Jewish World Review Nov. 18, 2003 / 23 Mar-Cheshvan, 5764

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European Union is playing a dangerous game | The European Union wants to play tough. And the World Trade Organization wants to help out the EU.

The WTO ruled this week that the 2002 U.S. steel tariffs violate international trade law. The decision clears the way for the EU to make good on its retaliation threats to the Bush administration. And soon we'll find out whether President Bush has the courage of his convictions. I hope that Bush demonstrates the same leadership on international trade he's demonstrated in geopolitics.

The EU might want to think twice before it launches a trade war against the United States. The Europeans, despite their union, are hardly monolithic. The United Kingdom, Spain, Italy and Ireland can be counted upon for both support and, ultimately, mediation should a full-scale trade war break out. The France-Germany-Belgium-Luxembourg axis is one we should dismiss out of hand. And, frankly, those countries are about as important to American economic interests as they were to our success militarily against Saddam Hussein. They're losers even before the first shot is fired in any trade war.

It may have escaped the attention of the Brussels bureaucrats, but America is Europe's biggest and best customer, and European countries simply can't afford the price of economic warfare. The United States' trade deficit with Europe last year totaled more than $82 billion. The United States has not run a trade surplus with Europe since 1992. In other words, collectively, the EU has sold the United States far more in goods and services than it bought for more than 10 years.

The president issued the steel tariffs not to alienate the European Union, but rather to save 150,00 jobs in our beleaguered steel industry. There have been more than 30 bankruptcies in the steel industry since 1997, and many representatives from the industry credit the president's decision to put tariffs on steel imports with keeping the U.S. steel industry alive.

"We have made significant progress in getting back on our feet, which would have been impossible without the president's program," said Thomas J. Usher, chairman and CEO of United States Steel Corp.

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As usual, the boys in Brussels want to play cute. The European Union has chosen a list of products to sanction in order to inflict economic and political pain on the United States and the Bush administration. The EU is targeting merchandise from electoral states critical to President Bush's bid for re-election. Among the goods pinpointed are textile products from the southeast, steel from West Virginia and citrus from Florida.

Such sanctions are always designed to carry the most political punch, but this sort of trade hardball was definitely not invented by the Europeans.

Back in 2000, for instance, the United States imposed 100 percent tariffs on several European luxury goods. The United States made the move following a bitter battle with Europe over the trade of beef and bananas. The EU blinked when the United States threatened to include cashmere on the list of goods that were to carry the steep tariff. Cashmere products are exported mainly to the United States, and such sanctions would have meant the end of the industry in Scotland. The Europeans got the message.

If the United States were to escalate the conflict beyond the steel tariffs, we could find ourselves in an actual trade war - something unprecedented in recent history. Nonetheless, an escalation cannot be ruled out. The Bush administration has clearly demonstrated that it does not need the approval of the global community when it comes to protecting U.S. interests. Simply put, this is a dangerous and silly game for the EU to play.

The Bush administration may be forced to take further action. The global economy is absolutely dependent on the America. The United States carries an annual current account deficit nearly half a trillion dollars with the rest of the world. And U.S. gross domestic product was more than $10 trillion in 2002, greater than that the next five highest GDPs combined. The success or failure of the American economy is more than important to the rest of the world.

President Bush has some difficult decisions to make. And the European Union may be in for an unpleasant surprise.

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Lou Dobbs is the anchor and managing editor of CNN's "Lou Dobbs Moneyline." Comment by clicking here.

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