The European Commission has published itsannual report on barriers to trade and investment in the United States.The report focuses on some key trade barriers and measures that preventEuropean Union exporters from tapping into the full potential of the USmarket. It notes some continuing concerns and highlights a number ofnew barriers introduced in 2008.
The EU and the US are each other's main trading partners andenjoy the largest bilateral trade relationship in the world. In 2007their combined economies accounted for nearly 60 percent of global GDP,approximately 33% of world trade in goods and 44% of world trade inservices.
The total flow of Foreign Direct Investment (FDI) between theEU and the US was approximately €147 billion. The EU FDI stock held inthe US amounts to about €926b. Total FDI stocks held in each otherscountries is approximately €1.89 trillion.
The onset of the financial crisis in 2008 hasresulted in a rapid deterioration of the real economy all over theworld, which has had a major impact on trade volumes. In this changingenvironment the US and the EU are the main engines of global growth andmust remain committed to free and nondiscriminatory trade. For thisreason, the unfolding economic recession makes the transatlanticrelationship even more pertinent. The size and importance of thebilateral trade relationship makes the EU and the US the key players onthe global scene.
In 2007 the EU and the US launched a new effort,the Transatlantic Economic Council (TEC), to integrate their economiesmore fully by identifying key areas where greater convergence betweeneconomies and systems could reap rewards on both sides of the Atlantic.The TEC has had three meetings so far, addressing issues likeinvestment, financial markets' issues, mutual recognition of accountingstandards and secure trade, as well as a number of more technicalregulatory issues.
However, there are trade barriers and differences that hindertrade and investment. The annual report on US trade barriers from theEuropean Commission highlights some of the impediments that the EUencounters when doing business with the US.
The barriers described range from the small and relativelyeasily addressed to larger, more complicated problems, includingchallenging regulatory questions and some issues that have been or arebeing litigated at the World Trade Organization.
In accordance with the report, only a small proportion of EU-UStrade is affected by trade disputes, but raising and addressing theseissues helps to boost confidence in the transatlantic marketplace andallows exporters to reap the full benefits available. The reporthighlights positive outcomes in the long-running dispute overhormone-treated beef and in the EU-US first-stage Air TransportAgreement, which creates new opportunities for EU air carriers tooperate in the US.
Concerns about US law
The report reiterates concerns about US legislation governingports and freight, in particular with respect to the potential costs ofthe scanning requirement and its impact on EU supply chains.
The report states that the GATS Basic TelecommunicationsAgreement, in force since February 1998, has a widely positive impacton communication services. Nonetheless, EU and foreign-owned firms arestill faced with substantial barriers to access the US market. Theseinclude, for example, restrictions to investment, lengthy proceedings,conditionality of market access and reciprocity-based procedures. Thereare also limits to foreign indirect investment, although this issubject to a public-interest waiver.
Much of the focus of US-EU discussions in the field offinancial regulation over the past three years has been to findpragmatic and mutually satisfactory solutions to ensure that provisionsof US law do not have unintended consequences for activities ofEU-established entities and vice versa.
In general, recognition of equivalence of home-countrystandards for capital and banking markets would significantly reducethe regulatory burden of firms and financial institutions that areactive on both sides of the Atlantic.
Financial-services negotiations in the framework of the GATSare also important. In this context, the EU is said to be working toimprove access for European financial institutions to US markets in anumber of key sectors.
Ari Syrquin is the head of the International Department at GSCB Law Firm.