Reuters | By Doug Palmer | Feb. 26, 2004
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 and Microsoft. 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.
(Additional reporting by Richard Cowan)Reuters:
