The United States and EU are parties to the largest two-way trade and investment relationship in the world. The EU is also the largest U.S. trading partner in services. They are nothing new nor unexpected given the huge volume of commercial interactions. In the middle of this decade, however, Washington and Brussels are still at loggerheads over a number of issues, ranging from bio-engineered food products and aircraft to the treatment of agriculture in the Doha Round of multilateral trade negotiations. Do the political disputes reflect differences between the two partners in terms of basic values and orientations? These include producers and workers, as well as consumer and environmental interest groups. U.S.-EU trade conflicts vary according to the nature of the demand for protection. Trade conflicts involving agriculture, aerospace, steel, and 'contingency protection' fit prominently in this grouping. These are examples of traditional trade conflicts, prompted by trade barriers such as tariffs, subsidies or industrial policy instruments, where the economic dimensions of the conflict predominate. During this period, the majority of U.S. Foreign Policy Conflict: Clashing State Interests

This category comprises conflicts where the United States or the European Union has initiated actions or measures to protect or promote their political and economic interests, often in the absence of significant private sector pressures. The underlying causes of these disputes are quite different foreign policy goals and priorities, if not interests. U.S. The four disputes summarized below are rooted in different regulatory approaches and public preferences. Beef Hormones

The dispute over the EU ban, implemented in 1989, on the production and importation of meat treated with growth-promoting hormones has been one of the most bitter and intractable trade disputes between the United States and Europe. Conflict Management

The three categories of trade conflicts—traditional, foreign policy, and regulatory—appear to offer different possibilities for conflict management. This is due not only to the fact that the causes and dimensions of these categories of conflicts differ, but also because the institutional relationships and forces that affect the supply of and demand for protection are operative in varying degrees from category to category. Bilateral and multilateral trade agreements can dampen the inclination of governments to supply protection and the private sector to demand protection by providing a fairly detailed "road map" of permissible actions and obligations. Regulatory Policy Conflict

U.S.-EU trade disputes have focused increasingly on differences in regulation, rather than traditional barriers such as tariffs or subsidies. Similarly, U.S.-EU trade conflicts may not be as ominous and threatening as they appear. Trade conflicts rather appear to have real, albeit limited, economic and political consequences for the bilateral relationship. Leadership Impact

Trade disputes may have discernible impacts on U.S.-EU efforts to provide leadership of the world economy.
The United States and the European Union (EU) share a huge, dynamic, and mutually beneficial economic partnership. Not only is the U.S.-EU trade and investment relationship the largest in the world, but it is also arguably the most important. Agreement between the two partners in the past has been critical to making the world trading system more open and efficient.
Given the high level of U.S.-EU commercial interactions, trade tensions and disputes are not unexpected. In the past, U.S.-EU trade relations have witnessed periodic episodes of rising trade tensions and conflicts, only to be followed by successful efforts at dispute settlement. This ebb and flow of trade tensions occurred again in 2006 with high-profile disputes involving the Doha Round of multilateral trade negotiations and production subsidies for the commercial aircraft sector.
Major U.S.-EU trade disputes have varied causes. Some disputes stem from demands from producer interests for support or protection. Trade conflicts involving agriculture, aerospace, steel, and 'contingency protection' fit prominently into this grouping. These conflicts tend to be prompted by traditional trade barriers such as subsidies, tariffs, or industrial policy instruments, where the economic dimensions of the conflict predominate. Other conflicts arise when the U.S. or the EU initiate actions or measures to protect or promote their political and economic interests, often in the absence of significant private sector pressures. The underlying cause of these disputes over such issues as sanctions, unilateral trade actions, and preferential trade agreements are different foreign policy goals and priorities of Brussels and Washington. Still other conflicts stem from an array of domestic regulatory policies that reflect differing social and environmental values and objectives. Conflicts over hormone-treated beef, bio-engineered food products, protection of the audio-visual sector, and aircraft hushkits, for example, are rooted in different U.S.-EU regulatory approaches, as well as social preferences.
These three categories of trade conflicts—traditional, foreign policy, and regulatory—possess varied potential for future trade conflict. This is due mostly to the fact that bilateral and multilateral agreements governing the settlement of disputes affect each category of disputes differently. By providing a fairly detailed map of permissible actions and obligations, trade agreements can dampen the inclination of governments to supply protection and private sector parties to demand protection.
In sum, U.S.-EU bilateral trade conflicts do not appear to be as ominous and threatening as the media often portray, but they are not ephemeral distractions either. Rather they appear to have real, albeit limited, economic and political consequences for the bilateral relationship. From an economic perspective, the disputes may also be weakening efforts of the two partners to provide strong leadership to the global trading system.