* -Cr 
•it -tt COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 26.07.1995 
COM(95)4ll final 
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 
Europe and the US : the way forward 

Europe and the US : the way forward 
INTRODUCTION 
EU-US RELATIONS TODAY 
Almost everything which happens in the world today is of interest to the EU and the US 
Both are global players in economic and political terms. They are also linked by close 
security ties and a common interest in handling effectively a wide variety of political and 
security issues across the globe. They share a broadly similar set of values, belief in 
democratic government, human rights and market economics and have a common interest in 
confronting global challenges such as threats to security and stability, weapons proliferation, 
unemployment, environmental degradation, drugs, crime and terrorism as well as other issues 
such as urban decay, ageing populations etc. Moreover, both share common interests in 
developing coherent strategies in order to favour harmonious economic development in the 
wider world and to promote, in particular, the stability of the international economic, financial 
and monetary system as well as the integration of countries in transition and developing 
countries. 
How each of the partners decides to deal with the many global challenges which confront 
them and whether they decide to do so separately or together, will inevitably colour and 
influence their bilateral relationship but disagreement on particular issues is not necessarily 
a sign of drift in the relationship. Differences of view in the past have reflected the strong 
commitment of each side to an active role in international relations. They have not 
undermined the basic strength of the relationship or its commonality of purpose. For in spite 
of the growth of other relationships, for each party the EU-US relationship is, and should 
remain central, both from a bilateral point of view and as regards its contribution to the 
political and economic stability of the world. 
The EU-US relationship is both multilateral and bilateral. It involves working together in 
many multilateral fora to advance shared objectives. The bilateral relationship was formalised 
in the November 1990 Transatlantic Declaration which sets out the common goals of the 
partners, the principles of their partnership and provides an institutional framework for 
consultation The relationship is of necessity complex. Nonetheless its depth and scope can 
be illustrated by reference to a few key facts and figures: 
political: EU relations with the US are comprehensive and of the first importance. At 
every level, from twice yearly Summits to debriefings on working groups there are 
intensive and frequent contacts. By virtue of their political and economic weight, the 
EU and US are present in critical areas around the world, (e.g. in the Middle East 
peace process and in helping to transform the countries of central and eastern Europe 
and the former Soviet Union), often acting together, on occasions disagreeing, but 
always needing to be in close contact to exchange information and views and, where 
appropriate, following an agreed approach. 
security: there are 100,000 US troops in Europe and through NATO the US plays a 
crucial part in maintaining stability in Europe. 
economic: the EU is responsible for over 50% of all foreign direct investment in the 
US, while US investment in the EU represents 40% of total US direct foreign 
investment. Around 3 million jobs on each side of the Atlantic depend on these 
investments. In 1994 17.6% (95 bn ECU) of EU exports went to the US and 17.3% 
(93 bn ECU) of EU imports came from the US. US exports to the EU represented 
22% (83 bn ECU) of total US exports and imports from the EU totalled almost 16 4% 
(87 bn ECU) of total US imports. 
Of course, the end of the Cold War has changed the nature of the relationship. There is no 
longer a single, common adversary and the need to guarantee military security has ceased to 
be the overriding feature of the relationship. In the new multipolar world both the EU and 
US are developing new relations with other partners, the US within APEC and with South 
America and the EU with Central and Eastern Europe and the Mediterranean . However these 
are not exclusive zones of influence. The EU is present and active in Asia, Africa and Latin 
America just as the US is deeply involved in central and eastern Europe and the Middle East 
Both partners have interests in all regions of the world. 
There can be no return to the time when political and economic issues were subordinate to 
the central question of security. Today it is necessary to demonstrate anew why this unique 
partnership is more valid than ever, for reasons which have more to do with the future than 
a past common heritage. Over several decades both main political parties in the US have 
supported moves towards European integration. In each new political generation on both 
sides of the Atlantic it is necessary to maintain consensus on the importance of the EU-US 
relationship. Changes in the EU in recent years such as the completion of the Internal 
Market, the adoption of the Maastricht Treaty and the prospects for EMU as well as the 
growing international role of the EU in supporting the efforts of economies in transition and 
of developing economies have made it increasingly possible and necessary for Europe to 
respond as never before to the challenge of being a full and equal partner for the US. 
How can we ensure that the relationship is responsive to the continuing needs of both parties, 
so that it remains the stable central core of their relations with the rest of the world? The 
purpose of this Communication is to review the main elements of the relationship - security, 
political and economic - and to sketch out areas for consideration which can then be brought 
together in a new framework. In order to be complete it goes beyond the traditional areas 
such as trade and suggests ways in which all aspects of the relationship might be advanced 
It makes proposals, taking account of the changes which have occurred in the EU and in 
Europe as a whole since the adoption of the 1990 Transatlantic Declaration. Of course, 
adapting the EU-US partnership to the needs of the future will take time and will have to wait 
in part for institutional changes such as those flowing from the 1GC and the rethinking of the 
roles of NATO and the WEU. Nonetheless there is much which can be decided in the 
coming months which will enhance the relationship and prepare the ground for future 
decisions. Indeed it is impossible to give serious consideration to the future of the 
relationship without looking at it in a comprehensive way. In this way a clear signal would 
be given at the highest level that the EU and US recognise the need to update the relationship 
and have set in motion a credible process for achieving that goal. 
THE COMPONENTS OF A NEW RELATIONSHIP 
It is becoming increasingly difficult in the modern world to maintain a separation between 
policy areas, such as defence and security, political co-operation and economic relations. In 
order to revitalise the EU-US relationship it is necessary to look at the whole range of areas 
for potential co-operation and at the linkages between its security, political and economic 
aspects. 
SECURTTY 
Both the European Union and the United States attach great importance to international 
security and stability in the volatile conditions of the post-cold war world. Interests may 
diverge on specific issues but there is a large measure of agreement on basic principles and 
overall objectives. The contributions of the EU and the US to international security and 
stability are to a large degree complementary, given the two partners' different structures and 
geographical location. 
The United States's enduring commitment to European security provides a valuable element 
of confidence and continuity in a rapidly changing world. The European Union has helped 
to overcome feelings of insecurity in central and eastern Europe during the period when the 
paramètres of international security are being redrawn. This has favoured the transition to 
systems based on political and economic freedom in remarkably peaceful conditions, except 
in the tragic conflict centred on Bosnia and in parts of the former Soviet Union. 
