updated 3/14/2008 3:06:31 PM ET 2008-03-14T19:06:31

European Union leaders threatened the United States and China with trade sanctions Friday if the world's two biggest polluters don't commit to ambitious cuts in greenhouse gases by next year.

The warning came as the economic downturn focused European leaders on the impact on industry of their groundbreaking agreement last year to cut carbon emissions by 20 percent from 1990 levels by 2020.

EU leaders want similar commitments from other major economies by next year, when a conference on global warning is to take place in Copenhagen, Denmark. Otherwise they say European companies will need protection from unfair competition from heavily polluting rivals in China and the United States — the world's biggest emitters of carbon dioxide.

In a declaration issued after a two-day summit, the 27 EU leaders warned: "If international negotiations fail, appropriate measures can be taken" to protect European industry.

French President Nicolas Sarkozy went further. "Our main concern is to set up a mechanism that would allow us to strike against the imports of countries that don't play by the rules of the game on environmental protection," he told reporters Friday.

German Chancellor Angela Merkel noted the threat to European producers. "Industry, faced with global competition could be exposed to a real disadvantage if no international climate accord is struck, but we in Europe have very strict rules," she said.

Still, Germany and Britain were wary about the threat of sanctions, fearing that waving a big stick at the Chinese and Americans could make it harder to strike a compromise.

"I don't think we should allow things to stand in the way of getting the best possible international agreement," cautioned British Prime Minister Gordon Brown.

Exemptions instead?
As an alternative, Germany wants an agreement within Europe that would exempt heavily polluting industries such as steel and cement from the cuts demanded by the EU plan, which are estimated to cost industry $78 billion.

However, the idea of protecting polluters drew condemnation from environmentalists.

"European leaders continue to focus on the dinosaurs in the energy-intensive industry," said Stephan Singer, head of WWF. "They run the risk to miss the big picture of the huge costs Europe and humanity will have to face if no serious action is taken now."

Despite the economic concerns, the EU leaders said they would stick to their carbon-cutting targets, which are among the world's most ambitious. They set an end-of-year deadline for resolving differences among the 27-nation bloc over which countries will have to bear the biggest burdens of the cuts.

Brown also said EU leaders agreed to consider a joint French-British plan to encourage industry by halving sales tax on environmentally friendly products.

Warming seen as 'threat multiplier'
For the first time, the leaders also looked at the security implications of global warming, calling it a "threat multiplier" bound to worsen tensions and instability through loss of arable land, water shortages, diminishing food and fish stocks, more frequent flooding, prolonged droughts and scarcer energy resources.

An EU report says climate change will trigger humanitarian crises, border disputes and "environmentally induced" migration of millions of people from Africa and the Middle East to Europe.

The EU leaders also addressed the world economic downturn and the impact of the strong euro, which hit a new high of against the dollar as they were meeting.

They pledged to maintain strict government spending and an economic reform package launched in 2000 to liberalize markets, ease labor restrictions and boost innovation.

"It's all the more essential that we press ahead with an agenda that is based on stability and economic reform," said Brown. "At all times we will maintain economic stability."

Leaders also backed a plan by Sarkozy to improve ties with nations in North Africa and the Middle East through the creation of a "Union for the Mediterranean."

"It's an important step that shows Europe is no longer turning its back on the Mediterranean," Sarkozy said.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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