EU Slaps Multi-Million Dollar Trade Sanctions On U.S.

By Agence France-Presse The European Union slapped multi-million dollar trade sanctions on the United States on Mar. 1 over illegal tax breaks given to U.S. exporters, urging U.S. lawmakers rapidly to repeal the measures. Backed by a World Trade Organization ruling, the European Commission announced duties on a wide range of U.S. goods entering Europe until the U.S. Congress annuls the tax breaks under the Foreign Sales Corporation (FSC) law. "Despite waiting for more than two years, the U.S. has not brought its legislation in line with WTO rules. We are therefore left with no choice but to impose countermeasures," said EU trade commissioner Pascal Lamy. "The name of the game is not retaliation but compliance: countermeasures will be lifted the day the FSC is repealed," he added. The commission underlined that the level of sanctions is substantially less than the $4 billion allowed by the WTO. The sanctions take the form of import duties starting at 5%, rising by one percentage point per month, on goods ranging from American meat to nuclear reactor parts. This year they would amount to some $300 million if continued until December, said Lamy's spokeswoman Arancha Gonzalez, but added that Brussels hopes the U.S. measures will be repealed before then. The WTO has ruled that the FSC law flouts global trade rules by allowing thousands of U.S. firms, operating through subsidiaries in offshore tax havens, to benefit from reduced export taxes. WTO arbitrators agreed with the EU that just over $4 billion (3.4 billion euros) would constitute "appropriate countermeasures" based on the trade impact of the U.S. policy. The U.S. administration says the EU decision is regrettable -- and insists it is pushing Congress hard to push through legislation to end the tax breaks "as quickly as possible," according to a U.S. spokesman. "We've urged the European Commission to refrain from imposing retaliatory tariffs, given the complexity of the legislation and we regret that they are moving forward," said a spokesman for the U.S. mission to the EU last week. The House of Representative and Senate are drawing up rival proposals for legislation, which would need to be hammered out in a compromise text before signature by President George W. Bush. Two of the main proposals contain a three-year transition period to phase out the tax break, however. Copyright Agence France-Presse, 2004