Hitherto the European Union's contribution to international security has been largely indirect. 
Its network of agreements with the countries of central and eastern Europe, covering political 
as well as economic issues, as well as the prospect of Union membership, provide an 
incentive to associated countries to work together and to overcome possible sources of 
tension. Its partnership agreements with Russia, the Ukraine and other countries of the former 
Soviet Union, link them with the wider process of European integration. The Union has also 
contributed to European security through multilateral channels, notably the Security Pact 
initiative, and the Organisation for Security and Cooperation in Europe, to which the Pact has 
now been transferred. The United States's involvement in these frameworks has proved 
valuable in ensuring their success. 
The European Union is also a force for stability in the Mediterranean region, an area where 
the United States, too, has security interests. The Union's agreements with countries on the 
southern and eastern shores of the Mediterranean, and its particularly close links with Cyprus, 
Malta and Turkey, now backed up by the important package of financial assistance decided 
by the Cannes European Council, can help to build support for the principles on which 
international peace and cooperation are based, and to counter tendencies which threaten 
international stability. 
The European Union can also work closely with the US in certain areas of Africa where they 
share a similar analysis of conflict situations and can contribute to developing mechanisms 
for conflict resolution. To that end the EU and the US should exchange information on 
developments in the region and promote joint initiatives in order to favour political dialogue, 
and to provide humanitarian assistance as well as joint responses to rehabilitation needs. 
The Common Foreign and Security Policy, provided for by the European Union Treaty, 
considerably enhances the Union's capacity to contribute to European and international 
security, together with the United States and other partners. By providing the means for the 
Union to act together, and to marshal the different instruments at its disposal, the CFSP makes 
the EU a more tangible partner for the United States. Political will is needed, of course, if the 
CFSP's full potential is to be realised. The 1996 Intergovernmental Conference will be seeking 
ways to improve policy analysis, to streamline decision-making, and to give the Union more 
effective forms of external representation. 
As far as security and defence are concerned, the European Union Treaty indicates that the 
Western European Union will be developed as the defence component of the Union and as 
a means of strengthening the European pillar of the Atlantic Alliance. Even though its 
operational development is at an early stage, the WEU has already proved its value as an 
instrument for implementing EU policy decisions, notably in the enforcement of the embargo 
against Serbia and Montenegro on the Danube, and, together with NATO, in the Adriatic. The 
WEU also plays an important role in security aspects of the EU's administration of the city 
of Mostar in Bosnia. The WEU decided at its meeting at Petersberg in Germany in June 1992 
that peace-keeping and crisis management should be priorities for future action. 
The IGC will be considering how to develop relations between the WEU and the EU within 
the final perspective of its integration into the European Union. Another important issue is 
the complementarity of the relationship between NATO and the WEU. The WEU should 
develop specific operational capacities in such areas as peacekeeping, crisis management and 
humanitarian operations. There is also a potentially important role for the WEU in taking 
action in pursuit of European interests outside of the NATO area. These developments will 
add significantly to the EU's capacity to act as a partner for the United States in security 
related fields. 
Recommendation 
The 1996 Intergovernmental Conference, as well as the enlargement of the European Union 
and of NATO, raise many security related issues which should be the subject of regular 
dialogue between the Union and the United States. Pending future developments in relations 
between the EU, the WEU, NATO and, indeed, the OSCE, in Europe's overall security 
arrangements, and recognising the special role of NA TO in transatlantic security relations, 
the EU and the US should also concentrate in their dialogue on specific issues where each has 
a particular contribution to make. These issues could include: 
- EU and NA TO enlargement 
- non-proliferation of weapons of mass destruction 
- prevention of the illicit sale of nuclear materials 
- controlling international arms trade 
- export controls (dual use goods) 
- the early identification of conflict 
- preventive diplomacy 
- the monitoring of human rights and minority problems 
FOREIGN POLICY 
The objectives of the Common Foreign and Security Policy of the European Union and the 
foreign policy of the United States are broadly similar, taking into account differences in the 
structure and the geographic location of the two parties. These objectives, as set out for the 
EU in article J.l of the Treaty, include the preservation of peace and the strengthening of 
international security, in accordance with the principles of the UN Charter, the Helsinki Final 
Act and the Paris Charter, the promotion of international cooperation and the development and 
consolidation of democracy and the rule of law, and respect for human rights and fundamental 
freedoms. This broad consensus on fundamental values and objectives is reflected in the 1990 
Transatlantic Declaration. 
The first main challenge in developing EU-US relations in the area of foreign policy is to 
derive specific policies from these broad objectives and to agree on an effective mechanisms 
for cooperation. The EU-US Summit in Washington on 14 June 1995 provided guidance on 
substanial issues where progress can be made through closer cooperation. These include: 
-human rights 
-nuclear safety 
-co-sponsorship of the "Friends of the Federation" between Bosnia and Croatia 
-assistance to the Palestinians 
-environmental issues in central and eastern Europe 
-assistance to emerging democracies in their fight against crime 
-the administration of justice in Haiti 
Before the end of 1995, concrete projects for joint action should be developed by the Eli and 
the US in these areas. Other fruitful areas for foreign policy co-operation include humanitarian 
and development assistance. 
6 
Humanitarian Assistance: Between them the EU and US provide 86% of official 
humanitarian aid (EU Member States 31%, EC 27%,US 28%). Although only 15% 
of foreign aid (development plus humanitarian) is channelled through the Commission 
almost 50% of the EU's humanitarian assistance is managed by the Commission This 
makes the Community the prime interlocutor for the US in this area and explains the 
close relationship which has developed. There are regular exchanges of views on 
general and operational issues. Since the end of 1993 the European Community 
Humanitarian Office (ECHO) and the US Office for Disaster Relief (OFDA) exchange 
data. Joint assessment missions are also carried out. ECHO staff has participated in 
training in disaster management at the invitation of the US government and the US 
Agency for International Development (USAID) now has an official posted to the US 
Mission in Brussels. A further ECHO-USAID meeting is scheduled for September 
Development co-operation: The United States and the European Union are also major 
actors in the field of development co-operation. In 1994 the United States was the 
second largest donor, after the Community and its Member States. However in terms 
of its percentage of GDP, the United States' foreign aid is currently the lowest of all 
official donors - 0.15%. 
