EC 1992 and US business - European Community - statement by Assistant Secretary for Economic and Business Affairs Eugene J. McAllister - Transcript

US Department of State Dispatch, June 15, 1992

Statement before the Subcommittees on International Economic Policy and Trade and on Europe and the Middle East of the House Foreign Affairs Committee, Washington, DC, June 9, 1992

I am pleased to have the opportunity to continue the discussions about EC [European Community] 1992 begun by these subcommittees in 1989. I would like to offer three general points:

1. As a whole, EC 1992 is good for US business. In general, the directives have not discriminated against US business and have contributed to a more efficient European market. The Community has approached the effort in a manner designed to increase trade and investment flows with the rest of the world.

Let me qualify this observation by noting that the 1992 process is not yet complete: There are important directives yet to be approved in areas such as data privacy. In addition, the EC has taken actions in particular areas that we believe are discriminatory. The US Government is concentrating our efforts to ensure that these EC actions are reversed.

2. The EC does not appear to be using the 1992 process to pursue unearned strategic advantages through discrimination. The United States was concerned about the potential abuse of trade measures by the EC to distort US business decisions. In its 1989 report, the Subcommittee on International Economic Policy and Trade pointed out an example of such a potential abuse of the rule of origin for semiconductors to force investment in Europe. We have not seen further examples of potential uses of such a strategy.

3. [The EC] 1992 [process] is generally open because the EC is approaching the endeavor with the intent of creating economic opportunities within Europe; they recognize the importance of an open European economy in creating these opportunities. [It] is open also because the US Government has been aggressive in protecting our interests and has adopted a broad strategy for influencing 1992 and other critical EC trade decisions. For instance:

* We are using Uruguay Round [of the General Agreement on Tariffs and Trade - GATT] negotiations to address directly EC 1992 related problems such as standards, sanitary and phytosanitary requirements, quotas on films and broadcasting, government procurement, and rules of origin.

* At a time when 25% of the US embassies and many consulates in Western Europe have experienced cutbacks in staffing, the US Mission to the EC has received a 35% increase in professional staff, with seven agencies now represented (State, Commerce, Agriculture, USTR [US Trade Representative], Treasury, Customs, and USIA [US Information Agency]).

1992: Generally Open

A good place to start in considering the effects of [EC] 1992 is what has actually occurred since the 1992 process began:

* US exports to the EC have nearly doubled since 1986, when plans for the single market were initiated.

* The United States moved from a $22.5-billion trade deficit with the EC in 1986 to a $16.7-billion surplus last year.

Our trade performance with key countries in the EC was equally impressive over the same period: Our exports to Germany doubled from $10.6 billion to $21.3 billion while our bilateral trade deficit shrank by two-thirds. US exports to the UK rose 94%, and we moved from a $4-billion bilateral deficit to a $3.6-billion surplus with the UK. US shipments to France increased 114% (from $7.2 billion to $15.4 billion), and our bilateral balance shifted from a deficit of $2.9 billion to a $2-billion surplus.

* US export performance to the EC was strong across a broad range of sectors, with noteworthy growth in shipments to the EC being in categories, including general transportation equipment, telecommunications equipment, electrical machinery, and road vehicles.

In the high-technology area, our exports to the EC of semiconductors inereased by 165% between 1986 and 1991. Exports of computers to the EC increased by 79% during the period.

We feel fairly confident making general observations about the trend of [EC] 1992 based on two considerations.

* 233 of the 275 necessary directives have been adopted by the Council and are thus final. (I must note that the member countries have varied in how rapidly they are making the necessary statutory changes in national legislation.)

* To date, the EC has adopted 11 of the 21 "new approach" directives on standards, which set general guidelines and leave the development of specific standards to standard-setting bodies.

In particular, the United States has been very pleased with the outcome on several critical directives.

Computer Software. The EC's software directive will provide new copyright protection for computer software programs, directly benefiting the US software industry by cutting the costs incurred from unprosecutable pirating. Industry estimates that US companies suffered over $1 billion in lost sales due to software piracy in EC member states in 1991. The largest loss was in Germany. We have reviewed the draft amendment to the German copyright law, which would implement the provisions of the EC directive, and it appears to resolve points of concern we had in the past.