Introduction
Trade between the Unites States and member countries of the European Union constitutes a greater percentage of international and global trades. Both actors are major players in the international scene. EU is the major and largest trade partners of the United States. It is estimated that the volume of trade between the US and EU in 2012 amounted to 800 billion Euros (Baetz, 2013).
International trade has continued to grow with the liberalization of economies from the Eastern European bloc; which hitherto practiced core communist trade system with high intervention on means of production and trade by government. For international trade neo liberalists’ proponents have always argued for a free market and have backed globalization where they want every country to partake in this culture and open up their economies. Change in government and politics have gone a long way in affecting how international trade is being conducted. Hence, with more of Eastern European countries adopting free trade the volume of United States and European Union trade is increasing in volume.
Comparative Advantage of US trade with EU
Engaging in international trade has given many countries the gain of comparative advantage Thus, through the exporting of domestically produced goods and services they have the ability, skill, material and capability to supply these goods cheaper and at low cost. Thus, free trade promotes low cost production of goods.
David Ricardo’s law of comparative advantage purported in 1816 compares advantages which countries derive from production and selling at the international market to those of other countries. The theory says countries with more advantages in the production of particular goods should continue with the production of such goods. Ricardo’s law as applicable to US trade has shows that the comparative advantage of the United States in the long run do not result in lost in job in the United States but new market tend to attain the lost of job status at the long run, because they just emerging into the market. So Samuelson sees Ricardo’s view as not applicable, giving the US economy, in this instance. The comparative advantage of U.S. international trade, in regards to its manpower training is one that is based on its long term experience. And this has madder its personnel training one that is very competitive in the global arena. The advantage United States has in the international trade is tied to many years of investment in fashioning ways for favorable competition in producing valuable services and goods overtime and with the accumulation of experience. This has made state’s institutions and machineries of production know how to effectively operate technical assistance program at relatively low cost” (U.S. Federal Trade Commission, 2006). The view of Paul Samuelson, is base on the post Keynesian theory that is “focused on history and institutions, and argued that a free market economic progress was fundamentally unstable, production rather than exchange was the base of analysis and disequilibrium and change overtime rather than equilibrium and stability were essential” (Chilcote, 2000). Thus, this view on historical perspective and institutional setup further buttress the fact that U.S. comparative advantage in its manpower level of competence is based on its long time wealth of experience and the institutional framework on ground overtime. The effectively management of a competitive assistance program is, according to the U.S. Federal Trade Commission, expressed in three reasons: first, a body of continues interactions with other foreign players at the international scene has boosted the state’s experience and expertise. Also, management structure of foreign trade activities for state’s actors is seen to have been steady in due course, so that administration of programs and interagency co-ordination is optional. Third, high quality control has been achieved through ongoing routine review of program activities (U.S. Federal trade Commission, 2006). In other words, the United States is gaining comparative advantages because of the strong institutional structures it has built and consolidated over the years.
US and EU Trade of Supremacy
The battle for supremacy over international trade is causing a war between the major actors of international trade (US and EU). These two actors are taking different stands in issue regarding variables associated with international trade; such as growth, trade, mergers and acquisitions, among others. The battle for supremacy in the international trade between US and EU is not a confliction one that brings about antagonism, but one that the individual actors seek to gain greater market share and influence over the market. The gap between US and the EU has increased in these aforementioned areas. The EU through many of its numerous multinational companies having gained space and market share, but are not yet a match to US influence in this regard. “Despite the increase in numbers and size, EU companies have lagged behind the US”(Rodriguez-Pose, 2001, pg 33). There is a reduction in labour productivity level for EU relative to what obtains in US. “The estimate of GDP ascribed to a worker per hour has a gap that range from EU levels 87% and 92% of US for 2002. This gap is further broadened in the subsequent year” (O’Mahony & Ark 2003, p. 5). The GDP indices for the year in review show that workers in US have greater contribution to national economic growth than their EU counterparts. “Economic integrations of member states of EU have formed a basis for rapid adaptation by the EU to future challenges pertaining new economic order. However in terms of trade growth rate the EU has a higher growth rate than US. “On average, the EU has had slightly greater growth than the US and lower than Japan during the post-war decades” (Rodriguez-Pose, 2001, pg 38). The challenge before the US in contemporary and 21st century is how to maintain a steady relationship and register its influence over rivals in the international trade. According to Kupchan & Myers (2003), “the challenge facing America in its foreign policy is the management of relations among contending centers of power and the consequent rivalries which will ensue". This means that interval rivalries among federating states has posed a challenge to US foreign policy which goes on to affect its foreign trade.
The strengths of EU member states have made it dominate certain aspect of international trade and have performed very well than the US. For instance, in the traditional manufacturing and industries process for innovation arising from Research& Development has made EU outperformed the US in all periods (1990s and the early 2000s) except in specialized suppliers manufacturing (O’Mahony & Ark 2003, pg 8). This relative strength in the manufacturing process and innovation of EU is linked to the advantage inherent in its higher intermediate skills labor.
