Europe is arming itself for a more lawless world of trade — and the bloc’s sights are on the US.
European Commissioner for Trade Phil Hogan on Thursday 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 WTO’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 to the panel 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 law-breaking countries.
Since before US President Donald Trump’s administration, 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 Trump’s “America first” agenda and protectionism from undermining the rules-based global order to which Europe is committed.
Over the past three years, Trump has angered Europe by hitting its steel and aluminum with tariffs based on national-security grounds, dangled the threat of similar levies on foreign vehicles and drawn up plans to target French goods with levies as retaliation over a digital tax in France.
Trump 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 UN accord to fight climate change.
The US steel and aluminum duties, initiated last year, prompted the EU to complain to the Geneva, Switzerland-based WTO.
The bloc also scrambled to put its own trade defenses in place for steel to prevent the US levies from diverting global shipments to the European market and flooding it.
The amended EU legislation that Hogan put forward comes less than two weeks after he took office as part of a new leadership team at the European Commission.
The proposal, which requires the support of EU governments and the European Parliament in a process that would last into next year, has political momentum.
The proposal from Hogan — an amendment to 2014 European legislation — would effectively serve as a third line of defense 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 does not accept the initial ruling, and has not signed up to the stopgap arrangement for handling appeals.
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