EU imposes sanctions on U.S. goods

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Registered: 04-16-2003
EU imposes sanctions on U.S. goods
Mon, 03-01-2004 - 2:09pm
EU imposes sanctions on U.S. goods


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By Raf Casert



March 1, 2004 | BRUSSELS, Belgium (AP) -- The European Union on Monday started imposing millions of dollars in sanctions on American goods but said it would stop the measure immediately if the U.S. Congress repeals its export tax break legislation.

The U.S. legislation was ruled illegal by the World Trade Organization two years ago and it authorized the EU to impose sanctions last year.



"The U.S. has not brought its legislation in line with WTO rules. We are therefore left with no choice but to impose countermeasures," EU Trade Commissioner Pascal Lamy said in a statement.

Although the WTO has authorized $4 billion in sanctions -- the biggest amount ever -- the EU is taking a graduated approach, hoping to pressure the U.S. Congress to change the Foreign Sales Corporation legislation while limiting the impact on European companies and consumers.

If the sanctions run on, they would cost U.S. industry some $300 million this year and about double that next year, the EU said.

Lamy was already trying to look beyond the sanctions. "The name of the game is not retaliation but compliance: countermeasures will be lifted the day the FSC is repealed," he said.

Lamy was in Washington last week to discuss the way ahead and said he was "encouraged that progress can be rapidly achieved to adopt legislation repealing the FSC."

Sanctions hurt U.S. producers by making it more expensive for them to sell their products in Europe. But they can also backfire by pushing up prices in Europe or disrupting production if other suppliers can't be found.

The WTO initially declared the U.S. law allowing big exporters to benefit from reduced export taxes to be illegal in 2000, and an amended law was rejected again in 2002. Last year the WTO authorized the EU to impose extra duties of up to 100 percent on $4 billion of U.S. trade, which it said was roughly equal to the estimated annual U.S. subsidy.

The EU decided in December to impose tariffs from March 1, starting at 5 percent and increasing monthly up to 17 percent, until a new law is enacted.

That means U.S. companies will have to pay an estimated $16.6 million in March, rising to $46.4 million by December for a total of $315 million in additional duties by the end of the year.

http://www.salonmag.com/news/wire/2004/03/01/eu_sanctions/index.html