Europe 1992: The Opportunity and the Challenge for U.S. Economic Interests

EUROPE 1992: THE OPPORTUNITY AND THE CHALLENGE FOR U.S. ECONOMIC INTERESTS Stephen Cooney B'y now it is almost a cliche to say that the program to complete the European Community internal market by the end of 1992 (EC-92) represents both a challenge and an opportunity for U.S. interests. The program contains an attractive dynamism that could accelerate Europe's economic transformation and thus create major new market opportunities for American investors and exporters. Simultaneously, EC-92 and some other EC trade policies contain elements ofprotectionism that could threaten the existing multilateral trade order. It has been widely said that the plan to perfect the internal market was developed without consideration of its impact on Europe's external interests. This is not quite true. As early as 1986, Lord Cockfield, then EC Commissioner for the internal market and prime architect of the 1992 program, noted that, "There are voices in Europe which demand. . . greater protection against the outside world. Otherwise, it is said, we shall be opening up the market in Europe not for our own benefit, but for the benefit of our competitors outside Europe."1 Moreover, many initial EC-92 proposals, such as those affecting banking, public procurement, 1. As quoted in a speech in New York, April 21, 1986. See European Commission press release IP (86) 180, 2. Stephen Cooney is Director of International Investment and Finance at the National Association of Manufacturers (NAM), Washington, D.C. He is the author of the 1989 NAM report, EC-92 and U.S. Industry, and has testified before Congress on this subject on several occasions. Except where expressly noted, this article reflects the author's personal views and not those of the National Association of Manufacturers or its member companies. 73 74 SAIS REVIEW and product certification, took into account the concerns of non-EC countries. TAe 17.5. Reaction to 1992 Active U.S. concern over the implications of EC-92 grew dramatically as the program gained momentum. At first the United States almost totally ignored the 1992 project, enunciated in a formal 1985 "White Paper." But the temporary resolution of the EC budget crises and the final ratification of the Single European Act in 1987 paved the way for the rapid development of specific EC-92 proposals. Enough specific U.S. interests were threatened by the proposals to create a generalized concern in the United States with the entire process. Hence, fears of a "Fortress Europe" (the expectation that the European Community would raise a wall ofprotectionist trade policies around its integrated market) were born. During 1988 and early 1989, this "danger " was documented by articles in the New York Times, the Wall Street Journal, the Washington Post, and important regional papers, as well as in the electronic media. Such fears were also featured in speeches by Reagan administration cabinet members and dominated a large number of congressional hearings. The "Fortress Europe" phenomenon arose from three factors. First, U.S. economic interests in Europe were (and still are) huge, with respect to both exports and direct investment. Second, the ground rules for American firms with a stake in the European Community appeared suddenly to be changing. And third, the United States appeared to be shut out of any direct consultative role on the nature of these changes. The EC's assurances that it would honor all international obligations and commitments provided little comfort since only the European Community would interpret what those commitments were. As former Under Secretary of Commerce Lionel Olmer observed, the rancorous history of U.S.-EC relations over the EC's common agricultural policy (CAP) stimulated U.S. fears that a similar EC policy, characterized by a closed market and higher subsidies, could be developed in industry.2 The European Commission, the executive body of the European Community, apparently did not anticipate the strength of the foreign, particularly U.S., concern over the direction of the EC-92 program. Further , it underrated or ignored what its trading partners considered the program's potentially adverse implications for the negotiations of new 2. Speech at Columbia Leadership Institute conference, Washington, D.C, February 24, 1989. EUROPE 1992 AND THE U.S. 75...