Euro Clash

Removing tariffs is easy. Breaking down social barriers to trade is hard.

Very Simply Different

One way to correct that perception is by generating more wins, and the Bush Administration has begun to get more aggressive — notably by filing a case against Europe’s then four-year-old ban on GMO food last May, and against China’s value-added tax on semiconductors in March (see “Chinese Walls,” at the end of this article).

But unlike those involving bananas or steel, these latest cases point to a more-serious divide welling up between the United States and Europe. “Increasingly, I’m worrying that [the disagreements] are over fundamental, almost philosophical issues, rather than over bananas or some other commodity,” says Reinsch. He points to the EU’s actions against Microsoft last March — fining the software giant $613 million for anticompetitive behavior, and ordering it to unbundle its media player from Windows software and share some of its code — as the latest sign of a divergence between U.S. and EU regulation of competition. Reinsch says this trend began with European antitrust regulator Mario Monti’s decision to kill the proposed merger of Honeywell and General Electric in 2001.

And then there’s “the vexed question,” as Lamy called it, of Europe’s opposition to GMOs, which the United States claims has cost American farmers more than $200 million a year in U.S. corn exports. The United States argues that Europe has wrongly closed its markets to GMO products (and beef from hormone-treated cattle) without providing any scientific basis for doing so. “This case is about playing by the rules negotiated in good faith,” said U.S. Agriculture Secretary Ann Veneman when the claim was filed.

But the question is somewhat more complex. The EU’s ban on GMOs was finally lifted last month after a series of traceability and labeling regulations were put in place for all biotechnology products and “downstream” products — that is, products that may contain (or have eaten) biotech crops. The U.S. Trade Representative office says these rules are expected to be “onerous and expensive,” and the United States has not lifted its WTO suit. Meanwhile, the European Food Safety Authority has lined up more than 10 GMO food products for review. By the time the WTO rules on the U.S. complaint, predicts the EC’s Laya, “it will no longer be an issue.”

To Lamy, there’s a sharp distinction between Bush’s steel tariffs and the GMO ban. The former, he said in March, “were clearly designed to protect an uncompetitive industry.” By contrast, the GMO ban was not designed to protect European farmers (the EU does import non-GMO crops and seed), “but reflects our society’s highly precautionary preference in this area.” Ultimately, said Lamy, there’s a distinction between protectionism and “the legitimate protection of social choices.”

Honey Dip

But that protection is beginning to rankle. On this side of the Atlantic, the EU’s social choices on health and safety issues often look like thinly disguised trade barriers. A case in point: Last June, the EU banned all U.S. honey exports because the Food and Drug Administration would not agree to adopt Europe’s more-stringent testing standards. “There’s never been a quality issue with U.S. honey,” says the National Honey Board’s Julia Pirnack, “but a ban doesn’t look good to [European] consumers.”

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