Turbulent times lie ahead for Europe-US relations

What are the prospects for European relations with the United States after the victory of Mr George W Bush and completion of the Treaty of Nice?

These two very big developments are not obviously related, but they will increasingly play together over the next four years as Mr Bush pursues a different set of foreign policy priorities and the US inclines more towards unilateralism. That will make the historic equalisation in EU-US relations currently under way more turbulent and trickier to manage.

The most obvious area of tension is in security and defence policy, but it extends to trade and economic relations, environmental questions, attitudes towards the United Nations and differing foreign policy perspectives.

While the US is the world's only superpower, relations with Europe are going through a period of rapid change, as the EU becomes the dominant organisation in the region.

At Nice the EU was given increased capacity to manage an enlargement that will more than double its size over coming years, giving it a single market and a population twice as large as the US. But there was a definite trend towards more inter-governmentalism and the Commission's role was marginalised, temporarily at least.

The large states came best out of the bargaining, with three of them now in a position to block qualified majority voting (QMV) - which also becomes more difficult to achieve, despite being extended to many new areas.

In a leaked memo on the outcome David O'Sullivan, the Irish secretary-general of the Commission, says Britain and Spain gained most from the reweighting of votes and protected their vetoes in the areas of most interest to them, including tax and cohesion funding.

The Commission is clearly disappointed with the failure to extend QMV to crucial areas concerning trade negotiations and enlargement (both of them having implications for relations with the US). Decision-making will become even more complex. This conflict between inter-governmentalism and democratically more accessible common institutions will play out in a quasi-constitutional debate between now and the next IGC in 2004.

Mr Bush's security and defence policies put less emphasis on Europe than has the Clinton administration. Peacekeeping is played down, with implications for Kosovo, and the EU's Rapid Reaction Force. It will fall to the next EU presidencies, Sweden and Belgium, to complete negotiations with the US and NATO as to how precisely the new force will relate to NATO.

Already there are considerable tensions, with the US saying the EU should do and spend more, but still reluctant to cede control.

Were such tensions to increase it could lead to a break-up of NATO in a surprisingly short time, according to some alarmist scenarios. In the meantime there will be more of a dynamic in EU than in NATO enlargement.

But a Bush administration more suspicious of an assertive Russia led by Mr Putin could change that. So would its determination to introduce an anti-missile defence system that would antagonise Russia and US allies in Europe in almost equal measure.

The United Nations assumes more importance to legitimise the Rapid Reaction Force across the span of EU states; but it seems certain to be downplayed by a more unilateralist Bush administration, backed by Republican majorities in Congress suspicious of the UN and most reluctant to pay its dues.

The US wants to reduce its share of UN expenses from 25 to 22 per cent compared to its current 29 per cent of world GNP, the rough benchmark used to determine contributions.

EU countries, with about the same share of world GNP, currently pay 36.7 per cent of UN expenses and have refused a US offer to pay back monies due on the basis of the 22 per cent formula. That could rapidly unravel in the new Congress, perhaps involving a withdrawal of the money paid.

Ireland will be in the middle of such arguments when it takes up its UN Security Council seat in two weeks' time. President Clinton's visit this week has brought it home once again how much we are in the middle of EU-US issues and policies.

The Irish economy is especially vulnerable to any US hard landing after the Clinton boom, although it is too early to say whether that is made more likely by Mr Bush's victory.

The high technology and pharmaceutical sectors have welcomed it, both of them crucial US players in this economy. A soft US landing would make it easier for European economies to take up the slack of world demand. And a strengthening euro against the dollar would certainly be in Ireland's interest.

Trade and environmental negotiations between the EU and the US look to become more difficult in the New Year. Issues of genetically-modified food and hormonal additives are up again for negotiation. Both sides are committed to another World Trade Organisation round, and Mr Bush is more of a free trader than the semi-protectionist Mr Gore. But their agendas will be very different in such a multilateral forum.

Such difficulties were well illustrated at The Hague last month, when talks on updating the Kyoto Protocol broke down after the EU and US delegations failed to reach agreement. Whatever about the Clinton administration, it seems inconceivable that a Bush one could reach an accord, since he rejects the protocol and the multilateral process and analysis of climate change it is based upon.

One of the main reasons why the European Commission is dissatisfied by the Nice Treaty is that its negotiating mandate and task in trade and environmental matters are hampered by the failure to extend QMV. That may give the larger EU states more leeway in such talks, drifting away from the institutionalised and rule-based system that gives smaller states more advantage.

The same argument applies to completing the EU enlargement negotiations.

The Government is pleased to have maintained its veto on tax affairs, precisely to protect its competitive advantage in attracting US multinational investment here. But if that makes EU enlargement more difficult to attain and manage there is a downside. That should be examined more openly over coming years.

The tax question will not go away, particularly if the euro strengthens and the European economy picks up further, as they are poised to do.

One way or another this promises to be an interesting time for trans-Atlantic relations. Despite all the possibilities of tension and competition, it is as well to remember that this is much the strongest bilateral relationship in the world economy and politics.

There are huge interests in avoiding disruptive conflicts, self-evidently among the free trading internationalist advisers Mr Bush is expected to appoint. But that is no guarantee they will not occur.