U.S.-EU Trade and Investment Ties: Magnitude and Scope

U.S.-EU Trade and Investment Ties: Magnitude and Scope

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Updated January 19, 2021
U.S.-EU Trade and Investment Ties: Magnitude and Scope
The United States and the current 27-member European
Treatment of UK in EU Trade and Investment Figures
Union (EU) have extensive trade and investment ties that
U.S. trade data for the EU from the U.S. Bureau of Economic
have evolved and deepened with the growth of global
Analysis (BEA) reflects the EU’s political membership for the
supply chains, trade in services, and cross-border
reference period, thus excluding the UK from EU data starting
investment. They are a dominant economic force globally;
with 2020 annual data. This In Focus provides trade and
in 2019, they jointly accounted for
investment data for the EU28 (with the UK) to inform analysis of

the U.S.-EU trade relationship historically, and for the EU27
26% of world merchandise exports and 30% of
(without the UK) to inform forward-looking analysis of the
merchandise imports;

relationship, such as on potential future U.S.-EU trade talks.
39% of world commercial services exports and 33% of
commercial services imports; and
U.S.-EU Trade
 more than half of global outbound and inbound foreign
The EU was the United States’ largest trading partner in
direct investment (FDI).
2019 (see Figure 2), representing one-fifth of total U.S.
(Trade data from World Trade Organization, extra-EU
trade. Given the UK economy’s size, Brexit brings changes
trade; FDI data from U.N. Conference on Trade and
to U.S.-EU trade and investment ties (see Figure 3).
Development.) Members of Congress have an interest in
Figure 2. U.S. Goods and Services Trade with Major
examining U.S.-EU trade and investment ties, given their
Trading Partners, 2019
magnitude, scope, and implications for U.S. trade policy.
EU Economy
Following Brexit—the UK’s withdrawal from the EU on
January 31, 2020—the EU consists of 27 member states
that are integrated economically. The EU’s largest
economies are Germany (25% of GDP of EU27, see text
box), France (17%), Italy (13%), and Spain (9%) (see
Figure 1). The UK formerly was the EU’s second-largest
economy (15% of EU28 GDP in 2019). EU member states
share a customs union, a single market in which goods,

services, people, and capital move freely, and a common
Source: CRS, data from U.S. Bureau of Economic Analysis (BEA).
external trade policy (negotiated by the EU) with common
Notes: Total trade is exports plus imports. Totals may differ due to
customs tariff rates that apply to imports across the EU’s
rounding.
external borders. The EU has a common currency used by
Figure 3. U.S.-European Trade, 2019
19 “Eurozone” members.
Figure 1. EU27 GDP: Composition by Members, 2019

Source: CRS, based on data from the World Bank.

Source: CRS, data from U.S. Bureau of Economic Analysis (BEA).
Notes: EU27 gross domestic product (GDP); current U.S. dol ars.
Notes: Total trade is exports plus imports. Trade balance is exports
At $15.6 trillion in GDP in 2019, the EU27 accounted for
minus imports. Totals may differ due to rounding.
nearly one-fifth of the global economy. The EU economy
Goods. In 2019, for goods, the EU27 was the United
grew by 1.5% in 2019, and is expected to contract by 7.4%
States’ largest export market ($269 billion), and its largest
in 2020 as the Coronavirus Disease 2019 (COVID-19)
source of imports ($454 billion), modestly ahead of China
pandemic takes an economic and social toll, before
as a source of imports ($452 billion). Germany and France
rebounding by 4.1% in 2021 (data from the European
were top U.S. goods trading partners within the EU27 in
Commission, November 2020).
2019. The composition of trade changes to some degree
without the UK (see Table 1).
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U.S.-EU Trade and Investment Ties: Magnitude and Scope
Table 1. U.S. Trade in Goods with EU, 2019, U.S.$ bn
billion), and Luxembourg ($297 billion) (BEA data, FDI

Product (NAICS 4-digit)
EU28 EU27
stock on a historical-cost basis).
Top
Aerospace products & parts
46.8
36.5
Figure 4. U.S. Foreign Direct Investment (FDI), 2019
U.S.
Pharmaceuticals & medicines
36.4
32.8
exports Oil & gas
25.8
19.8
Nonferrous (excluding
16.0
3.9
aluminum) & processing
Motor vehicles
13.9
12.7
Navigational/measuring/medical
13.8
12.1
control instruments
Medical equipment & supplies
13.7
12.7
Top
Pharmaceuticals & medicines
100.5
93.4

