Battle over a bottle.

Canadian beer fans, beware: The United States has slapped a $3-a-case tariff on all beer imported from the Canadian province of Ontario, the latest volley in a longstanding trade war between the two countries over access to each other's lucrative beer markets. Ontario has fired back, imposing equal import duties on the products of two U.S. beer companies, Heileman and Stroh.

Though it has many accoutrements of a classic trade tussle, the great North American beer war has some distinctly environmental overtones. At the heart of the feud is the question of how best to package beer in an ecologically friendly way. The recent U.S. tax on imported beer came in retaliation for Ontario's decision to double to 10 cents an environmental tax on non-refillable alcoholic beverage containers (usually aluminum beer cans) as well as for other measures that U.S. officials say are aimed at protecting Ontario's brewers, such as the imposition of minimum price requirements and warehousing fees for imports.

Around the world, national environmental laws are increasingly coming under fire for being "non-tariff barriers to trade." Among them: Germany's path-breaking packaging law, Austria's new law stipulating that timber from the tropical rain forests be labeled as such, and U.S. embargoes on tuna caught through fishing practices that endanger dolphins.

In the Ontario case, American brewers argue that the 10-cent non-refillables tax is a thinly disguised attempt to protect the province's beer industry, as most American beer is sold in cans. Canadian beer tends to be sold in refillable bottles. The U.S. Trade Representative estimates that the 10-cents-a-bottle levy combined with other new charges imposed by Ontario pushed the price tag for a case of American beer sold in Toronto from U.S. $19.83 to $24.35 - enough to discourage sales. The new levy looked particularly suspicious to U.S. trade officials because it came just days after the Canadian government had made a number of concessions on other matters in the long-standing dispute. These concerned Canada's pricing, listing, and distribution practices.

The Ontario government and many local environmental groups deny U.S. charges that the non-refillables tax is a protectionist move. It's a bonafide environmental measure, they say, designed to prevent the current high rate of bottle refilling from being undermined by the growing influx of canned U.S. beer. It will also raise revenue for the cash-strapped province, they add. The tax does seem to be having the desired effect of discouraging the use of cans: sales of canned beer in Ontario have dropped by more than 60 percent since May, while bottled beer sales increased modestly over the same period. In Ontario's view, any attempt to overturn the tax through trade negotiations would sacrifice environmental goals on the altar of free trade.

Much of Ontario's case rests on the assumption that refillable bottles are preferable to recycled cans on environmental grounds. Bottle refilling is higher on the "reduce, reuse, recycle" hierarchy, and most studies conclude that it uses less energy and creates less air and water pollution than aluminum recycling. According to a study by the U.S.-based Argonne National Laboratory, a 12-ounce refillable bottle reused 10 times requires 75 percent less energy per use (when manufacture, transportation, and washing are figured in) as a recycled glass or aluminum container, and 84 to 91 percent less energy than a throwaway container. Fifty go-rounds are not unusual for a single bottle where refillables are widely used.

Not surprisingly, the aluminum industries in Canada and the United States are not fond of thc 10-cent tariff. They are doing their best to poke holes in Argonne's and others' findings with studies of their own supposedly showing that refilling is not always such an environmental bargain. Alcan, Canada's largest aluminum manufacturer, recently mounted a full-fledged campaign to repeal the tax that includes taking out full-page ads in Canada's top newspapers.

Whatever the merits of bottles versus cans, to many environmentalists a fundamental principle is at stake: the government elected by the citizens of Ontario decided that refillables are the way to go, and its decision should not be overridden by trade concerns. In this case, and in several others that have arisen in recent years around the world [see "The Tuna Test," World Watch, May-June 1992], a dangerous precedent is emerging for national environmental laws to be subject to challenge - and possible override - by international trade rules.

These rules generally uphold the right of national governments to make their own environmental laws, but they stipulate that a country must hold its own companies to the same rules it applies to an importer, and that all importers must be treated alike. At first glance, Ontario's law would seem to meet these tests, but U.S. brewers argue that in practice it doesn't, because the bottle collection system in the province is set up in a way that makes returning bottles of U.S. origin inconvenient.

Trade rules also dictate that environmental laws must be legitimately environmental and not just a trade barrier in disguise. But sorting out which is which can be difficult. In the North American beer dispute, U.S. brewers contend that Ontario's law is protectionism in a green cloak because it applies only to alcoholic beverage containers, not to soda and other drink containers. If environmental considerations were paramount, U.S. beer makers ask, why not apply it across the board and include all beverage containers?

The answer to that question is a perfect example of how complex environmental trade disputes can be. The provincial government contends that it is easier to tax alcoholic beverage containers, because beer, wine, and spirits are sold in government-run stores, while soda is not. U.S. brewers question this explanation, as does Ruth Lotzkar, president of the Environmentally Sound Packaging Coalition of Canada, and many other Canadian environmentalists. If the government were serious about refillables, says Lotzkar, then it could find a way to make reuse mandatory for all beverage containers, not just those for alcoholic products. Lotzkar thinks there is some good old-fashioned favoritism behind Ontario's law. Soft-drink containers in Ontario are made mostly of steel, not aluminum, and Lotzkar suggests that the province's steel industry may have used its political clout to keep its containers outside the law.

As is often the case in these disputes, there is undoubtedly a mixture of environmental and trade motivations behind Ontario's environmental levy. Politics is often a messy business, and numerous environmental laws would never have been passed in national legislatures if environmentalists had not formed uneasy alliances with other powerful interests.

Meanwhile, trade negotiators from both countries are busily at work trying to broker a compromise. But neither side appears prepared to give much ground, meaning that consumers in both countries may find their beer choices restricted for some time to come.

As the North American beer war demonstrates, existing international trade rules are inadequate to the task of arbitrating tensions between trade and the environment. Ongoing talks at the General Agreement on Tariffs and Trade and at the Organization for Economic Cooperation and Development might one day yield some workable guidelines. But until they do, more environmental laws are likely to come under siege, and costly trade wars are all but inevitable.