U.S. Tariffs On European Steel And Aluminum Lead EU To Open Case With WTO
MARY LOUISE KELLY, HOST:
The European Union is fighting back against tariffs on aluminum and steel announced by the Trump administration. Here's Cecilia Malmstrom, the EU's commissioner for trade, speaking today in Brussels.
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CECILIA MALMSTROM: This is further weakening the transatlantic relations, and it also increases the risk of severe turbulences in the markets globally. Protectionism can never be a solution, and this will hurt jobs here in the European Union but also in the U.S.
KELLY: The EU released a list of American goods that they will slap their own tariffs on, things like Harley-Davidson motorcycles and Kentucky bourbon. Also this morning, the EU opened a case against the United States at the WTO, the World Trade Organization. So what happens now? We asked Chad Bown, senior fellow at the Peterson Institute for International Economics, to walk us through how things might unfold.
CHAD BOWN: So what happens here is the European Union files a case in Geneva at the World Trade Organization. And there have been, you know, more than 500 or so of these cases filed over the years, a couple of hundred of which have involved the United States, dozens and dozens between the United States and the EU. We like to fight each other. And it's basically - here, the European Union is claiming that the Americans have implemented trade restrictions - in this case, the steel and aluminum tariffs - that violate the rules of the international system.
KELLY: This is something that German Chancellor Angela Merkel has said explicitly. She says these U.S. tariffs break WTO rules. So that's my next question. Is she right? Do they?
BOWN: Well, we don't know. What we do know is the excuse that the Trump administration is using to impose these tariffs is really unprecedented. President Trump is imposing them under the allegation that steel and aluminum threaten American national security. The United States really hasn't done this at any great scale before, and trading partners really haven't done the same thing because it's broadly seen as a major excuse.
KELLY: And you're saying - when you say it's unprecedented, the WTO has never had to decide before whether national security might pose a legal justification for imposing tariffs.
BOWN: Exactly. And it's partly by design. You know, you don't want to have this case actually have to come to Geneva and get litigated by these, you know, nameless, faceless jurists out there. If the United States wins the arguments, if they win the legal decision, that's bad because it basically says to the entire world, all you have to do is to just throw out this card and say, hey, you know, this is in my national security interest to protect this industry, to impose these tariffs. And that basically means that any country at any moment in time can just evade the rules-based trading system and just slap on tariffs.
KELLY: How long will this take for this dispute settlement to play out? I mean, how long might we be looking at before we figure out whether the judges were persuaded or not?
BOWN: These cases actually take quite a long time, so it's really probably two, three, four years before we would get anywhere near resolution to this issue.
KELLY: So as someone who watches what's going on in Geneva and is watching the WTO quite closely, I guess my takeaway question is, how much power do they have to prevent a trade war from breaking out? The EU and other countries are already going other routes beyond the WTO process.
BOWN: The WTO actually has very little power in and of itself. You know, any of these disputes are reliant on countries bringing them forward. The WTO just kind of establishes the framework and the setting for countries to be able to resolve their grievances in a non-conflictual manner. But the WTO really can't step in and say, you know, you've gone too far; you need to cool it down. That's not really their role in all of this unfortunately.
KELLY: You're saying if the U.S. is determined to go ahead with these tariffs, they're going to go ahead.
BOWN: If the U.S. is determined to go ahead with tariffs, they're going to go ahead. If the Europeans are determined to go ahead with the retaliation, they're going to go ahead. And there's really not much that the WTO can do to stop it unfortunately.
KELLY: Chad Bown, thanks very much.
BOWN: Thanks for having me.
KELLY: He's a senior fellow at the Peterson Institute for International Economics. Transcript provided by NPR, Copyright NPR.