fault of the EU, but of the economic problems in Asia, Russia, and Latin America. In fact the surpluses and deficits have alternated over the years between the US and the EU. For the first 8 months of 1998 EU trade with the United States rose by 14 percent for imports from the US and l5 percent for exports to the US. This follows a pattern of balanced trade. For example, bilateral trade from 1993 to 1997 was almost in equilibrium. The EU had a trade deficit with the US from 1990 to l992. The European Union is the United States best trading partner. In 1998 the European Union's trade surplus significantly slowed. This year the Union's surplus with the world was less that $11 billion as compared to over $32 billion for the same period in 1997.

We attach as much importance to the WTO as does the United States. Both the US and the EU, as its main creators, must uphold WTO rules and the dispute settlement process at its core. In this regard, we have changed our banana regulations to fully comply with WTO rules. And in addition we have every intention to conform to the dispute panel decision on hormones by the May 13, 1999 deadline. Any judgment on compliance has to take place in accordance with WTO rules and procedures, not by unilateral decisions by WTO members.

The EU would agree that the credibility of the WTO is at stake. Under great pressure, the US government institutes unilaterally retaliatory measures as early a February 1 by raising tariffs on a number of European products ranging from cheese to toys. This unilateral initiative has escalated trade tensions and endangered the trading system, as we know it.

Instead of unilateral retaliation, WTO members must resolve their differences. This is the only way to share the burden of alleviating the world's economic difficulties. In so doing, we must resist protectionist pressures and maintain the current level of market access while pursuing further multilateral and bilateral liberalization.

We should continue to spur economic recovery. In this regard, most of the member's states of the Union have recently reduced their interest rates, which are substantially lower than the rates prevailing in the United States.

The EU/US Summit on December 18 is an occasion for the two areas in the world which still offer a potential for economic growth and stability to consult on how together they can reverse the economic downturn in major parts of the world. It would seem to be a better use of our economic and political capital then indulging in hopeless bickering.

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