Even in their core functions, they still cannot get it right

As if Peter Mandelson did not have enough problems with dealing with the long-running Airbus dispute, we learn from the Daily Telegraph business section today that he is headed for another mega-row.

This one, according to the Telegraph, has been triggered by the US administration, which "wants the WTO to investigate EU customs tariffs, which it claims are inconsistent."

Robert Zoellick, the US trade representative, is cited as complaining that, "Although the EU is a customs union, there is no single EU customs administration. Lack of uniformity, coupled with lack of procedures for prompt EU-wide review can hinder US exports, especially for small to mid-size business."

Typically, the EU has dismissed the complaint, a spokesman airily declaring: “We think the US case is very weak."

But Zoellick is deadly serious. According to a statement posted on the US Trade Representative's website and repeated on the US Mission to the EU's site, with explanatory notes, the US has already tried to sort out the matter, having filed a request for consultations with the EU on 21 September 2004.

Representatives then met with EU officials in Geneva in mid-November 2004, but the meeting failed to resolve the dispute.

Nor is the US alone with its grievance. Six other WTO Members - Argentina, Australia, Brazil, India, Japan and Taiwan – have also asked to join the consultations as third parties, demonstrating the level of concern about the EU system.

Looking at the detail, WTO rules require all WTO members to administer their customs laws in a uniform, impartial and reasonable manner. They also require members to provide tribunals for prompt review and correction of administrative action relating to customs matters. The US considers that the EU fails to meet either of these requirements. It now states:

EU institutions - including the Commission, the Court of Justice, and the Parliament – "have routinely noted the lack of uniformity in the administration of EU customs law." For example, in its comments on a March 2001 report by the EU Court of Auditors, the Commission stated, "The objective that for all trade in goods the Community should operate as a real customs union with uniform treatment of imported goods can be fully obtained only if the customs union is operating on the basis of a single customs administration, which is not the case." The United States fully agrees.

Variations in the way that goods are treated by the different EU member States can cause problems that burden all traders. These problems are compounded by an inability to obtain prompt EU-wide review of national administrative decisions. An importer or other interested party has to wend its way through national administrative and/or judicial appeals before obtaining an authoritative determination from an EU-level tribunal.

The case presented by the US appears to be damning. The lack of uniform customs administration by the EU, it says, affects its producers, farmers, and exporters in a number of important ways:

For example, goods may be classified differently and thus be subject to different tariffs depending on the EU member State through which they are imported. Similarly, a U.S. exporter may be able to obtain binding guidance in one member State on how its goods will be valued for tariff calculation purposes. But the exporter may not be able to rely on that guidance in anothermember State; indeed, in some member States the exporter may not be able to obtain binding valuation guidance at all.

These problems, it adds, fall particularly hard on small and mid-size businesses, which often lack the resources to work their way through member State and EU bureaucracies in order to reconcile inconsistencies in classification or valuation in different States.

There is clearly a sense of exasperation driving the complaint, which even penetrates the dry bureaucratic language of the Trade Department statement.

"Officials have tried to work with the EU commission to address the concerns of US exporters," it complains. "Indeed," it continues: "this was the culmination of efforts over the past seven years to address such concerns in various WTO fora." But… "Although the Commission has tried to help with individual problems, it has become clear that the allocation of authorities within the EU and even the Commission has precluded achieving the necessary systemic solutions."

The most damning thing about all this thought is it confronts the very core function of the EU and its central (or so we are told) rationale – the administration of its customs union. The whole point of having a central administration and institutions like the EU commission is to manage the system and to make sure it works efficiently.

Yet, even after nearly fifty years since the Treaty of Rome, after thousands of laws, and millions of man hours, it seems that, even in their core functions, they still cannot get it right.