	Introduction

The United States and Europe share a long and intertwined history. NATO, which was created in 1949, and the European Union (EU), the latest stage in a process ofEuropean integration begun officially in 1952, are the two main pillars upon which the transatlanticrelationship still rests. The U.S. Congress and successive U.S. Administrations have strongly supported both NATOand the EU, believing that both organizations have helped foster democracy, reliable military allies,and strong trading partners. The UnitedStates and the EU share the largest trade and investment relationship in the world. Annual two-wayflows of goods, services, and foreign direct investment exceed $1.1 trillion. The total stock oftwo-way direct investment is estimated to be over $1.6 trillion, making this huge investment positionperhaps the most significant aspect of the relationship. (2) 
Despite the shared history and close economic ties, the transatlantic partnership has beenfundamentally challenged in recent years. The crisis over Iraq is most notable,but the list of disagreements is wide and varied. Otherssuggest that U.S. actions in the prosecution of the war on terrorism and in Iraq have prompted someto question whether the two sides of the Atlantic still share enough values and interests to make thetransatlantic partnership work. This report assesses the present state of the U.S.-Europeanrelationship and reasons for current frictions, and provides, for the purpose of analysis, a spectrumof options for U.S. policymakers in considering the future shape of the political and strategicdimensions of the transatlantic partnership. Even without the Soviet threat to unite the two sides of the Atlantic, the United States andits European allies face a common set of challenges -- from countering terrorism and WMDproliferation to ensuring the stability of the global financial markets -- and have few othercomparable partners. (5) 

		U.S.-European Frictions and a Relationship in Flux

Despite the ties that bind, the events of September 11 and the crisis over Iraq have helpedspark significant changes in the U.S.-European political and strategic relationship. and European leaders. Suchstructural changes include different policy preferences, the U.S.-European defense capabilities gap,and Europe's ongoing but unfinished integration. Leadership Issues. Some observers note that diverging U.S.-European threat perceptions are not new,and have been emerging since the end of the Cold War. A current and key distinction between the two sides of the Atlantic relates to the role ofmultilateral institutions and the use of force. Such forums may provide usefulopportunities for enhancing transatlantic dialogue on where the U.S.-European relationship stands,in what ways U.S.-European interests coincide or diverge, and what direction should be pursued inthe future in order to continue to promote security and prosperity on both sides of the Atlantic.
The United States and Europe share a long and intertwined history, replete with many upsand downs. The modern transatlantic relationship was forged in the aftermath of World War II todeter the Soviet threat and to promote security and stability in Europe. NATO and the EuropeanUnion (EU), the latest stage in a process of European integration begun in the 1950s, are the two keypillars upon which the U.S.-European partnership still rests. The U.S. Congress and successive U.S.administrations have supported both organizations as means to nourish democracy, foster reliablemilitary allies, and create strong trading partners.
Despite the changed European security environment since the end of the Cold War andcurrent transatlantic frictions, many observers stress that the security and prosperity of the UnitedStates and Europe remain inextricably linked. Both sides of the Atlantic continue to face a commonset of challenges -- from countering terrorism and weapons proliferation to ensuring the stability ofthe global financial markets -- and have few other comparable partners. The United States and theEU also share the largest trade and investment relationship in the world; annual two-way flows ofgoods, services, and foreign direct investment exceed $1.1 trillion, while the total stock of two-waydirect investment is over $1.6 trillion.
Nevertheless, the transatlantic partnership has been fundamentally challenged in recent yearsas numerous trade and foreign policy conflicts have emerged. The crisis over Iraq is most notable,but the list of disagreements is wide and varied. It includes the Israeli-Palestinian conflict, the EUarms embargo on China, the role of multilateral institutions and the use of force, the U.S. treatmentof prisoners in Iraq and at GuantÃ¡namo Bay, aircraft subsidies, and trade in genetically-modifiedfood. These disputes have been driven partly by leadership frictions and European perceptions ofU.S. unilateralism, and partly by structural issues -- different policy preferences for managing threats,the U.S.-European defense capabilities gap, and the EU's political evolution -- set in motion by theend of the Cold War and September 11. These factors are also prompting some Americans andEuropeans to question whether the two sides of the Atlantic still share the same values and interests,and whether enough commonality remains to make the partnership work.
This report assesses the present state of the U.S.-European relationship and the reasons forcurrent frictions. To stimulate debate and for the purposes of analysis, it also offers a spectrum ofpossible options for U.S. policymakers in considering the future shape of the political and strategicdimensions of the transatlantic partnership. These selected options should be viewed as illustrativeguideposts, however, rather than definitive, exhaustive predictions or stark choices. This report willbe updated as needed. For additional information, see CRS Report RL32342 , NATO and theEuropean Union , by [author name scrubbed] and [author name scrubbed]; CRS Report RS21372 , The European Union:Questions and Answers , by [author name scrubbed]; CRS Report RS21864 , The NATO Summit at Istanbul,2004 , by [author name scrubbed]; and CRS Issue Brief IB10087, U.S.-European Union Trade Relations: Issuesand Policy Challenges , by Raymond Ahearn.