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Magazine / ECONOMIC INTERESTS

Beyond Bickering

March 22, 2008

BRUSSELS -- The European Union and the United States are like an old married couple, bound together by experiences shared over many years, with a common perspective on life and deep economic ties that defy unraveling. Perhaps like many an old couple, Washington and Brussels are constantly bickering, often over the most mundane issues. And, for the last 14 years, they have been in counseling, meeting regularly to iron out their differences in the hope of building a better life together.

Over the years, that trans-Atlantic economic dialogue has repeatedly broken down, only to be reconstituted at the insistence of the children: European and American businesses that are the economic stakeholders in the relationship. The Transatlantic Economic Council, the current version of this family therapy, will meet here on May 13. Its most important challenge is to make sure the talking continues over the next 18 months, through what may prove to be a rockier than usual period: the American election, followed by a new, preoccupied administration taking over in Washington, and then a change in the European Commission and European Parliament late next year.

Business leaders want to embed this dialogue more firmly into the fabric of U.S.-E.U. relations and to convince the next resident of the White House that it is worth preserving. "It is vital that the TEC not allow the U.S. election calendar and change in administration to slow progress," concluded a recent letter to the Bush administration from the U.S. Chamber of Commerce and its European counterpart, Business Europe.

 

The economic dialogue was launched with much fanfare in 1995. The initial goal was to iron out differences in domestic regulations that impeded commerce, but the effort quickly bogged down. Lacking political impetus, negotiators found it impossible to cut through bureaucratic impediments.

In 2007, German Chancellor Angela Merkel persuaded President Bush to create the Transatlantic Economic Council, a regular meeting of Cabinet-level officials from Washington and Brussels, led by a White House official and the vice president of the European Commission. The intent was to re-energize economic integration through top-down political leadership.

The two sides have resolved some long-standing issues, such as mutual recognition of accounting standards, but after only one TEC meeting, it is too early to judge the effort.

The May agenda takes up a number of problems. For starters, the E.U. wants to draw a road map for harmonizing patent law. Progress could be slow, however, because U.S. reform has bogged down in Congress and the European Commission may not have the legal right to amend the European Patent Convention.

The Europeans also want a framework for establishing mutual recognition of securities regulations -- but again, the E.U. may lack the requisite power and Washington may want to go slow.

The 2007 summit agreed to develop compatible U.S. and E.U. specifications for biofuels; now officials must push regulatory bodies on both sides of the Atlantic to quickly develop those standards.

Additionally, the E.U. wants U.S. agreement that makers of small appliances, such as toasters and lamps, can self-certify their compliance with safety codes issued by the Federal Communications Commission and the Occupational Safety and Health Administration. Currently, Washington requires independent labs to verify such compliance.

But all of these high hopes could be hijacked by a chicken war. Europeans ban imports of plucked U.S. birds that have been doused in chlorine to kill pathogens. E.U. governments are worried about a possible cancer risk, and they are apprehensive that their farmers will want to adopt the same treatment and thus introduce future water-pollution challenges. The White House is insisting on selling American chickens in Europe by this summer. The European Commission has offered only eventual resumption of sales. If the sides don't budge, this chicken war threatens to dominate the May meeting, much like a banana dispute tied U.S.-E.U. meetings in knots in the 1990s.

Whatever can be accomplished in May, the principal challenge ahead is to ensure that some form of economic integration dialogue survives the coming transitions in Washington and Brussels.

Both capitals generally agree that the Cabinet-level meetings are an important way for political leaders to drive lower-level bureaucratic negotiations. The first TEC gathering included an unstructured lunch discussion that focused on China and sovereign wealth funds. European and American officials say that this informal exchange enhanced recent cooperation on both issues.

"The TEC is an exercise in global leadership," said Gunter Verheugen, vice president of the European Commission, at the recent Brussels Forum, an annual conference of European and American government, business, and intellectual leaders. TEC participants urge the European Union and the United States to continue such open-ended, high-level discussion to deepen cooperation and to maintain interest among high-level officials, who often find regulatory issues deadly dull.

Similarly, strong future political leadership is deemed essential. In any new American administration, the State Department, the U.S. Trade Representative's Office, and possibly the Treasury Department are likely to jockey to control trans-Atlantic negotiations. Veterans of these talks say it is essential that the White House remain in control through an official who speaks for the president.

Some have suggested moving responsibility to the Office of Management and Budget or even to the vice president, much as Al Gore took responsibility for nurturing the Russian relationship in the 1990s. Whoever is in charge must exert budgetary leverage over regulatory agencies such as the Food and Drug Administration and the National Highway Traffic Safety Administration. Without their cooperation, greater regulatory coherence -- the heart of further U.S.-E.U. economic integration, will grind to a halt.

Participants also urge the next U.S. administration to appoint a powerful ambassador to the European Union. C. Boyden Gray, the current envoy, has been a driving force in revitalizing regulatory cooperation. The next U.S. ambassador needs to be a savvy Washington political operator with a detailed interest in policy.

Congress played a limited role in last year's TEC meeting. Because regulatory agencies are accountable to Congress, both American and European officials call for more-substantive congressional involvement, possibly through official representatives who report to the House and Senate leadership.

To pull Congress in, the next administration will have to reach out to Hill Democrats, who have been less engaged than Republicans in the dialogue so far. "There is no less dedication on the Democratic side to the idea of a trans-Atlantic marketplace," said Rep. Sander Levin, D-Mich. "But the agenda has been much too narrow." Much of the dialogue has focused on cutting regulatory costs for business; future discussions may have to include a broader range of issues, such as developing a common front on unsafe imports from China.

Meanwhile, the business community argues that the Bush administration can do a lot before it leaves office to make regulatory cooperation part of the federal government's day-to-day operations. The U.S. chamber and Business Europe suggest that OMB require regulatory agencies to explicitly assess the international trade and investment effects of their actions as a standard part of the required cost-benefit analysis of new regulations. The Transportation Department regularly posts online the impact of its regulatory decisions on key U.S. trading partners, including the European Union. The administration could require this kind of database for all federal agencies.

In the end, however, political symbolism may prove more important to enhancing cooperation than all of the bureaucratic or personnel fixes. French President Nicolas Sarkozy, who will also be president of the E.U. Council in the second half of this year, may visit Washington in November or December to meet the next U.S. president. If Sarkozy makes it clear to his incoming American counterpart that the trans-Atlantic economic dialogue is a European priority, the next resident of the White House will not find it easy to downgrade the exercise.

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