America's Two-Front Economic Conflict

DOUBLE TROUBLE

Since the end of the Cold War, the perceived threats to U.S. security have been mainly from "rogue states" such as Iraq and North Korea -- none of which are superpowers or likely allies of each other in confronting the United States. But the United States now faces the real possibility of economic conflict with both Europe and East Asia -- the commercial and financial equivalent of two-front combat. In this domain, both potential rivals are superpowers. Moreover, they have already demonstrated their ability to coalesce against the United States, as they did to help torpedo the Seattle ministerial meeting of the World Trade Organization (WTO) in December 1999.

Peaceful and effective resolution of these potential conflicts is one of the most important and difficult issues facing the new U.S. administration and the world. The American and global economies are slowing sharply, and their futures may be heavily affected by the outcomes. In a post-Cold War world in which economic issues are central to international relations, those outcomes will also be crucial for U.S. foreign policy and global stability. Compounding the complexity of the situation is the fact European and East Asian nations are not only the United States' economic competitors but also its economic partners -- and many of them are close security allies as well.

CONTINENTAL DIVIDE

The United States and the European Union (EU) are on the brink of a major trade and economic conflict. Washington has already retaliated against European import restrictions on American beef and bananas -- each retaliation accounting for a hundred million dollars or so of annual trade -- and has rejected all European efforts to resolve these disputes. Europe in turn threatens to retaliate against several billion dollars of U.S. export subsidies, as well as new U.S. trade laws that would channel the proceeds of antidumping penalties from the Treasury Department to the complaining industries and would force the president to continually change the products being retaliated against, thus intensifying the impact of U.S. punitive sanctions.