[A-List] Europe/US rivalry: trade wars

[Keaney Michael]

Steel tariffs are no way to treat an ally
George W Bush's decision to impose tariffs on steel will undermine wider transatlantic co-operation, warns Leon Brittan
Financial Times: March 19 2002

During the cold war there was no shortage of serious trade disputes between the European Union and the US. But a degree of restraint was always shown, even if some tit-for-tat retaliation took place. This was because both sides realised the risk of economic conflict spilling over into the political arena. In theory, trade disputes were supposed to be kept separate from strategic issues. But in practice a bitter trade war was bound to colour EU attitudes towards the US more generally. That was too dangerous to contemplate.

When the cold war ended, those of us who regarded the Atlantic alliance as of continuing paramount importance had to find new ways to prevent strains in the economic relationship poisoning the strategic partnership. Thus in spite of further serious trade disputes, Pascal Lamy, my successor as trade commissioner, worked closely with the US to launch the Doha trade round. Later, when the World Trade Organisation ruled that American export subsidies were illegal, the EU could have lawfully increased tariffs against the US in respect of several billions of dollars of trade. But there was a mutual understanding that the EU would hold off from doing so, to give the US the chance to amend its legislation to conform to the WTO ruling.

This co-operation and restraint did not explicitly take place because of the need to protect the strategic relationship but this was an ever-present underlying factor. In spite of all protestations to the contrary, there had always been a loose linkage between economic and political co-operation and partnership. If serious strains arose on one side of the relationship, there was always a risk that the other would suffer.

That is why the recent decision of the US to impose punitive tariffs on steel is not only illegal, hugely damaging and inexcusably protectionist; it also threatens wider EU-US co-operation, however much leaders on both sides of the Atlantic may wish to avoid this. It is bound to raise questions about the benefits of such co-operation, for example, in Iraq - questions that were being asked in any event but will now inevitably be asked more sharply and critically.

Britain has been the US's closest ally in the fight against terrorism and has been the leader in the effort to mobilise international support for the US's far-reaching and ambitious campaign. But there are many voices, not just on the left of the Labour party, who have been asking whether some aspects of the American approach, such as preparations for a frontal attack on Iraq or implied threats to North Korea, are wise or ultimately counter-productive, in terms of their impact on allies of the US all over the globe.

There may or may not be persuasive answers to those questions. But when the US hits its closest partner in the teeth, it is inevitable that those questions will be asked more persistently and that those who have hitherto been ready to take much of what the US says and does on trust will be less ready to do so in the future. Tony Blair was humiliatingly and publicly rebuffed. He wrote to President George W. Bush urging him not to apply illegal steel tariffs. He spoke to him personally on the telephone. All to no avail.

The president ignored the prime minister's arguments about the legality and wisdom of pursuing a protectionist course. He ignored the prime minister's plea on behalf of an important British industry. No amount of insistence that political and economic issues must be kept apart is going to prevent people asking with increased scepticism some potentially damaging questions. What are we actually getting in return, for sticking so closely to Mr Bush? Even if our interests in fighting terrorism are fundamentally the same, do we really gain from being so prominently and apparently at the president's side at every twist and turn in this lengthy saga? What evidence is there that doing so gives us any influence over US policy?

Those questions will now be asked with ever-increasing force, most damagingly by those who have stayed silent and hid their doubts until now.

I am not sure if the genie can be put back in the bottle. But Mr Bush still has some weeks before confirming his steel decision. If he declines to do so, not only will he be taking a small step in restoring the US's tattered reputation as a prominent supporter of freer trade. He will also be showing that he does not regard his supporters on wider issues, such as the UK, as simply camp followers whose adherence to his side can be taken for granted. He will be demonstrating in a practical way that loyalty is a two-way obligation. In doing so he would encourage those who ask questions about the wider issues to be more inclined to give him the benefit of their very considerable doubts.

Lord Brittan is a former EU trade commissioner

Full article at:
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3XKWHQYYC&live=true

Michael Keaney
Mercuria Business School
Martinlaaksontie 36
01620 Vantaa
Finland

michael.keaney at mbs.fi