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Europe Tackling Trade Disputes

The two-day summit of European leaders in Barcelona yields agreements on deregulating EU energy markets, combating US protectionism in steel trade, and backing Yugoslavia in its newly-unveiled form.

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French Prime Minister Lionel Jospin (left) shares a word with German Chancellor Gerhard Schroeder

The big question mark going into this weekend’s EU summit of leaders – the so-called European Council – was whether fourteen countries’ statesmen could pressure their partner France’s president and prime minister into energy deregulation.

As it turns out, they have succeeded, but only in part.

Why does it matter? Because since other countries in the EU’s common market started deregulating themselves, France had so far resisted, making cross-border competition between gas and electricity utilities decidedly uneven.

Electricité de France (EDF), which has always enjoyed a monopoly at home, has lately gone on a shopping spree, buying up distributors in other European countries where free competition is allowed. Meanwhile, the French government has forced foreign and even domestic competitors to stay out its market.

Saturday’s decision, grudgingly supported by the French leaders, is a first step toward freer competition with France. If carried through as agreed, it means France will partially open its energy market in 2004, allowing utilities other than EDF to sell to French businesses, Reuters reported. Domestic consumers, however, will still only be able to buy from the national service.

France’s compromise with its increasingly insistent EU partners, it now appears, was pre-planned between French President Jacques Chirac and Prime Minister Lionel Jospin. In an unusual show of solidarity in a hotly political season, Chirac and Jospin who will face off in a presidential election next month were brought together by national interest.

They told other European leaders they could go "no further" on deregulation, Reuters reported.

Relative calm outside

Despite fears of rioting outside the summit in Barcelona’s Congress Palace, heightened Friday when some protestors clashed with baton-wielding police, Saturday’s scene was calm through the afternoon.

Spain’s police, army and navy have been on high alert for the summit, in light of both the perceived terrorist threat and last year’s fierce clashes in Italy and Sweden between police and anti-globalisation protestors.

The relative calm at this event will be taken by many as a sign that Spain, previously whispered to be over-doing its security alert, has done a good job in difficult circumstances.

Whereas numerous past events of this nature recently have gotten out of control, even distracting the summits themselves, the meetings on Friday and Saturday went smoothly and featured notable agreements despite the summit’s broad agenda.

US trade dispute

High on the list of priorities was the steel trade and how the EU should react to a US decision to impose tariffs on imports.

The US decision is seen around the world as illegal by the rules of the World Trade Organisation (WTO). European steel manufacturers, for whom the US is a major market, are sure to feel the effect acutely.

Leaders at the summit decided to back the proposal of the EU’s executive European Commission, to file a complaint directly through the WTO.

The US had warned in advance of the summit that retaliatory tariffs imposed outside the orderly structure of WTO mediation could spark precisely the sort of "trade war" EU leaders feared when the US decision came down.

Nonetheless, steelmaking EU countries like Germany are sure to maximise pressure against the US in this case, sore that the administration of US President George W. Bush takes an ideological line backing "free trade" but opts to protect its often inefficient steel industry at allies’ expense.

A draft communique from the leaders Saturday afternoon noted "great concern" the US action, describing the tariffs as "not in conformity with WTO rules" and recommending "pursing consultations under WTO agreements and initiating a procedure for possible Community safeguard measures."

As trade wars go, this is a warning shot across the US’s bow.

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