Posted on 01/21/2005 9:26:51 AM PST by jb6
BRUSSELS (Reuters) - The European Union (news - web sites) resolved an internal wrangle on Friday over whether to assert now that sanctions on U.S. goods could be automatically reimposed in 2006 if the WTO backs its complaint about residual export tax breaks.
AFP Slideshow: World Trade Organization
Diplomats said trade representatives from the bloc's 25 nations agreed to put in place a legal provision for further punitive tariffs next year.
However -- in what diplomats described as a compromise -- the member states also committed themselves to hold political consultations before imposing any new sanctions.
Their agreement cleared the way for a formal decision lifting sanctions on $4 billion worth of U.S. goods retrospectively from Jan. 1 this year following Washington's repeal of illegal export tax subsidies last October.
"We have delivered on our commitment to suspend sanctions from Jan. 1, as announced and in recognition of the U.S. move to repeal its FSC (Foreign Sales Corporation) law," European Commission (news - web sites) Trade spokeswoman Claude Veron-Reville said.
"We will be in a position to reinstate those sanctions if the WTO (World Trade Organization (news - web sites)) finds the American law is not in compliance," she added.
The U.S. Foreign Sales Corporation (FSC) legislation, ruled illegal by the WTO, was the trigger for the biggest transatlantic trade dispute in 50 years.
The European Union slapped an initial duty of 5 percent on a broad range of goods from steel to textiles and paper last March, ratcheting it up to 14 percent by the end of the year.
The bloc announced it would lift its sanctions in 2005 after the law was repealed, but complained at the same time to the WTO about remaining subsidies under the regime.
These include three years of transition relief for companies that have benefited from the FSC and -- under a so-called grandfathering clause -- continued benefits for all exporters that entered binding contracts before Sept. 17, 2003.
The grandfathering clause favors producers of large capital goods with long delivery times such as Microsoft, Motorola, General Electric and Boeing .
Officials say the WTO is expected to rule on the legitimacy of remaining FSC subsidies in September next year.
Washington maintains that it has honored its obligation to remove illegal subsidies.
The Commission, the EU's executive arm, had proposed that the regulation lifting the sanctions should also spell out that they could be reimposed -- on about 60 percent of the $4 billion in U.S. exports -- if the WTO backs it on remaining subsidies.
Diplomats said a minority of EU states, including Britain and the Netherlands, objected to this "automaticity" clause, saying it could unnecessarily aggravate Washington at a time of tense trade relations.
Let the inevitable trade war with EUrope begin.
Add India and China to the list. They know there's economic forces and lobbies in America that profit from American weakness such as outsourcing. The cover-story pholosophy is "free trade" - and, of course, India, China and EU practice nothing of the kind to their profit.
Given the "free trade" orientation of our economic theorists I don't think we have the ability to play the real-world game of hidden barriers. Heck, India's and China's are hidden at all yet the "free traders" argue if we "open" our markets without restriction to them they'll open up theirs. Sometime. In the future. Out of guilt or something they'll act against their economic interest and free trade barriers. Sometime. In the future.
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