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The European Commission has published its annual report on barriers to trade and investment in the United States. The report focuses on some key trade barriers and measures that prevent European Union exporters from tapping into the full potential of the US market. It notes some continuing concerns and highlights a number of new barriers introduced in 2008.
The EU and the US are each other's main trading partners and enjoy the largest bilateral trade relationship in the world. In 2007 their combined economies accounted for nearly 60 percent of global GDP, approximately 33% of world trade in goods and 44% of world trade in services.
The total flow of Foreign Direct Investment (FDI) between the EU and the US was approximately â‚¬147 billion. The EU FDI stock held in the US amounts to about â‚¬926b. Total FDI stocks held in each others countries is approximately â‚¬1.89 trillion.
The onset of the financial crisis in 2008 has resulted in a rapid deterioration of the real economy all over the world, which has had a major impact on trade volumes. In this changing environment the US and the EU are the main engines of global growth and must remain committed to free and nondiscriminatory trade. For this reason, the unfolding economic recession makes the transatlantic relationship even more pertinent. The size and importance of the bilateral trade relationship makes the EU and the US the key players on the global scene.
In 2007 the EU and the US launched a new effort, the Transatlantic Economic Council (TEC), to integrate their economies more fully by identifying key areas where greater convergence between economies and systems could reap rewards on both sides of the Atlantic. The TEC has had three meetings so far, addressing issues like investment, financial markets' issues, mutual recognition of accounting standards and secure trade, as well as a number of more technical regulatory issues.
However, there are trade barriers and differences that hinder trade and investment. The annual report on US trade barriers from the European Commission highlights some of the impediments that the EU encounters when doing business with the US.
The barriers described range from the small and relatively easily addressed to larger, more complicated problems, including challenging regulatory questions and some issues that have been or are being litigated at the World Trade Organization.
In accordance with the report, only a small proportion of EU-US trade is affected by trade disputes, but raising and addressing these issues helps to boost confidence in the transatlantic marketplace and allows exporters to reap the full benefits available. The report highlights positive outcomes in the long-running dispute over hormone-treated beef and in the EU-US first-stage Air Transport Agreement, which creates new opportunities for EU air carriers to operate in the US.
Concerns about US law
The report reiterates concerns about US legislation governing ports and freight, in particular with respect to the potential costs of the scanning requirement and its impact on EU supply chains.
The report states that the GATS Basic Telecommunications Agreement, in force since February 1998, has a widely positive impact on communication services. Nonetheless, EU and foreign-owned firms are still faced with substantial barriers to access the US market. These include, for example, restrictions to investment, lengthy proceedings, conditionality of market access and reciprocity-based procedures. There are also limits to foreign indirect investment, although this is subject to a public-interest waiver.
Much of the focus of US-EU discussions in the field of financial regulation over the past three years has been to find pragmatic and mutually satisfactory solutions to ensure that provisions of US law do not have unintended consequences for activities of EU-established entities and vice versa.
In general, recognition of equivalence of home-country standards for capital and banking markets would significantly reduce the regulatory burden of firms and financial institutions that are active on both sides of the Atlantic.
Financial-services negotiations in the framework of the GATS are also important. In this context, the EU is said to be working to improve access for European financial institutions to US markets in a number of key sectors.
Ari Syrquin is the head of the International Department at GSCB Law Firm.