This situation is likely to deteriorate in the coming years since American official 
development assistance is under pressure in the US Congress, in the context of efforts 
to reduce the fiscal deficit. Therefore a substantial reduction in development 
assistance is to be expected in the next few years. 
The US Administration is working to reinforce its co-ordination with the European 
Union in this field. The European Union has a strong interest in re-inforcing 
co-operation with the US. It is in our mutual self-interest as donors and trading 
partners with the developing countries, to support the efforts of the US Administration 
to keep development assistance on the political agenda. Indeed, strengthening co­
operation with the US would also allow the EU to further develop its ability to 
influence donor policies. 
For its part, the Commission envisages formalising and reactivating its co-operation 
with the US Administration in the field of development co-operation , with a view to 
strengthening modes of co-operation with the US Government in priority areas; 
jointly reassessing ways of improving the impact and effectiveness of development 
aid. 
The second challenge on furthering co-operation in foreign policy is to establish effective 
mechanisms for consultation and dialogue. 
Over the years a wide range of consultation mechanisms have grown up to foster dialogue and 
meet different needs. These contacts were formalised in the 1990 Transatlantic Declaration 
which provides for . 
7 
bi-annual consultations between the Presidents of the Council, Commission and US 
bi-annual consultations between EU Foreign Ministers, the Commission and the US 
Secretary of State 
ad-hoc consultations between the Presidency Foreign Minister, or the Troika and the 
US Secretary of State 
bi-annual consultations between the Commission and the US government at Cabinet 
level 
briefings by the Presidency to US representatives on European political co-operation 
meetings at Ministerial level 
in addition mere are many Troika contacts at political director and expert level. There 
are also regular meeting at sub Cabinet level between the Commission and the US 
Administration. The European Parliament also has regular inter-parliamentary contact 
with the US Congress. 
The wide ranging process of consultation on foreign and security matters which has grown 
up in recent years now needs to be reviewed to take account of political changes inside the 
EU since the entry into force of the Maastricht Treaty and to ensure that it represents the most 
efficient and operational way of meeting its objectives. There are now so many meetings 
between the EU, in different formats, and the US, discussing such a huge range of issues that 
it is difficult to have a sense of overall priorities. Serious attention should be given to 
considering whether fewer, more focused meetings would lead to better follow-up and to a 
more visible, coherent policy response to some of the challenges currently confronting the 
partners. Before the end of the year the Commission, together with the Council, and the US 
Administration, should review the operation of existing consultation mechanisms and explore 
possibilities for rationalisation and ways of increasing their effectiveness. For example, the 
periodicity of certain pre-scheduled meetings could be changed, consultations could be 
grouped so as to permit a more efficient use of resources etc. 
Certain structural improvements could also be made to the dialogue. Although there are 
frequent and intensive contacts there are almost no mechanisms to ensure co-ordination 
between the various layers. Thus each level sets its own agenda without taking into account 
problems encountered at a lower level and often without ensuring the necessary coherence 
between trade and economic issues on the one hand and the second and third pillars on the 
other. 
A more coherent approach is needed, bringing the different strands of the relationship 
together. The 1994 EU-US Summit meeting in Berlin decided to set up three working groups 
to set up three working groups to study ways of co-operating on assistance to central and 
eastern Europe, on CFSP and third pillar areas. These groups reported in June 1995 and 
having completed their tasks were disbanded. The June 1995 EU-US Summit decided to 
create a high level group charged with assessing progress in strengthening and further 
developing the relationship and with studying ideas for discussion at the December 1995 EU-
8 
US Summit. 
Despite increasing levels of co-operation, the US is critical of the fact that the EU is not 
always in a position to speak with one voice or has no or insufficient competence to deal with 
matters on which the US would like to have a dialogue with the EU. For example, attempts 
to date to begin a process of exchanging information on Third Pillar areas of interest have 
been held back by reticence on the EU side. Failure to speak with one voice reduces EU 
influence and can, on occasion, even damage EU interests. 
Nonetheless, it is possible to further improve political dialogue with the US. This can be 
done by building on the process of identifying areas of mutual interest susceptible to co­
operation, co-ordination of activities or joint initiatives. It is now important to go beyond the 
affirmation of common objectives such as the promotion of democratic values and economic 
prosperity throughout the world to concrete actions such as joint demarches vis à vis certain 
countries, co-operation on humanitarian and development assistance and in international 
organisations such as the UN and OSCE. It is also necessary to find ways of dealing with 
issues where the EU and US approaches differ (e.g. recent examples include Cuba, Iran etc) 
Recommendations 
to intensify dialogue and co-operation in a number of areas including humanitarian 
and development assistance in addition to the areas identified by the June 1995 EU-US 
Summit. 
to review the current mechanisms for consultation with the US on foreign policy 
issues with a view to rationalising them and making them more effective. 
ECONOMIC AND TRADE 
There is a high degree of interdependence between the EU and US economies, in terms of 
jobs, incomes, investment and technological development. Each market offers the other a 
large base with similar levels of development and consumer purchasing power. Annex I sets 
out details of the economic relationship. In addition, following the completion of the Uruguay 
Round average industrial tariffs between the partners are low and a high proportion of trade 
is already duty free. Despite occasional trade disputes, most of this trade is trouble free. 
However there are many ways in which trade and economic relations can be further facilitated 
e.g. by removing existing impediments. Some can be advanced on a bilateral basis, others 
will be best handled in the multilateral context. Tariffs are by no means the most important 
of the remaining impediments. 
The fact that the EU and the US are the two biggest economies in the world affects their 
relationship. Policies pursued in each economy exert a major influence on the other and on 
global growth prospects. It is the responsibility of both partners to take account of these 
effects in their strategy in order to contribute effectively to international economic stability 
This warrants a dialogue which should encompass not only the traditional area of trade but 
also macroeconomic issues. Moreover it involves paiticipation in and follow-up of 
international initiatives on subjects of global concern such as growth, the environment, 
population trends. 
