Legal problems of commercial relations between EU and USA

Mgr. Jitka Hlavová

Master's thesis

Abstract:

The Agreement establishing the World Trade Organization with its annexes containing other multilateral agreements constitute the most comprehensive legal framework between the EU and the USA and the most important legal basis for promoting transatlantic economic integration. An opening of the new Round of negotiations in Doha and strong efforts to keep the negotiations going despite few set-backs, together with the frequent use of the WTO Dispute Settlement system show the interest and commitments of USA and EC to cooperate on promotion the WTO as a basic framework of their relationship. But the two world powers don’t rely only on multilateral agreements. European Community signed also about 50 bilateral agreements with United States, mainly on the trade with agriculture products (rice, wine, animal products, bovine meat, cereals, etc.), on regulation of competition of issues (enforcement, positive comity principles, application, etc.), and energy issues. They were usually concluded in the form of the exchange letters. The future development of the relationship might bring the creation of the Transatlantic Free Trade Area or Transatlantic Single Market. Although the benefits for the EC and USA are obvious, there are a lot of impediments caused either by the current inconsistency of the both legal systems or by the virtual unreadiness of all stakeholders ( authorities, business, consumers, etc.) to compete on the real open market. Brown and her colleagues estimated in their work trade creation and welfare gains if post-Uruguay Round barriers are completely removed, either regionally and multilaterally. In a world of free trade, US imports of merchandise and services would expand by 14 % based on the model created by Brown. Assuming that the EU shared pro rata in this expansion, EU exports to the US would increase by about 44 USD billion annually. Conversely, EU imports would expand by about 13 %. Assuming that the US shared pro rata, US exports to the EU would increase by about 48 USD billion annually. And what are the biggest brakes to the transatlantic trade engine? Its widely accepted fact, that it is not tariffs anymore. Today non-tariff barriers and regulative burdens are the issues which are to be dealt with. However, they are much harder to monitor and legislatively regulate then traditional tariff barriers. Dealing with two or even more different sets of standards is one of the biggest burdens for small and medium-sized business from the United States and EU Member States. In 1997, the EU and the USA signed the Mutual Recognition Agreement, which should facilitate transatlantic trade and promote overal regulatory cooperation. The Agreement “specifies the conditions by which each Party will accept or recognize results of conformity assessment procedures, produced by the other Party's conformity assessment bodies or authorities,…”. It consists of a framework agreement and six sector annexes. Although MRA was concluded with lot of expectations, its implementation had to face many obstacles and delays and certain parts are remaining unimplemented even 10 years after the conclusion of the agreement. One step further is the new MRA for Marine Equipment, signed in June 2001, which provides for mutual recognition of each parties standards and procedures as equivalent. Significant barriers also remain in the sphere of trade with services, although that is where many researchers see the most opportunities. The prerequisite for the free transatlantic trade with services is the creation of the free movement of services among the Member States in the internal market of the EU . Only after the new EC Directive on services is properly implemented, I see the possibility of creating a similar legal framework also with the USA. Increasing role in governing transatlantic relationship is played by non-economic interests, like environmental issues, human and animal health, consumer safety and national security. In lot of areas, cons

Abstract:

umer groups and NGOs have a strong word, and they do not want to give up their heavily achieved national legislation at the expense of the possible macroeconomic gain. Trade disputes are also part of the bilateral relation. Both partners strive to defend their interests at the WTO forum. The EU and the USA are the most frequent users of the WTO Dispute Settlement System. And despite the fact, that only very small percentage of their mutual trade flow is affected by those disputes (estimates are 2%), they are definitely bringing a lot of tensions and counter-productive interactions. Some disputes were very costly for both sides and they were hitting the headlines of the news for more than a decade. It is not rare, that EC or USA are using suspension of concessions as a result of non-implementation of the Panel Report. Many disputes, although already taken to the DSB continue to be unsatisfactory solved, e.g. zeroing methodology, Foreign Sales Corporations, Hormones-treated beef, etc. Notwithstanding that the European Union and the United States of America are trying to bring their economies closer together and get open access to the other party market with goods and services, they are both using protectionist trade instruments, like dumping and subsidizing. The EC Commission and the US Department of Commerce together with the US Trade Commission are all very busy with continuing investigations of aviation, agricultural and industrial subsidies. Those topics are evergreens on the transatlantic agenda. Transparency is another issue on which the EU and the US could work together. It looks like the lack of transparency in the WTO and other international organizations, where the EU and the USA are the main actors , can bring much bigger problems in the future. More transparent and thus more legitimate WTO would also serve as a better dispute resolution forum. The multilateral framework of WTO and bilateral agreements between the Union and the United States are the main legal basis in governing the relation. If we take into account the fact, that the trade between the two sides of the Atlantic didn’t really begin before the Second World War and now it is by far the most prosperous bilateral trade in the world accounting for about 3 billions USD a day, we have to admit, that such a legal regulation works satisfactory. At least in the meantime. The question is how long can both partners rely on the WTO, which probably really is in a slight crisis right now. With the threat of Asian competition in their minds , USA and EU cannot stop pushing their mutually benefiting relationship further. The problems are not that they do not realize it, but that there is not enough political willingness to make a compromise on certain issues. The pressure from the strong domestic industries and other internal problems – EU and its new constitutional treaty with further enlargement and US with its war in Iraq and other foreign policy issues – do not help the situation either. What is apparent from the works of the researchers and scholars as well as from the statements of the political leaders (and what is also my personal opinion after the research I did in connection with writing this thesis) is that a Free Trade Area or Single Transatlantic Market are not coming any time soon. The reality of both is conditioned by the convergence of legal systems, economic goals and interests, which are now too far away in the case of the USA and the EU. According to my opinion, any strengthening of transatlantic relationship would bring positive bias toward multilateralism as such. The working partnership might be leading by example, framing cooperative endeavors that invite wider participation while inviting third parties to participate. “A revitalized Atlantic alliance could be the greatest force for global progress in the 21st century, and free trade the economic engine that powers it.”

Keywords

internatinal trade, European Union, United States of America, trade measures, antidumping, subsidies, Transatlantic economic, bilateral agreements, multilateral framework, trade policy, prevention of disputes, export, import initiation, Transatlantic Single Market, World Trade ORganization, Dispute Settlement Body, Dispute Settlement Understanding, Panel Ruling, protectionism, financial market, legal services, defense measures, Doha Round, Private parties in EU/US disputes

Language used: English

Date on which the thesis was submitted / produced: 17. 8. 2007

Thesis defence

• Date of defence: 19. 9. 2007
• Supervisor: prof. JUDr. Vladimír Týč, CSc.

Masaryk University

Faculty of Law

Master programme / field:
Law and Legal Science / Law