Contrary to popular belief, regulators tend to be very clever people. They know the rules of the game, and they know to how to use them to their advantage.
The latest example of bureaucratic perfidy is a recent decision by EU officials to raise tariffs on some high-tech goods from the United States. This doesn’t seem like a smart policy at first glance. It will make goods more expensive for European consumers. The tariffs might also be a violation of the Information Technology Agreement. The U.S. is not pleased, and is launching a WTO case.
There are two ingenious ways that revenue-hungry EU regulators are gaming the system.
One is taking advantage of how bureaucratized the WTO is. The current dispute is only in the first step right now, which is a formal consultation between the WTO and the EU. I believe the next step involves a strongly worded letter.
The EU regulators who imposed the tariffs know that the case will take years to decide. Their tariffs — and revenues — will stand untouched until then. They know they can violate free trade agreements almost at will, and years will pass before they’ll have to answer for it. Very clever.
The second spark of regulatory intelligence is a creative interpretation of the Information Technology Agreement (ITA). Under the agreement, computer monitors are duty-free, but televisions are not. So the EU is arguing that people are using larger computer monitors primarily as televisions, and not as computer monitors. That way they can be taxed.
Of course, only the people actually buying and using large computer monitors can say what they’re using them for. But the regulators have made a good enough argument to stall the WTO.
These are some very smart people. What a shame then, that they are using their talent to hinder trade instead of to free it.
Inertia Wins! 