Trade Battle Soon To Escalate

Trade Battle Soon To Escalate

Horner Op-Ed in The Washington Times
April 17, 2002

President Bush's recent tariffs on steel imports drew threats of retaliation, particularly from Europeans who are most directly impacted. They and others are presently cobbling responses, to not only leaven the hit on their industries but to modify U.S. behavior, present and future. Wrangling over the legality of these maneuverings likely will only have begun when later this year the Europeans threaten trade sanctions dwarfing this debate. This during two weeks in August and September when the world's trade, economic and environment ministers meet in Johannesburg for the World Summit on Sustainable Development. Readers who recall the campaign season of 1992 may recognize Johannesburg as the 10th anniversary of the "Rio Summit," which spawned such agreements as the Kyoto Protocol on "global warming" and mortally wounded George Bush "41." Europeans recognize this, too. George Bush says the U.S. will not ratify Kyoto, to howls from moralizing European competitors (who have also refused to ratify, four years running). Amid continued bleating about American irresponsibility, European Union (EU) countries now say they will finally, formally inflict Kyoto on their citizenry by submitting ratification instruments in Johannesburg. This will set in motion a major trade war. Let us assume EU sincerity, and it generates sufficient ratification for Kyoto to go into effect. Kyoto will inarguably prove a significant economic drain to ratifying nations due to required increases in energy taxes, energy rationing, or switching to ineffective and wildly more expensive energy sources. Already agitating over America's "unfair energy tax competition," how do these countries ensure they are not crippled by further energy suppression? If you believe EU threats, Europe intends trade sanctions. Understand that, despite its green rhetoric, Kyoto is purely an economic instrument, requiring massive energy use reductions predicated on science that couldn't fool a high-school physics student. One year ago, amid revelations about the collapsing case for warming, then-EU Environment Minister Margot Wallstrom bluntly asserted that Kyoto was "not about whether a bunch of scientists can agree." "[Kyoto] is about economy", Mrs. Wallstrom confessed. "This is about leveling the playing field for big businesses worldwide." Retaliatory tariffs against the U.S., or any Kyoto signatory sober enough to not ratify (Australia, for instance), implicates, at minimum, the multilateral trade framework colloquially known as the World Trade Organization (WTO). Among WTO requirements are that economic barriers be applied evenly, and that sovereign, e.g., environmental, policies cannot be protectionism veiled in green. A now-notorious "shrimp-turtle" decision by the WTO is instructive. That panel originally ruled against a U.S. policy banning shrimp imports from countries not using certain "turtle-safe" nets, because it did not apply equally to all trading partners. The policy smacked of market protection for U.S. fishermen. The U.S. adapted the ban to conform to the ruling, and prevailed in a subsequent challenge. This requirement that environmental protection measures apply equally to all trading partners dooms EU plans as currently envisioned. In fact, on its face, this seems to deter any punitive measure citing Kyoto as its basis, be it so patently aimed at America or not. The EU wants to punish recalcitrant signatories on Kyoto's "Annex I", or covered countries not ratifying. But that list is only 38 strong, exempting 140 signatories; any measure aimed at "Annex I" parties on its face treats partners differently. Alternatively, punishing every country not meeting a Kyoto-like "greenhouse gas" emission profile is equally untenable. Plainly stated, the EU is as adamant about not including the environmentally backward developing world in Kyoto's wreckage as they are in favor of punishing U.S. prosperity. The third obvious option, should the EU be serious about committing Kyoto's economic Hari Kari, is equally unpromising. They must convince the WTO that U.S. refusal to impose domestic energy taxes, etc. constitutes an unfair trade advantage. Distilled: If the EU decides to do something stupid, the U.S. cannot just sit there and not follow suit. Yet, let us not take the apparent lack of legal justification for such EU threats lightly. Not only are they determined to force us into their energy-starved world, but trade disputes are not always adjudicated (or settled) in the most thoughtful manner. The United Nations has for a decade thrown its significant weight behind using "climate change" to "level the playing field", seeking to "harmonize" taxes upward. International tribunals frequently expose their anti-Americanism. Finally, even WTO representatives have engaged the issue of "harmonizing" WTO and Kyoto, by, incredibly, amending the former to accommodate the latter's obvious violations of an existing treaty. The mere political threat has already cowed the Bush administration to informally ask our allies to please not make Johannesburg about "environment," but instead a forum for discussion of issues such as AIDS and education. Our trade competitors typically fare well when they get tough with us. Showing fear at this stage can only encourage them.