In an earlier post, I highlighted the United States’ efforts to establish formal trade alliances with the European Community (EC), which is the present-day European Union (EU),[1] during the 1960s and 1970s. Trade disputes between the two economies continued into the 1980s, thus hindering progress toward economic cooperation.
By the 1990s, the United States and the EC were more successful because of the institutionalization of their relationship.
However, even with the established institutional framework, the challenges that the US-EC trade relationship faced during this period continue to offer lessons for these two economic partners as they anticipate the start of free trade negotiations by June 2013.
U.S.-EC Trade
Trade between the United States and the EC grew by 1990 compared to a decade earlier. Two-way trade between the United States and the EC increased from a little over US$90 billion in 1981 to close to US$200 billion in 1990. The EC represented 21 percent of U.S. total trade with the world in 1990, up from 19 percent in 1981.
Furthermore, U.S. imports from and exports to the EC showed significant growth during the same time period. U.S. imports from the EC jumped from about US$40 billion (17 percent of total U.S. imports) to almost US$91 billion (18 percent of total U.S. imports). U.S. exports to the EC increased from almost US$51 billion (24 percent of total U.S. exports) to about US$93 billion (25 percent of total US exports) (Table 1).
Table 1: U.S.-EC Trade,1981 and 1990 (US$billion)
Two-way Trade | U.S. imports from EC | U.S. exports to EC |
|
|---|---|---|---|
| 1981 | 92.9 | 41.4 | 50.6 |
| 1990 | 183.9 | 90.8 | 93.1 |
Additionally, the U.S. trade balance with the EC improved greatly from the mid-1980s to 1990. Whereas the United States carried a trade deficit with the EC of US$25.3 billion in 1986, it reported a trade surplus of US$2.3 billion four years later.
Trans-Atlantic Institutional Framework
As a result, it became even more important to overcome the challenges of earlier efforts to deepen bilateral economic ties. Both economies addressed those challenges by institutionalizing relations. Institutionalization, in this sense, does not necessarily refer to the establishment of formal organizations. Rather, it “is a process whereby a coordination and pattern of behaviour between actors is established and developed,” writes Steffenson (2005, 5).
Throughout the 1990s, three initiatives took effect (Table 2).
Table 2: Institutionalization of Transatlantic Relations
1990 | 1995 | 1998 |
|
|---|---|---|---|
| Initiative | Transatlantic Declaration | New Transatlantic Agenda | Transatlantic Economic Partnership |
| Outcome | US-EC maintain regular consultations but still must defer to multilateral General Agreement on Tariffs and Trade (GATT) for rules governing bilateral trade relationship | establishes an institutional framework to manage trade tensions | maintained institutional framework |
What We Can Learn
Two proposals failed to take effect during this decade–the New Transatlantic Marketplace and the Transatlantic Free Trade Area.
The New Transatlantic Marketplace (NTM) was first proposed in 1995 and then again in 1998. The NTM was approved in March 1998 by the European Commission. Its objectives were to remove trade and investment barriers between the United States and the EU and establish a transatlantic marketplace in 2010.
However, concerns about the NTM arose. France reportedly opposed the NTM because of its concern that it would be harmful to the interests of its agricultural and communication sectors. Furthermore, France and the Netherlands felt that the NTM would undermine the rules established under the World Trade Organization. Finally, the Netherlands opposed and the United States was less enthusiastic about the NTM, because it did not include agricultural liberalization, according to several reports at that time.
The Transatlantic Free Trade Area was proposed in 1995 by former German Foreign Minister Klaus Kinkel. Trade tensions and concerns about what a bilateral deal would mean for the multilateral WTO resulted in the TFTA remaining merely an idea.
Liberalization of the agriculture trade remains a sticking point today. Negotiators will have to go in with serious intentions to promote trade liberalization in agriculture to avoid stalled negotiations that resulted in the collapse of the Free Trade of the Area of the Americas (FTAA) and an inability to complete the Doha Round of the WTO negotiations eight years later.
**Come back for Part 3 of the Series: US-EU Trade in the 21st Century
[1] The European Union was established in 1993 under the Maastricht Treaty.
Sources:
Kevin Featherstone and Roy H. Ginsberg. The United States and the European Union in the 1990s: Partners in Transition. New York: St. Martin’s Press, 1996.
Rebecca Steffenson. Managing EU-US Relations: Actors, Institutions and the New Transatlantic Agenda. New York: Manchester University Press, 2005.
Other recommended reports:
“New Transatlantic Marketplace: France Keeps Brittan’s Ship at Bay,” Bridges Weekly Trade News Digest, International Center for Trade and Sustainable Development, 4 May 1998
“EU-U.S. work to reach agreement on transatlantic issues,” Bridges Weekly Trade News Digest, International Center for Trade and Sustainable Development, 18 May 1998
“European Commission backs New Transatlantic Marketplace,” IP/98/237 Brussels, 11 March 1998
Denman, Roy. “A Trans-Atlantic Free Trade Area?“ New York Times 21 June 1995
Kern, Soeren. “Why the New Transatlantic Agenda Should, But Won’t, Be Reformed.”
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License
