The EU takes up free trade

One of the major lobbying arenas for American companies in Europe is free trade: The chance for U.S. corporations to sell their products into the EU market without the imposition of unfair or protectionist trade practices. That issue is now being taken to a new stage. EU Trade Commissioner Peter Mandelson has just launched a review of the union’s trading system, with an eye on liberalizing the EU’s trade rules.

The system has so far focused on protecting European producers against unfairly traded and subsidized imports from third countries like the United States. The EU’s trade defense instruments, or TDIs — anti-dumping, anti-subsidy and other safeguard measures — allow the EU to defend its producers against the kinds of distortions in competition that are harmful to the European economy.

During the 10 years that the EU has operated its current system, the global economy has changed significantly, with businesses’ and workers’ interests increasingly linked to production outside of Europe.

The rise of China as an export power has underlined a split within the EU among those politicians and enterprises that are reaping the benefits of cheap imports and those that are under pressure from heightened competition.

These conflicting interests and divisions among member states have made it increasingly difficult to define what constitutes an “EU interest.” Commissioner Mandelson has already twice this year, in disputes over imports of Chinese textiles and shoes, found himself stuck between free marketers such as the United Kingdom, Germany and Sweden — which said that imposing TDI in these cases was protectionist and would raise prices for consumers — and manufacturing countries such as Italy, France, Spain and Poland, which claimed that imports of under-priced Asian goods were putting their industries at risk and threatening thousands of jobs.

In the past, Mandelson has been under pressure from member governments to get tougher with China on issues such as dumping or state subsidies and follow the United States, which has launched litigation at the World Trade Organization against China.

The EU, meanwhile, has delayed taking up the proposed reforms of the bloc’s trading structure, as member state governments were too divided on the issue. But that hasn’t kept the issue off the table. In fact, lobbyists for American companies would be wise to join the debate.

Trade liberalization needs to happen because it would be a fundamental mistake to encourage public perception that international trade and therefore foreign investment in EU economies is a bad thing. The EU and the United States are now the biggest exporters of foreign direct investment in the global economy, and some $300 billion (U.S.) of such investments depend on the argument that capital movements pose no threat.

Over the last two decades, EU investment alone has created far more jobs in the U.S. economy than the United States has lost to China. The EU has nothing to gain from a protectionist turn in global markets.

Close ties between Europe and the United States are still the main foundation of world politics and the global economy. Both have a deep store of shared values, experiences and interests. Behind the entire discussion about a new EU trade defense policy lies a much larger and more important message. The EU is currently beginning to transform itself from an internal market into one that looks increasingly beyond its borders.

The EU institutions are about to live up to this heritage and become true world players. U.S. companies and lobbyists have to see this as both a challenge and a chance: On the one hand, they will not be able to just ignore the EU and “walk over” Brussels, as Jack Welch tried to do. On the other hand, with the EU becoming a real player, they have now, for the first time in history, the possibility to directly and substantially influence European politics in a way they are used to doing in Washington.

Geiger is founder and managing partner of Alber & Geiger , a leading EU government relations law firm with offices in Brussels and Berlin. Before that, Geiger was head of the EU Law Center of Ernst & Young , and president and CEO of Cassidy & Associates Europe. He has written a handbook on lobbying the EU.