Europe is arming itself for a more lawless world of trade and the bloc’s sights are on the US.
EU trade chief, Kilkenny-man Phil Hogan has sought an upgrade to EU legislation on enforcing international commercial rules.
His proposal would allow the EU to impose sanctions against countries that illegally restrict commerce and simultaneously block the World Trade Organisation’s dispute-settlement process.
The timing of the initiative in Brussels is no coincidence.
On Wednesday, the WTO’s much-prized appellate body ceased to be able to handle new cases because a US veto of any appointments left it without the minimum three members required for verdicts.
The body is the WTO’s supreme authority, issuing binding decisions that give winning parties in disputes the right to apply trade penalties such as higher tariffs against lawbreaking countries.
Since before Donald Trump’s presidency, the US has accused the appeals’ panel of overstepping its mandate and has demanded changes to the body’s practices.
The EU is asserting itself more in a bid to prevent Mr Trump’s ‘America First’ agenda and protectionism from undermining the rules based global order to which Europe is committed.
Over the past three years, Mr Trump has angered Europe by hitting its steel and aluminium with tariffs based on controversial national-security grounds, dangled the threat of similar levies on foreign cars and drawn up plans to target French goods with levies as retaliation over a digital tax in France.
The US president has also sought to restrict European trade with Iran after pulling out of an international agreement to control the country’s nuclear activities and backed out of a landmark United Nations accord to fight climate change.
The US steel and aluminum duties, introduced in 2018, prompted the EU to complain to the Geneva-based WTO.
The bloc also scrambled to put its own trade defences in place for steel to prevent the US levies from diverting global shipments to the European market and flooding it.
The amended EU legislation Mr Hogan put forward comes under two weeks after he took office as part of a new leadership team at the European Commission, the bloc’s executive arm, under president Ursula von der Leyen.
The proposal, which requires the support of EU governments and the European Parliament in a process that will last into next year, has political momentum.
The bloc’s national leaders are, this week, asking its legislative actors “to examine, as a matter of priority, the commission’s proposal”.
The government chiefs are also due to express support for a stopgap arbitration system that the commission is pursuing with EU trade partners such as Canada and China pending any revival of the WTO appellate body.
The proposal from Mr Hogan, an amendment to 2014 European legislation, would effectively serve as a third line of defence for the EU as it seeks to uphold the WTO system.
The extra tool would come into play in a scenario in which the WTO appellate body is still sidelined and the bloc wins a case against a country that doesn’t accept the initial ruling and hasn’t signed up to the stopgap arrangement for handling appeals.
In that event, the EU would be in a position to impose counter measures.
The planned change would also empower the commission to calculate the level of penalties — a ceiling normally set by the WTO.
In that context, the proposal may encourage more countries to join the makeshift appeals’ system that the commission is advocating.
- Bloomberg
