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Monday, January 30, 2012

U.S.-EU Trade and Economic Relations: Key Policy Issues for the 112th Congress

Raymond J. Ahearn
Specialist in International Trade and Finance

The 112th Congress, in both its legislative and oversight roles, confronts numerous issues that affect the trade and economic relationship between the United States and the European Union (EU). As U.S.-EU commercial interactions drive significant job creation on both sides of the Atlantic, Congress is monitoring ongoing efforts to deepen transatlantic ties that are already large, dynamic, and mutually beneficial.

U.S. and European private stakeholders, concerned about slow growth, job creation, and increased competition from emerging economies, have urged Brussels and Washington to strengthen transatlantic trade and economic ties by reducing or eliminating remaining trade barriers and by cooperating more closely in addressing global economic challenges. A number of studies produced over the past several years have called for new bilateral trade, investment, and other economic arrangements to maximize economic opportunities available to stakeholders on both sides of the Atlantic.

At the November 28, 2011, EU-U.S. Summit meeting, leaders from both sides directed the Transatlantic Economic Council (TEC) to establish a High Level Working Group on Jobs and Growth. The Working Group, which will be led by U.S. Trade Representative Ron Kirk and EU Trade Commissioner Karel de Gucht, was tasked with assessing options for strengthening the U.S.-EU trade and investment relationship, especially those that have the highest potential to support jobs and growth. The findings and recommendations of the Group are due by the end of 2012. The Working Group will provide an interim update to Leaders in June 2012.

There are many options the Working Group could explore for greater liberalization of the transatlantic economic relationship. They range from a comprehensive and traditional free trade agreement to parallel but separate negotiations in areas such as elimination of tariffs on trade in goods, liberalization of services trade and foreign investment restrictions, and reduction of regulatory barriers. A select group of these issues, including enhanced bilateral cooperation on global issues, is discussed in this report.

Despite generally low tariff levels on both sides, some in the U.S. and EU business communities support negotiating the elimination of all remaining tariffs imposed on U.S.-EU trade through a bilateral negotiation. Support for a zero-tariff agreement is based on a combination of factors, including the agreement’s ability to generate economic benefits for both sides and the leverage such an agreement could create for pressuring emerging economies to make more concessions in the Doha Round of multilateral trade negotiations. Consideration of enhanced regulatory cooperation and one or more bilateral agreements addressing investment and services trade issues are also being touted by the business community.

Greater collaboration and alignment of U.S. and EU approaches towards addressing global economic challenges, such as completing the Doha Round, dealing with China’s trade barriers, and reducing global imbalances, remain a work in progress. Given shared interests in opening emerging markets further to industrial goods and services, business interests have urged U.S. and EU negotiators to work more closely together to press other countries for more concessions. EU negotiators in the past have remained reluctant to move in this direction perhaps out of concern that greater ambition would require further EU concessions on agriculture.

Date of Report: January 18, 2012
Number of Pages: 19
Order Number: R41652
Price: $29.95

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