EU Pitches Plan from WTO Ruling; U.S. gives lukewarm response to British Chancellor's Trade Proposal
August 06, 2001
Calls by Gordon Brown, the chancellor of the exchequer, for a trans-Atlantic single market have been overtaken by fears of a renewed trade war between Europe and the United States.
Some experts this side of the Atlantic have described Brown's plans as overambitious but the threat of a trade war will put plans for a trans-Atlantic single market on ice for the time being.
WTO ruling
Robert Zoellick, U.S. trade representative, has described the World Trade Organization ruling in favor of the EU against tax breaks that the United States gives American exporters as a nuclear device because of the damage it could cause.
Under current law, U.S. corporations doing business abroad - typically through foreign subsidiaries - pay taxes on foreign profits only when they bring those profits back to the United States. It is estimated to be worth $4 billion a year.
The WTO branded the write-offs an illegal export subsidy and that could spark a trade war, with the Europeans threatening to retaliate with billions in sanctions. U.S. trade specialists say the ruling also is likely to infuriate U.S. legislators who made concessions in a bid to appease EU trade officials.
Brown's proposals for a trade bloc between the world's wealthiest nations also comes during a period of heightened European concerns that the Bush presidency is drawing America into a new period of isolationism.
In Washington, there are worries that Brussels is more interested in buttressing the walls of a Fortress Europe, with regulations and rulings to defend it against U.S. hegemony, than seeking reform.
This comes at a time, according to Brown, when the collapse of the Soviet Union and fall of the Berlin Wall have created the chance for a new age of economic interdependence - a vision propounded by President Kennedy 40 years ago.
Investment The annual flows of goods, services and foreign direct investment between the United States and Europe is about $1 trillion. One-fifth of total U.S. merchandise exports, and one-third of U.S. services exports go to the EU.
During the past decade, there has been an astonishing tenfold increase in European investment in the United States to $235 billion while U.S. direct investment in Europe of $520 billion totaled nearly half of all U.S. direct investment abroad, Brown says.
Brown estimates the annual income gains from a trans-Atlantic marketplace, including the elimination of industrial tariffs with all Britain's trading partners, would be nearly $350 billion.
An editorial in the U.S. edition of the Wall Street Journal welcomes his views as really good news which, if combined with President Bush's calls for free trade across the Americas, could be revolutionary.
Jeffrey Gedmin, executive director of the New Atlantic Initiative, a pro-Atlantic foreign policy group, says other leading European politicians and trade diplomats, such as Leon Brittan, former EU trade commissioner, had made similar calls for a transatlantic single market but without success.
Gedmin, who believes it would have substantial political benefits, says, On a wide range of issues the relationship between Europe and the U.S. is fraying. Brown's proposal is a tall order but it would complement NATO (the North Atlantic Treaty Organization).
Claude Barfield, resident scholar on international trade at the American Enterprise Institute, a Washington-based think tank, dismisses Brown's proposal as a very bad thing that could destabilize the efforts of the WTO.
Barfield says: It is going to expend a lot of energy to detract from a bigger payoff - the liberalization of world trade.
Industrial tariffs Jeffrey Schott, who is a senior fellow at the Institute for International Economics and the former U.S. trade negotiator, believes scraping industrial tariffs makes a lot of sense but would be difficult to implement within the existing global trade system.
Schott says: It would be difficult to implement the most favored national arrangements outside broader trade pacts in which developing nations were contributing to market reform. But that does not mean it is not worthwhile to try to find ways that Europe and the U.S. can lead the way to broader multilateral reforms.
Brown, in a bid to widen support for his plan to dismantle industrial tariffs, called for a study similar to the 1988 Cecchini report that made the case for Europe's single market.
Meanwhile, trade specialists are hoping the brewing row over foreign sales corporation tax can be settled before either side resorts to sanctions or tariffs.
EU officials have expressed concerns that any attempt to stop the practice could invite U.S. retaliation.
