THE current dispute between the European Community (EC) and the US government on the subject of hormones in beef must not, and need not, be allowed to degenerate into a trade war. The public pronouncements, actions, and counteractions from both sides reflect hard-nosed trading positions that tend to neglect the broad issues and basic interests of both the US and Europe. If handled skillfully, however, the dispute may provide an opportunity to open new paths for reconciliation in international trade. A number of facts concerning the current controversy need to be stated:
At issue is US exports of beef that amount to about $100 million per year. Total US exports to the EC were $60.6 billion in 1987, and are estimated at $76.5 billion for 1988. The beef-hormone issue represents a tiny fraction of total US exports to the EC.
The United States was given an extra year - 1988 - to organize its beef exports in a manner to comply with the European requirements. Australia and Argentina (which are much more dependent on beef exports to the EC than the US is) have been able to comply.
Last month the US retaliated by doubling import duties on a variety of consumer items from the EC.
The European foreign and agricultural ministers, meeting Jan. 23, approved ``countermeasures'' consisting of raising tariffs on a number of agricultural imports from the US. The ministers postponed action and agreed to ``take stock of the situation'' at its session Feb. 20. But they agreed that ``the countermeasures will be put into effect unless there is satisfactory progress in GATT [General Agreement on Tariffs and Trade] or in bilateral negotiations with the US.''
GATT provisions allow import restrictions to protect health as long as such measures do not constitute ``disguised restriction on international trade.''
The EC, a huge cheese producer, has not challenged US requirements that exclude non-pasteurized milk in the domestic production of cheese and in cheese imports. Presumably the Europeans accept this restriction as a valid US health measure, even though healthy Europeans enjoying their cheese from unpasteurized milk consider the US provisions irrational.
The suggestion has been made that ``impartial health tests'' be agreed upon covering the beef-hormone issue. In the unlikely event that the Europeans agreed, they would surely insist on the same procedure for cheese. But such surveys would miss the point, since GATT provides for national (or community) decisions on such matters, provided that health, and not protectionism, is the basic motive.
If the Uruguay trade negotiations, and progress toward a fully free European market by 1992 that will be not a Fortress Europe but a positive element in world trade, are not to be jeopardized, senior policy officials must think imaginatively in order to serve the broader public interest on both sides of the Atlantic.
The surfacing of this issue during the early days of the Bush presidency offers an opportunity for the new administration to act decisively in order to convert an obstacle into an opportunity. Legitimate US trade interests can be protected while procedures can be established that will help resolve future disputes.
An arbitration panel should be established to:
1.Decide whether there is evidence that the European requirements were designed to meet European health concerns and not primarily for protective purposes.
2.Consider establishing a continuing panel (or panels) of European and American experts, as recently recommended by European and American lawmakers, to exchange technical information on actions claimed as being based on health or other justifications that would affect not only domestic production but imports as well.
The objective of the initial panel would be to settle the immediate issue. The establishment of a continuing technical panel or panels would represent the determination of Europeans and Americans to establish continuing means of arbitration concerning future issues that might disturb US-European relations.
There are difficult US-European trade problems concerning overall agricultural policies, plus industrial and service issues, that must be faced. To become embroiled by disputes on beef hormones or pasteurized cheese diverts governments from fundamental issues. The establishment of arbitration panels of competent experts would decrease the likelihood of specific disputes' degenerating into basic disturbances inconsistent with fundamental interests of the US and Europe.