BRUSSELS — "Euro-U.S. Trade War!" was the story the Brussels press corps was itching to write this week. But as economists and business experts predicted, it didn't happen. Europe and America, they maintained, just couldn't afford it.
"We are like an old, married couple," Paul Horne, chief international economist at Smith Barney, an investment bank, said in Paris. "We may squabble, but we need each other too much."
In the end, after months of white-knuckle suspense and escalating rhetoric, Boeing Co. consented to some concessions that the European Union demanded as a condition for approving its merger plan with McDonnell Douglas Corp.
Americans may have been stunned that European regulators had interfered in a purely U.S. affair. But for Europeans, it was no more outlandish than recent American laws--the D'Amato and Helms-Burton acts--that would punish certain European companies that invest in Iran, Libya or Cuba.
"If the boot is on one foot this time, it's often been on the other foot," said Stanley Crossick, chairman of the European Policy Center, a Brussels think tank.
In the future, Americans may have to get used to it. Though European officials have taken on U.S. companies, including United Brands and Continental Can, in trade disputes since the mid-1960s, and were able to force changes in another American merger, between Scott Paper Co. and Kimberly-Clark Corp., the Boeing affair may be a landmark.
In a season when Europeans are just as likely as not to complain about bullying from the Clinton administration, Boeing's climb-down under duress, whatever its commercial importance, looks to many Europeans like a victory.
But the brouhaha over the U.S. aerospace merger, which the European Commission approved in principle Wednesday, masks a larger truth: For sheer volume, no two-way commercial relationship in the world tops the one between the United States and Europe. In the five months ending in May, according to the U.S. Department of Commerce, America and the 15 nations of the European Union exchanged goods worth $122.3 billion, compared with $77 billion in U.S.-Japanese trade during the same period.
Decades of thriving trade and investment have spawned a complex but mutually profitable entanglement of economies on the two shores of the Atlantic. Take a seemingly apple-pie American corporation like Boeing. The Seattle-based airplane builder now does so much business in Europe that this year it expects to purchase $1.8 billion in supplies from 191 European companies and claims to account directly or indirectly for 60,000 European jobs.
At the recent Paris air show, Boeing executives even boasted that their two-engine 737-700 will create more jobs in France in the coming three years than its European rival, the Airbus A319, the Paris newspaper Le Monde reported.
As for Airbus, a four-nation consortium headquartered in Toulouse, France, roughly 30% of its typical plane is made by U.S. companies or their European subsidiaries--including numerous Southern California firms.
Depending on the model, the "European" jetliner that will be the only global competitor for the new and bigger Boeing may fly on General Electric engines assembled in a plant near Cincinnati. In its tail, it carries a contraption shaped like a small beer keg, made by a German subsidiary of the U.S. company Allied Signal, that generates electricity for on-board instruments and other uses. In its red-white-and-blue promotional material handed out in the United States, Airbus says it buys from 800 American parts makers and is responsible for 50,000 U.S. jobs.
With such symbiosis, many analysts say a trade war between Europe and the United States has now become too scary and counterproductive to contemplate.
"There is common interest on both sides of the Atlantic in this relationship, and it's more important than any single issue," Crossick said. Michael Gallagher, head of the economics section at the U.S. Mission to the European Union in Brussels, said nowadays only "2% to 4%" of U.S.-European trade is really subject to dispute. The remainder flows back and forth across the ocean with no government interference.
In the early 1990s, U.S-European differences over agricultural subsidies were still wide enough to hold up the negotiations that resulted in the 1994 creation of the World Trade Organization for four years.
In past decades, partners on both sides of the Atlantic have haggled over citrus and sugar subsidies, steel dumping and the public money given to European aerospace companies, including Airbus. In comparison, said Greg Mastel, vice president of the Economic Strategy Institute, a Washington think tank, today's problems are "small but acute."