IDLE SUMMITRY?

MAKING THE US-EU SUMMIT MATTER

by Tyson Barker

Washington’s recent pre-occupation with Asia gives way tomorrow to the US-EU summit at

which President Obama will sit down with European Commission President José Manuel

Barroso, Council President Herman Van Rompuy, and High Representative Catherine Ashton.

As with past gatherings of this sort, this one promises to be a low-key event. But given the

magnitude of the eurozone debt crisis, the high levels of unemployment on both sides of the

Atlantic, and a taste for austerity in foreign engagement, the meeting could prove one of the

administration’s most important.

Past summits have put in place initiatives that are beginning to yield tangible results at the

working level. The 2010 Lisbon summit, for example, launched the US-EU working group on

cyber security. Along with the US-EU Energy Council and the Innovation Action Partnership

(IAP) in the Transatlantic Economic Council (TEC), the summitry is slowly grafting together

nodes of consultation. This dense overlapping network is creating trans-Atlantic frameworks for

portfolios such as energy, IT, privacy protection, trade and raw-materials policy.

That said, strategic guidance at the presidential level has been a more difficult to achieve.

Criticism of past US-EU summits has been that they are unfocused and lacking ambition. The

incentives to pack the agenda with a roster of every imaginable issue dilute the strategic

effectiveness of leaders setting clear priorities. At the same time, summits have punted visionary

projects that could focus the mind of policymakers and imbue the relationship between the

world’s largest economies with greater purpose.

To prevent a recurrence of this, tomorrow’s meeting should focus exclusively on three key areas:

strategic consultation on the eurozone crisis, forward-looking creation of an agenda on jobs, and

pooling resources for post-Arab Spring transition countries.

The Eurozone Crisis: Washington’s greatest foreign-policy challenge

Europe’s triple fiscal, competitiveness and banking crisis could have a triple blowback on the

American economy. It could rob the US of the largest pool of consumers for its goods and

services, damage a vital repository for US foreign direct investment and cause enormous damage

to the US banking sector.

The Obama administration is right to worry about it. More than one-fifth of US exports go to the

European Union. Declining demand there, the largest foreign market for US products, could

pinch US GDP by as much as 2.9 percent. For the banking sector, a euro collapse would choke

off lending that could starve European banks of capital, blow holes in balance sheets and spread

financial catastrophe around the globe. US banks may have limited exposure to the sovereign

debt of the EU’s periphery, but their links to the European banking system are extensive.

Financial disaster on the other side of the Atlantic could tear the fragile US recovery to shreds.

The Obama administration must use the US-EU summit to convey the importance of eurozone

growth to the Commission and the Council. It should emphasize the importance of strong and

stable domestic demand as a central tenet of the reform process. Growth and job creation must be

at the heart of Europe’s reform process.

Washington should also make clear that the eurozone must hold together. German politicians

who hint that Greece could or should exit the eurozone act irresponsibly. They undermine the

true commitment to the single currency and invite speculators to test the credibility of that

commitment. The US should state clearly to EU leaders that such talk cannot be tolerated as it

threatens the European and American economies.

Thus far, the US has targeted eurozone member-states, in particular Germany, in its outreach to

Europe on the crisis. With its growing influence and more ambitious eurobond proposal, the

Commission offers a strong complement to Berlin.

Unlock the Latent Power of the Trans-Atlantic Economy: A jobs agenda US export growth has been one of the most impressive economic legacies of the Obama

administration. Its National Export Initiative (NEI), which looks to double US exports by March

2015, has already contributed to a 25.3 percent increase in exports. Yet there remains a great deal

of untapped growth potential in the trans-Atlantic market.

A Commission-initiated study contends that policies to eliminate non-tariff trade barriers could

unleash an additional US$158 billion (or 0.7 percent) in GDP growth for the EU and US$53

billion (or 0.3 percent) for the US. A 2010 study commissioned by the US Chamber of

Commerce demonstrated that the removal of such barriers would net even greater benefits: an

increase in exports from the US to the European Union of up to 17 percent (US$53 billion) and

from the EU to the US of up to 18 percent (US$69 billion). These trade gains could boost US

GDP growth by as much as 0.6 percent and EU GDP growth by almost 1.0 percent.

The economic boon could translate into high-value jobs in the manufacturing sector. With this in

mind, the Bertelsmann Foundation and the Atlantic Council proposed in a strategy paper in

November 2010 that the Obama administration craft a trans-Atlantic jobs agenda with a one-

million job compact at its heart.

There is substantial support for such an effort. Think tanks, the business community and hearings

in Congress have been clamoring for such a sweeping initiative in recent years. The European

Parliament has issued a resolution stating that a roadmap for easing trade and investment should

be a priority and that the TEC process can be the vehicle for action.

Establish a Joint Planning Unit for post-Arab Spring Transition Countries

Revolutions and continued unrest in the Middle East and North Africa could bring about the

greatest geopolitical transformation of the last decade. The US and EU account for more than 80

percent of aid to that region but both are entering a period of protracted introspection. Significant

cuts to foreign assistance, particularly from the US, may lie ahead. The US and EU should

therefore integrate efforts to consolidate the burgeoning gains to Arab democracy.

Presidents Obama and Barroso should establish a joint unit for development assistance in

transition countries and task its coordinators with identifying and enacting tangible savings

through combined operations in reconstruction and development that can be demonstrated to

Congress, the European Parliament and EU member-states. Election monitoring, technical

assistance, infrastructure planning, capacity building, rule of law, regulatory reform, and tax, fee

and lease collection from extractive industries are areas in which Washington and Brussels can

cooperate. An institutionalized joint planning team for assistance in these areas would provide

greater economic returns for both sides by avoiding duplication and increasing aid effectiveness.

Such a high-profile planning cell would also send a political signal that the US and Europe stand

united in their goal to integrate transition countries into the community of liberal democracies.

Tyson Barker is director of trans-Atlantic relations at the Bertelsmann Foundation.

tyson.barker@bertelsmann-foundation.org

ABOUT THE BERTELSMANN FOUNDATION: The Bertelsmann Foundation is a private, non-partisan operating foundation, working to promote and strengthen trans-Atlantic cooperation. Serving as a platform for open dialogue

among key stakeholders, the foundation develops practical policy recommendations on issues central to successful development

on both sides of the ocean.

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