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The EU and the United States

Summary

The United States supported European integration from the beginnings of European co-operation after the Second World War despite domestic concerns that Europe was creating a trade grouping that would disadvantage the US. The partnership is a critical one in many policy areas, notably trade and security. The relationship has waxed and waned from time to time as a result of changes of attitude in the US or Europe but the fundamental ties of history and values have ensured that although it is often difficult it endures.

This paper covers some of the historical background, examines the often controversial trading relationship and takes a detailed look at the politics involved. Details of the machinery through which the EU-US relationship operates can be found in the annex.

The US & European Integration

In the aftermath of the Second World War and in the face of the Communist threat the US offer of Marshall Aid funds to help rebuild Europe contributed significantly to the emergence of European co-operation. Early attempts at co-operation in Europe were stymied by fears of a revived Germany but the when the Schuman Plan proposed a supranational body for the coal and steel industries it was strongly supported by the United States.

US support for European integration has continued ever since despite occasional periods of doubt in some presidential administrations (1991-2 and 2003-5 for example), usually prompted by specific disagreements over policy or sometimes bitter trade disputes (see below). Whilst the United States has largely supported European integration they have not always liked dealing with a single EU. Sometimes the US will complain that Europe does not speak with one voice; on other occasions they find the effectiveness of a single EU message (e.g. over climate change) disagreeable.

Controversy & Co-operation: The Trading Relationship

The EU and the US are each other’s largest trading partners – about 40 per cent of world trade is between the EU and the US. The relationship is not just strong in trade but also in foreign direct investment; about two-thirds of European and American companies’ overseas investment crosses the Atlantic.

The sheer volume of trade creates its own pressures. US suspicions of the single market took many in the EU by surprise in the run up to its introduction at the end of 1992 but it reflected a longstanding concern in the US that a "fortress Europe" was being constructed that would be protectionist.

Trade issues of relatively minor importance in themselves have dominated disputes between the EU and the USA for many years. The EU-wide ban on adding any hormones to beef resulted in a ban on the import of most US beef (see Annex) A second major dispute arose over the EU’s policy of giving preferential access to banana growers in the Caribbean. The World Trade Organisation ruled the EU quotas illegal in 1997. After much aggravation agreement was finally reached in 2001.

More recently the EU’s reluctance to allow genetically modified crops, which the US regards as unscientific and an illegal barrier to trade (in which they have been upheld by the WTO), and large commercial aircraft subsidies (essentially US complaints about government launch aid for Airbus, with the EU counterattacking over US indirect subsidies to Boeing through Defense Department and NASA spending) remain outstanding issues in dispute

Other trade disputes occur between the US and the EU reflecting the political pressures on either side of the Atlantic. For example the decision of the administration of President George W Bush to restrict steel imports because of the difficulties in the US steel-producing sector (much of it located in key swing States such as Ohio) led to an EU protest to the WTO and a ruling against the US.

Looking beyond the Doha round of world trade talks, (not dealt with in this paper) it has been suggested (by German Chancellor Angele Merkel amongst others) that there should be an EU-US free trade area. It would be difficult to achieve an all-embracing free trade agreement but there is greater scope for sector by sector agreements on EU-US trade.

Political relations

Both the EU as such and its MemberStates have political relations with the UScovering a wide variety of political, security and strategic issues. The UK/US relationship which includes a unique intelligence relationship is obviously a key one and probably the most wide-ranging. But other bilateral relationships are also important, notably the US’s relations with Germany and France. The interplay of these bilateral relationships affects the health and effectiveness of the EU-US relationship.

A further complication is that much of the European (as opposed to EU) defence and security relationship takes place in NATO, of which 21 out of 27 EU Member States are also members, along with the US, Canada and Turkey. As the EU itself has in recent years become more and more involved in security issues, the EU-NATO relationship has also become correspondingly important. Not to be forgotten as well is the relationship created by common membership of the G7/G8, composed of the major European states (France, Germany, Italy, UK plus the EU Commission and Presidency), the US, Canada, Japan and, latterly, Russia

The EU’s Member States (with the UK very much to the fore) have long wanted and worked for a distinctive and unified European political influence in the world to complement the influence of the EU’s in the trade field. NATO could not be the forum for such a dialogue because of its exclusively defence role and it is inevitably dominated by the US. So over the years an important EU-US political dialogue has developed paralleling the dialogue on trade issues

There are multiple fora for this (as described in the annex) but as important is the network of ad hoc arrangements, the unrecorded phone calls and unscheduled informal meetings as well as the confidence and intimacy of the relationships between individual leaders and countries on any given issue at any given time. This is inevitable and natural given the wide range, complexity and importance of the issues on which consultation is needed. Some of them are handled in NATO as well (eg Bosnia and Kosovo), or in groupings outside but related to the EU and/or NATO (eg the Contact Group on the Balkans) and the EU3 (France, Germany, UK with Javier Solana on Iran), or bilaterally outside either grouping (Iraq). Much depends on the willingness of leaders to use the available mechanisms let alone to use them effectively for genuine consultation with a view to common approaches.