The multilateral trade agenda 
In working together to achieve the successful completion of the Uruguay Round the EU and 
US have shown that where they co-operate and aim at the same goal, they can achieve 
considerable progress. The common commitment of the EU and US to uphold the multilateral 
process and to establish the WTO on a solid basis is crucial to the future of the open world 
trading system and is the basis for healthy economic bilateral relationships. Both parties need 
to work together to build the WTO into a strong, objective and decisive body. The EU is 
concerned by US tendencies to prefer unilateral and special bilateral arrangements over the 
multilateral and must use its relationship with the US to stress the advantages for both parties 
of the multilateral approach and the damage done by the use or the threat of using unilateral 
measures. The EU will therefore continue to oppose such unilateral measures. The EU is 
already committed to remaining open to the world, while at the same time developing WTO-
compatible trade relations with its neighbours to the East and South, as well as with key 
partners further afield. In considering any new regional agreements, both the EU and US will 
need to ensure that they are compatible with WTO rules and, more broadly, do not risk 
undermining the multilateral trading system. 
The EU and US should now concentrate on maintaining the momentum of the multilateral 
process working together on a new agenda for further world trade liberalisation. The first 
priority is to complete the unfinished business of the Uruguay Round in areas such as 
telecommunications and maritime services. The EU must also seek to re-engage the US in 
the multilateral process designed to achieve a comprehensive agreement on financial services. 
Then there are the issues already identified by the Community as priorities for further work -
investment, the relationship between trade and competition, the environment and social policy. 
The agreement reached by OECD Ministers in May to begin negotiations on a multilateral 
investment agreement and to begin discussions in WTO marks an important start to a new 
phase of liberalisation. 
In addition to this busy agenda there are other areas which the EU and US could explore with 
a view to maintaining the momentum of liberalisation and providing a further stimulus to 
world trade. These include further tariff reductions, harmonisation and simplification of rules 
of origin, including further negotiations on intellectual property rights, government 
procurement, strengthening of subsidy disciplines and promotion of deregulation. The EU and 
US can act as motors for international change and can contribute significantly to the 
multilateral process. Both partners should also seek to work together to bring countries such 
as Russia and China into the WTO. As the G7 Summit recognised, we need to develop an 
ambitious agenda on these lines for the December 1996 WTO Ministerial meeting in 
Singapore. 
Another area which should continue to be addressed is US involvement in the European 
Energy Charter Treaty, a multilateral treaty to encourage trade, investment and co-operation 
in energy. A total of 49 states including all Member States as well as Japan and Australia 
and the European Communities, have signed the treaty. Despite participating in all the 
negotiations the US has not yet done so. 
10 
Recom m endations 
to make a concerted push with the US over the next year or so to identify the scope 
for further liberalisation and deregulation worldwide 
To build up the WTO by completing unfinished business, developing the new 
WTO work programme and by working together on issues such as the accession of 
Russia and China to WTO 
to oppose unilateral action by the US 
to ensure that all new regional arrangements are WTO compatible and would 
effectively strengthen the multilateral trading system 
The bilateral trade agenda 
Without in any way detracting from EU-US co-operation in multilateral fora, which remains 
a central and integral building block of the bilateral relationship, there are areas of economic 
activity across the Atlantic where trade and investment flows could be facilitated by 
appropriate decisions taken on a bilateral basis by the EU and the US. The business 
community needs to be involved in identifying areas where action is needed A number of 
ongoing problems need to be resolved and the development of an early warning system should 
be further strengthened. At present there are many bilateral negotiations underway which are 
seen to be of limited relevance, confined to certain sectors and activities, without being fully 
appreciated in their wider context as part of a strong and constantly evolving EU-US 
partnership. 
Any re-appraisal of EU-US relations should include drawing these different strands together 
into an overall approach, setting a clear timeframe for the conclusion of negotiations and 
giving sufficient political backing and momentum to the process to attract public and political 
as well as business attention. Such a process will be worthwhile in itself but can also serve 
to provide the building blocks for possible future initiatives once sufficient political and 
technical consideration has been given to the form and direction of closer economic relations 
The degree of openness that already exists in economic relations between the EU and US and 
the scope for further enhancing relations and removing the obstacles that stand in the way is 
such that it is not too ambitious to envisage a major new initiative in EU-US economic 
relations. 
Towards a Transatlantic Economic Space: creating the building blocks 
A new concept is needed to draw all of these elements together : a Transatlantic Economic 
Space. This should provide an overall framework within which existing and new initiatives 
become part of a coherent, political drive towards closer economic relations. What now needs 
to be done is to identify precisely the areas where bilateral agreements can be realistically 
achieved which would remove existing obstacles or otherwise enhance transatlantic economic 
activity. In this way the building blocks for a Transatlantic Economic Space can be created 
11 
There are many areas of current or potential co-operation such as customs co-operation, 
science and technology, the information society, intellectual property rights, aviation and 
maritime transport, steel, public procurement, biotechnology, competition policy etc which 
could benefit from the building block approach. However, given the size of the Union and 
of the United States, such a Space would have to take into account its effects on the 
development of the multilateral system of trade - and on trade by and with third countries -
as well as the perception of their agreement by the rest of the world. 
One of the obstacles to trade most frequently cited by business on both sides of the Atlantic 
is the absence of mutual recognition of standards, certification etc. The EU and US often 
have different philosophical approaches to the same issues and find different regulatory 
responses, thus complicating the operation of businesses which trade in both markets. As a 
first step towards resolving some of these difficulties, a recent sub-Cabinet level meeting 
between the EU and US agreed on principles for regulatory co-operation. The aim is to 
enhance (or where necessary establish) co-operation on technical issues for regulatory projects 
of joint interest, to make greater use of each others' technical infrastructure to provide early 
warning of divergent or incompatible regulatory initiatives which may have trade implications 
In a number of sectors negotiations are underway aiming to reach agreement on mutual 
recognition of conformity assessment. This would not change standards on either side of the 
Atlantic but would enable firms to seek certification for both EU and US standards with 
locally based testing and certified bodies. The negotiations are currently looking at, inter alia, 
telecommunications, electrical safety, pharmaceuticals and medical devices. Every effort 
should be made to conclude these negotiations by the end of 1995. The same principles and 
techniques can then be extended to many other areas, such as differences in legal and 
commercial practices. 
In the period up to the end of December 1995 the Commission proposes to work with the US 
Administration to draw up a list of specific objectives to be achieved within a clear timeframe 
in a range of areas such as those listed above. These could then be submitted to the Council 
for political approval of the objectives and the agreed action plan could be considered by the 
EU-US Summit due to take place in December 1995. 
