FYI, this is the full text of my fair and balanced reply:
1. What impact can a new US president, of any political persuasion, have on business in Europe. There are three related international political 'arenas' where any new US president could have a major impact on business in Europe. The first, and most obvious, are the climate change negotiations through the UN Framework Convention on Climate Change (UNFCCC). Both candidates have forwarded domestic proposals. A cap and trade scheme for emissions trading will be launched in the USA, although it is unclear how high the cap will be, and whether emissions will be auctioned. If the USA sets a sufficiently high domestic goal, a new international agreement that succeeds the Kyoto protocol will be signed. If the major developing countries do not take up restrictions under that agreement, the parties that do are likely to introduce border adjustment taxes for 'embodied carbon' with regard to those states (which is possible under WTO rules). International aviation and shipping are likely to be included in the new protocol. Action on climate change by the USA means that the regulatory playing field will be leveled for European heavy industry. Whether this happens only with regard to the USA, or globally, depends upon success in international negotiations. The second would be in the Doha round of international trade negotiations. These negotiations are stuck. There have been differences between the US and the EU during the course of negotiations, but these have to some extent been resolved (although they might re-emerge as Sarkozy is questioning the mandate of Mandelson). The major problem is a disagreement between the US and EU and a group of large developing countries. It will take dedicated attention from the highest level to turn these negotiations around. Both candidates are interested in free trade, but have their pros and cons. Obama is reluctant about free trade itself, due to the influence of economic populism in his party, and McCain will be reluctant about the inclusion of social and environmental standards in trade agreements. Due to the general mood in the US, it is unlikely that Congress will grant the new President 'fast track authority' for negotiations. All of these problems render a new general agreement unlikely. However, there may be partial agreements, such as sectoral agreements on particular types of manufacturing goods, and on environmental goods and services. A general deal would have disruptive consequences for several European industries, notably agriculture, but would be beneficial for financial services. The third, and least obvious, is in transatlantic economic cooperation. Managed through the Transatlantic Economic Council, this is currently on a mostly technical level. However, there are calls for increasing the strategic and political content of cooperation. It is quite possible that there will be a successful push for this by several EU states, led by France, as there is a general trend to increase the strategic nature and political control of bureaucratic entities, witnessed for instance by the newly born 'Mediterranean Union'. Greater political control over transatlantic economic cooperation would empower it to deal with big current economic issues more flexibly, but may also increase the possiblity that some new, general restrictions will be instated as older, national restrictions are eliminated. Domestic policies will also have an impact. The big issue is the policy of the Federal Reserve. If the new President will follow a fiscally prudent, strong dollar policy, that will improve the situation for European exporters. However, I see little chance for this. McCain is committed to continuing spending on the war on Iraq and will likely push for upholding the Bush tax cuts. Obama will increase spending on domestic entitlement programmes and has committed to only raising taxes on the rich while retaining the tax cuts for the middle class. 2. Does the US have a growing or declining influence on European economies? The purely economic influence of the US on European economies is declining. This decline can to some extent be measured. For instance, the trade flows between the EU and the USA have grown at a slower pace than overall economic growth in the EU. This means that the influence of the US on the European market has declined. Generally, however, EU trade with the rest of the world has grown at a higher pace than overall economic growth. This indicates an even larger relative decline of the USA. The share of the US in trade flows has especially fallen in goods, less so in services. In terms of foreign direct investment flows, there has been no decline. It has to be added that both Europe and the United States will on the long term have a declining influence on the world market, as the growth rates of their economies are lower than the global average. This shared decline could lead to greater economic cooperation, and thus paradoxically to a greater influence of the US on European economic policy. 3. In which parts of the European economy is American money most important? In the European economy, American money is most important for financial services. Nearly half of all FDI stocks are in financial services. In turn, over half of all FDI stock in the EU is from the US. 4. Who amongst the European business community would welcome a Republican president, and why? 5. Who amongst the European business community would most welcome a Democrat president, and why? I don't know the European business community that well. On the face of it, John McCain should be better for the oil industry due to his calls for more exploration and his promise to stay the course in Iraq (where several European firms are also working). On the other hand, most of the benefits from those policies will flow to US companies. Which goes for most economic policies either candidate would enact. There may be a perception that a Democratic President will be more protectionist, which will lead the financial sector to hope for a Republican President. However, I think that this perception is not accurate with regard to Obama.
