EU to Impose Sanctions on U.S. on Monday

Reuters ^ | Thu Feb 26, 2004 | Doug Palmer

[yonif]

WASHINGTON (Reuters) - European Union Trade Commissioner Pascal Lamy said on Thursday the EU would slap a 5 percent duty on more than $4 billion worth of U.S. exports beginning on Monday because of Congress' failure to repeal tax breaks declared illegal by the World Trade Organization.

"The picture is now quite clear. Countermeasures will go into effect by next Monday," Lamy told the European American Business Council after meeting with the chairman of the U.S. House of Representatives Ways and Means Committee.

The retaliation, the first imposed by the EU on the United States, will hit a wide array of agricultural and manufactured goods ranging from buckwheat to nuclear reactor parts. Lamy said the sanctions would remain in effect until the U.S. Congress passes legislation to repeal the tax breaks.

House Democratic leaders seized on the looming retaliation as an example of failed Bush administration trade policies, which they said have contributed to 2.9 million manufacturing job losses since January 2001.

They called on President Bush to "replace the disarray in U.S. trade policy with a comprehensive pro-jobs and pro-growth strategy for manufacturing, textile and apparel industries and the American economy as a whole."

The EU set the March 1 deadline for U.S. action last fall. The sanctions begin with a 5 percent duty on more than $4 billion worth of U.S. exports to Europe. The duty will increase by 1 percentage point each month up to a cap of 17 percent.

EU officials estimated the monthly value of the duties would rise from $16.5 million in March to $46.4 million in December for a 10-month total of about $315 million.

If the duties were to stay in effect at 17 percent, they would collect about $667 million annually -- assuming there was no impact on trading patterns, the officials said.

The tax breaks at the center of the dispute benefit large U.S. exporters like Boeing (BA.N: Quote, Profile, Research) and Microsoft (MSFT.O: Quote, Profile, Research) . The WTO has ruled, in a case dating back to the late 1990s, that the measures are illegal export subsidies.

The U.S. Senate is expected to begin debate next week on a bill to repeal the provisions and use an estimated $50 billion in savings to lower the corporate tax rate for manufacturers to 32 percent, from 35 percent currently.

The outlook for action on a similar bill in the House is less certain. However, industry officials are hopeful lawmakers can agree on a bill in the coming months to send to Bush.

The largest category of U.S. goods hit by the sanctions is jewelry, with an estimated $1.43 billion worth on the list. Other items include machinery, paper products, leather, meat and dairy products, fruits and vegetables, grains, cotton and textiles, tools, toys, games and sporting equipment.

WTO Director-General Supachai Panitchpakdi told reporters after a speech at the National Press Club he hoped the United States and EU could resolve the trade spat soon.

With world trade talks showing new signs of life, "I don't want the conflict to overflow to other areas," he said.

[Excuse_My_Bellicosity]

No problem. If they want to play games, we could put the EU under in less than a year. Bring it on.

[Diogenesis]

Would you like to know what I think of the skanky EU?

[Gunslingr3]

No problem. If they want to play games, we could put the EU under in less than a year. Bring it on.

Trade wars lower standards of living on both sides and just put more money in the hands of bureaucrats. It's nothing to hope for.

[DannyTN]

So if the case goes back to the 1990's is that a Clinton trade policy or a Bush Sr. trade policy that resulted in sanctions?

[ChadGore]

Isn't most of this offset by the change in the dollar ?

[StriperSniper]

The tax breaks at the center of the dispute benefit large U.S. exporters like Boeing

What did Mrs. dashole know, and when did she know it?

[cajun-jack]

tell 'em screw you...we can afford to hold the products much longer than they can afford to do without them.

pull all u. s. troops out of germany...close all bases...immediately, there would be a wailing from the germans that rent slums to lower ranking EM that don't qualify for base housing at inflated prices...the bars and resturants (guesthauses) near all bases would immediately go bust..the whores are immediately out of business...

throw the dollar in the pot and say "call"....see who's bluffing

[Willie Green]

No problem. If they want to play games, we could put the EU under in less than a year. Bring it on.

The Bush Administration is already engaged in a trade war against our domestic businesses and industries. I don't think the Euroweenies could do anything to make the situation worse. They have their own problems.

[GeronL]

The EU basically keeps a lot of their industries afloat with subsidies and we should ban American airlines from buying Airbus aircraft.

[Prodigal Son]

Isn't most of this offset by the change in the dollar ? More than offset actually. The weak dollar covers all exports to the EU- not just a few sectors. They are still losing out in competition overall because American goods are much cheaper at the moment.

[BykrBayb]

So we'll raise the price of the goods enough to cover the duty, thereby passing the cost on to the EU consumers. Check, and mate.

[Prodigal Son]

and use an estimated $50 billion in savings to lower the corporate tax rate for manufacturers to 32 percent, from 35 percent currently.

If they really wanted to retaliate against the EU's sanctions, the Congress would lower the corporate tax to zero (or very, very low) and you'd really hear the EU squeal then. If we made the States a tax haven for corporations maybe a lot more businesses would be coming in as opposed to going out.

[commish]

Something tells me I am about to get reprimanded but I have to say this exactly this way :

HEY EUROPE, F**K EU

[jwalburg]

we can afford to hold the products much longer than they can afford to do without them.

Yeah! How long can they go without diamond tie tacks? Especially the French!

[camas]

that is very true

[raloxk]

a trade war will only cost jobs, they better end the tax subsudies

[NRA2BFree]

It's time to tell the EU AND the WTO to kiss off!!!

[cajun-jack]

I don't know anything about diamond tie tacks, but i do know when i was stationed there in '68 & '69, if there was too much trouble in town the base commander would put the town off limits and in less than 24 hrs the burgermeister (mayor) and other prominent citizens was begging at the gate for him to reconsider.

If we immediately closed all bases and moved the troops...there would be chaos....even back then, they all hated us, but loved our money.

[McGavin999]

Well, we can handle that. 17% maximum? Just lower the corporate income tax rates by 17%