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Iraq: War Worsens Trade Tensions Between U.S. And EU

Tensions and disagreements over trade issues have been growing for several years between the United States and the European Union. Now, the U.S.-led war on Iraq has served to heighten those tensions and add new dimensions to them. Are the world's two biggest trading entities becoming rivals instead of partners?

Prague, 10 April 2003 (RFE/RL) -- One of the most unexpected events of the past few months has been the way the humble potato has become an instrument of international politics.

Not often is a vegetable raised to this status, but it has happened in the United States, with the renaming of French fries as "freedom fries." The change was sparked by U.S. congressmen angered by France's stand at the United Nations Security Council against the U.S.-led war in Iraq. The name has caught on, with restaurants across American now offering freedom fries.

The move is purely symbolic. The potatoes involved are presumably American, as are the buyers of the fries -- and the sellers, too. France's potato farmers are not affected. But as any poet or politician knows, symbols are powerful. They concentrate attention on an idea -- in this case, the idea that France has acted in a way that some Americans feel is not right.

The negative publicity from this and other anti-French campaigns is having an impact on people's buying patterns. A survey carried out in the United States last month indicated that 64 percent of those questioned thought less favorably than before of French products. Twenty-nine percent of those questioned said they would boycott French goods.

The survey showed a similar, if less pronounced, trend concerning German products. That reflects Germany's similar, but less flamboyant, stance at the UN alongside France.

In Western Europe, feelings are also running high, but in the opposite direction. There is strong public rejection of the war in Iraq. So far, there has been no attempt to rename filet Americain "filet pour la paix," or "peace steak." But a group of German university professors are calling for many popular English-language words used in Germany to be replaced with French terms. For instance, "OK" would become "d'accord."

On a wider scale, the trans-Atlantic ill feelings caused by differences over the war are threatening to worsen trade tensions. As Brussels-based analyst Cindy Williams put it: "Trade in general could be harmed because of feelings that were stirred up both in the United Nations and in NATO between the United States and the continental powers of Europe, especially France and Germany."

Williams is a principal researcher at the German Marshall Fund, which promotes the exchange of ideas and cooperation between the U.S. and Europe. She said one of the big business areas that could be affected is defense-industry cooperation. She said arms companies on both sides of the Atlantic have been seeking greater cooperation.

"The defense firms have an interest in it and are trying in almost every way conceivable to do it. The U.S. offers a very large market -- a huge market -- that the Europeans would very much like to crack into. But on the other side, I notice that the U.S. defense giants -- Lockheed Martin and Boeing -- would really like to bring in European partners and try to crack into the European markets," Williams said.

Williams said that even if the private firms agree that cooperation makes good business sense, government support for such ventures now seems unlikely unless relations improve. She noted the signs are not good. In Washington, a bill has been introduced in Congress that seeks to prohibit U.S. companies from participating in this year's Paris air show.

Another point of trans-Atlantic contention is Iran. Washington views Iran as a member of the "axis of evil" and accuses it of trying to develop nuclear weapons, a charge Tehran denies.

In Brussels, however, Iranian and European Union officials this week held substantive talks on developing trade. That's despite the intention of the United States to blacklist those EU companies that work in Iran.

The differences of view on Iran are fundamental, said Katinka Barysch, an economic analyst with the Centre for European Reform in London. "The EU has always been of the opinion that they should engage Iran rather than punish it, and they are hoping that by engaging Iran they can press for slow, positive changes in the country. Because they do not see Iran as a rogue state like the United States does. They see it as a country which has problems but which can be dealt with on a sensible level," Barysch said.

The trade tensions come at a bad moment for the world economy. The European Commission this week estimated euro-zone growth for this year at only 1 percent, rising to 2.3 percent in 2004. U.S. growth was predicted as somewhat stronger.

EU and American finance officials are meeting in Washington this week, and the Europeans are expected to ask the U.S. to cut its huge budget deficit, which they fear could send the dollar down in value and therefore make EU goods and services less competitive.

According to analyst Barysch, fallout from the Iraq war could also have an impact on the continuing Doha round of world trade talks. "Maybe the Doha trade round would have stood a better chance of being concluded in time had it not come to this political falling out over the Iraq war, because in order to avoid trade tensions, you always need a political push," Barysch said.

The Doha round has just failed to meet a deadline for the conclusion of negotiations on agricultural products. That sector is yet another area of disagreement between the United States and the European Union.