Posted on 12/06/2003 5:06:25 AM PST by sarcasm
ONDON, Dec. 5 - One day after President Bush abandoned American protective tariffs on imported steel to avert a trade war with Europe, Pascal Lamy, the European trade commissioner, said he would use the same tactics again in another long-running trade dispute with the United States.
Mr. Lamy said the European Union would press ahead with punitive tariffs on some $4 billion worth of goods from politically pivotal regions of the United States if Washington did not end tax breaks for American corporations' offshore operations. The tax breaks have already been found by the World Trade Organization to be an illegal export subsidy.
Mr. Lamy's remarks reflected assessments by some European trade experts that after the American retreat on steel, the power balance of global trade had shifted in Europe's favor.
"We in Europe, by standing together, by using the World Trade Organization and saying we're going to uphold the rules of world trade, we've played our hand very, very effectively indeed," said Patricia Hewitt, Britain's trade minister.
In a telephone interview from Brussels, Mr. Lamy said the outcome of the steel dispute should demonstrate that Europe "punches its weight."
"It's a message sent within Europe," he said. "It's a basic lesson: union equals might and strength. It's why we are building Europe."
In fact, though, the euphoria of the moment - a rare instance of the European Union's besting the United States in a trade dispute - seemed to cloud two other issues that have as much bearing on the future of trans-Atlantic and global trade as the steel dispute.
One is the stalled negotiations on a new world trade agreement. The World Trade Organization's 148 member nations have yet to restart the talks formally, after the collapse of their ministerial gathering in Cancún, Mexico, in September.
And, although senior officials of the organization are scheduled to meet at its headquarters in Geneva on Dec. 15 to discuss the situation, many trade experts say that the setback in Cancún may mean that the negotiations will fail to meet a Jan. 1, 2005, deadline for reaching a broad new agreement to lower farm subsidies and open markets.
"We are ready to negotiate," Mr. Lamy said. "The problem is that there is no negotiation."
More immediately, though, a deadline of March 1, 2004, looms for the United States to comply with another W.T.O. ruling in the offshore tax-break dispute. As in the steel case, the trade organization - which functions both as a negotiating forum and as an adjudicator of disputes - has ruled against the United States and in favor of the European Union.
President Bush's decision to lift the protective steel tariffs he had imposed in 2002 headed off a threat of reprisals against some $2.2 billion in American exports, directed specifically at the economies of states like Florida and Michigan that are expected to be crucial to President Bush's hopes for re-election next year.
In the offshore tax-break dispute, the European Union has said it will begin to impose progressive tariffs starting next March on up to $4 billion worth of goods, beginning with a 5 percent tariff and increasing 1 percentage point each month to a total of 17 percent. Again, the targets of the tariff have been chosen for their potential political effect.
A trade negotiator in Geneva who spoke on condition of anonymity said the dispute "is hanging like the sword of Damocles."
In the telephone interview, Mr. Lamy said the European Union planned to go ahead with the reprisals if the United States authorities "have not complied - which we hope they will do" by the March 1 deadline. Europe, he said, would "proceed with the sort of clear, constant and predictable behavior" it used in the steel dispute to persuade Washington to comply.
The World Trade Organization made no formal statement in reaction to President Bush's decision to withdraw the steel tariffs, in line with the organization's desire to be seen as a neutral arbiter of global trade. But trade experts in Geneva said that the American retreat on steel was likely to be interpreted as a huge boost for the organization's credibility - and to its ability to promote the liberalization of world trade - at a time when the collapse of the Cancún talks had left it in the doldrums.
By being seen to force a major trade power to fall in line with its rules, the organization countered criticisms that it functioned as a club for rich countries to subjugate poor ones, these experts said. Conversely, Mr. Lamy said that further defiance from the United States on the steel dispute would have been dangerous for the organization. "If the big guys in the system use it this way, it's a very bad precedent for the others," he said.
After making only muted public statements on Thursday, senior American executives in the steel industry lashed out on Friday at the United States trade representative, Robert B. Zoellick, saying he had not done enough to challenge the World Trade Organization ruling or fight back against the European retaliation plan.
"At the end of the day, the president was poorly served by his advisers at the United States trade representative, particularly given the gloating and the swaggering on the part of Pascal Lamy and his colleagues," said Terrence D. Straub, senior vice president of U.S. Steel. "The other side always seemed to be one step ahead of the United States trade representative."
Mr. Straub, in a phone interview initiated by U.S. Steel, said he was in Paris trying to negotiate with European and other nations over reducing government subsidies to steel makers and cutting global overcapacity in the industry. Mr. Bush's decision on Thursday to back down in the face of Europe's threats, he said, had led to an immediate "hardening of positions" on the part of the Europeans in the Paris talks.
Daniel DiMicco, chief executive of Nucor, also criticized the performance of Mr. Zoellick and his team.
"I don't think U.S.T.R. used all the avenues available to them as they promised they would two years ago, in face-to-face meetings, to deal with the E.U. response," he said in a phone interview he initiated. "We tried to get them to recognize that they had other avenues available to them, and apparently they chose to ignore it."
Mr. DiMicco said he and other industry executives now suspected that the administration imposed the tariffs solely as a tactical move to help build support in Congress last year for granting the president authority to negotiate new trade agreements. Mr. Bush later won the authority, which Congress had denied to President Bill Clinton.
"There's obviously a very strong feeling in the industry that we were used to get trade promotion authority passed," he said. "Once they got that passed, they didn't live up to their commitments to the industry. In particular, that has to do with the U.S.T.R."
Asked about the criticism of Mr. Zoellick, John Veroneau, general counsel for the trade representative's office, said: "The president ended his safeguards because upon review it worked and the situation improved. These guys are still wrongly fixated on E.U. retaliation instead of the main issues."
"If the safeguards had been maintained, we would have vigorously pursued this matter further in the W.T.O.," he added.
Some trade experts ascribe the European Union's success on steel to fast footwork by Mr. Lamy himself. He was quick to move Europe into a leadership position, along with several Asian nations and Brazil, in challenging the American tariffs after they were imposed 21 months ago.
Mr. Lamy repeatedly made clear, moreover, that the European Union was serious about reprisals. "My simple goal is compliance," he said in an interview during a visit to Washington on Nov. 4. "I will not change our deadlines."
Well, you know how the French operate.
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