US and EU Hold Summit

(December 19, 2000) The U.S. and European Union held a summit in Washington DC on Monday, December 18, but made little progress in talks to avert a potential trade conflict that could harm U.S. high tech companies.

U.S. President Bill Clinton, French President Jacques Chirac, and EU President Romano Prodi participated. Also involved were USTR Charlene Barshefsky, EU Trade Commissioner Pascal Lamy, and EU External Relations Commissioner Chris Patten.

Talks covered a wide range of issues, including infectious diseases, Airbus, NATO, the Balkans, and relations with Russia and the Ukraine. However, the talks also addressed several ongoing trade disputes between the U.S. and EU that could ultimately impact U.S. high tech companies.

The U.S. objects to EU agricultural policies regarding beef and bananas. The EU objects to the U.S. tax regime, now embodied in the Foreign Sales Corporation (FSC) replacement act, which subsidizes U.S. exporters.

High tech exporters, such as Microsoft, Cisco, and Motorola, all benefit from the FSC tax regime. Moreover, the EU has indicated that if trade differences are not resolved, and if the EU resorts to retaliatory tariffs, then U.S. high tech companies would be targeted. This would harm U.S. technology companies.

Pascal Lamy EU Trade Commissioner

Little, if any, progress was made in this area. Pascal Lamy, the EU Commissioner for Trade, addressed the progress of talks on beef and bananas in an address late Monday at the American Enterprise Institute. On bananas, he stated that there is "not enough to settle the issue, but enough to make progress. There still remain a number of technical details." He added, "So, we are not there yet."

On beef, he said that "we are still apart, although not dramatically apart."

He also criticized the American position, that EU support for agriculture "is still blamed for everything." He described this as "peculiar" because the two entities spend the same amount in support of their farmers. He concluded that "this fact certainly does not fit the script over here."

Lamy declined to answer questions from reporters after the event.

Similarly, Clinton advisor Gene Sperling spoke at a press conference on Monday regarding progress at the summit on agricultural policy. "On the trade issues, there has been, as always, significant work and discussion on both beef and bananas. On bananas, there has been some closing of differences in the last several days. The issue was discussed between President Clinton and President Chirac, but there is no resolution at this point. However, the negotiators, people in charge -- Charlene Barshefsky and Pascal Lamy -- feel that there is reason enough to continue talking and negotiating not only in the coming days, but even in the coming hours. So that is that state."

Sperling continued: "On beef, again I think there has been some positive discussions in the last couple of weeks on trying to move from a system of sanctions to an agreement on access. This remains, obviously, a difficult issue. The EU is having their own problems in their own market with the BSE [bovine spongiform encephalopathy] and other issues there. Again, we feel that there is reason to continue talking and seeing what progress can be made during this administration." See, transcript of press conference.

The summit also produced a joint statement on e-commerce and e-commerce dispute resolution. It states that "We now reaffirm these important goals and objectives, including the agreement to provide 'active support for the development, preferably on a global basis, of self-regulatory codes of conduct and technologies to gain consumer confidence in electronic commerce.' We also reaffirm our commitment to the OECD Guidelines on Consumer Protection in the Context of Electronic Commerce issued in December 1999."

The statement also provided that "The expansion of electronic commerce will be essentially market-led and driven by private initiative." And, it encouraged the use of alternative dispute resolution mechanisms.