The US as a superpower has a wider strategic world view than most Europeans, some of whom are rather regional in outlook, it is less reluctant to see military force as an instrument of policy and more sceptical about supporting multilateral UN-agreed solutions to international problems than the Europeans. But the EU is not without influence. Its gradually increasing ability to combine the "hard power" of military force (supported by closer EU-NATO co-operation) with "soft power" expertise in trade, development, justice and human rights, gives it increasing influence in a world where military force is not enough on its own.

The Future

In his first term, President George W Bush appeared to make a radical break with the past. The "neo-cons" seemed to believe that Europe was of less significance to US policy following the end of the Cold War and the UN a barrier to unilateral action. The President was clearly determined to go it alone, if necessary, for example in dealing with Iraq or global warming. This unilateralist approach was accentuated by the events of 9/11, which encouraged American fears of the wider world.

In his second term President Bush has rowed back some way. This does not mean that on many issues the Administration does not remain driven by its own view, notably in the Israel-Palestine dispute. But, recognising belatedly that the US needs the legitimisation of wider international support, preferably at the UN, the Administration is working harder to achieve international support for what it wants to do. None of which is to say that the temptation to go it alone does not remain if they do not get their way in the end (e.g. over Iran).

As for the EU, Member States need to recognise that they are more likely to influence America if they speak on the basis of common policies, not least towards the US itself. A common EU position is more likely to influence Washington than a range of opinion. The EU needs to formulate agreed policies on the way in which individually and collectively they will try to move the US towards multilateral co-operation. Whatever their differences they will serve Europe’s interests better if they resist anti-American popular feeling. There is nothing to be gained by widening the present divisions.

Where the US and Europeans can work together, they can achieve much, while conversely if they pull in different directions, they achieve little: and the world’s most pressing problems, from climate change to the several crises in the Middle East require them to work together.

March 2007

                                                   Annex

A Framework for Relations

The European Community (i.e. the Commission) and the US have had missions in each other’s capitals for over 50 years. The current Commission representative in Washington is the former Irish Prime Minister John Bruton. Political relations have been dealt with between the US and the incumbent Presidency and more recently the EU’s High Representative for the CFSP (Javier Solana).

It was not until 1990 that the two sides sought to build on their long history of co-operation with a formal agreement. The November 1990 Transatlantic Declaration was not a treaty but a political agreement on increased co-operation. It grew out of the uncertainties in Europe created by the end of the Cold War and the transition to democracy in the Warsaw Pact countries. The United States was anxious to support EU efforts to boost the economies and democratic institutions of former Communist countries and Member States wanted to secure continuing US commitment to Europe at a time of uncertainty.

The 1990 Transatlantic Declaration encouraged the development of greater co-operation in economic matters, education and science and laid down a mechanism for political relations. Biannual consultations between the US President on the one hand and the Commission President and the President of the European Council on the other were the most important element in this structure. Although these "summits" have rarely led to striking policy changes and in fact now only occur once a year, they have strengthened the dialogue between the EU and the United States and ensured that there is always a forum for debate even when there are tensions in the relationship.

The New Transatlantic Agenda

In 1995 matters were taken a stage further with the signature of the New Transatlantic Agenda (NTA) by President Clinton and representatives of the EU. This agreement expanded areas of co-operation, reflecting the growing development of the Common Foreign & Security Policy in the EU and therefore the EU’s importance as an actor on the world stage. Concerns about the proliferation of weapons of mass destruction, failed states and the threat they posed to global peace were also factors behind the agreement. The difficulties in the EU-US over trade provided a further impetus and three years later the Transatlantic Economic Partnership was launched under the framework of the NTA.

One successful outcome of the NTA was the establishment of the TransAtlantic Business Dialogue. This is a business lobby that provides useful guidance to trade negotiators on both sides concerning the technical aspects of trade problems.

Trade Issues - Beef

The scandal over the adding of inappropriate hormones to beef in Italy in the 1980s led to a 1989 EU-wide ban on hormones in beef. Imports of US been were banned as a result amidst protests from the US that this was unscientific. The dispute ended up before a WTO panel who ruled against the EU more than once although the EU now argues that it has complied with previous WTO rulings but the US has improperly retained its trade sanctions against the EU despite this.

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