TRADE: Move to Narrow EU-U.S. Divide

By IPS Correspondents Reprint | | Print |

Stefania Bianchi

BRUSSELS, Mar 10 2004 (IPS) - The Danish Prime Minister has called for a new forum to resolve differences between the EU and the United States.

The transatlantic relationship has suffered from serious political tensions in the past year, Prime Minister Anders Fogh Rasmussen said in Copenhagen Tuesday.

Europe and the United States can discuss their security policies within the North Atlantic Treaty Organisation (NATO), but Rasmussen said there is "a need for other forums where the countries can discuss other issues like commercial policies, where disagreements often arise."

Top-level meetings are held every six months between the EU and the United States at present. These seek to address trade and economic problems and to build a constructive economic agenda.

But Rasmussen suggested that is not enough – recognition also of the extent of differences that have developed between the two.

Rasmussen pointed to differences "on a number of issues, especially when it comes to the war in Iraq, but also on questions concerning trade, the environment, and the International Criminal Court." He said "several countries are of the opinion now that it’s time to move on."

A new forum, he said, could give "a new start to these relations" between the EU and the United States.

EU-U.S. relations have run into bruising differences recently.

Last year the U.S. invasion of Iraq caused a rift both within the EU and between countries like France and Germany on the one hand and the United States on the other. Denmark backed the U.S.-led invasion of Iraq.

Rasmussen says relations are likely to improve after a sovereign Iraqi government takes over, as expected to on July 1.

"This change will be significant for many of the countries that were skeptical of the war, and that have become more and more involved in the development and the rebuilding of Iraq," he said.

But since the end of the war in Iraq trade and environmental issues have further strained relations.

There was a brief moment of respite last December when Washington bowed to pressure to repeal steel tariffs. But disputes continue over issues ranging from trade in hormone beef to illegal tax breaks for U.S. exporters.

The EU decision to impose sanctions on U.S. goods earlier this month was the latest dispute to hit transatlantic trade ties. The World Trade Organisation (WTO) declared a system of tax breaks for U..S. exporters an illegal export subsidy, and gave the EU the right to impose sanctions worth 40 billion dollars a year on U.S. goods.

The United States is still pursuing a trade case against the EU at the WTO over its reluctance to import genetically modified (GM) foods and crops. Washington says the EU ban costs its farmers some 300 million dollars a year.

The trade war looks set to rumble on. Although the United States has made moves to eliminate tax breaks for exporters under the Foreign Sales Corporation and Extraterritorial Income (FSC-ETI), it will not scrap them until May at the earliest.

"There appears to be an understanding on the U.S. side that the FSC/ETI legislation needs to be amended to comply with obligations under the WTO," Adrian van den Hoven from UNICE, a business federation representing some 16 million companies told IPS. "The sooner the U.S. complies, the better it will be for EU-U.S. economic relations."

But although he believes that both sides want to make institutional meetings as effective as possible, Van den Hoven was doubtful they would want to create a separate "secretariat or organisation to deal with their economic/trade relations."

Rasmussen plans to raise the proposal at the EU-U.S. summit in June and explore the idea of a transatlantic free trade zone in the long run.