It is clear from the above that there are many different options when it comes to choosing the 
building blocks for a Transatlantic Economic Space. The possibility of including a Free Trade 
Area component in a Transatlantic Economic Space is a further such option which has 
attractions but also has a number of drawbacks and therefore deserves serious further study 
Free trade areas involving the elimination of duties and other restrictive regulations of 
commerce on substantially all trade between the parties can be a way of promoting further 
international trade liberalisation provided they are compatible with the rules of the WTO The 
Commission has recently set out its views on free trade areas in a Communication to the 
Council1. Given the recent conclusion of the Uruguay Round it remains to be seen whether 
there is realistic scope for further tariff cuts between the EU and the US. No informed 
political decision on whether or not to envisage a transatlantic free trade area at some stage 
in the future can be taken without first undertaking detailed economic analysis of the existing 
Sec (95) 322 
12 
tariff levels, the likely gains and losses which would result from their removal, the impact on 
particular sectors and the possibility of their partial exclusion from a free trade area as well 
as an assessment of the likely trade creating/trade diverting effects of such a Free Trade Area, 
and the implications of the creation of so large a free trade area for the multilateral trading 
system. 
The Commission is currently carrying out a technical study designed to provide the elements 
necessary for political consideration of the issues involved. A similar study is underway in 
the US. In order to ensure that there is agreement on the basic facts consideration could be 
given to carrying out during 1996 a joint EU-US feasibility study on the advantages and 
disadvantages of a transatlantic free trade area. Such a study could also look at the feasibility 
of making membership of any such area open to third parties. 
It is becoming increasingly important to ensure that transatlantic competition policies do not 
diverge in their application. The recent EU-US Competition Agreement represents an 
important step in closer co-operation. Consideration should also be given to building on this 
co-operation with a view to reaching a greater compatibility between the regulatory systems 
of the EU and US markets. One consequence of the creation of a Transatlantic Economic 
Space would be that the use of anti-dumping and countervailing duty measures by one side 
against the other could be gradually rendered unnecessary.This is a longer term objective. It 
is noteworthy that anti dumping and countervailing duties have been maintained in the US-
Canada Free Trade Area and in NAFTA. 
The concept of a Transatlantic Economic Space is also relevant for new Information Society 
services. Information Super-Highways are such that geographic borders will no longer act as 
natural barriers to trade in services. Since the economies of the EU and the US are service-
driven, it is essential that the principle of mutual recognition be applied in the field of 
services regulation in order to allow the economic benefits of the Information Society to be 
attained. Bilateral discussions on this issue should therefore take place as soon as possible 
Recom m endations 
to seek to resolve ongoing problems and to strengthen the early warning system with 
a view to preventing the emergence of future problems 
to identify potential building blocks for the creation of a Transatlantic Econom ic Space 
to make as rapid progress as possible in creating them, especially in the current 
bilateral negotiations 
to consider further the possibility of including a free trade area component by means 
of a joint EU-US feasibility study to be carried out in 1996 
to further develop co-operation on competition policy. 
to enter into bilateral discussions on mutual recognition of services regulations. 
13 
Macro-economic issues 
There are at least three reasons to strengthen the dialogue on macroeconomic issues between 
the United States and the Union as soon as possible. 
A macro economic framework which helps to avoid excessive and unpredictable fluctuations 
in financial and currency markets would contribute to the harmonious development of trade 
between the EU and US. The recent G7 Summit in Halifax pointed out the risks that such 
fluctuations present for a sustainable, non inflationary growth as well as for the continued 
expansion of international trade. It is in the interest of the EU and the US to work more 
closely together in favour of such a framework. Moreover the development of EMU and the 
introduction of a single currency will have far reaching implications for the international 
monetary system. It is in the interest of the US and of the EU to make sure that the 
introduction of the single currency contributes to the stability of the international monetary 
system. Furthermore, the orientations chosen for the budgetary policies of the Member States 
and of the US exert a reciprocal influence on economic developments in these countries and 
are of major importance for international macroeconomic equilibria. Since the coming into 
force of the Maastricht Treaty, the broad guidelines of economic policy of the Member States 
are adopted by the Council, after discussion at Heads of State level. Furthermore the 
orientations of the budgetary policy of the Member States is subject to a Community 
discipline. These factors taken together make it advisable for the EU and the US to conduct 
a dialogue, at an appropriate level, on their respective orientations concerning macroeconomic 
policy. 
More and more medium term, structural issues with substantial economic aspects appear on 
the international agenda, including on the Community agenda. The two most prominent 
issues are employment and the need to reconcile growth with environmental protection In 
both domains, the Union is currently preparing political initiatives. Concerning employment, 
on which a bilateral dialogue has already commenced in the sub-Cabinet framework. Member 
States are due to establish pluriannual programmes, to be assessed by the Commission in co­
ordination with the Council before the end of the year. The relationship between growth and 
environment and its political implications are currently discussed by the ECOFIN Council on 
the basis of a Communication to the Commission. A more intense dialogue with the US on 
the economic aspects of these two issues and on their implications for economic policies 
would contribute to deepening the common understanding of these issues. 
The US and the EU implement a comprehensive economic and financial strategy in their 
relationship with third countries. Both parties are deeply involved in central and eastern 
Europe, in the former Soviet Union and in the Mediterranean area. The policies of the Union 
and its Member States as well as those of the United States often have a major influence on 
the development strategy pursued by third countries. Both parties use a wide range of 
instruments: commercial policy, macro-financial assistance, budgetary support, actions in the 
framework of Bretton Woods institutions aiming at improving the stability of the 
international financial system and the strengthening of surveillance mechanisms, participation 
in regional development banks and financing institutions. It is therefore appropriate that the 
existing dialogue between the EU and the US, which concentrates at this stage mainly on 
political aspects, be systematically extended to macroeconomic and macrofinancial issues 
14 
Recommendations 
to extend the agenda of the EU-US Summit to macroeconomic and macrofinancial 
issues 
to envisage a dialogue, at ministerial level, between the US Treasury and the Union 
represented by the Presidency of the ECOFIN and the Commission 
to reinstate the dialogue between the Treasury and the Commission's services aiming, 
among others, at preparing the contacts at political level between the US and the EU 
Other areas of co-operation 
The range of issues which affect the EU and US is so large that a very broad range of EU 
policies are potential candidates for co-operation with the US. Some of those fall within the 
scope of the EU Treaties, others are matters for which the Member States are also responsible 
Rather than attempt to compile an exhaustive list of areas where co-operation does or should 
take place, consideration should be given to highlighting a limited number of such areas 
which potentially have significant public appeal. The purpose of such an approach is not to 
give the areas identified a higher priority but to illustrate to the general public some of the 
ways in which the EU-US relationship can directly affect their lives and through co-operation 
produce better results than if each partner acted on its own. A number of areas where this 
approach could be applied are set out as follows : 
Environment 
Protecting the environment is a double challenge for the EU-US relationship. First of 
all each partner needs to aim for the highest possible standards in its domestic policy 
but also to seek to take account of the others interests in formulating and applying 
policy. In order to accomplish that aim the annually high level EU-US consultations 
on environmental issues have provided a forum to exchange information and ideas, 
present strategies and devise co-ordinated positions on a number of important issues. 
