Take no notice of the EU's crocodile tears over Mr Bush's steel tariffs

'Protection is sometimes necessary to prevent unfair advantage from imports subsidised by EU grants'
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The Independent Online

The European Union has been spoiling for a trade fight with the United States for years. The opprobrium that has fallen on the head of President Bush is vicious and unjustified. If the EU were itself an open and enlightened free trade organisation and came to the steel dispute with clean hands it might be entitled to be listened to with respect. But the sickening response to the US by Pascal Lamy, the European Commission's trade representative, was full of undisguised bile and underlines a fundamental hatred of all things American.

If the EU had not already had bruising battles with the US on previous occasions – over bananas, hush kits, beef, Boeing and Airbus – there might be some justification for the outrage being expressed by Commissioner Lamy. But in nearly all these other run-ins with the US, it has been the EU that has been in the wrong.

What is reprehensible about the EU outrage is not that the US decision to impose tariffs on imported steel will directly harm European imports into the US, but that below-cost steel from third countries to the US will now be diverted to Europe. So it is all right for America to suffer the consequences of unfair competition from the Far East and Eastern Europe as long as none of it finds its way into the EU market. This has to be just as selfish an attitude by the EU as is its excited denunciation of Mr Bush.

The US has a far better reputation for open world trading than Europe, while the introduction of the single currency and the expansion of EU membership will intensify and increase the growing list of trade issues that ultimately threaten any expansion of world trade.

But we should acknowledge that independent sovereign states are occasionally entitled to put their national interest first. Lip service has always been paid to free trade by most countries. In any event is protection always such a bad thing?

I watched, with dismay, the steel industry of this country, particularly in Scunthorpe, which I once represented, devastated, in part by dumped steel products from Italy in the 1980s. Because of EU rules, nothing could be done to prevent closures and import penetration. Protection is sometimes necessary, at least in the short term, to prevent an unfair advantage from imported products that are clearly heavily subsidised – often by EU grants and loans.

The EU is itself based as much on a proliferation of rules and regulations, restraints on trade and subsidies as on anything that might reasonably be described as free trade. Indeed, it is a socialist mindset that Commissioner Lamy represents, one that often encourages the very protectionism he pretends to oppose.

In the case of America, there are occasions where it is necessary to ensure that, because it is the biggest driver of the world economy, it is allowed a breathing space to make sure that its domestic economy continues to thrive. It is not as though its steel industry has received anything like the vast taxpayer subventions that have gone, over many years, to the European steel industries. And it must never be forgotten that, as Hamish McRae pointed out in our business pages yesterday, the US remains the world's largest market for imports by a huge margin.

Last year, in a prescient book, Stars and Strife, the former Tory cabinet minister John Redwood warned of the coming trade wars between Europe and the US, predicting that the list of disputes would grow – in spite of World Trade Organisation negotiations. Britain, he forecast, would often be caught in the crossfire, and he suggested that we would, sooner or later, begin to appreciate the benefits of a direct bilateral trade relationship with the North Atlantic Free Trade Area (Nafta).

In spite of the supposed deepening – albeit often reluctant – relationship between Britain and the rest of the EU, the links between the UK and the US economies have grown during the past 50 years. British companies have invested more in the US than US companies have invested in Britain. According to Mr Redwood, half of all the foreign investment in Britain comes from the US, with 40 per cent of all Britain's overseas investments centred in the US. Only a quarter of foreign investment in Britain has come from our EU trading partners, and only a third of our outward investment has gone to other EU states.

In any truly sensible desire to expand free trade, the EU should be signing up to an agreement with Nafta but the anti-Americanism of France, and Commissioner Lamy, will always prevent such a sensible solution. In addition, protectionism and selective interpretation of EU rules by some member states will prevent genuine free trade between these two blocs – far more than any isolated decision by President Bush.

So Britain should accept that for all the attempts through international trade bodies to establish world free trade, such a goal is ultimately doomed – certainly under the aegis of the EU. Far better to face the fact that at any moment in time there is always a natural temptation for a sovereign country to engage in trade protection. It cannot be wished away but it can be restrained where there are established trading relationships. What is certain is that its manner and style make the EU the most unhelpful of all world trading blocs in seeking to remove international barriers to trade.

Nafta's outlook and capitalist style are far more in keeping with the natural style of British businessmen, and it is the obvious complement to a decision to stay out of the single currency. EU-protected markets and cartels have not resulted in profits being made by Britain on the continent – as Marks & Spencer in Paris, and British Airways, with their attempts to link up with Deutsche BA, can testify.

At the very least Britain should look again at the greater benefits that membership of Nafta would bring. By the time Poland, Romania and other Eastern European countries have become full members of the EU, complete with their subsidised steel, we will be looking with envy at the relative free trade openness of Nafta. The biggest enemy to free trade is not the occasional protectionism of US; it is the inherent protectionism of the EU. Our natural trading partner is the US, not the EU.