Q&A: Calming the Waters: A Talk with the U.S. Trade Rep

Zoellick and the EU are set to announce a broad new accord

To most folks, trade ties between the U.S. and Europe look frayed these days. But to U.S. Trade Representative Robert B. Zoellick, all the transatlantic static is an opportunity. A brainy ex-Reagan Administration economic official, Zoellick is working hard to ease relations between the two trading blocs. On July 17, he and European Union Trade Commissioner Pascal Lamy will meet in Washington to narrow their differences on a new trade round. In a July 10 interview with BusinessWeek Washington Bureau Chief Lee Walczak, the top U.S. trade gun laid out his agenda.

Q: How much has the European Union's rejection of the General Electric-Honeywell International merger hurt relations between the two trade powers?

A: It's not surprising that, as economic integration deepens, you're going to have conflict. GE [and] Honeywell are now both European and American companies, and competition authorities on both sides of the Atlantic have to assess their merger. In this case, as in other cases, there will be disagreements. [The ruling] reflects a mistaken view of competition by the Europeans. But I don't believe it's driven by some anti-American motive.

Q: So everything's peachy between the U.S. and Europe on the trade front?

A: EU Trade Commissioner Pascal Lamy and I are working closely on the launch of a new WTO round in November, and in doing so are trying to reverse the stain of Seattle's failure. We are trying for resolution of [outstanding] trade cases. The relationship is never going to be without friction, but the question is: Can we resolve disputes and keep our eye on the larger objective?

Q: If we are such a close-knit bunch, why is the U.S. cool to EU Antitrust Chief Mario Monti's call to synchronize antitrust policy?

A: The EU has said that competition is one of the areas it would like to add to the new trade round. But it's a very modest agenda. We have been willing to discuss that but have questions about how dispute resolution would operate.

Q: But even on the new trade round you mentioned, there are differences. The Europeans want a broad agenda; the U.S. seeks more limited objectives...

A: This is one of the key questions we have to resolve. The U.S. favors a round that, in the old days, would have been considered extensive, including topics such as agriculture, industrial goods, services, improved transparency, subsidies that affect the environment, etc. But the EU and Japan want to add other items, including investment, competition--and one that they label environment but, in fact, covers everything from the role of science in risk assessment to health and other topics. If Europe and Japan are willing to negotiate seriously in agriculture, politically they need to broaden [the agenda] to deal with these other topics. We've been having discussions with the Europeans to see what they need politically.

Q: When the WTO ruled that U.S. foreign sales corporations were an illegal export subsidy, you called the outcome a "potential nuclear bomb." Can you defuse this threat?

A: I hope so. One of the reasons I made my point was to emphasize the risks of either side mishandling this issue. I cautioned the Europeans that raising questions about tax systems could lead us to roam far afield and runs risks for all parties.

Q: How are efforts to restore the President's fast-track trade-negotiating authority going?

A: There's a bill on the House side; a bipartisan bill on the Senate side. On the House side, it was sponsored almost totally by Republicans. We've been able to regain some momentum in international trade--launching the Free Trade Area of the Americas, getting China into the WTO, and moving forward on the global round. We now need to convince Congress that we need the negotiating authority that five prior Presidents were granted.

Q: The House GOP bill makes no concession to labor and environmental protections, a key demand of Democrats. So how can you get a deal?

A: Look, while there are many ways to try to support international environment and labor objectives, you have to be very careful to do so in a way that doesn't become a form of protectionism. Developing countries are worried that this is a new way to slow their growth, and they have a justifiable concern. Ralph Nader and his minions are not exactly out to open markets. Too many in the AFL-CIO leadership are still protectionists. What the Administration talks about is a toolbox to address labor and environmental issues without resorting to sanctions.

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