None of this is to suggest that the EU is about to collapse or that
it has stopped moving forward. Its ability to progress on an agenda
that includes monetary union, enlargement, building the rapid
response force, and economic reform that finally is producing
respectable growth is rather impressive. This is to suggest that the
finality debate will not produce finality. The EU will continue to
evolve into an increasingly complex hybrid of dispersed and
centralized powers--"a superpower but not a superstate", as Tony
Blair phrased it in his October 2000 Warsaw speech--that will present
an array of challenges for U.S. policy.

The External Dimension

In viewing the EU's constitutional travails, some U.S. commentators
have expressed satisfaction with current trends and specifically with
the apparent ascendancy of "widening" over "deepening." Zbigniew
Brzezinski, for example, suggests that enlargement on the scale being
contemplated will result in a Europe that is "geographically and
culturally whole, but almost certainly politically diluted." The
accession of many new members is likely to block any serious move
toward genuine or deep political integration, frustrating attempts to
acquire an autonomous military capability and leaving the United
States through NATO the arbiter of developments on the continent.

This is much too sanguine a view. An EU that is engaged in perpetual
constitutional reform and an open-ended process of enlargement will
constitute a threat to an effectively managed international system
able to cope with the strains of globalization. Anything that the
United States might gain from a politically divided, NATO-compliant
Europe will be more than lost in political ill will generated by
endless squabbles over trade and other economic issues. A more likely
outcome of current trends is the emergence of an enormous trade and
regulatory bloc, increasingly able to influence the world economy,
but lacking the requisite political cohesion either to provide a
level economic playing field inside the Union or to deal with
security threats in Europe's near abroad (or in what could become
unstable regions internal to the Union). This is not a recipe for a
Europe "whole and free." It is a formula for intra-alliance trade
wars, and for continued security dependence in an increasingly
fractious economic and political environment.

Many of the escalating trade disputes between the United States and
the EU already reflect the externalization of the uneven
decision-making and enforcement situation within the Union. The
banana import and beef hormone cases demonstrate the difficulty the
EU has in bringing its trade and regulatory legislation into
compliance with WTO rulings. The United States and the EU finally
managed to resolve the banana dispute in early 2001, but only after a
nine-year period in which a coalition of member states blocked
Commission efforts to establish a WTO-compliant import regime. In the
case of beef, the EU has not even tried to meet WTO objections;
instead it has offered compensation in the form of allowing the
United States to impose tariffs on unrelated products.

It is an open question as to whether a liberal international trading
order and a solid transatlantic political relationship can survive
the growing stresses of the EU's internal incoherence. It is worth
recalling that the celebrated vandalizing of a local McDonald's by
French farmer José Bové was prompted by the imposition by the United
States--in response to the beef hormone exclusion--of WTO-sanctioned
tariffs on Roquefort cheese made from the milk of the sheep raised on
Bové's farm. Bové's trial provoked a wave of anti-U.S. and
anti-globalization protest in France. Meanwhile, the U.S. Congress,
irritated by EU failure to comply with adverse WTO rulings, sought to
increase the price of noncompliance by legislating so-called carousel
retaliation, which in turn threatened to give rise to further action
in the WTO, this time by the EU. Lost in the trading of trade-war
blows was the fact that the entire cycle of retaliation and
counter-retaliation would never have begun in the first place had the
EU been able to comply with its own commitments.

Several aspects of the EU's international behavior that grow out of
its complex internal situation should concern U.S. policymakers. Five
are especially noteworthy.

First, as in the example just cited, is the EU's difficulty in
applying internally its international trade obligations. This casts
the United States in the position of trade bully vis-à-vis European
publics, without resulting in any market openings that benefit
producers.

