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  U.S. – EUROPE COMMERCE NEWS

A weekly service provided to the American Chambers of Commerce in Europe

US & EU ECONOMIC STATS

U.S. CONSUMER CONFIDENCE AND DEMAND FOR BUSINESS EQUIPMENT DOWN

The University of Michigan said its index of consumer sentiment, a widely-watched measure of U.S. consumer confidence, fell to a new nine-year low of 80.6 in October from 86.1 in September. Components of the index that assessed consumers’ attitudes about current conditions and the future both fell. Also this week, the U.S. Department of Commerce reported that demand for non-military capital goods, or business equipment, decreased by $7.5 billion, or 12.6 percent, to $52.1 billion in September, which is the largest decrease since December 1997. The figure is considered a key indicator of U.S. business investment climate. New durable goods orders also fell 5.9 percent to $167.6 billion in September, the largest decrease since November 2001.

U.S. FEDERAL RESERVE ISSUES “BEIGE BOOK” REPORT

The U.S. Federal Reserve Bank issued its “Beige Book” report on October 23, which is a compilation of reports from the 12 U.S. Federal Districts. According to the report, economic activity remained sluggish in September and early October, with the exception of a robust housing market and positive U.S. productivity gains. Retail sales and manufacturing activity remained weak. Overall wage and price increases were moderate, though substantial price increases were noted in health care, insurance, and shipping. Consumer loan demand was strong, but commercial lending activity was weak.

U.S. AGRICULTURAL EXPORT SURPLUS DECLINES IN 2002

According to a report issued by the U.S. Department of Agriculture on October 21, after eleven months of fiscal year 2002, the U.S. agricultural export surplus has declined by 10 percent since fiscal year 2001 to $1.2 billion. While exports have only increased by $555 million in 2002 (or by 1 percent), imports have increased by $1.8 billion (or 5 percent). Thus far, export gains have been driven by vegetable oils, soybeans, other oilseeds, and wheat. The largest import gains have been in grains, feeds, and oil meals; cocoa; fruits and juices; and vegetables and preparations.

FOREIGN INVESTMENT IN U.S. AND UK DECLINES SHARPLY IN 2002

The United Nations Conference on Trade and Development (UNCTAD) reports that investment flows to the United Kingdom and the United States have significantly decreased in 2002 after a collapse in cross-border mergers and acquisitions activity. UNCTAD predicts that global inflows of foreign direct investment (FDI) will drop by over a quarter in 2002. The UK is expected to suffer the largest decline, from $54 billion in 2001 to only $12 billion in 2002. Only 42 cross-border merger and acquisition transactions worth $7.4 billion were recorded in the first half of 2002, compared to 162 worth $24 billion in 2001. UNCTAD also predicts that U.S. FDI will decline from $124 billion in 2001 to $44 billion in 2002. The value of U.S. cross-border mergers and acquisitions until early September is running at only one-third the value of the same period last year. In contrast, for the first time in three decades, France and Germany are expected to match the U.S. in FDI inflows this year.

EU REFUSES TO DELAY NEW WINE LABELING REGULATIONS

At a Geneva meeting, the European Union refused the requests of the United States and other wine exporters to delay pending regulations on wine labeling beyond their scheduled implementation date of January 1, 2003. The new regulations would prevent wines imported into the EU from using a variety of traditional expressions (which the EU argues are tied to geographic origin) used to describe the type of wine or the vintner producing it. The EU has justified the new rules in terms of preventing the deception of consumers. However, countries opposing the new rules argue that they are not the least trade-restrictive option for preventing consumer deception, and that the new rules have no basis in intellectual property rules and are not covered by the WTO Agreement on Trade Related Aspects of Intellectual Property Rights. These countries have not yet threatened a WTO challenge to the new regulations, although the USTR’s Office of General Counsel is reportedly looking into them to determine their WTO consistency. The United States and the European Union are continuing their negotiations on the issue.

EU REDUCES GRAINS QUOTA OFFER TO U.S.

In an attempt to pressure the United States to enter into formal negotiations on a revised tariff regime for grains, the European Union proposed a system of tariff-rate quotas on wheat and corn that could, if imposed unilaterally by the EU, give the U.S. market access far below its demands and less even than previous informal EU offers. A report issued by the U.S. Department of Agriculture predicts the latest Commission proposals would squeeze out high quality U.S. wheat in favor of cheaper, lower quality imports from the Ukraine. The U.S., by maintaining its refusal to enter into formal negotiations under WTO Article 28, is reportedly betting that EU member states will withhold approval from the Commission for unilaterally changing from a tariff-only system to its proposed regime based on tariff-rate quotas.

U.S. SPORTS FISHING GROUP WITHDRAWS PETITION SEEKING INVESTIGATION OF EU

At the request of the U.S. Department of Commerce, the Recreational Fishing Association (RFA) has withdrawn a Section 301 petition that called for the Bush Administration to investigate the European Union for failing to comply with the International Convention for the Conservation of Atlantic Tuna, a commercial treaty that is intended to manage the populations of blue and white marlin, bluefin tuna, swordfish, shark and other species that migrate across the Atlantic. RFA's petition alleged that the EU was violating quotas established by the agreement, which the U.S. and EU have both signed. The petition could have led to trade sanctions against the EU under Section 301 of the Trade Act of 1974, which requires the president to impose sanctions against foreign countries that violate international agreements to which the U.S. is a party. The RFA withdrew the petition after Commerce officials gave the group the Administration's assurances that it would work to negotiate with the EU to comply with the agreement.

PRESIDENT BUSH LIKELY TO VISIT RUSSIA IN NOVEMBER

A U.S. diplomat told the Financial Times on October 22 that President Bush is likely to visit Russia in November after attending the NATO summit in Prague. According to reports, reassuring Russians that NATO enlargement is not directed against them and seeking further Russian assistance on strategic matters concerning Iraq and North Korea would be at the top of President Bush’s agenda.

REMINDER!

Just a reminder, nominations for the U.S. Chamber’s Corporate Citizenship Awards will be accepted until October 30. Candidates for these awards must be members of the U.S. Chamber of Commerce and/or AmChams. In addition, they must have made a demonstrably positive impact on their community in one or more of the following ways:

• Stimulating economic opportunity (e.g. skills training, micro credit lending);
• Enhancing economic recovery (disaster and humanitarian assistance);
• Public Service (anti-corruption measures, environmental clean-up);
• Providing extraordinary care for employees, customers, and local citizens in need.

Please fax submissions to D. Tomme Beevas at 202-463-5308.