Scared of Being Right

Article published on March 5, 2004
community published
Article published on March 5, 2004

This article has not been vetted by an editor at Paris HQ

Europe is at long last set to impose trade sanctions on the US. But the EU is still scared of asserting the legality of the case and provoking an open economic war with the United States.

In 2000 the EU presented to the Dispute Resolution System of the WTO its complaints over tax breaks for US exports. Huge corporations such as Boeing, Microsoft and General Electric could, by virtue of the subsidy (Foreign Sales Corporations), receive tax savings of up to 30% of the value of their products. Ever since then, the more the EU has seemed to be proven right, the more flexible and understanding it has become.

A tentative approach

More specifically it is the Trade Commissioner, Pascal Lamy, who has taken this approach (1). He has played to perfection the biblical role of the prodigal son’s father. The tentativeness of his approach has allowed opportunities to pass by, despite the WTO’s unfailing support of the ‘European cause’. Commissioner Lamy decided to opt for a policy of forgiveness and understanding, allowing American economic policy to continue as it was, with only timid reforms that failed get to the heart of the problem.

In 2003 the WTO (which after all cannot be classified as an anti-American organisation) decided to allow sanctions of up to 100% on products whose questionable exportation methods were in dispute. Today this would be nearly 5,000 million dollars.

After all Commissioner Lamy’s words full of good intentions – ‘gradual pressure’, ‘we want withdrawal, not reprisals’, ‘countermeasures, not chastisement’ – the ‘fine’ now imposed on the closed list of items exported by the US is 5%. And another 1% for every month it is breached, up to a maximum of 17% (3). Sanctions that were some time ago threatened at 100% now stand at just 5%.

Fears of a trade war

Europe is scared that the sanctions could degenerate into an open trade war, when in fact they cause no great harm on the other side of the Atlantic. Given the weakness of the dollar against the Euro the sanctions won’t have much of an effect on the competitive American market. And one presumes Commissioner Lamy knew this.

The issue is under debate by top American authorities. The Treasury Secretary is calling for measures that will allow him to comply with the WTO’s decision, but is really only in search of a way to avoid the sanctions and carry on helping exporters.

There’s no need to adopt a policy of hostility towards the US any more than there is need for the maximum punishments to be levied against her. But when it comes to defending the interests of European business there’s no place for fear, fear of confronting illegalities that directly threaten our economy. They over the pond are certainly not afraid to promote their interests however wrong that may be. They would have no qualms about raising another ‘iron curtain’ in order to strengthen their own economy (let us recall the fraudulent tariff policy imposed on imports of this product) (4).

They are without doubt our greatest competitor. And we will meet again in the future. The most difficult thing about being right is acting on your convictions.