U.S. Blasts Europe’s Trade ‘Hypocrisy’ as Legal Showdown Looms

(Bloomberg) -- U.S. Trade Representative Robert Lighthizer blasted the European Union’s retaliatory trade measures as hypocritical, increasing the risk of a legal showdown that could shake the global commercial order.

The escalating tit-for-tat trade measures are taking trans-Atlantic relations to a new low, with the U.S. standing firm behind its decision to slap duties on one of its closest allies and the EU refusing to engage in negotiations until those tariffs are lifted. The conflict will likely end up with the World Trade Organization, a move that could ultimately undermine the legitimacy of the Geneva-based organization.

The U.S. in March used a seldom-used national-security law to impose levies on steel and aluminum imports, drawing a tariff response from the EU targeting companies in sensitive political locations, such as Harley-Davidson Inc. in Wisconsin, and Kentucky whiskey distiller Jack Daniel’s, a unit of Brown-Forman Corp.

“These retaliatory tariffs underscore the complete hypocrisy that governs so much of the global trading system,” Lighthizer said in a statement late Tuesday. “Their recent tariffs prove that they simply ignore WTO rules whenever doing so is convenient.”

National Security

The statement came about a week after the EU, India and Turkey joined China in imposing retaliatory tariffs on $9.3 billion worth of U.S. goods. Beginning on July 1, Canada is expected to impose retaliatory tariffs on $12.5 billion of U.S. goods.

Washington has relied on a Cold War-era law -- Section 232 of the Trade Expansion Act of 1962 -- to impose its metals tariffs, saying the imports threatened national security. The White House argued that the WTO has no authority over such disputes because the organization’s rules permit countries to take “any action” to protect their “essential security interests.”

Despite the fact that President Donald Trump has linked his policy decisions to an effort to level the global playing field and even out the balance of trade, Lighthizer insisted that because the tariffs are protective “there is no credible basis for the EU’s legal theory.” EU Trade Commissioner Cecilia Malmstrom has called the U.S. duties “illegal” and said “it’s frankly ridiculous that EU steel is considered a threat to U.S. national security.”

Trade officials are concerned that the WTO could be sidelined if countries increasingly cite the national-security exemption to justify their trade restrictions. Furthermore, by the time a dispute were to reach the WTO’s appellate body it could be irrelevant because the U.S. is blocking nominees to the mediating forum. If the U.S. continues its hold, the group will be paralyzed by late 2019 because it will lack the three panelists required to sign off on rulings.

“Despite our tireless efforts to keep the unity of the West, trans-Atlantic relations are under immense pressure due to the policies of President Trump,” EU President Donald Tusk said in a letter to EU leaders on Wednesday. “It is my belief that, while hoping for the best, we must be ready to prepare our union for worst-case scenarios.”

--With assistance from Bryce Baschuk.

To contact the reporter on this story: Richard Bravo in Brussels at rbravo5@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, James Hertling

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