Paris, Tuesday, September 12, 2000 Those Self-Defeating Trade Squabbles By Reginald Dale International Herald Tribune
WASHINGTON - Anyone who has followed trans-Atlantic trade disputes knows that saber-rattling brinkmanship is a big part of the game. In the end, good sense usually prevails and conflicts are defused before too much damage is done. Good sense, however, is notably lacking in the latest rash of disputes between the two trade superpowers, which now risks escalating into one of their worst-ever confrontations. This time the sabers are well out of their scabbards.
With the United States on the verge of introducing new rotating sanctions on $300 million worth of EU exports in conflicts over beef and bananas, the EU is considering action against an unprecedented $4 billion worth of U.S. trade in retaliation for Washington's unwillingness to scrap tax arrangements favoring exporters over domestic producers.
Legally, both sides are technically in the right. But they are failing to see the big difference between what they are entitled to do and what is in their own best interests.
Strangely enough, at the heart of the disputes lies the World Trade Organization in Geneva, the body set up to police the rules of world trade more effectively than its predecessor, the General Agreement on Tariffs and Trade, in the hope of improving international mechanisms for dispute settlement.
One otherwise welcome aspect of the WTO's rules seems to be causing trans-Atlantic disputes to break out more virulently than in the past. Under the old GATT system, countries accused of violating the rules of the trading system could effectively veto the proceedings - a right they no longer enjoy in the WTO.
In fact, one of the main reasons that the United States fought so hard to establish the new organization was precisely to get the veto removed, rightly calculating that America stood to gain more than it would lose from tougher enforcement of the rules.
But that has not solved the problem of what happens if offenders fail to comply with WTO rulings. First, the EU prevaricated in the face of WTO rulings against its import restrictions on beef and bananas. Now, most regrettably, Washington seems to be ducking full compliance with a ruling against a system that allows American companies to dodge U.S. taxes on exports.
The replacement system the administration is rushing through Congress in an apparent effort to comply with the ruling is vulnerable to EU charges that it does not make big enough changes.
When they have won their cases, on the other hand, Washington and Brussels have sanctimoniously trumpeted the outcome as justifying sanctions against the other, rather than seriously attempting to defuse the issues.
By their behavior, both as winners and losers, the world's two biggest trading powers risk undermining the World Trade Organization, even though a strong WTO is manifestly in their own best interests. They are doing so when the organization is already under fire from anti-trade activists around the world and good trans-Atlantic relations are essential if trade liberalization is to proceed.
Most sanctions, anyway, are unlikely to work. European consumers won't change their minds about the safety of U.S. hormone-fed beef just because Roquefort cheese is summarily priced out of the American market. And U.S. importers can evade rotating punitive tariffs on some goods by stockpiling them in advance.
The reasons why the two big trading powers are behaving so badly are, predictably, political. EU countries want to keep on good terms with their territories and former colonies in the Caribbean and elsewhere by continuing to import their overpriced bananas. They do not want to upset persnickety European voters by lifting the ban on U.S. hormone-fed beef.
Prime Minister Tony Blair of Britain has frantically lobbied President Bill Clinton not to include Scottish cashmere in the latest round of rotating U.S. sanctions for fear that job losses could help Scottish nationalists in parliamentary elections that are expected next year. He is asking Mr. Clinton to clobber one of his EU partners instead.
The U.S. government, for its part, does not want to anger major corporations, especially in an election year, by abolishing tax privileges for exports - even though Vice President Al Gore constantly attacks big business in his presidential campaign.
What is lacking is the leadership necessary to put the long-term interests of the trading system above short-term domestic political concerns. Sadly, that may be too tall an order.