EU Threatens U.S. With Trade War Over Tax Dispute

By Agence France-Presse The European Union published Sept. 13 a list of U.S. products on which it threatens to impose over US$4 billion in levies annually, in a trade row of potentially unprecedented scale. The dispute, which follows a World Trade Organization (WTO) ruling at the end of August, risks further souring trans-Atlantic relations at a time when tensions are also high on the political front. A spokeswoman for the European Commission, the EU's executive arm, said the value of the preliminary list amounted to two or three times the amount authorized by the WTO in the dispute over U.S. export tax breaks. She added that the Brussels-based Commission hoped the U.S. would change its laws to avoid the EU sanctions. "What is important for us is that the legislation in the U.S. is finally changed," she said. But, "we have not presented a deadline." On Aug. 30 in Geneva, WTO arbitrators authorized the 15-member European Union to impose over $4 billion in retaliatory sanctions against the U.S. in a dispute over the U.S. Foreign Sales Corp. tax law. The WTO had earlier ruled that the law, which gives tax breaks to firms that operate abroad, was not in compliance with global trading regulations. The Aug. 30 ruling triggered an unusual statement from WTO Director-General Mike Moore, who urged the U.S. and EU to resolve the dispute in "an amicable and constructive fashion." Immediately after the WTO ruling, U.S. Trade Representative Robert Zoellick said the United States would change the tax system to comply with global trading regulations. The EU's list includes a range of meat, dairy, vegetable and cereal products, as well as leather, fur and textiles, forestry products, iron and steel, ceramics and glassware, jewelry, electronic products including sound and image recorders, and toys and games. The European Commission has asked EU member states to submit their comments on the list and make any requests to remove products before Nov. 12. Copyright Agence France-Presse, 2002

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