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How the US should respond to `Europe in '92'

I RECENTLY received a publication from the European Community (EC) decrying a press report stating that ``it is time that we Americans finally declare our independence from Europe and our two-century-old fixation with western civilization. The fact is that the long era of Europe's dominance in culture and trade is now coming to an end.'' Such reports fuel the EC's worry that the United States' preoccupation with Asia will be to the detriment of Europe. I strongly believe that the US must greatly strengthen our exports to Asia, but in our rush to build upon our current ties with Asia, the US should not write off Europe.

It is important to remember that while our total trade with Asia has surpassed our trade with the EC, this country has had large and growing trade deficits with Asia since 1976. In the past few years we have also run trade deficits with the EC; historically, however, our trade with the EC has often been in significant surplus.

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We already have substantial markets in Europe. The US sold about one-quarter of its exports to the EC in 1987 (over $60 billion) - more than we sold to Canada and more than twice as much as to Japan. The EC also is the top purchaser of US farm products.

Moreover, we have the potential to restore our trade surplus position with the EC. We will always have a close cultural affinity with Europe and an important defense relationship.

The European Community is now developing ambitious plans to integrate the economies of its member states more fully. The deadline for removing all remaining internal barriers to trade and investment is 1992. EC integration holds the promise of creating a large market comprising roughly 320 million people, a market that could bring many new economic opportunities not only for Europeans, but for Americans as well.

An integrated EC could well bring new jobs and more wealth to the Continent. This increased purchasing power could result in more sales by US exporters, and thus more jobs for Americans, too.

America will benefit only, however, if the EC does not abandon its current commitments on access to its markets for US exporters and if the Community continues to work for further expansion of world trade as well as of intra-European trade.

The EC leaders have continually repeated their strong support for the ``maintenance of a one-world trading system.'' Still, there is good reason that Americans should actively work to ensure that the ``EC-in-1992'' effort does not deteriorate into a new form of protectionism, ``Fortress Europe.''

The problem is that customs unions like the EC tend toward isolationism by their members. In a customs union, not only do countries eliminate trade barriers among themselves, they also adopt a common set of trade restrictions against non-member countries. This fact generates concern here in the US and in other countries about the further integration of the EC.

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Why? First, because the retention of trade barriers against non-member countries is fundamental to customs union. Second, because trade with countries outside the customs union could become less important to members of the union as their trade with each other grows. Third, the time-consuming, complex decisionmaking process in establishing common external barriers in a customs union may mean that, in practice, once common external barriers are established, they are difficult to change. Finally, in a customs union, the degree of trade liberalization with non-member countries is based on that permitted by the country least willing to reduce trade barriers - the lowest common denominator.

Moreover, the sheer magnitude of the EC's task - to merge member-country practices on 300 issues - could divert its attention from the important international trade negotiations (the Uruguay Round) now under way to create more effective worldwide rules for fair and growing trade. Besides, if many EC trade practices are unsettled during the Uruguay Round, it could be difficult to measure whether new trade agreements will turn out to be beneficial to the US.

It is clear that EC plans for integration could pose problems as well as new economic opportunities for the US. Therefore, we must not make the mistake of focusing only on Asia now and in the 1990s. America's economic interests in Europe are too great for a one-continent trade strategy. I believe Europeans need not fear that we will turn our backs on this part of the world. Rather, the US national interest in the coming decade and beyond is in building bridges for US trade across both the Atlantic and Pacific Oceans and beyond. In a global economy, America's future depends on global trade.

Given the importance for US interests of ``Europe in '92,'' we should work to establish a ``bicontinental dialogue'' between US and European businessmen and policymakers. In that way, we can help ensure that European economic integration becomes a positive development for the US.

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