Endangered Trade
(The Asian Wall Street Journal, Mar., 1999)
Such is the special relationship between America and its NATO partners that while that alliance cooperates to bomb Serbian forces, the U.S. and the EU are managing a trade war against each other. Fortunately, no lives are at stake in the latter conflict. Yet if it spreads unchecked, the rest of the world is sure to feel the pain of it.
It’s hard to decide whether the U.S. or Europe deserves the most contempt for expanding their trade war. The first fight, over bananas, is essentially a struggle between two fruit distributors with strong political connections. Now Washington and Brussels are escalating their battle over beef, with European farmers stooping to phony science in their claims that hormone-treated American beef is unsafe.
In his first term in office, President Bill Clinton teamed up with the Republicans to push major free-trade liberalizations. Now, however, he seems bent on pursuing ‘level even if playing fields,’ torpedoing the world economy. The latest salvo was fired this week, with the U.S. announcing it has targeted close to $1 billion of European products for 100% tariffs if the European Union doesn’t drop the hormone nonsense.
The move follows an earlier announcement that the U.S. administration will fight Europe’s banana import regime by hitting a range of European goods with prohibitive tariffs. Add to this renewed American threats to raise the drawbridge to Russian, Japanese and Brazilian steel, as well as administration support for a congressional vote to ban Concorde flights from Europe in relation for EU threats to refuse landing rights to old-American planes retrofitted with noise reducing technology.
Mr. Clinton sounded the protectionist battle cry in his January State of the Union address, where he vowed to fight for ‘a freer and fairer trading system for 21st century America.’ In the case of agriculture, when the respective lobbies on both sides of the Atlantic enter the fray, that translates into a sticky situation. On the whole, American farmers are major exporters. And U.S. farmers have a good case on beef hormones. But it is nonetheless dangerous for the U.S. to shut off $1 billion in trade.
This is not to excuse the EU. The hormone argument is nonsense. The World Trade Organization has acknowledged as much, ordering the EU to allow imports of American meat by May 13. Brussels has responded by saying that it needs more time because European citizens, who supposedly don’t like hormones in their food, would rebel against their governments if American meat suddenly appeared on their store shelves.
Were it not for the high stakes involved for both producers and consumers, the argument might be amusing. When governments curtail trade the global economy shrinks and for all the jobs ‘saved’ by protections, there are a lot more lost. The Smoot-Hawley agricultural protections imposed by the U.S. Congress in the late 1920s certainly contributed to the Great Depression. Mr. Clinton may believe he is fighting the good fight. But we’ve never thought much of the kind of war where you pose even when you win.