EU Slaps Trade Sanctions on U.S. Goods

[Robbien]

BRUSSELS (Reuters) - The European Union imposed sanctions on the United States for the first time on Monday as a dispute over tax breaks for U.S. firms turned into a trade battle that could cost U.S. exporters $300 million this year.

The lower tax rates on exports by firms including Boeing and Microsoft have been judged an illegal subsidy by the World Trade Organization (WTO), which ruled the EU could respond by imposing up to $4 billion in sanctions a year on U.S. goods. But European Trade Commissioner Pascal Lamy decided to apply only gradual pressure by phasing in the measures, which will hit a wide range of goods, including textiles, jewelry and toys.

The sanctions are intended to prod the U.S. Congress quickly to replace the tax breaks with measures in line with WTO rules. "The name of the game is not retaliation, it is compliance," said a spokeswoman for Lamy. "The day the new measures are passed by the Congress, we will stop the sanctions."

The sanctions start at $16 million as an extra five percent duty on selected U.S. goods in March. They are due to rise one percent a month to $315 million in 2004 and $666 million if they run throughout 2005. Based on the full $4.0 billion, the main sector to be hit would be U.S. jewelry at an estimated $1.43 billion.

http://www.boston.com/business/articles/2004/03/01/eu_slaps_trade_sanctions_on_us_goods/

comment: The article goes on to say how Bush plans to resolve the issue. Would a tax cut surprise any one?

[0007]

1. Ah, another tax is just what the doctor ordered

We'll show "old Europe" who's boss

[cprise]

2. Isn't "free trade" fun?

The EU telling Congress what to do... Wheee!

[MrSoundAndVision]

3. Sanctions, bah!

We'll pay for them as consumers without even blinking.

[section321]

4. We don't pay for these sanctions as consumers.

We pay for them as exporters. EU citizens pay for these sanctions as consumers. American products just became more expensive in the EU.