Trading Places
In a ruling by the World Trade Organization (wto) in late August, the European Union was awarded the right to use a record $4 billion in trade sanctions against the United States for its violation of trade agreements.
The 30-year dispute revolves around the U.S.’s Foreign Sales Corporation (fsc) tax breaks. The ruling follows the wto’s decision in January that some aspects of the fsc are incompatible with wto regulations.
Europe may find that it was worth putting up a fight for so long. It is increasingly finding itself in a commanding trade relationship with a powerful weapon—one that the U.S. Trade Representative Robert Zoellick compared to a commercial atomic bomb.
Revealing History
The United States maintained a trade surplus (exports exceeded the value of imports) until the late 1960s. When a trade deficit appeared, the U.S. sought measures that would close this gap.
One avenue the U.S. pursued was to enact tax laws that would encourage companies to export more goods and services. The tax laws implemented during the 1970s were later found to be in violation of what the U.S. had agreed to under the General Agreement on Tariffs and Trade (gatt), the wto’s predecessor. In an effort to quell ongoing criticism over the illegal export subsidy, the Reagan administration created a new scheme called Foreign Sales Corporations. These too were found to be in violation of international trade agreements.
In 2000, the Clinton administration developed a solution: It modified the tax code so that it appeared as if the U.S. was adhering to the trade agreements. In reality nothing substantially changed. What was implemented was just another smoke-and-mirrors scheme. Ironically, this is the same type of deceitful initiative that U.S. leaders have condemned when discussing Enron and other ethically corrupt companies.
These trade violations were what led to the wto’s $4 billion ruling against the U.S.
Given this history, the strained relationship between the EU and the U.S. is no surprise. At issue is more than just a few isolated incidents. There are multiple significant trade disputes brewing between the U.S. and the EU right now.
Current Disputes
Creating tension are the tariffs on steel imports that the Bush administration enacted in March. The U.S. steel industry, so vital for national security, has endured hard times for decades and is now in dire trouble.
High tariffs on foreign steel entering the U.S. make it less attractive to domestic buyers and force foreign steel producers to seek other markets. The EU fears that its delicate steel industry will be jeopardized. If outside producers of steel, denied access to the U.S., flood the Continent’s markets, European companies may be forced to cut jobs, or close plants all together. The steel industry is just as critical to Europe as it is to America. steel
Meanwhile, the EU has filed another claim with the wto alleging that America’s recent steel protectionist measures violate the trade agreements the U.S. has signed. If the wto rules in favor of the EU (as expected in March 2003), it could force the U.S. to withdraw its tariffs and abandon any special protection to its ailing steel industry.
The smoldering conflict between the two great powers is also fanned by other trade disputes. (These trade issues are largely a result of measures that the U.S. has taken to curb its trade deficit.) Prime examples are the U.S. import duties levied on European uranium, and the $51 billion the U.S. has promised to American farmers over the next six years. Then there is the debate that still rages—after a decade—over the EU ban of hormone-treated U.S. beef.
Economic Leverage
European-American trade problems are compounded by America’s trade deficit and national debt. Europe could use this leverage over the next several months and years as these and other disputes climax.
Astute analysts can clearly see the danger. “The U.S. financial position is rapidly deteriorating, due mainly to America’s persistent and growing trade deficit. U.S. ambitions to run the world, in other words, are heavily mortgaged. Like any debtor who borrows more year after year with no plausible way to reverse the trend, a nation sinking deeper into debt enters into an adverse power relationship with its creditors—greater and greater dependency” (The Nation, Sept. 23).
Europe, which holds a large portion of U.S. debt, retains more than a threat of using $4 billion in trade sanctions against the U.S. It wields the power to call in a significant portion of America’s loans. In recent months, Saudi Arabia’s wealthy private investors did just this when they recalled as much as $200 billion in American debt. Undoubtedly this withdrawal weakened the dollar, but as The Nation pointed out in the same article, “If Asian money or Europe’s were to undertake a similar exit, the financial quake would send damaging tremors through virtually every dimension of U.S. economic life.”
This is the power that the EU, one of America’s bankers, possesses. Currently it is showing restraint, but the question is, will Europe use its powerful economic weapons against the U.S.? An understanding of human nature and Bible prophecy shows that, under pressure of its own set of economic woes, it ultimately will.
Understanding
The one constant throughout history is human nature. General Patton, trying to educate his son in this principle, wrote to him in a letter on June 6, 1944, “To be a successful soldier you must know history. Read it objectively, dates and even minute details of tactics are useless. What you must know is how man reacts. Weapons change, but the men who use them change not at all.”
“All is vanity,” is how King Solomon summed up the thinking of humankind apart from God. It is what consistently leads to war and suffering.
The Apostle James was inspired to write, “But every man is tempted, when he is drawn away of his own lust, and enticed. Then when lust hath conceived, it bringeth forth sin: and sin, when it is finished, bringeth forth death” (James 1:14-15).
Lust and covetousness are not new. They are the same causes that have led to trade wars and hot wars throughout millennia. “From whence come wars and fightings among you? come they not hence, even of your lusts that war in your members?” (James 4:1).
The economic disputes between the U.S. and the EU are a result of human greed. Bible prophecy indicates that Europe is destined, this time, to come out on top.
The EU will undoubtedly use its economic advantage to place itself in a position of exalted power, as every other nation in the history of the world has done when given the opportunity.
How can we be sure?
The Bible reveals that a rising Europe will have tremendous wealth and economic power, but only for a short while (Rev. 13:4, 16-17; 18:11-15). In the context of trade war, Herbert W. Armstrong stated in 1985 that “Slowly but surely events are working toward a coming conflict between Europe and the United States as prophesied in the Bible” (Member and co-worker letter, May 16, 1985).
Seven years earlier, the magazine Mr. Armstrong founded, the Plain Truth, wrote that “Since the early 1950s, the editors of this magazine have warned that a devastating trade war would erupt among the free-world economies; that, as a result of the breakdown of international commerce and the real possibility of a worldwide economic depression, the very fabric of the post-World War ii alliance structure would be ripped apart.
“We have warned of the likelihood of both a remilitarized Japan and a powerful United Europe, under German domination, that would ultimately stand apart from—and in opposition to—the United States.
“The stage is being set for these occurrences right now!” (April 1978).
The stage was being set then! Europe, as a political and economic power to offset the United States, is now a reality. Trade conflicts between these two great powers are destined to intensify.
Ultimately, trade war will explode into world war!