Brian Goldstein, a New York lawyer specializing in trade conflicts, says: There is a great deal of anger about this. It is not an easy situation.
Some experts this side of the Atlantic have described Brown's plans as overambitious but the threat of a trade war will put plans for a trans-Atlantic single market on ice for the time being.
WTO ruling
Robert Zoellick, U.S. trade representative, has described the World Trade Organization ruling in favor of the EU against tax breaks that the United States gives American exporters as a nuclear device because of the damage it could cause.
Under current law, U.S. corporations doing business abroad - typically through foreign subsidiaries - pay taxes on foreign profits only when they bring those profits back to the United States. It is estimated to be worth $4 billion a year.
The WTO branded the write-offs an illegal export subsidy and that could spark a trade war, with the Europeans threatening to retaliate with billions in sanctions. U.S. trade specialists say the ruling also is likely to infuriate U.S. legislators who made concessions in a bid to appease EU trade officials.
Brown's proposals for a trade bloc between the world's wealthiest nations also comes during a period of heightened European concerns that the Bush presidency is drawing America into a new period of isolationism.
In Washington, there are worries that Brussels is more interested in buttressing the walls of a Fortress Europe, with regulations and rulings to defend it against U.S. hegemony, than seeking reform.
This comes at a time, according to Brown, when the collapse of the Soviet Union and fall of the Berlin Wall have created the chance for a new age of economic interdependence - a vision propounded by President Kennedy 40 years ago.
Investment The annual flows of goods, services and foreign direct investment between the United States and Europe is about $1 trillion. One-fifth of total U.S. merchandise exports, and one-third of U.S. services exports go to the EU.
During the past decade, there has been an astonishing tenfold increase in European investment in the United States to $235 billion while U.S. direct investment in Europe of $520 billion totaled nearly half of all U.S. direct investment abroad, Brown says.
Brown estimates the annual income gains from a trans-Atlantic marketplace, including the elimination of industrial tariffs with all Britain's trading partners, would be nearly $350 billion.
An editorial in the U.S. edition of the Wall Street Journal welcomes his views as really good news which, if combined with President Bush's calls for free trade across the Americas, could be revolutionary.
Jeffrey Gedmin, executive director of the New Atlantic Initiative, a pro-Atlantic foreign policy group, says other leading European politicians and trade diplomats, such as Leon Brittan, former EU trade commissioner, had made similar calls for a transatlantic single market but without success.
Gedmin, who believes it would have substantial political benefits, says, On a wide range of issues the relationship between Europe and the U.S. is fraying. Brown's proposal is a tall order but it would complement NATO (the North Atlantic Treaty Organization).
Claude Barfield, resident scholar on international trade at the American Enterprise Institute, a Washington-based think tank, dismisses Brown's proposal as a very bad thing that could destabilize the efforts of the WTO.
Barfield says: It is going to expend a lot of energy to detract from a bigger payoff - the liberalization of world trade.
Industrial tariffs Jeffrey Schott, who is a senior fellow at the Institute for International Economics and the former U.S. trade negotiator, believes scraping industrial tariffs makes a lot of sense but would be difficult to implement within the existing global trade system.
Schott says: It would be difficult to implement the most favored national arrangements outside broader trade pacts in which developing nations were contributing to market reform. But that does not mean it is not worthwhile to try to find ways that Europe and the U.S. can lead the way to broader multilateral reforms.
Brown, in a bid to widen support for his plan to dismantle industrial tariffs, called for a study similar to the 1988 Cecchini report that made the case for Europe's single market.
Meanwhile, trade specialists are hoping the brewing row over foreign sales corporation tax can be settled before either side resorts to sanctions or tariffs.
EU officials have expressed concerns that any attempt to stop the practice could invite U.S. retaliation.
Brian Goldstein, a New York lawyer specializing in trade conflicts, says: There is a great deal of anger about this. It is not an easy situation.
