Transatlantic economic relations: continuity amid discord

Abstract

The European Union (EU) and the United States are the world's largest and most-interconnected economies. In the 1990s, they engaged in a series of joint initiatives designed further to liberalise the transatlantic marketplace through cooperation in trade and regulatory matters, including pursuant to the 1995 New Transatlantic Agenda. From 2000 to 2004, however, political tensions between the US and Europe intensified, as conflicts arose over the war in Iraq, the International Criminal Court, and the Kyoto Protocol, triggering fears that political turmoil could disrupt the mutually beneficial transatlantic economic relationship. Despite the political challenges, the transatlantic economic relationship has demonstrated extraordinary continuity and resilience amid the discord. The US/EU economic relationship has been subject to intensive disputes in areas such as steel, airplanes, and genetically modified foods, but there is little sign that the election of George W. Bush or the 2003 invasion of Iraq was responsible for these tensions, which arose primarily from pre-existing divergent domestic political pressures. This relative insulation of the economic relationship from the dispute over the Iraq war, however, does not imply that power politics is unimportant in the economic realm, and indeed we argue that outcomes in the economic realm are shaped significantly by differences in US and EU market and institutional power in different sectors.