THE search for ways to maintain close US-European ties after the cold war is leading out of diplomatic corridors and into corporate board rooms. US and European business leaders are now in a stronger position than they ever have been to shape the transatlantic relationship.
The immediate opportunity for the private sector arises from an invitation by the Clinton administration and the European Union to nearly 100 executives to meet in Seville, Spain, Nov. 10-11. Their mandate is to map out a practical strategy that will link the US and European markets more tightly.
At a deeper level, the upcoming business dialogue reverses two longtime patterns in US-European relations.
First, trade and investment have begun to displace alliance ties as the main cohesive force binding the United States and Europe together. This sea change was unthinkable during the cold war, when close military and diplomatic links were relied upon to keep US-European conflict in check. Trade negotiators hammered each other for decades with full knowledge that the strategic imperative of Atlantic unity would take precedence over economic disputes. The increased fragility of the security pillar in recent years, however, has shifted weight to the economic foundation of long-term Atlantic partnership.
Second, government officials have shown a newfound willingness to yield the initiative to business leaders. This turnaround is clearly a step in the right direction. While years of pitched trade battles have left a bitter legacy at the official level, US and European firms have invested more than half a trillion dollars in one anothers' markets. Two-way trade exceeds $200 billion per year. Business has a much keener sense than government of what can be done to create new trade and investment opportunities.
To be sure, a brief retreat of senior corporate executives is not going to work miracles overnight. Expectations are too high that the business dialogue in Seville will pave the way for the early removal of all barriers between the US and European markets. As a practical matter, a Transatlantic Free-Trade Area is not within reach in the near or midterm - especially in light of the European Union's own daunting agenda for enlargement and monetary union.
In addition, the private sector is not going to turn contentious US-European trade negotiations into a love feast. Business cannot be expected to sacrifice the bottom line for the political objective of Atlantic cooperation.
The most serious complication is the overall imbalance between US and European competitiveness. US firms got a head start in restructuring and are less encumbered by regulation than their European counterparts. US industry also has regained a technological edge that seemed at risk only a few years ago. As a result, Europeans are bound to worry whether they have as much to gain from more-open markets as do their US rivals.
What can be done
Nonetheless, the business leaders can play a potentially decisive role in strengthening transatlantic relations:
First, the Seville meeting can underscore the huge interest that Americans and Europeans have in one anothers' economic success. For outward-looking US firms, Europe absorbs nearly one-quarter of US exports and receives almost half of all US overseas investment. For European companies, the US market stands alone outside the EU itself in terms of size and profitability.
Second, business leaders can lay out concrete steps that will mesh the US and European markets more tightly. The most promising areas of progress lie in harmonizing industrial standards and testing procedures, eliminating tariffs on information-technology products, streamlining customs procedures, and allowing more-competitive transatlantic sourcing in government procurement. Success will hinge on insuring that the advantages of improved market access are perceived as comparable by US and European industry.
Third, the private sector can press US and EU officials to join forces to support a multilateral system of trade and investment that really works. This means putting an end to this year's US and European power plays within the World Trade Organization over naming a new director-general and the US holdout from a new agreement on financial services. Instead, the business community should insist that Brussels and Washington concentrate on seeing that Russia, China, and other emerging economies respect the multilateral rules and disciplines upon which the US and European-based enterprises rely.
Fourth, US and European business leaders can urge their governments to pursue policies that will contribute to higher levels of long-term growth. In the US, the primary requirement is to bring the budget deficit under control and increase a dismal rate of domestic savings through an overhaul of the current tax system. In Europe, governments must accept the near-term dislocation of energizing their economies further through deregulation and privatization.
Seville marks the opening of a phase in which business leaders can make a real difference in transatlantic relations. The challenge is immense, but the opportunity should not be missed.