- The Washington Times - Sunday, November 30, 2003

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.

The lack of evidence on the five hormones — and maintaining a ban in the meantime — is especially bothersome to U.S. ranchers and indicative of problems with the precautionary principle.

“The EU model forces us to prove a negative, prove nothing happens. You can’t prove something doesn’t happen,” said Gary Weber, executive director of regulatory affairs at the National Cattlemen’s Beef Association, a U.S. industry group.

The United States has rejected the new evidence. Since the 1998 WTO ruling against the beef ban, the United States has slapped $116.8 million a year in tariffs on EU products. Other cases are brewing.

The beef ban and a European ban on genetically modified crops — most U.S.-grown soybeans, corn and cotton — are products of the precautionary principle.

Chemicals are to get the precautionary treatment soon, though EU rules have been eased under heavy industry and foreign pressure.

In October, the European Union’s executive arm approved legislation that would force enterprises that manufacture or import more than 1 metric ton of a chemical per year to register and test the product. The Office of the U.S. Trade Representative had warned that an earlier version of the rules raised “significant concerns” regarding WTO compliance because of new regulatory burdens on U.S. companies.

The United States does not enter the regulatory debate with clean hands.

“Even though the United States has not adopted the ‘capital P’ precautionary principle, in many cases it is more precautionary, for example with air pollution, mad cow disease, blood donations, and especially recently our precaution against terrorism,” Mr. Wiener said.

The United States is not less cautious, just cautious about different things, Mr. Wiener said.

The United States, for example, pioneered some precautionary legislation in the 1970s with the Clean Air and Clean Water acts and has signed onto the U.N. Biosafety Protocol, which regulates trade in genetically modified products and follows some precautionary principles.

Outside the health and safety areas, the European Union objected to U.S. oversight regulations for accountants and auditors in the Sarbanes-Oxley Act of 2002, and antiterrorism rules that place U.S. Customs inspectors in foreign ports. The measures hinder trade in services and goods, the European Union said.

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