There are three related international political 'arenas' where any new US president could have a major impact on business in Europe.
The first, and most obvious, are the climate change negotiations through the UN Framework Convention on Climate Change (UNFCCC). Both candidates have forwarded domestic proposals. A cap and trade scheme for emissions trading will be launched in the USA, although it is unclear how high the cap will be, and whether emissions will be auctioned. If the USA sets a sufficiently high domestic goal, a new international agreement that succeeds the Kyoto protocol will be signed. If the major developing countries do not take up restrictions under that agreement, the parties that do are likely to introduce border adjustment taxes for 'embodied carbon' with regard to those states (which is possible under WTO rules). International aviation and shipping are likely to be included in the new protocol. Action on climate change by the USA means that the regulatory playing field will be leveled for European heavy industry. Whether this happens only with regard to the USA, or globally, depends upon success in international negotiations.
The second would be in the Doha round of international trade negotiations. These negotiations are stuck. There have been differences between the US and the EU during the course of negotiations, but these have to some extent been resolved (although they might re-emerge as Sarkozy is questioning the mandate of Mandelson). The major problem is a disagreement between the US and EU and a group of large developing countries. It will take dedicated attention from the highest level to turn these negotiations around. Both candidates are interested in free trade, but have their pros and cons. Obama is reluctant about free trade itself, due to the influence of economic populism in his party, and McCain will be reluctant about the inclusion of social and environmental standards in trade agreements. Due to the general mood in the US, it is unlikely that Congress will grant the new President 'fast track authority' for negotiations. All of these problems render a new general agreement unlikely. However, there may be partial agreements, such as sectoral agreements on particular types of manufacturing goods, and on environmental goods and services. A general deal would have disruptive consequences for several European industries, notably agriculture, but would be beneficial for financial services.
The third, and least obvious, is in transatlantic economic cooperation. Managed through the Transatlantic Economic Council, this is currently on a mostly technical level. However, there are calls for increasing the strategic and political content of cooperation. It is quite possible that there will be a successful push for this by several EU states, led by France, as there is a general trend to increase the strategic nature and political control of bureaucratic entities, witnessed for instance by the newly born 'Mediterranean Union'. Greater political control over transatlantic economic cooperation would empower it to deal with big current economic issues more flexibly, but may also increase the possiblity that some new, general restrictions will be instated as older, national restrictions are eliminated.
Domestic policies will also have an impact. The big issue is the policy of the Federal Reserve. If the new President will follow a fiscally prudent, strong dollar policy, that will improve the situation for European exporters. However, I see little chance for this. McCain is committed to continuing spending on the war on Iraq and will likely push for upholding the Bush tax cuts. Obama will increase spending on domestic entitlement programmes and has committed to only raising taxes on the rich while retaining the tax cuts for the middle class.
2. Does the US have a growing or declining influence on European economies?
The purely economic influence of the US on European economies is declining. This decline can to some extent be measured. For instance, the trade flows between the EU and the USA have grown at a slower pace than overall economic growth in the EU. This means that the influence of the US on the European market has declined. Generally, however, EU trade with the rest of the world has grown at a higher pace than overall economic growth. This indicates an even larger relative decline of the USA. The share of the US in trade flows has especially fallen in goods, less so in services. In terms of foreign direct investment flows, there has been no decline. It has to be added that both Europe and the United States will on the long term have a declining influence on the world market, as the growth rates of their economies are lower than the global average. This shared decline could lead to greater economic cooperation, and thus paradoxically to a greater influence of the US on European economic policy.
3. In which parts of the European economy is American money most important?
In the European economy, American money is most important for financial services. Nearly half of all FDI stocks are in financial services. In turn, over half of all FDI stock in the EU is from the US.
4. Who amongst the European business community would welcome a Republican president, and why? 5. Who amongst the European business community would most welcome a Democrat president, and why?
I don't know the European business community that well. On the face of it, John McCain should be better for the oil industry due to his calls for more exploration and his promise to stay the course in Iraq (where several European firms are also working). On the other hand, most of the benefits from those policies will flow to US companies. Which goes for most economic policies either candidate would enact.
There may be a perception that a Democratic President will be more protectionist, which will lead the financial sector to hope for a Republican President. However, I think that this perception is not accurate with regard to Obama.
