William H. Cooper
International Trade and Finance
The United States and
the European Union (EU) economic relationship is the largest in the world—and
it is growing. The modern U.S.-European economic relationship has evolved since World
War II, broadening as the six-member European Community expanded into the
present 27- member European Union. The ties have also become more complex
and interdependent, covering a growing number and type of trade and
In 2011, $1,466.5 billion flowed between the United States and the EU on the
current account, the most comprehensive measure of U.S. trade flows. The
EU as a unit is the largest merchandise trading partner of the
United States. In 2011, the EU accounted for $268.6 billion of total U.S. exports
(or 18.1%) and for $367.8 billion of total U.S. imports (or 16.7%) for a U.S.
trade deficit of $99.2 billion. The EU is also the largest U.S. trade
partner when trade in services is added to trade in merchandise,
accounting for $191.2 billion (or 31.5% of the total in U.S. services exports)
and $152.5 billion (or 35.4% of total U.S. services imports) in 2011. In
addition, in 2011, a net $176.9 billion flowed from U.S. residents
to EU countries into direct investments, while a net $105.1 billion flowed
from EU residents to direct investments in the United States.
Policy disputes arise between the United States and the EU, generating tensions
which sometimes lead to bilateral trade disputes. Yet, in spite of these
disputes, the U.S.-EU economic relationship remains dynamic. It is a
relationship that is likely to grow in importance assuming the trends toward
globalization and the enlargement of the EU continue, forcing more trade and
investment barriers to fall. Economists indicate that an expanded
relationship would bring economic benefits to both sides in the form of
wider choices of goods and services and greater investment opportunities.
But increasing economic interdependence brings challenges as well as benefits.
As the U.S. and EU economies continue to integrate, some sectors or firms
will “lose out” to increased competition and will resist the forces of
change. Greater economic integration also challenges long-held notions of “sovereignty,”
as national or regional policies have extraterritorial impact. Similarly,
accepted understandings of “competition,” “markets,” and other economic
concepts are tested as national borders dissolve with closer integration
U.S. and EU policymakers are likely to face the task of how to manage the
increasingly complex bilateral economic relationship in ways that maximize
benefits and keep frictions to a minimum, including developing new
frameworks. For Members during the 112th Congress, it could mean weighing
the benefits of greater economic integration against the costs to constituents
in the context of overall U.S. national interests.
Date of Report: May 30, 2012
Number of Pages: 11
Order Number: RL30608
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