The EU and the US appear poised for another damaging trade war after the World Trade Organisation (WTO) this week cleared the way for Washington to level tariffs on $116 million worth of European Union products. The latest dispute involves the EU's 11-year ban on hormone-treated beef imports from the US. Irish exporters are certain to get caught in the crossfire between Brussels and Washington; the final list of affected products has still to be finalised but it appears that some £10 million worth of Irish exports including pork and bacon products, cereals and confectionery, are at risk. Other EU products, including ham, poultry, French cheese and possibly some industrial goods like motorcycles, could also be affected. Brussels claims that the use of such hormones in US beef represents an unacceptable health risk to EU citizens but the WTO, the arbitration body in international trading disputes, does not agree. The WTO has formally ruled that there is no scientific evidence to justify Brussels' concerns. But the EU refuses to comply with the WTO decision until it has completed its own scientific tests.
This week, WTO arbitrators ruled that the ban had resulted in $128 million a year in lost trade for the US and Canada, just over half what the two countries said was required to compensate them for the ban - but still much higher than the $40 million EU estimate of lost trade. In recent days, US officials have been in bullish mood: Ambassador Peter Scher, Special Trade Representative, has warned that the EU must now pay a price for its unjustified ban. He expects US "retaliation" to be in place by the end of this month.
In all of this there is a strong sense of deja vu: earlier this year, the WTO ruled that the US could impose some £140 million worth of tariffs on EU goods. It found that some aspects of the EU's banana regime, giving preferential access to former colonies, were illegal. The parallels with the current dispute are striking: the EU is again seeking to defy a WTO ruling and it has assembled a poor case in its own defence. The EU can claim that hormone-treated beef contributes to prostate, colon and breast cancer but it will have to produce independent, well-grounded scientific evidence to back up its case. Otherwise, it is vulnerable to the charge that it is exploiting supposed health concerns simply to protect its own beef markets. The EU might also look to the wider picture. It has adopted what might diplomatically be called an a la carte approach to WTO rulings on both beef and bananas. But the EU cannot stand alone; like every other trading nation it must respect international trading rules. In truth, the EU can ill-afford a further trade war at a time when most of its economies are emerging from recession and in advance of next year's critical round of world trade talks, where the EU will be battling to retain its export subsidy regime. Brussels has already lost its battle with the WTO; unless it can produce definitive scientific evidence supporting its claims about hormone-injected beef, it should step back from a war it also seems destined to lose.