Updated July 9, 2019
U.S.-EU Trade and Investment Ties: Magnitude and Scope
Introduction
continued tit-for-tat escalation of tariffs among trading
partners.
The United States and European Union (EU) (and its
predecessors) have extensive and globally significant trade
U.S.-EU Trade
and investment ties that have evolved since World War II.
These ties have broadened as the EU’s membership has
Despite the rise of China and other emerging economies, as
grown, and have deepened with the growth of global supply
well as current transatlantic trade frictions, the United
chains, trade in services, and cross-border investment. The
States and EU remain each other’s largest trading partners
transatlantic economy is a dominant force globally,
(see Table 1). The EU, as a bloc, accounts for about one-
accounting for nearly half of world gross domestic product
fifth of U.S. total trade in goods and services.
(GDP) (current U.S. dollars), 11% of world population,
one-third of goods trade, and over half of global foreign
Table 1. U.S. Goods and Services Trade, 2018 ($ bns)
direct investment (FDI). Given the extensive and
Selected
U.S.
U.S.
Total
Trade
interconnected nature of the transatlantic economy,
Partners
Exports
Imports
Tradea
Balanceb
Congress has an interest in examining the trade and
investment ties underpinning it.
EU-28
$574
$688
$1,262
-$115
EU Economy
China
$178
$559
$737
-$381
The EU consists of 28 member states that are integrated
Canada
$365
$361
$725
$4
economically in many respects. Members share a customs
Mexico
$300
$378
$678
-$79
union, a single market in which goods, services, people, and
capital move freely, and a common external trade policy
Japan
$121
$179
$300
-$58
(negotiated by the EU on their behalf) with a common
Source: Data from U.S. Bureau of Economic Analysis (BEA).
external tariff. The EU has a common currency used by 19
Notes: (a) Exports plus imports. (b) Exports minus imports.
“Eurozone” member states. It is pursuing further integration
in financial and other areas, but faces challenges.
Between 2003 and 2018, total U.S.-EU trade in goods and
At $18.7 trillion, the EU is about one-fifth of the global
services (exports plus imports) doubled from $595 billion to
$1.3 trillion (see Figure 2). The United States had an
economy. Its largest economies currently are Germany, the
overall trade deficit of $115 billion with the EU in 2018, as
United Kingdom (UK), France, and Italy (see Figure 1).
The 2008-2009 global recession and subsequent Eurozone
the goods deficit ($170 billion) outweighed the services
debt crisis depressed European economies, led to
surplus ($55 billion).
unemployment increases in many member states, and raised
Figure 2. U.S. Trade with the EU
concerns about the vitality of the European banking system.
While 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), 2018

Source: CRS, based on data from BEA.
Merchandise. In 2018, for goods, the EU was the United

States’ largest export market ($320 billion), and second
Source: CRS, based on data from the World Bank.
largest source of imports ($490 billion) after China ($540
billion) (BEA data). The EU represented about one-fifth of
In 2018, the United States and EU both saw positive rates
both U.S. goods exports and imports in 2018. For EU goods
of economic growth, of 2.9% and 2.1%, respectively
trade, the United States accounted for the largest share of
(International Monetary Fund data). Downside risks to
EU exports (19%) and second largest share of EU imports
economic growth include potential economic impacts from
U.S. import-constraining tariff measures and potential
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U.S.-EU Trade and Investment Ties: Magnitude and Scope
(14%) after China (20%) (2017 trade data, World Trade
2018, transatlantic FDI flows totaled nearly $6 trillion—
Organization).
$3.3 trillion of U.S. investment in the EU and $2.6 trillion
of EU investment in the United States (BEA data, see
As highly advanced economies, the United States and EU
Figure 4). The magnitude reflects U.S. and EU overall
trade in similar goods with two related features prominent
investment-friendly business climates, as well as the
in their bilateral trade (see Figure 3). One feature is intra-
preference of firms for reaching markets by establishing
industry trade (trade of goods within the same industry),
local presence.
often consisting of trade in components or intermediate
goods used to produce complex products such as cars and
U.S. and European majority-owned multinational
machinery, allowing firms to specialize and benefit from
enterprises (MNEs) directly employed over nine million
economies of scale by focusing on different parts of the
employees combined at their subsidiaries in each other’s
supply chains. In many cases, intermediate goods are traded
markets in 2016—4.7 million jobs by U.S. MNEs in Europe
between a parent company in one country and its affiliate in
and 4.5 million jobs by European MNEs in the United
another, known as related-party or intra-firm trade (e.g.,
States (BEA data). Transatlantic FDI occur in
BMW in Germany trading with BMW in South Carolina).
manufacturing, banking, financial, and other sectors.
Figure 3. U.S.-EU Trade: Top Traded Goods in 2018
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 (data from Census Bureau). On the services side, U.S.
and EU services providers increasingly deliver services
through their foreign affiliates. In 2016, about half of
services supplied by U.S. MNEs were to foreign persons
located in the EU, and also about half of sales of services to
U.S. persons by U.S. affiliates of foreign-owned MNEs
were by EU-based MNEs (BEA data).
In 2018, the largest destinations in the EU for U.S.
investment (historical-cost basis) were: the Netherlands
($883 billion), the UK ($758 billion), Luxembourg ($714
billion), and Ireland ($442 billion). The largest sources of
FDI to the United States from the EU were: the UK ($561
billion), the Netherlands ($479 billion), Luxembourg ($356
billion), and Germany ($324 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 2017, U.S. services
exports to the EU totaled $254 billion and U.S. services

imports from the EU totaled $199 billion (BEA data).
Source: CRS, based on data from U.S. Bureau of Economic Analysis.
Business services, travel (both business and personal),
charges for use of intellectual property, transport services,
Issues for Congress
and financial services were the leading services traded
Members of Congress may examine the role of U.S.-EU
across the Atlantic. Services trade also helps to facilitate
trade and investment ties in bolstering the U.S. economy
U.S.-EU trade in goods.
and U.S. prosperity, any negative effects of these ties for
The UK is the United States’ largest services trading
U.S. economic interests, and implications of any changes to
partner, both in the EU and globally. U.S. services exports
these ties for their constituents. Potential changes to U.S.
to the UK totaled $70 billion and U.S. services imports
trade policy—such as addressing tariffs and other and other
from the UK totaled $57 billion, with trade in financial
frictions in U.S.-EU trade relations and pursuing further
services prominent. Within the EU, Ireland and Germany
liberalization through the negotiation of a proposed U.S.-
were also leading U.S. services trading partners.
EU trade agreement—could affect U.S.-EU trade and
investment flows, and could have implications for U.S.
U.S.-EU Investment
business and economic interests with the EU.
While trade is an important part of the U.S.-EU economic
For more information, see CRS In Focus IF10931, U.S.-EU
relationship, FDI ties are even more significant, given their
Trade and Economic Issues, by Shayerah Ilias Akhtar.
size and interdependent nature. The United States and EU
are each other’s largest source and destination for FDI. In
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U.S.-EU Trade and Investment Ties: Magnitude and Scope

IF10930
Shayerah Ilias Akhtar, Specialist in International Trade
and Finance


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https://crsreports.congress.gov | IF10930 · VERSION 6 · UPDATED

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