EU would pay for US sanctions, claims US official
machinery if Brussels follows through on a threat to impose
sanctions in a long-running trade spat with Washington, a US trade
official said on Friday.
Europeans could pay more for everything from toys to heavy machinery if Brussels follows through on a threat to impose sanctions in a long-running trade spat with Washington, a US trade official said on Friday.
The World Trade Organisation has ruled four times that billions of dollars in tax breaks for US exporters from Boeing to Walt Disney are illegal export subsidies under international trade rules.
In the latest step in the case, the European Commission, the executive arm of the European Union, published a list on Friday identifying for preliminary retaliation some $14 billion (€14.5bn) of US food products, electronics, toys, sporting equipment, machinery, steel and other goods.
The list will be pared down over the next several months to $4 billion (€4.13bn) - the level set by the WTO for EU retaliation and also the largest level approved yet in any trade dispute.
"We believe that making this list public and seeking input from European stakeholders will help focus European attention on the implication of retaliation. This is truly a doubled-edged sword," said Rich Mills, a spokesman for the US Trade Representative's office.
Ron Gaskill, an agriculture trade policy specialist with the American Farm Bureau Federation, said his organisation was still reviewing the many farm products on the EU list, but it appeared it would not hit US farming particularly hard.
"I'm not sitting here alarmed; interested certainly, but not alarmed," Gaskill said. He said it seemed "heavy-duty commodities," such as soybeans, corn and wheat, had escaped.
The Bush administration has said it intends to avoid retaliation by working with Congress to change the US international tax regime to comply with WTO rules.
But given the complexity of the proposed tax reforms, lawmakers have downplayed the chance of Congress finishing its work this year, as EU officials have recently urged.
That is "not only a tall order, but a very unrealistic order," House Ways and Means Chairman Bill Thomas, a California Republican, told reporters on Friday.
The new EU retaliation list should push the issue by focusing Congress' attention on the risk of inaction, he said.
Thomas also downplayed the risk of the EU imposing sanctions this year, saying the individuals who would make such a decision recognised the difficulty of changing US tax law.
Thomas has introduced a bill to repeal the offending tax provisions and provide new corporate tax breaks not specifically aimed at exporters. The measure has faced strong opposition from Boeing and other beneficiaries of the export tax break, who say it does not do enough to help them.
Stuart Eizenstat, a former deputy Treasury secretary, agreed with the Bush administration that retaliation could hurt the EU as much as the United States.
"If they pull this trigger, it'll potentially have a devastating effect on their economies," he said.
But Eizenstat also said the White House could do more. "One of the disappointments so far has been the lack of involvement by the administration in trying to develop a bipartisan solution," he said.
A European Commission spokesman in Washington said the EU's decision on sanctions would be directly related "to the speed or swiftness or pace" of legislation moving through Congress.
European officials in Washington also would not rule out the EU slowly phasing in sanctions if Washington acted slowly.
US business groups shared Thomas' scepticism that the EU would retaliate soon.
"Personally, I think they (the EU) are expecting (Congress to get this) this done in 2003," Bill Reinsch, president of National Foreign Trade Council, said. "If it's not, I think you'll see a more serious discussion of retaliation."