The dialogue has been particularly fruitful in the areas of air pollution, chemicals and 
biotechnology in which technical groups hold regular discussions. By pursuing this 
dialogue on a periodical basis and alerting each other at an early stage to new 
initiatives - many of which will have clear trade implications - environmental 
regulations can be made more compatible, more protective of the global environment 
and also potential trade conflicts may be averted. 
Secondly the EU and US need to work together to assist the world at large to meet 
the global challenge of caring for the environment. The need for close co-operation 
between the EU and the US is most visible in the international negotiations on global 
environmental matters. The EU and the US acting together in international 
organisations can be decisive. This includes a number of energy related issues such 
as the greenhouse effect and nuclear safety in eastern Europe and the countries of the 
former Soviet Union. A strengthening of co-operation in this area could have 
15 
important results, most notably in negotiations concerning the future work of the 
Commission for Sustainable Development (CSD), the Intergovernmental Panel on 
Forest, those in the Trade and Environment Committee within the WTO, and the 
Berlin Mandate Group, which will negotiate on the further commitments under the UN 
Framework Convention on Climate Change. 
The regular EU-US dialogue on environmental matters has established mutual 
understanding on bilateral issues and in international fora. Since environmental 
considerations are gaining strategic importance in the mainstream of international 
politics - the trade/environment interface is a case in point. This mutual dialogue 
needs to be further strengthened. 
Recom m endations 
to strengthen the existing framework for regulatory co-operation in the environmental 
area, paying due attention to cost and efficiency aspects when setting up new schemes. 
m to extend co-operation in the chemical area by including additional aspects, 
particular the issue of Prior Informed Consent 
to implement a new phase of co-operation in the area of biotechnology 
to explore the possibilities of finding comparable emission test procedures and 
standards for cars, trucks and other mobile sources which could eventually lead to 
similar technical requirements in more and more sectors of the type approval, and to 
include common work in international bodies (UNECE) as a means to decrease 
emissions from all kinds of mobile sources 
to consult regularly before High Level International Meetings, and to co-ordinate 
negotiating positions with a view to furthering progress at the multilateral level. 
Information Society» Information Technology and Telecommunications 
The development of advanced communication and information technologies are 
leading the world to a Global Information Society. This will be the backbone of the 
economy in the future. The EU and US alike recognise the importance of improving 
global interconnection and interoperability of information networks and services. The 
G7 Conference held in Brussels on 24-25 February 1995 and the two dialogue 
meetings on the Information Society held in November 1994 and July 1995 have 
helped reinforce views and paved the way to further co-operation in international fora 
vis-à-vis OECD, GATS, NGBT etc. 
However key issues having an impact across the world on telecommunications (ie 
global satellites, standards, IPR linked to multimedia) need further co-operation rather 
than the unilateral approach that the US has so far undertaken. 
16 
Recommendations 
to strengthen co-operation on regulatory issues having a global impact i.e. satellites 
to strengthen co-operation in the fields of standards and research for the important 
interoperability of networks, services and information technologies 
co-operate in order to make the best of OECD work on the subject. 
Social Policy and Emplnyi^nt 
The G7 Summit in Detroit raised the profile of employment on the international 
agenda and since then the Commission has maintained contact with the US 
Administration. A teleconference was held in April 1995 to discuss financial 
incentives to create jobs, and the Halifax G7 Summit reiterated the urgent priority to 
create good quality jobs and reduce unemployment. During meetings over recent 
years between the President of the US and the President of the Commission, social 
issues and employment in particular, have been discussed regularly. There is clearly 
scope for further bilateral contacts with the US in the context of implementation of 
both the White Paper on growth competitiveness and employment and the White Paper 
on social policy. 
Equally a range of social policy issues, such as industrial relations, health and safety 
at work, public health, social protection and equal opportunities have received much 
attention on both sides of the Atlantic. Here again, there is scope for building further 
co-operation. 
A particular example is the challenge posed by the ageing of their societies 
Managing this transition throws up a huge number of opportunities and challenges 
The impact on the health care sector, on public finances, on transport, on employment, 
on information technology are among the more obvious areas where the EU and US 
systematically exchange information as to the nature of the problems and evolving 
policies for dealing with them, as well as consider the possibility of co-operation for 
specific purposes. Furthermore, the ageing of population will also have implications 
for the equilibrium of public finances, in the EU as in the US, and consequently for 
the investment/saving ratio in the world. It is therefore in the interest of both partners 
to co-operate in the preparation of political responses to these developments. 
Recom m endations 
to pursue exchange of information and discussions with the US in the field of 
employment 
to explore further with the US the possibility of developing a more systematic 
exchange of information and identification of areas of further co-operation on social 
issues. 
17 
to examine the usefulness of a joint study with the US on the ageing of the population 
and to co-operate in order to make the best of OECD work on the subject. 
Justice and Home Affairs 
Apart from building on the initiative, launched at the EU-US Summit in Berlin in July 
1994, for co-operation in the fight against organised crime and drug abuse, the EU and 
US could also usefully explore the possibilities for co-operation on immigration and 
asylum issues. These are areas where the EU and its Member States on the one hand, 
and the US on the other, have both shared interests and responsibilities and different 
experiences based, among other things, on history and geography. Comparing these 
experiences as well as co-ordinating approaches to new developments could be of real 
benefit to both sides. 
to explore possibilities for co-operation in the fight against organised crime and drug 
abuse as well as on immigration and asylum 
Science and Technology 
The EU and US have been co-operating for many years in the area of science and 
technology. At first, co-operation was limited to nuclear research. Later it expanded 
into other areas, such as renewable energies, minerals technologies and biotechnology, 
but the accent still lies on the nuclear sector. Co-operation takes place under a 
number of bilateral agreements as well as through informal contacts and exchanges of 
information. 
