Economic warfare

In 2003, relations between the USA and the EU were tense over several trade issues. US trade officials wanted to begin proceedings against the EU in the World Trade Organisation (WTO) for blocking imports of genetically modified (GM) foods. The EU objected to new US "anti-dumping" tariffs on its steel products and US tax breaks for foreign sales of its big multinationals. The US would be likely to win any case it took to the WTO. Several years ago, the USA fought and won a similar action when EU officials banned US beef exports on the grounds that they contained unsafe growth hormones. However, it takes several years to obtain a final ruling under the laborious WTO disputes settlement procedure. In the beef hormone dispute, the EU has chosen to pay a $100m fine each year rather than admit US beef products. Environmentalists also believe that it would be unlikely that European consumers would be persuaded to buy GM foods as a result of a WTO ruling that says they are safe.

To counteract the effect of import bans, US farmers - who export 30% of their crops - were given an additional $180bn in aid in 2003. This aid package could be under threat if the world trade talks in 2003 reach agreement on limiting agricultural subsidies. And those same trade talks could hold a trump card for the EU. That is because in principle, trade ministers have agreed that in future, environmental agreements like the Montreal biosafety protocol should have equal legal weight in trade law treaties. The Montreal agreement, signed in 2002, agreed that the "precautionary principle" should apply to the export of GM foods.