Updated July 20, 2018
U.S.-EU Trade and Investment Ties: Magnitude and Scope
Introduction
U.S.-EU Trade
The United States and European Union (EU) (and its
Despite the rise of China and other emerging economies, as
predecessors) have deep and extensive trade and investment
well as current transatlantic trade frictions, the United
ties that have evolved since World War II. Their ties have
States and EU remain each other’s largest trading partners
broadened as the EU’s membership has grown, and have
(see Table 1). The EU, as a bloc, accounts for about one-
deepened with the growth of global supply chains, trade in
fifth of U.S. total trade in goods and services.
services, and cross-border investment. The transatlantic
economy is a dominant force globally, accounting for 46%
Table 1. U.S. Goods and Services Trade, 2017 ($ bns)
of global GDP (current U.S. dollars), 11% of world
population, one-third of goods trade, over half of global
Selected
U.S.
U.S.
Total
Trade
foreign direct investment (FDI), and the highest level of
Partners
Exports Imports
Tradea
Balanceb
cross-border data flows.
EU-28
$528
$629
$1,158
-$101
EU Economy
China
$188
$524
$712
-$336
The EU consists of 28 member states that are integrated
Canada
$341
$339
$680
$3
economically in many respects. Members share a customs
union, a single market in which goods, services, people, and
Mexico
$277
$346
$622
-$69
capital move freely, and a common external trade policy
Japan
$115
$171
$286
-$57
(negotiated by the EU on their behalf) with a common
external tariff. The EU has a common currency used by 19
Source: Data from U.S. Bureau of Economic Analysis (BEA).
“Eurozone” member states. It is pursuing further integration
Notes: (a) Exports plus imports. (b) Exports minus imports.
in financial and other areas, but faces challenges.
Between 2003 and 2017, total U.S.-EU trade in goods and
At $15 trillion, the EU is about 20% of the global economy.
services (exports plus imports) nearly doubled from $594
Its largest economies currently are Germany, the United
billion to $1.2 trillion. The United States had an overall
Kingdom (UK), France, and Italy (Figure 1). The 2008-
trade deficit of $101 billion with the EU in 2017, as the
2009 global recession and subsequent Eurozone debt crisis
goods deficit ($153 billion) outweighed the services surplus
depressed European economies, led to unemployment
($51 billion) (Figure 2).
increases in many member states, and raised concerns about
the vitality of the European banking system. While the EU
Figure 2. U.S. Trade with the EU
overall seems to be recovering, Greece and some member
states continue to face economic difficulties. The rise of
emerging markets as major global economic players
confronts the EU with other challenges.
Figure 1. EU Gross Domestic Product (GDP), 2017

Source: CRS, based on data from BEA.
Goods
Source: CRS, based on data from Eurostat.
In 2017, for goods, the EU was the United States’ largest
export market ($285 billion), and second largest source of
In 2017, the United States and EU both saw positive rates
imports ($437 billion) after China ($506 billion). The EU
of economic growth, 2.3% and 2.7%, respectively.
represented about one-fifth of both U.S. goods exports and
Continued economic growth is projected, but downside
imports in 2017. For EU goods trade, the United States
risks include potential economic impacts from U.S. import-
accounted for the largest share of EU exports (20%) and
constraining tariff measures and potential continued tit-for-
second largest share of EU imports (14%) after China.
tat escalation of tariffs among trading partners, including
As highly advanced economies, the United States and EU
the United States and EU.
trade in similar goods with two related features prominent
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U.S.-EU Trade and Investment Ties: Magnitude and Scope
in their bilateral trade (Figure 3). One feature is intra-
investment in the United States (Figure 4). The magnitude
industry trade (trade of goods within the same industry),
reflects U.S. and EU overall investment-friendly business
often consisting of trade in components or intermediate
climates, as well as the preference of firms for reaching
goods used to produce complex products such as cars and
markets by establishing local presence.
machinery, allowing firms to specialize and benefit from
U.S. and European majority-owned multinational
economies of scale by focusing on different parts of the
enterprises (MNEs) directly employed about nine million
supply chains. In many cases, intermediate goods are traded
employees combined at their subsidiaries in each other’s
between a parent company in one country and its affiliate in
markets in 2015—4.7 million jobs by U.S. MNEs in Europe
another, known as related-party or intra-firm trade (e.g.,
and 4.3 million jobs by European MNEs in the United
BMW in Germany trading with BMW in South Carolina).
States (BEA data). Transatlantic FDI occur in
Figure 3. U.S.-EU Trade: Top Traded Goods in 2017
manufacturing, banking, financial, and other sectors.
FDI is a driver of U.S.-EU trade in goods. Related-party
trade accounted for about one-third of U.S. goods exports to
the EU and 60% of U.S. goods imports from the EU in
2016. On the services side, U.S. and EU services providers
increasingly deliver services through their foreign affiliates.
In 2015, 44% of services supplied by U.S. MNEs were to
foreign persons located in the EU, and 56% of sales of
services to U.S. persons by U.S. affiliates of foreign-owned
MNEs were by Europe-based MNEs.
Within the EU, the largest destinations for U.S. outbound
investment (historical-cost basis) in 2017 were: the
Netherlands ($937 billion), the UK ($748 billion),
Luxembourg ($677 billion), and Ireland ($446 billion). The
largest sources of inbound FDI to the United States from
the EU were: the UK ($541 billion), Luxembourg ($411
billion), Germany ($310 billion), and France ($276) billion.
Figure 4. U.S.-EU Foreign Direct Investment (FDI)

Source: CRS, based on U.S. International Trade Commission data.
Services
The United States and EU are the world’s two largest
services economies. The services sector is highly integrated
across the Atlantic. In 2016, U.S. services exports to the EU

totaled $231 billion and U.S. services imports from the EU
Source: CRS, based on data from U.S. Bureau of Economic Analysis.
totaled $176 billion. Business services, financial services,
charges for use of intellectual property, travel (both
Issues for Congress
business and personal), and transport services were the
primary services traded across the Atlantic. Services trade
Given the transatlantic economy’s extensive and highly
also helps to facilitate U.S.-EU trade in goods.
integrated nature, Congress has an interest in examining the
The UK is the United States’ l
trade and investment framework underpinning U.S.-EU
argest services trading
economic ties. U.S.-EU trade and economic relations are
partner, both in the EU and globally. U.S. services exports
facing increased frictions in light of U.S. trade policy under
to the UK totaled $66 billion and U.S. services imports
the Trump Administration, especially its focus on unilateral
from the UK totaled $52 billion, with trade in financial
tariff measures. Congress may wish to consider the possible
services prominent. Within the EU, Ireland and Germany
implications of changes in U.S. trade policy, such as on
were also leading U.S. services trading partners. Business
tariffs, for U.S. business and economic interests with the
services and charges for intellectual property use were
EU. For more information, see CRS In Focus IF10931,
notable in U.S. services trade with these other countries.
U.S.-EU Trade and Economic Issues, by Shayerah Ilias
U.S.-EU Investment
Akhtar.
While trade is an important part of the U.S.-EU economic
Shayerah Ilias Akhtar, Specialist in International Trade
relationship, FDI ties are even more significant, given their
and Finance
size and interdependent nature. The United States and EU
are each other’s largest source and destination for FDI. In
IF10930
2017, transatlantic FDI flows totaled over $5 trillion—$3.2
trillion of U.S. investment in the EU and $2.3 trillion of EU
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U.S.-EU Trade and Investment Ties: Magnitude and Scope


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https://crsreports.congress.gov | IF10930 · VERSION 4 · NEW

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