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Former American ambassador to Tokyo Mike Mansfield was fond of calling the U.S.-Japan relationship the most important bilateral relationship in the world. Yet for all the undeniable importance of the interaction of the world's two largest national economies, this statement is an exaggeration. The U.S.-Japan relationship continues to be outweighed by America's ties with the European Union (EU). And the U.S.-European relationship remains Number One not only in the security sphere, but in the economic sphere as well.
Nonetheless, transatlantic relations stand at a critical juncture, and much evidence indicates that their continuing importance is not fully appreciated in the United States. Some of the reasons are understandable. The Asia-Pacific region's sheer size, its breathtaking economic and technological progress, and its staggering potential - both as market and as rival - make it easy to overlook a European Union whose unemployment rates are too high, whose growth rates are too low (when they are positive at all), and whose once promising integration plans seem to have stalled out.
But not only does the European Union - which will soon expand its membership, at least - still represent America's biggest and most profitable economic partner. Washington's frustration with alleged European foot dragging at the recently concluded world trade talks and the resulting talk of an American tilt toward Asia overlook the fact that, in the realm of economics, what unites America and the European Union is more important than what has been driving them apart.
As highly developed industrialized regions with fully democratic governments and relatively generous welfare states, the United States and the EU share common values and common problems. Some of the latter involve the economic challenges posed by the distinctive, closely related systems of capitalism that have sprung up all around the Pacific Rim. Although these systems all use mechanisms, they differ qualitatively from their U.S. and European counterparts in areas such as business structures and openness to foreign commerce.
Other shared problems include coping with technology-generated unemployment, finding affordable ways of providing health care for aging populations, preserving the environment, and preventing the welfare state from smothering economic incentives. The United States and the European Union may not be able to - and may not want to - forge a common approach to deal with these challenges. But because the two parties seem to have forgotten many of their common interests (or maybe because they take them for granted), they risk missing an opportunity to explore promising new modes of cooperation.
This study attempts to shed light on the true nature of U.S.-European and U.S.-Asian economic linkages, and to draw policy conclusions.