U.S.-EU trade woes test relations

Differing ideas about how to protect citizens and regulate business are testing the economic relations between the United States and the European Union.

The American-European trade and investment relationship is the largest in the world, with about $1 billion in transactions a day.

The bulk of trans-Atlantic commerce goes smoothly, but divergent rules and regulations on corporate takeovers, chemicals, agriculture and food labeling are threatening to stifle some trade.

Traditional trade disputes are simple. With U.S. tariffs on steel, for example, the Bush administration said foreign competition was harming a major domestic industry, so it effectively taxed foreign-made steel, pricing many products out of the market.

Divergent rules complicate disputes. The regulations are not necessarily designed to block cross-border trade and investment, but they can do just that.

Governments from the European Union last week approved regulations on mergers and acquisitions that allow European companies protection from hostile takeovers — especially from outside the 15-nation EU bloc. The rules would allow for a “fortress Europe,” critics say.

Other rules derive from the “precautionary principle,” a better-safe-than-sorry prescription enshrined in EU law but also widely practiced in the United States.

A Bush administration official last month said there is hope that Europe is moving away from an extreme interpretation of the principle.

“While it is fashionable to criticize Europe on the subject of precaution, and much of that criticism is deserved, it should also be noted that the [European Unions] official views on precaution are becoming more nuanced,” John D. Graham, an administrator for information and regulatory affairs at the Office of Management and Budget, said in an October speech.

Millions of dollars in trade in major commodities such as soybeans, corn and beef have been blocked by differing regulations across the Atlantic. Chemicals may be next on the list.

“There are certainly some people who have argued that it’s a vehicle for disguised protectionism. One might argue that cases such as beef hormones is a trade-protection measure,” said Jonathan B. Wiener, a Duke University professor who has studied use of the principle in Europe and the United States.

The European Union bans North American cattle that are treated with growth-promoting hormones, saying it could harm consumers. The United States, backed by the World Trade Organization, maintains that EU legislation is not scientifically based.

The European Union in October said it obtained the proper scientific evidence — one hormone commonly used to promote growth in cattle is a carcinogen and the effects of five others are unproven.

“Public health and consumer protection are the core of our approach to food safety, guided by independent scientific advice,” said David Byrne, EU health and consumer-protection commissioner.

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