Culture clash looms in U.S.-Europe trade negotiations

November 02, 1999|By William Pfaff

PARIS -- Difficult trade talks begin this month in Seattle, with Europeans in conflict with the United States over the European Union's refusal to accept certain categories of U.S. food exports regarded by the European public as dangerous: genetically modified foods, and beef that has been fed hormones.

Important commercial disagreements also arise from issues of cultural identity and the protection of intellectual and artistic works.

In the background, however, is something more serious. Trans-Atlantic competition is intense in strategic high-tech industries that both sides consider essential to economic sovereignty and national security.

Orders received by European Airbus in October brought the company's total to more than 70 percent of all orders this year for large commercial aircraft. The total back-orders of Airbus and Boeing Corp. are now roughly equal, but current business is going to Airbus, which now plans to build a bigger plane than Boeing's 747. Boeing is on the defensive. The European commercial space launcher Ariane has half the world market.

Trans-Atlantic mergers

Competition in military aerospace is provoking new U.S. demands for Trans-Atlantic mergers. Pentagon officials recently said that the United States might ease the security restraints that are a major obstacle to Trans-Atlantic fusions, but congressional and State Department reaction to that idea suggests otherwise.

Manfred von Nordheim, the man who heads Daimler-Chrysler Corp.'s aerospace activities in the United States, says the U.S. government doesn't seem to know what it's doing with one hand or the other. It wants the mergers for reasons of efficiency, as well as to prevent what it calls "a fortress Europe" closed to U.S. military sales. On the other hand, Congress won't let it make equal-partner mergers in which the U.S. company shares its secrets.

Washington wants U.S. and European aerospace companies to merge, but on U.S. terms, which means that advanced technology stays strictly in U.S. hands. In the past, this has been possible in cooperative projects because a divided European industry could always be called on for subcontracting work.

However, the Europeans have now created their own megacompanies and intend to deal with the United States as equals.

In the strategic high-technology industries, mergers also decide whether a nation, or group of nations like the European Union, maintain the industrial and economic guarantees of sovereignty. Sovereignty, in the modern world, has an industrial base.

The natural tendency of a free market is to produce monopolies. Before the European Airbus consortium was formed, there were three major U.S. commercial aircraft manufacturers, and several lesser ones in western Europe.

Since the Boeing-McDonnell Douglas Corp. merger, subsidized by the U.S. government, and Lockheed Corp.'s abandonment of the commercial market, there are only two in the world. If at some point, Boeing's existence were to seem threatened, the U.S. government would rescue the company. There is a U.S. national interest in Boeing's survival.

Europe's demands

The Pentagon-sponsored concentration of U.S. military producers, which produced three big groups -- Boeing, Lockheed Martin and Raytheon Hughes -- impelled the major European governments to demand an equivalent concentration of Europe's military aerospace producers.

The result includes this fall's merger of British Aerospace with Marconi Electronic Systems. Their claim to have become the biggest military aerospace company outside the United States was shortly overtaken by the even bigger mergers that made Aerospatiale Matra, DASA and Spain's principal aerospace manufacturer, Casa, into one company. More players are expected to join.

Other realignments in the missiles, electronics and engines are taking place or in prospect. The integration of Europe's military and civil aerospace, rocket, electronics and other strategic industries will lead almost inevitably to some form of European preference in procurement.

That, precisely, is what Washington has wanted to avoid. If it happens, it is likely to be seen in the United States as a hostile development. But, of course, the United States buys American. It was front-page news a few years ago when the Army gave up its 1911 model Colt .45 pistol for a new pistol made by Beretta of Italy.

The United States certainly is not about to buy European fighter planes or missiles. The Europeans understand that. It is a sovereignty issue. But the sovereignty issue counts in Europe, too.

The big mergers that have taken place thus far have all aligned Americans with Americans, and Europeans with Europeans. That is not likely to change.

William Pfaff is a syndicated columnist.

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