Spring 2004 Volume 5 - Number 2

European Perspectives
Leader in Focus
Transatlantic Relations
Cover Story
Special Report
Finance
Opinion
Trade
Homeland Security
Book Reviews

Letter from the Publisher: Bewildering New World

European Perspectives

London's Atlantic Bridge Is Falling Down
Peter Riddell, Chief Political Commentator, The Times of London

Anger over Outsourcing Is Less Strong in Europe
Tim King, Business Journalist, Brussels

Italians Are Unusually Gloomy Over their Role in Europe
Reginald Dale, Editor-in-Chief, European Affairs

Leader in Focus

Three Challenges for Europe ­ Enlargement, Growth and Fiscal Discipline
Jean-Claude Trichet, President, European Central Bank
Five years after its introduction, the euro has proved a success. Europe, however, now faces three key challenges: integrating the ten new member countries into the single market and the single currency, achieving higher growth and employment by means of structural reforms and implementing an original form of fiscal surveillance in the euro area. The EU Stability and Growth Pact should be maintained. It could be operated more effectively, without any need to change its wording.

Transatlantic Relations

Europe Must Exercise Both Soft and Hard Power
Bernard Bot, Minister of Foreign Affairs, The Netherlands
EU leaders agree that the United States and Europe must maintain a united front against the challenges of the 21st century and that the EU must play a greater role in assuring international security. This means that Europe must acquire more "hard" power by developing its capacity for military intervention, while the United States should give more credit to the diplomatic and economic weapons of "soft" power. The Netherlands will use its six-month presidency of the European Union to work on a broad agenda for Transatlantic cooperation.

Cover Story:
EU-China Relations

EU's Links with China Pose New Threat to Transatlantic Relations
Frank Umbach, Resident Fellow, Asia-Pacific Program, German Council on Foreign Relations
As the EU strives to play a greater role in world affairs, it is seeking to develop a strategic relationship with China, independently from its links with the United States. The most immediately controversial issue is a French-backed proposal to drop the EU embargo on arms sales to China, imposed after the Tiananmen massacre in 1989, which is hotly opposed by Washington. It is high time that the U.S. and the EU sought to agree a common approach to China, given that the EU is about to become China's largest trading partner and its strategic interest in Asia will continue to grow.

Special Report:
The Enlarged European Union


Europe's Constitution Is Welcome, but Very Different from its U.S. Counterpart
Stephen G. Breyer, United States Supreme Court Justice
The proposed European Constitution addresses many of the same concerns about government that worry Americans. But it is very different from the U.S. Constitution. It is not easy to summarize its basic principles, to interpret how much power it will transfer to the EU central institutions or to predict whether it will make the Union more democratic. It leaves major issues to be interpreted by the new, enlarged European Court of Justice, which is still a largely unknown factor. Nevertheless, its aim of uniting Europe in peace can only be welcomed.

After its "Big Bang" Expansion, the EU Will Grow More Slowly
Oana Lungescu, European Regional Correspondent, BBC World Service
After its "Big Bang" enlargement, in which it admitted ten new members simultaneously in May, 2004, the European Union is in no mood to repeat the experience. It has not abandoned plans for further enlargement ­ far from it ­ but new members will join piecemeal, as and when they are ready. Bulgaria and Romania are next in line, followed by Croatia. But Turkey's bid for membership is creating big problems.

New Members Should Help Spur Economic and Political Reforms
Philippe de Buck, Secretary General, UNICE
Fears that the new EU member states in Central and Eastern Europe will flood the EU with migrants and steal jobs from Western Europe are largely misplaced. Economic growth and demographic changes should create enough jobs for all Europeans if companies can operate in a competitive regulatory framework. Enlargement should encourage the EU to rethink how its markets are organized and to adopt political and economic reforms to improve European competitiveness.

Finance

Governments Must Do a Better Job of Promoting Globalization
Jean-Philippe Cotis, Chief Economist, Organization for Economic Cooperation and Development
The world recovery is well under way, but Western continental Europe, particularly Germany, is still lagging behind, largely because of failure to implement badly needed, but politically difficult reforms. Most governments, especially in Europe, have failed to educate public opinion about the benefits and opportunities of globalization. They need to do so, and to put the right policies in place to take advantage of the opportunities.

Correcting the U.S. Current Account Deficit Need Not Be Painful
Roger W. Ferguson, Jr., Vice Chairman, Federal Reserve System
The United States is running a current account deficit equal to about five percent of gross domestic product. Because of its size and persistence, as well as recent declines in the dollar, the deficit is receiving a huge amount of attention, and there are frequent forecasts of a "disorderly correction," involving a sharp fall in the dollar with disruptive effects on financial markets. But there is little evidence for such a scenario, and U.S. current account adjustment could, in fact, be associated with quite favorable scenarios for the global economy.

Europe Should Protect Itself from U.S. Interest Rate Contagion
Gerd Häusler, Counsellor and Director, International Capital Markets Department, International Monetary Fund
There is a growing correlation between interest rates on either side of the Atlantic, as financial markets increasingly draw on a global pool of capital. Rates in Europe and elsewhere are being driven by those set in the United States, which are not necessarily appropriate for countries with different growth potentials. Europe can, and should, protect itself from such "contagion" by developing a highly efficient capital market of its own, similar to that of the United States.

Opinion

Without Reform, the Euro Zone Could Fall Apart
Brendan Brown, Economist, London
When they decided to adopt an economic monetary union and a single currency, in the early 1990s, EU governments presented the move as irreversible ­ for political reasons. They wanted to bind a newly united Germany permanently into an integrated Europe. But there are actually several practical steps member countries could take to leave the euro zone, and, if the rules governing the euro are not reformed, some or even all of them may be tempted to do so.

Trade

The WTO Must Open Up its Trade Dispute Proceedings
James Bacchus, Former Member and Chairman, Appellate Body, WTO
No important international institution is more misunderstood than the WTO, particularly with regard to its trade dispute settlement procedures. If WTO proceedings were opened up to wider public observation, many of the false accusations leveled at the Organization by anti-globalists and protectionists would be defused. Greater transparency would help to build broader international support for open trade, leading to more democratic and prosperous societies around the world.

Homeland Security

The U.S. and the EU Are Working to Protect Global Trade from Terrorism
Robert C. Bonner, Commissioner, U.S. Customs Service
The U.S. and the EU are working to counter terrorist threats to the global economy by increasing the security of international container traffic, the life blood of world trade. An agreement recently signed by the U.S. and the EU in Washington will help to extend the U.S. Container Security Initiative throughout Europe and develop new techniques for reducing the vulnerabilities of the global trading system. In the end, trade should become not only more safe, but also more efficient.

Tighter Security Must Not Slow Down World Trade
Robert Verrue, Director General for Taxation and Customs Union, European Commission
As they seek to increase the security of international trade, the EU and the U.S. must be careful to strike a balance between introducing tighter controls and placing unnecessary obstacles on legitimate trade. The EU is working to ensure that trade continues to flow smoothly, and that it is not distorted by different security procedures at different points of entry into the enlarged, 25-nation EU. It is also essential to keep the EU internal market functioning freely.

Book Reviews

Two Pleas for Greater Transatlantic Understanding
Alliance at Risk: The United States and Europe since September 11 by Laurent Cohen-Tanugi

Friendly Fire: The Near-Death of the Transatlantic Alliance by Elizabeth Pond
Reviewed by Louis Golino

How Europe Produced a Less than Historic Constitution
The Accidental Constitution: The Story of the European Convention by Peter Norman
Reviewed by Andrew Moravcsik

For Further Reading