European Affairs

Summer/Fall 2003

 

Letter from the Publisher:
A Crisis that Calls for U.S.-EU Cooperation
By Jacqueline Grapin

 

Turmoil in the Middle East, including the war in Iraq, has triggered an international crisis. The Transatlantic relationship has been disrupted, European unity has been weakened and relations between the United States and Russia have been compromised. North Korea and Iran are causing trouble again. Even Turkey, long considered a solid ally by Washington, has become an ambiguous partner for the United States. The extent of these uncertainties and tensions calls for a change of attitude by everyone, including the United States. The United Nations, which risked becoming irrelevant in the spring, has become a key institution from which solutions were expected to come in the fall.

As efforts are being made to find those solutions, two observations might be worth considering. The first is that the unintended economic consequences of the current situation should be recognized or more damage will result from this crisis for all of us. Too little attention has been given to the economic implications of the war against terrorism and the war in Iraq. Wall Street analysts have recently become increasingly worried about the size of the U.S. budget deficit, which is at an all time high in absolute terms and higher than it has been for ten years relative to U.S. gross national product. Members of Congress from both parties are expressing concern, not only about the deficit, but, as importantly, about the fact that the full costs of the continuing operations in Iraq are still unknown.

More broadly, fundamental questions that would normally be at the center of international attention are simply not being addressed. That is particularly true of the increasingly dangerous global trade and monetary imbalances, which, combined with the U.S. budget deficit, could trigger a serious global financial crisis. The international community is not properly organized to face this potential trouble. The summit meeting of the Group of Eight in Evian in June was considered a success because everyone was nice to President George Bush and vice versa. Although the G8 is an economic decision-making body, the leaders talked mostly about political questions.

The idea of creating a United Nations Economic Security Council, proposed many years ago by Jacques Delors, the former President of the European Commission, has resurfaced. It is a strange moment to revive this proposal, considering the lack of U.S. enthusiasm for reinforcing UN institutions. But there is no doubt that better international economic and monetary coordination, especially between the United States and the European Union, would be particularly useful in such a difficult period.

The second important question is how to restore European unity and a proper dialogue between the European Union and the United States, both of which are key to international peace and prosperity. While Europeans have blamed many current problems on the U.S. administration's "unilateralism," the Europeans have themselves been guilty of not using their own institutions for the most important political and security decisions. Britain, France and Germany need to agree if a common foreign and security policy is to be produced by the European Union.

They are trying to do so. But they also need to include the other members of the European Union in the process and more effectively use the mechanisms of the European institutions. Recently, Sweden's vote against joining the euro zone did not only indicate that rich Nordic populations are not enthusiastic about the prospect of sharing their fate with others and possibly losing some of their expensive social benefits in the process. It also indicates that the advantages brought by the European Union have not been made clear enough to them. The role that the European Union plays in securing peace is either too obvious or not obvious enough. Thanks to the Union no one expects a war in Europe any more. Meanwhile, the Union's embryonic Common Foreign and Security Policy has not yet made enough impact to convince European citizens that it is worth making sacrifices for. Even the less prosperous Baltic countries, Lithuania, Estonia and Latvia, showed obvious caution in voting to join the European Union in their recent referendums.

The last few months have demonstrated that dealing with a divided Europe is not in the interest of the United States any more than it is in the interest of Europeans. It is a paradox that the worst ever crisis in Transatlantic relations has come at a time when U.S.-European economic integration has reached such extraordinary levels. Millions of people work for Europeans in the United States, and millions work for Americans in Europe. It should not be forgotten that the United States and the European Union are each other's major trading and investment partners, and each other's most important sources of overseas corporate profits. More than two thirds of total European assets abroad are in the United States and more than half of U.S. foreign assets are in Europe. European investments represent 60 percent of all foreign direct investment in the United States, and U.S. investment in Europe produces half of all foreign earning for U.S. companies. U.S. assets in Germany alone are greater than total U.S. assets in the whole of South America, and there is more European investment in Texas than all the U.S. investment in Japan.

U.S. National Security Advisor Condoleezza Rice opened a new era when she said that Mr. Bush's foreign policy would: "... proceed from the firm ground of the national interest, not from the interests of an illusory international community." The difficulty that Washington has encountered in putting this principle into practice in recent months has clearly demonstrated something that she did not mention: multilateral agreements and the international community are also part of the U.S. national interest and they are indispensable for the implementation of key U.S. policies. The same is true for Europeans.

While the interests of Europe may be different from those of the United States in some respects, both belong to the same international community. Americans and Europeans together account for 40 percent of world trade and 60 percent of world economic output, although they constitute only some 10 percent of the world's population. That is not only a remarkable tribute to the success of the West. It also shows how influential the United States and Europe can be when they work together and how much they stand to lose if things go wrong.