CRITICAL REVIEW

Critical Review

Critical Review

Introduction

In this period of increasingly frequent transatlantic disagreements, many observers claim that trade relations between the EU and the US are the worst in recent memory. In the past few weeks new potential disputes have emerged over the US Farm Bill, the imposition of tariffs on imports of steel to the US, and most recently the US decision to create anti-terrorist customs controls at certain EU ports. In this climate, even the procedural framework of the WTO dispute settlement process seems incapable of ensuring wholly amicable US-EU trade relations. Nevertheless, transatlantic cooperation in the area of trade is better than that in the international political arena, where open disputes have erupted over such issues as the International Criminal Court and the Kyoto Protocol.

Overview of Current EU-US Trade Relationship

The EU-US trade relationship is of great importance in today's global economic system. Not only do bilateral economic relations between these two economic giants make up over 40% of world trade, but their trade relationship also greatly influences political cooperation between the two unions. As Leon Brittan, former EU commissioner for trade recently wrote, there is a loose linkage between economic and political cooperation and partnership. If serious strains arise on one side of the relationship, there is always a risk that the other will suffer. The US-EU trade relationship draws wider circles, however, and also serves an important signalling effect to the world trading system as a whole. Indeed, it is difficult to move the global trade agenda forward when the EU and US pull on opposite strands. (Leamer 1995)

There is currently a long list of US-EU trade disputes ranging from unresolved issues, such as the EU refusal to allow imports of hormone treated beef (despite a contrary WTO ruling), to those disputes that are only just about to erupt, such as the potential row over the imposition of tariffs on US steel imports. Most recently, the EU has won a case against the US for its Foreign Sales Corporation (FSC) Law, which bestows special tax breaks on US companies in the exporting business. The EU was granted the right to impose sanctions worth up to $4 billion - the largest award in WTO history. For the status and a brief summary of the 11 currently active bilateral US-EU cases in the WTO please refer to the Annex below. Even though EU-US trade accounts for less than 22% of EU trade, it comprises over 47% of the EU's WTO disputes. By contrast, the EU currently has not a single WTO dispute with its preferential partners in Europe and Africa, although 32% of its trade takes place with these countries. These numbers point out that, even though the EU and US try to settle their trade disagreements in various informal and formal bilateral settings, they still depend heavily on the WTO dispute resolution mechanism to solve their most contentious problems.

US Trade Policy Towards the EU

EU commercial policy is remarkable as it is the principal area in which the ...