(co-authored with Lorenzo Cladi)
As Governor Christie and Democratic lawmakers argue over the true cost of the ARC Tunnel project, the wisdom of merging Rutgers-Camden and Rowan University, and the components that will comprise New Jersey’s Fiscal 2013 budget, the odds are slim that the European Union will enter the conversation.
Likewise, when we make decisions on where to shop and dine, we look for good prices and quality products. We don’t think too much about economic policies set in place on the other side of the Atlantic.
But in today’s global economy, the decisions being made some 4,000 miles away by the 27 member states of the European Union could easily impact how much New Jerseyans pay for food, clothing and household items.
We live in a global village where speed has conquered distance and time has annihilated space. We can connect with a person living two oceans away in the blink of eye – with virtually no cost thanks to Facebook, Skype and other platforms.
This is why the economic recession of September 2008 was really a global phenomenon that deeply affected millions of people worldwide, including those living in the Garden State. The simple message we learned 20 years ago from the Clinton campaign — “It’s the economy, stupid” – still rings true today on both sides of the Atlantic.
In Europe, the economic recession represented the sharpest contraction in the history of the European Union and had profound implications for the United States. To fully comprehend what this will mean for the New Jersey economy, one must first understand the history of the European Union and its unique relationship with our nation.
The roots of the European Union can be found in the 1950s when politicians in war-torn countries decided it was time to find a better means than another war to revive the economy. Rather than compete with each other, six European countries (France, Germany, Italy, the Netherlands, Belgium and Luxembourg) banded together in 1951 to pool their economic resources and power for the first time. They created the European Coal and Steel Community (ECSC), a common market for coal and steel.
The ECSC was joined by two similar communities in 1957, the European Economic Community (EEC) and the European Atomic Energy Community (EURATOM). In particular, the goal of the EEC was to remove trade barriers between member states, creating a common market. In 1992, the Maastricht Treaty was signed, which created the modern day European Union (EU) and paved the way for the Euro.
Over the years, the European Union has worked. There has not been any single conflict among European powers since World War II. European countries have gradually united several sectors of their economies. Step-by-step, they have grown richer, and they also become more and more interdependent upon one another.
The success of the European Union was made possible because, during the Cold War the United States allowed the Europeans to recover without having to worry about costly defense issues. But the United States also became involved economically with the Marshall Plan, a large scale American program to aid Europe while simultaneously combating the spread of communism.
The relationship between the United States and the European Union grew stronger throughout the long decades of the Cold War, and it continued after the Cold War even after the common enemy disappeared.
Today, as data available in the European Commission show, the United States and the European Union share the largest bilateral trade relationship in the world. They are each other’s main sources of foreign direct investment. In 2009, as the global economic recession was reaching its apex, the EU invested 79.2 billion euros in the U.S. and the U.S. invested 97.3 billion euros in the EU.
Economic growth in Europe leads to an increase in demand for products, many of which come from the United States. For example, having a stable currency can significantly stimulate the economy of Europe while increasing the amount of U.S. exports to the EU. The policies that the EU and the United States adopt can therefore have a significant impact on one another.
Trade and cooperation between the U.S. and the EU has grown exponentially over the years, but neither has forgotten that they are competitors. In the 1990s, the EU banned the import of meat that contained artificial beef hormones. The United States opposed this ban and the World Trade Organization (WTO) ruled against the EU. Similarly, as the U.S. imposed 30 percent steel tariffs on a range of imported steel products in 2002, the EU took the matter to the WTO, which ruled decisively that the U.S. tariffs were illegal under world trade rules.
So as we have seen with beef and steel, when policymakers act in Europe, there are repercussions in the United States. And for as long as the U.S. and the EU maintain their current relationship, there will be similar repercussions throughout our nation — in towns and communities of every shape and size, including the 566 municipalities that make up the State of New Jersey.
# # #