Over the years both sides have felt the need to upgrade their co-operation and to give 
it a better structure. This led to the establishment of the EU-US Joint Consultative 
Group on Science and Technology in November 1990. 
However both sides continue to feel the need for widening the areas of co-operation 
and for a clearer situation as regards mutual access, intellectual property rights 
protection, equal treatment etc. In May 1994 the US State Department proposed to 
the Commission the negotiation of a Framework Agreement for Science and 
Technology Co-operation. This proposal still is the subject of exploratory discussions 
between the two sides. 
Recom m endations 
continue the discussion of a comprehensive S&T co-operation agreement, including 
the examination of the possible benefits for the EU, the areas to be included and the 
modalities and conditions for co-operation 
in the meantime further develop co-operation under the existing specific co-operation 
agreements, while renewing those that have expired; 
18 
examine and exploit opportunities for co-operation at the multilateral level 
Education and Training 
Following a two-year exploratory phase of co-operation in higher education, a draft 
Agreement for co-operation in higher education and vocational education and training 
has been negotiated and is now before the Council and Parliament for decision. The 
main activity proposed is the provision of seed-funding on a competitive basis for a 
limited number of EC/US joint consortia projects. Through the stimulation of 
innovative forms of transatlantic co-operation and the sharing of experience, the aim 
is to improve mutual understanding and bring balanced benefits on both sides. Other 
actions within the draft agreement provide a framework for developing other 
complementary modes of co-operation in education and training. 
Transport 
Both the aviation and maritime sectors offer opportunities for closer EU/US co­
operation. 
In the maritime sector, the US has a considerable marine interest and the EU fleet is 
still significant in global terms. The EU and US have common interests, in particular 
in areas such as safety, crew qualifications and market access. 
The US has already indicated its interest in negotiating with the EU in the aviation 
sector. In 1992, over 30 million passengers travelled between the EU and the US 
At present, a network of bilateral agreements between individual Member States and 
the US govern this trade. So that Member States are able to gain the additional 
benefits from acting together in this area, the Commission has already proposed that 
there should be an EU/US aviation agreement. The aim being to obtain full and equal 
access for US and Community carriers to the US and Community markets. This 
would bring benefits to consumers and airline companies on both sides of the Atlantic, 
and could be a first step in building much closer EU/US links in this area. 
Information and Culture 
Informing the general public about developments in the EU and US as well as of the 
mutual benefits of closer relations is an essential part of the dialogue. For example, 
decision makers and opinion formers in the US need to be aware of the process of 
European integration and of its impact on international security and economic 
relations. The Commission is currently preparing a medium-term communications 
strategy in relation to the US which will be designed to meet some of these needs. 
Greater understanding can also be achieved through the strengthening of cultural 
activities and links between people on either side of the Atlantic. 
19 
Urban Decay 
Given the importance which urban problems hold for the EU and for the US which 
has given rise to the development of major programmes aimed at tackling problems 
in crisis areas, as well as the increasing importance of the urban dimension in EU 
policies such as environment, energy, transport and social policy, it is proposed that 
a system should be set up to provide for more systematic exchange of experience 
between the EU and US. This could take the form of an annual forum involving the 
relevant Community and US federal administrations as well as high level outside 
experts. 
OTHER LINKS 
It is important to involve a wide range of participants on both sides of the Atlantic for 
a number of important reasons. Firstly to provide a clear signal of the seriousness of 
intent with which both the EU and the US are proceeding with the process of updating 
the relationship. Secondly, in order to provide both the EU and the US with fresh 
ideas of practical value which can be taken aboard in the process of updating 
Thirdly, meaningful progress cannot be made without substantial non-governmental 
involvement. 
The business community, parliamentary and Congressional opinion, the academic 
world and major foundations are among the sectors of society that should be included 
in this process. 
Parliamentary links 
As the section in this Communication on political dialogue shows there are 
arrangements for extensive EU-US consultation at Ministerial and administrative level 
However there is also a need to involve elected representatives in discussions about 
how to strengthen the relationship as well as on the issues of the day. The new 
generation of elected representatives in Europe and in the EU is less deeply rooted in 
their belief in the primacy of EU-US relations and more regular contact between the 
two sides would contribute to better understanding. Some formal links already exist. 
For example, the North Atlantic Assembly meets to discuss NATO related issues. A 
delegation of the European Parliament meets regularly with the International 
Committee of the House of Representatives, and some national EU parliaments have 
their own links. However there seems to be a need for a forum which brings together 
both Houses of Congress, members of the European Parliament and representatives of 
EU national parliaments to discuss the full range of EU-US relations. A decision on 
this issue is essentially one for the parliaments themselves to take, but there is no 
reason why the EU and the US Administrations should not consult parliamentary 
leaders on both sides to see whether the creation of such a forum is considered to be 
a useful step and to discuss how it could relate to the updating of the EU-US 
relationship as it develops. 
20 
Involving The Business Community 
Many organisations exist to foster contacts between businesses in the EU and the US 
and these regularly contribute to the identification of policy areas where action is 
needed. Recent soundings taken on both sides of the Atlantic reveal a desire among 
business leaders for a forum which brings together the Commission and the US 
Administration and business leaders in which transatlantic business developments can 
be discussed. As a result of these expressions of interest the Commission and the US 
Administration have decided to launch a Transatlantic Business Dialogue which will 
hold its first Conference in the autumn of 1995. The Dialogue will allow business 
leaders to identify problems and opportunities which should be tackled by the public 
authorities. The high degree of convergence on both sides of the Atlantic in terms of 
preliminary identification of areas for action has already proved to be of value in 
helping both administrations to set priorities for their own and the bilateral agenda 
Recom m endations 
to consult European Parliament, EU national parliaments and Congressional leaders 
as to their interest in creating a joint forum, and if the response is positive, to discuss 
how such a forum could be involved in the ongoing updating of the EU-US 
relationship 
to proceed with the Transatlantic Business Dialogue conference in autumn 1995 and 
to consider how to develop the Dialogue further in the light of that conference 
to consider further w ith the US the possibility of developing new fora for Transatlantic 
dialogue in the academic community and other sections of society. 
