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Highlights of the remarks by Sven C. Oehme, President & CEO, European-American
Business Organization, Inc. as keynote speaker at the 10th Annual
Averell Harriman
International Trade Awards Dinner in New Windsor, NY, on May 3, 2005.
US-EU Economic
Relations:
The Engine of the World Economy
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The United States and the European Union (EU)
are the two leading economies in today’s world. In 2004, the US, the Euro area
(12 countries in the EU that use the Euro as their currency) and the UK produced
39.3% of world GDP. In terms of exports, the US, the Euro area and the UK
generated 46.2% of all exports. Germany and the US are the leading exporters
whereby the US, in 2004, held a share of 10.4% with Germany close behind with a
share of 9.5%.
Just as a comparison, in 2004, China generated
13.2% of world GDP and 5.9% of the world’s exports. However, it must be taken
into consideration that China’s share of the world’s population is 20.7%
compared with the US, the Euro area and the UK combined share of approximately
10%.
The EU is currently made up of 25 member states.
10 of them, primarily countries that became independent when the Iron Curtain
came down at the end of 1989, joined the EU on May 1 of 2004. Romania and
Bulgaria will become members of the European Union in 2007. The EU will start
accession negotiations with Turkey on October 3 of this year. The expectation is
that it may take up to 10 years before Turkey joins. This is due to the fact
that Turkey is a country of almost 80 million people and will require very
substantial subsidies from the EU to eventually bring it up to par with the
other EU countries.
The current 25 countries of the EU cover an area
that is about 40 % of the US territory. However, the population of the EU 25 is
about 460 million, compared to the almost 300 million in the US. In 2003, the
GDP of the EU 25 and the US was very similar at roughly $11 billion. The
deviation, however, is clearly more evident in the GDP per capita recorded in
2003 for the US at $37,756 compared to $24,027 for the EU 25.
Canada and the EU are the largest trading
partners of the US. In 2004, the US had a trade deficit with Canada of $67
billion, $110 billion with Europe and $162 billion with China. The major export
destinations of the US in 2004 were Canada, followed by Mexico, Japan, the UK
and China, respectively. The principle imports of the US in 2004 came from
Canada, China, Mexico, Japan and Germany.
For those who are engaged in international
trade, the current exchange rates are of importance. The Euro has increased its
value from 2001 to 2005 rather significantly. On May 3 of 2001 1 Euro bought 88
cents. On May 3 of 2005 1 Euro was worth USD$1.28. For an exporter, this means
that revenues in Europe are generating about 40 cents additionally on each Euro.
Clearly, this is a substantial increase in the income from any sales to the Euro
area markets.
New York State and the EU are also important trading partners, as the Empire
State is the second largest exporter to the EU of the 50 US states. In 2003, New
York State companies exported more than $11 billion in goods and services. New
York State was ranked third among the US states as a recipient of EU investments
in 2002 and the EU is the number 1 investor in New York State, supporting
260,000 jobs. The most important product category of exports to Europe from New
York State is computer and electronic products. Miscellaneous manufactured
commodities, then chemicals, transportation equipment and machinery, except
electrical machinery, follow.
Many products sold in Europe require a CE mark.
The CE stands for conformite
europeanne, which means European
conformity. For many products a self-certification is sufficient. To obtain the
CE mark, however, the producer must ensure that the product meets certain
criteria laid out in EU directive(s). If the product meets the provisions of the
applicable EU directive(s), then the CE marking may be affixed to the product.
The CE marking is frequently referred to as the EU passport for products,
whereby authorities in specific EU and Euro zone countries cannot reject
the product. For a number of products the certification process must be
completed by a notified body, which will review the product and its compliance
with the applicable EU directive(s). Proof of meeting the provisions of such EU
directives must be presented at an address within the territory of the European
Union. Usually this is done at the site of the subsidiary, or at the office of
the importer.
The EU will encounter various challenges over
the next few months and years. Most prominent and current is the ratification of
the EU constitution for which referenda are scheduled throughout Europe. The
next ones this year are scheduled to take place at the end of May and the
beginning of June; first in France followed by the Netherlands. EU enlargement,
which includes the integration of the newly ascended countries that joined the
Union as of May 1 of last year, as well as continued negotiations with
additional candidate countries that are predicted to apply to join the EU, will
continue to be major issues in Europe. The EU will also have to revive the
Lisbon Agenda, which emphasizes the goals of reforming the economy to generate
continuous growth and securing a sufficient job base and competitiveness during
a 10-year period, which began in 2000. In the past, these ambitious goals have
not been met, making the next five years crucial. Finally, Europe will also
face a significant increase in immigration from those countries to the East of
the European Union.
A number of trade issues exist between the EU and the US. Subsidies for the two
leading aircraft manufacturers in the world, Boeing and Airbus, are an extremely
hot issue. Talks to resolve the issue are currently underway. But in case
there is no resolution this issue will have to be reviewed by the WTO. A
possible open skies agreement between the EU and the US is another area of
contention. It would open up the US and EU markets for airlines based there.
Under such an agreement, Europeans will propose changes to current US law to
allow them to own more than 25 % of a US carrier. Data protection, agricultural
subsidies, the issue of American hormone-fed beef exports and genetically
modified foods are also hot topics in the current trade environment. A major
issue for the immediate future is the completion of the Doha Round of trade
talks, in which the primary point of contention revolves around the developing
world’s demands that the US and EU agree to faster liberalization of
agricultural trade.
What does this mean for you? Small and
medium-sized American companies should seize the moment and introduce their
goods to Europe. The current exchange rate and the competitiveness of a large
number of American products have paved the way to create increasingly favorable
market conditions. Now is the time to export products and services to Europe
as it is anticipated that the EU economies will pick up starting later this year
and continue into next year, resulting in an interest from Europeans to buy more
products. Finally, it is important to consider that US companies exporting to
Europe are currently able to generate a greater return in dollars than was
possible 5 years ago; 40 cents per Euro more. Not a bad deal!
The current environment in US-EU economic and
trade relations is increasingly favorable for US companies exporting to the EU,
as the partnership continues to thrive as the engine of the world economy.
Despite the various trade issues that are currently being negotiated, the
enlargement of the EU, as well as the Euro are presenting further opportunities
for an even stronger and more beneficial trading partnership between the US and
the EU. Ultimately, the benefits far outweigh the disadvantages, as it must be
recognized that the time to export to the EU is now.
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The
European-American Business Organization, Inc.