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WTO Sanctions US; The EU Emerges a Winner

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Those opposed to the US’s economic protectionism should be bolstered by yesterday’s announcement that the WTO has ruled to sanction a number of American exports. The ruling comes in response to a controversial US law protecting domestic steel producers by hindering foreign competition through high penalty taxes that redistribute foreign funds to US companies:

The World Trade Organization imposed penalties Friday on U.S. exports ranging from apples to textiles, escalating a trade dispute the Bush administration has struggled to defuse by unsuccessfully urging Congress to repeal legislation aimed at protecting American steelmakers.

Two years ago, the WTO ruled the law was illegal, arguing that it punishes exporters to the United States twice: First they are fined, then those fines are given to their competitors.

The value of the sanctions hasn’t been determined, but trade officials estimated them at more than $150 million a year. That compares with the $2 billion in sanctions the EU threatened in its successful bid to force the United States to lift illegal tariffs on foreign steel last year.

The administration has promised compliance.

Before anyone critical of the Washington Consensus breaks out champaigne and considers this a resounding victory for the world’s exploited and poor, they would be wise to realize that the EU was critical in the sanctions’ passage. The Europeans are not exactly saints when it comes to setting an example for fair trade practice, coming under fire themselves for extensive subsidation of their agricultural sector and their aggressive protection of textile producers. If anything, this is a win for the EU and bolsters its image as an economic leader despite the inherent hypocrisy; EU leaders lash out at the US on the basis of its unfair trade agenda while they pursue their own highly unfair trade practices.

Economic realpolitik at its best.

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