Oh let's be sensible about trade disputes

["Lisa & Ian Murray" <seamus@xxxxxxxxxxxxx>]

[full article at http://www.iht.com/IHT/TODAY/TUE/FIN/think.2.html ]

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.