The longer term 
As has been said, some of the components of a revitalised EU-US relationship will take time 
to mature, particularly those in the area of security policy. Therefore any overall 
formalisation of the relationship cannot be envisaged in the near future. On the EU side, for 
example, the IGC will in any event need to be concluded before the nature of such a 
formalisation could be given serious consideration. However once the various components 
of a new relationship are in place it will then be possible to consider the desirability of 
bringing them all together in a single solemn Agreement such as a Transatlantic Treaty 
CONCLUSION 
The EU-US relationship is complex and is changing. It needs to find new ways of working 
together and of being seen by the public as relevant and enriching the lives of citizens on both 
sides of the Atlantic. As explained in this Communication the Commission proposes that over 
the next six months the Council, Commission and, where appropriate, the US Administration 
should work towards creating a new framework for the EU-US relationship. Some of the 
components are already identified and progress can be made now, others can only be decided 
21 
in the coming years. However the aim should be to have the EU-US Summit in December 
i 995 raise the political profile of the relationship and by expressing a clear decision to update 
all aspects of the relationship and launching the measures which give practical expression to 
that mtent Such a decision can begin a process which will ensure that the EU-US 
relationship continues in the next century to fulfil the role and the promise it has shown m 
the twentieth century. 
This Communication started by expressing the view that the EU-US relationship remains 
central for each of the parties and for the world, whether it is judged in political, economic 
or security terms. However, it cannot be relied upon to function in the future on the basis of 
structures and priorities relevant to the Cold War era. Therefore, in their common interest, 
the EU and US need to invest time and effort in building the framework which will ensure 
that the relationship continues to function and prosper in the future. 
This Communication contains proposals in all of the main areas of the relationship and reflect 
the institutional responsibilities of the Commission, Council and Parliament. Each of the 
proposals made would be worth pursuing for its own sake. But for the relationship to be 
effectively updated it is necessary to put these individual proposals under a common umbrella, 
thereby showing the seriousness of purpose which both the EU and US bring to these vital 
tasks. It is therefore proposed that the European Council meeting in December 1995 shouid 
formally endorse the EU's wish to update and strengthen its relations with the US in the 
framework of a structured partnership, covering the areas described in this Communication 
In the period up to December 1995 the Commission, Council and, where appropriate, the US 
Administration will work to develop the proposals set out in this Communication with a view 
to producing an action plan to accompany a joint statement to be adopted by the EU-US 
Summit in December 1995. 
R ecom m endations 
that the European Council in December should formally endorse the EU's wish to 
update and strengthen its relationship with the US in the framework of a structured 
partnership and approve an action plan, based on the proposals in this Communication. 
that this action plan be submitted in the next EU-US Summit for adoption together 
with a political statement on the strengthening of the relationship. 
2.2. 
Background note 
Subject: Key data on EU - US trade 
The current status in transatlantic trade 
The EU and the US are leading players in the international trade system. Their weight 
in global trade and their openness to it are roughly equal: both have a 15-20 % share in 
world trade and both have an export/GDP ratio of about 10%. 
For the European Union, the US is the single most important trading partner. In 1994 
17.6 % of EU exports went to the US and 17.3 % of EU imports originated in the US. 
All the other trading partners of the EU had export and import shares of less than 
10%. 
EU exports 1994 EU12 imports 1994 
Based on 10 
months data 
For the United States, trade with the EU is second only to trade with Canada. In 1994 
21.8% of US exports went to the EU and 16.4 % of US imports originated in the EU. 
US exports 1994 US imports 1994 
Japan 
SourceOECD SourceOECD 
22> 
Recent trends in EU-US trade 
The EU has lost ground as an exporter to the US in recent years. Canada's and Japan's 
exports have grown much faster since 1990 which means that the EU has moved from 
top position to third place among exporters to the US market. In relative terms 
China/ASEAN have shown the fastest growing exports to the US with an increase in 
their share of US goods markets from 8.7% in 1990 to 13% in 1993. If this trend is 
maintained, this group of countries will become the third largest exporter to the US in 
about three years time. 
Regarding exports from the US, there is a similar decline in the relative position of the 
EU the share of US exports which go to the EU has fallen from 25% in 1990 to 21% 
in 1993. Canada and Latin America, on the other hand, have increased their shares of 
US exports and in 1993 Canada became the largest market for US exports with 21.6% 
On current trends, Latin America will also, in two years, surpass the EU as destination 
for US exports. 
These trade figures indicate, to some extent, a relative shift from inter-regional trade to 
intra-regional trade in the case of the US. For EU trade, such a trend only exists on the 
export side and it is less pronounced than for US trade. 
The bilateral trade balance 
The balance of EU-US trade does not show any significant or structural disequilibrium. 
Transatlantic trade flows in goods amounted to about ECU 95 billion in each direction 
in 1994. This contrasts with the pronounced structural deficit in US bilateral trade with 
Japan (ECU 60 billion in 1994). 
(b*cu) EU-US trade 
-20-1 1993 1994 
EU exports F I EU imports —o— Balance 
Sectoral trade data show that the single most important category in EU-US trade is 
"machines, electrical equipment, optical and photographic instruments" which 
represented 41% of bilateral trade in 1994. The US had a considerable bilateral surplus 
in this category with exports exceeding imports by 28% (ECU 9.4 billion). The US 
also recorded a surplus on agricultural products with exports exceeding imports by 
about 30% . The EU had surplusses on transportation equipment; textiles & footwear; 
and wood, stones & base metals. 
Bilateral trade by product group, 1994, billion ECU 
Agriculture + food industry 
Mineral products, oil incl. 
Chemical & plastic products 
Textiles, footwear & misc. manuf. 
Wood, articles of stone & base metals 
Mach. & electr. equip. / opt. & photo, instr. 
Vehicles, aircraft & transport equipment 
Others 
TOTAL EU exports to 
US 
5.1 
3.0 
12.8 
7.2 
13.5 
33.6 
15.4 
4.3 
95.0 EU imports 
from US 
6.7 
2.5 
12.8 
3.3 
9.6 
43.0 
9.8 
5.4 
93.2 EU trade 
surplus with 
US 
-1.6 
0.5 
0.0 
3.9 
3.9 
-9.4 
5.6 
-11 
Ï! 

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