Second is the EU's increasingly political approach to regulation.
Nowhere is the EU's implementation deficit more apparent than in the
field of regulation, where the Union and its member states have
managed to achieve the worst of all possible worlds: disputes with
trading partners who suspect the EU of using regulatory barriers as a
disguised form of protectionism, widespread public scorn over the
Commission's perceived bureaucratic preoccupation with setting
standards on trivial matters, and a failure to protect the public
from genuine dangers such as "mad cow" disease and threats to the
blood supply. EU agencies for the environment, medicinal products and
other areas have been established, but the member states have not
been prepared to cede them genuine rule-making and enforcement powers
of the type that federal agencies exercise in the United States. The
result is a regulatory process that is easily politicized and that
lacks credibility both with its purported beneficiaries at home and
with trading partners abroad.

Europe's trading partners are especially wary of the "precautionary
principle", under which the EU claims the right to ban the import of
products when there is uncertainty or the possibility of a health or
environmental hazard. WTO rules allow countries to block the import
of hazardous products, but only on the basis of sound scientific
evidence. The United States and other countries are concerned that
the EU's use of precautionary standards will make their exports
vulnerable to decisions taken on ostensible grounds of health and
safety, but in fact made in response to political pressures,
artificially fanned by economic interests that stand to gain from
precautionary bans.

An additional exemplary domain concerns anti-trust regulation.
Anti-trust is an area in which the Commission enjoys strong powers
relative to the member states, but here as well the EU has failed to
establish the arm's length relationship between politics and
regulation needed to inspire international confidence. While U.S. and
EU regulators have tended to see eye-to-eye on most large mergers,
anti-trust has been an accident waiting to happen in transatlantic
relations. It was only a matter of time before the Commission made a
decision involving U.S. firms that would be perceived in Washington
as commercially motivated, provoking a serious transatlantic
controversy. Indeed, that decision seems to have come with the
Commission's blockage of the GE-Honeywell merger previously approved
by U.S. and Canadian authorities.

A third area of concern is the growing involvement of the European
Parliament in trade issues and in regulatory issues with effects on
trade. The Parliament was the driving force behind the ban on
aircraft engine hush kits to meet noise standards imposed by the EU
outside the International Civil Aviation Organization, the forum in
which international standards on aircraft noise are negotiated. This
action, had it been taken by the U.S. Congress, would have caused
howls of protest about American unilateralism. The European
Parliament has also taken hard-line positions on data protection
issues that affect U.S. firms as well as on broadcast and motion
picture quotas. It has seized upon the presence of U.S. listening
posts in Europe as evidence of commercial espionage intended to
damage the interests of European firms. And it sought to amend (and
ultimately blocked) the Commission's proposed takeover directive to
make unsolicited takeovers more difficult for U.S. firms.

Up to a point, these actions reflect the understandable response of
elected politicians to concerns raised by globalization. But they are
also an outgrowth of the EU's convoluted internal situation. Engaged
in a permanent campaign to enhance its powers relative to the
Commission and the member state governments, the Parliament tends to
subordinate policy considerations to this institutional objective. To
the extent that anti-Americanism in the name of environmentalism,
food safety and other concerns has become fashionable in Europe, the
Parliament reflects this trend.

A fourth area in which the EU's internal complexities spill over into
the international arena concerns the aggressive approach the
Commission has taken in the WTO toward other countries. The
Commission has exhibited a marked intolerance for shortcomings in
other countries that, while surely not desirable, can be shown to
have little real effect on EU trade--an intolerance that sits oddly
with the Commission's inability to tackle barriers inside the Union.
While "beef and bananas" has become a kind of shorthand for
transatlantic trade tensions, these cases--market access complaints
that the United States has filed against the EU--are probably less
important for the future of the international trading order than the
growing list of suits that Brussels has brought against the United
States.

In 1997, for example, the EU initiated a case against the U.S.
Anti-Dumping Act of 1916, claiming that a provision that allowed for
private lawsuits for treble damages and criminal penalties against
importers of products sold at below market value contravened
international trade agreements. The United States argued that the law
was susceptible to interpretation that would permit compliance with
WTO obligations. It pointed out that there had never been a
successful criminal prosecution under the act, and that no
complainant in a civil suit had ever recovered damages. The WTO panel
rejected these arguments and the EU, which claimed that threats of
adverse decisions under the act cast a cloud over the business plans
of European steel exporters, prevailed in the case.