As highlighted in the introductory part of this write-up, the Euro is gaining more ground as currency for international trade. The weakening state of the US dollar has made some country to adopt Euro as their means for transactions. “The Euro has replaced the dollar as the main currency in Central Europe. EU-Russia trade is now denominated in Euros, not dollars. Go to Moscow today and look at the price tags. They're not in rubles or dollars any more, they're in Euros” (Kupchan & Myers 2003). This shows that Euro is gaining more ground in the international trade and market; hence, this is a favourable sign for the bloc.
EU Checkmating US at the International Trade Arena
EU as a rival to US did not just emerge as a snapshot; it was a deliberate process of integration and amalgamation. The European Union, many have argued, is not a real federal state, but conglomerates of countries with the same interest. But the structure of the EU institutions and mechanism for production and international trade are in tune with features of modern state. The 26-nation bloc has now ascribed to itself “a supranational political prominence”, in which case the members in their individuality are coordinated and institutional framework operated as a wholesome system (Ruggie 1998, cited in Fabbrini 2004).
The EU has acquired to itself the attributes of modern state, in the sense that policymaking cuts across a wider range of policy sectors. Thus, such institutions such as the Commission, the European parliament (EP), the European Council of Ministers, and the body’s Court of Justice are mechanisms for formulating and implementing policies for the supranational or federated EU. Richardson (1996) argues that “though state-like in at least key attribute, the EU is, of course a complex and has distinctive system for policy making.” The bloc’s membership federating structure which permits freedom of decisions and member-states, this has encouraged several levels of policy making for the bloc. Similarly, Fabbrini (2004), position is that “the EU has the features of a multi-level system of governance-that is, a system territorially organized around a plurality of centres of authority. Although the distribution of resources and powers among them continues to be uncertain, each can mobilize veto positions in order to preserve or to promote their own interests and views”. Thus, it is seen that the EU maintains a horizontal intergovernmental relations among member states. It is more decentralized in its federalist structure than what is obtainable in the US structure. Hence, the central government of the EU federation is not so powerful, since each member state has a right to walk away from the union, or oppose any issue it considers baseless and inadequate for their continuity. This supranational status of the EU is not a complete federalist status, but a combination of federalism and confederation attributes in its structuring. Thus, there is a complex system of interlocking governmental bodies.
The EU federalism system operates a decision making network that is informal, and hence needs the support of member states to enforce its policy formulation and implementation. To this end, Fabbrini (2004) state that “the EU context it has to be interpreted as patterns of decision-making based on informal networks of public and private actors and aimed at generating decisions through extensive consultation, diffusion of information, contingent integration of individuals and groups, promoters of specific knowledge, and a horizontal circulation of influence”. The confederal elements present in EU supranational structure, represented by the intergovernmental conferences of the European Council of heads of state and governments of the various member states, while the federal elements are those institution it possess like the Commission, the Court of Justice, the European Parliament, and the European Central Bank (Ibid). These institutional structures, which operate in the confederating EU block, may not be as strong as those that support US trades at the international scene, but they have aided EU in shaping the course of members activities at the international scene, and strive to bring more benefits to members of the bloc.
The strength of the integrated nations forming EU is a threat to the power status of the US in international trade. This has lead to EU increasingly challenging the powers of US in international trade by saying US need to move over or make way, whereas US is adamant in paving way for EU (Kupchan & Myers, 2003).
Conclusion
While the international trade between US and the EU has continued to grow in past years, it is paramount to state that recently, this has been threatened as the revelation of US espionage on its European allies continue to spread. There are revelations that the United States’ CIA has been secretly spying and tapping on the mobile phones of some European leaders like German Chancellor Angel Merkel among others. This new twist is bound to affect the cordial trade relationship that the two global giants have enjoyed over the years if not properly handled and addressed. The EU’s 28-member countries have the option of putting to an end or suspending the trade agreement between American companies and subsequently levying them with fines.
References
Baetz, Juergen. (2013). “EU Spying Backlash Threatens Billions in US Trade” in the Associated Press.
Chilcote Ronald H (2000) Theories of Comparative Political Economy. Boulder , CO : Westview Press. p.6.
Fabbrini, Sergio (2004), “Is the EU exceptional? The EU and the US in Comparative Perspective” in Fabbrini Sergio (ed.) Democracy and Federalism in the European Union and the United States: Exploring Post-national Governance New York; Routledge Pp.1-17
Kupchan, Charles & Myers, Joanne J. (2003), “The End of the American Era: U.S. Foreign Policy and the Geopolitics of the Twenty-first Century” Carnegie Council Podcast http://www.cceia.org/resources/transcripts/876.html (04/04/08)
O’Mahony & Ark (2003). “EU Productivity and Competitiveness: An Industry Perspective. Can Europe Resume the Catching-up Process?” http://www.ggdc.net/pub/EU_productivity_and_competitiveness_exec.pdf. (04/04/08)
Rodriguez-Pose, Andres (2001) “The European Union: Economy, Society, and Polity” http://patrick.toche.free.fr/teaching/MORE/ECMC373/RodriguezPose_01.pdf. (04/04/08)
U.S. Federal trade Commission (2006) “The united States Experience in Competition Law Technical Assistance: A Ten Year Perspective. U.S. Department of Justice, Antitrust Division http://www.oecd.org/dataoecd/37/61/1833990.pdf (12/06/06)