Source: CRS, data from U.S. Bureau of Economic Analysis (BEA).
U.S.
Motor vehicles
42.9
33.2
Note: FDI stock on a historical-cost basis.
imports
Aerospace products & parts
33.7
28.1
Other general purpose
20.2
17.9
In 2018, sales of EU27-based affiliates of U.S. MNEs and
machinery
sales of U.S.-based affiliates of EU27 MNEs totaled $3.8
Navigational/measuring/medical
18.8
16.5
trillion, and these affiliates employed about 6 million
control instruments
workers directly (see Table 2 for breakdowns). The UK
Basic chemicals
17.8
16.6
formerly accounted for around one-third of U.S.-EU28
Source: CRS, data from U.S. International Trade Commission.
MNE affiliate sales and jobs.
Notes: Total exports and general imports. NAICS: North American
Table 2. U.S. and EU Multinational Enterprises
Industry Classification System. Special NAICS categories (9300, 9800,
(MNEs): Affiliates’ Sales ($trn) and Jobs (mn), 2018
9900) are excluded.
U.S. Direct
FDI in
As highly advanced economies, the United States and EU

Investment Abroad United States

trade in similar goods within the same industry (known as
Sales
Jobs
Sales Jobs
intra-industry trade). This often consists of trade in
World
$6.7
14.4
$4.9
7.8
components or intermediate goods used to produce complex
products such as cars and machinery, allowing firms to
EU28
$2.7
4.3
$2.4
4.4
specialize and benefit from economies of scale by focusing
EU27
$2.0
2.9
$1.7
3.1
on different parts of the supply chains. In many cases,
UK
$0.7
1.5
$0.7
1.3
intermediate goods are traded across the Atlantic between
multinational enterprises (MNEs) and their affiliates (e.g.,
Source: CRS, based on data from Bureau of Economic Analysis.
BMW in Germany trading with BMW in South Carolina).
Note: For majority-owned U.S. and EU MNEs.
Services. The United States and the EU are the world’s two
In 2019, related-party goods trade (between U.S. firms with
largest and highly integrated services economies. The UK
their subsidiaries abroad, and by U.S. subsidiaries of
previously accounted for the largest share of U.S.-EU
foreign companies with their parent companies) accounted
services trade. U.S. services trade with the EU27 bloc,
for 40% of U.S. goods exports to the EU27 and 64% of
however, remains significant, accounting for about one-
U.S. goods imports from the EU27; including the UK does
third of total U.S. services trade. Ireland and Germany were
not significantly alter these shares (Census Bureau data). In
top U.S. services trade partners within the EU27. Various
2018, about one-half of all services supplied by U.S.
business services, travel, and charges for intellectual
affiliates to foreign persons was to the EU28, and about
property use led total U.S.-EU27 services trade.
one-third of those services were to the UK. EU affiliates in
the United States, when including UK affiliates, account for
U.S.-EU Foreign Direct Investment (FDI) over half of all EU foreign services trade (BEA data).
U.S.-EU FDI ties are significant in light of their size and
interdependent nature. While the UK was significant to
Issues for Congress
these ties, the United States and 27-member EU bloc
In the 117th Congress, issues that may arise include
remained each other’s largest FDI sources and destinations
 the impact of U.S.-EU trade and investment ties on the
in 2019 (see Error! Reference source not found.4). The
U.S. economy and U.S. prosperity overall, and for
magnitude of FDI reflects the overall investment-friendly
constituent interests, more specifically;
business climates of the United States and EU, and firms’
 the evolution of these ties post-Brexit; and
preference to reach customers through local presence. FDI
 the implications of a potential U.S.-EU trade
occurs in manufacturing, banking, financial, and other
liberalization agreement, or further escalation of tariff
sectors.
frictions, for U.S. commercial and economic interests.
In 2019, the largest destinations in the EU27 for U.S. direct
For more information, see CRS In Focus IF11209, U.S.-EU
investment abroad were the Netherlands ($861 billion),
Trade Agreement Negotiations: Issues and Prospects.
Luxembourg ($766 billion), and Ireland ($355 billion); and
the largest sources of FDI in the United States from the
Shayerah I. Akhtar, Specialist in International Trade and
EU27 were: the Netherlands ($487 billion), Germany ($373
Finance
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U.S.-EU Trade and Investment Ties: Magnitude and Scope

IF10930

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