LET'S say you think enslaving children is bad, and you decide that foreign companies that use forced child-labour should be barred from marketing their wares in the United States. Should that be allowed, under international trade laws? What if the company in question is breaking no laws in the country where it uses such labour? Isn't that country being unfairly attacked? Who is the United States Congress to decide what kinds of labour should or should not be legal in another country? Would that country not have the right to retaliate by barring imports of some American products?
I think most Americans would answer that the United States has the right to bar foreign companies that use forced child-labour from selling their wares in the United States. But let's say you thought this was an intrusion on other countries' sovereign right to set their own labour laws and on companies' freedom to engage in commerce provided they follow local laws. What if, instead, the United States just banned the import of the actual products that were made with such labour, allowing the import of any other products those foreign companies might make? Surely that would be okay.
I think most Americans would say that it would be okay, or rather that it would actually be insufficient. But let's say you still thought this went too far. What if, instead, the United States just slapped a tariff on products made with forced child-labour, intended to compensate for a market externality by raising the cost of the product to whatever it would have been if produced by adult wage labourers? Surely that would be the very minimum, no, really much less than the minimum that civilised trade law ought to permit.
Now let's say you're the European Union. You think that unrestricted emission of carbon dioxide is bad, because it causes global warming and threatens the climate of the world. Perhaps others disagree, just as some people in Africa may think there's nothing wrong with child labour; but you think carbon emissions are bad. So you decide that airlines, both foreign and domestic, should have to comply with the cap-and-trade system you've set up that already covers every other industry in Europe, and buy emissions permits when they fly to destinations inside your borders. You're not saying they have to comply with emissions limits everywhere in the world or they'll be barred from flying into Europe. You're not even saying they have to comply with emissions limits everywhere in the world or they'll face tariffs when they fly into Europe. You're just saying they have to have emissions permits on those specific flights when they fly into Europe.
[A]pplication of the emissions trading scheme to aircraft operators infringes neither the principle of territoriality nor the sovereignty of third States, since the scheme is applicable to the operators only when their aircraft are physically in the territory of one of the Member States of the EU.
According to Hillary Clinton, this is an unacceptable violation of the principles of international free trade that will lead America to exact retaliatory tariffs on European exports.
Absent such willingness [to halt or suspend the ruling] on the part of the EU, we will be compelled to take appropriate action...It is the responsibility of the EU and its member states, not the United States or other countries, to find a solution to this impasse.
At least we agree with the Chinese on something!
To put this another way, when the United States prosecutes foreign companies for things they've done far outside the United States, like selling technology to Iran or bribing an African oil minister, that's America defending the free world and fighting international corruption. When the EU requires airlines to buy carbon permits for their flights into European territory...you get the picture.