A key State Department official yesterday presented a grim picture of deteriorating American-European economic relations, charging that some Common Market governments are trying to solve pressing domestic problems through import restrictions or export subsidies that affect the United States.
Robert D. Hormats, assistant secretary of state for economic and business affairs, told the Mid-America Committee in Chicago that economic pressures in Europe are so severe and prospects for economic growth so slim that "Europe appears to be losing confidence in itself and its future."
Hormats held out the potential for a souring U.S.-European relationship on all fronts. He warned that growing irritations on economic matters could spread to other areas, resulting in "a downward spiral in world trade and investment" that could lead to "poisonous effects" in political and security relationships.
Just back from a round of talks with European Community leaders in Brussels, Hormats said that "in their weakened state, some European governments cannot, or are reluctant to, take unpopular corrective measures, and are finding it more difficult to resist pressures to solve domestic problems through import restrictions or export subsidies.
"And the authority of Community institutions to deal with these problems has been sapped by the political weakness of member governments and the lack of a consensus among them."
A further complication, he said, is that those European officials who lived through the past quarter century of American-European co-operation that gave birth to the Atlantic economic partnership, NATO, and the Common Market itself "are gradually being succeeded by a new generation" to whom the identity of U.S.-European interests "is no longer self-evident."
Hormats said that European leaders, despairing of achieving a smart economic recovery, are responding to internal demands for protection, especially against Japan and the advanced developing countries. "These demands, and European reaction to them, are at the heart of the U.S. trade problems with the Community," Hormats said.
For the future, he urged that the U.S. and Europe renew faith in market-oriented principles; try to restore some of the cooperative spirit of the past, and refrain "from shifting the burden of adjustment to one another"; recognize that measures to restore economic growth, "often unpopular" are needed; build a new framework governing rules on international investment; and resist permanent protectionist devices against imports.