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U.S., EU Seek Conflict Resolution

<CS:BOLD>WASHINGTON -- U.S. Trade Representative Robert Zoellick, seeking to lower tensions with the European Union over export subsidies, said Friday that the U.S. is developing a compliance proposal.<BR><BR>In a joint news conference, Zoellick and...

WASHINGTON — U.S. Trade Representative Robert Zoellick, seeking to lower tensions with the European Union over export subsidies, said Friday that the U.S. is developing a compliance proposal.

In a joint news conference, Zoellick and European Trade Commissioner Pascal Lamy laid out the details of the delicate discussions.

“I was trying to emphasize that we as an administration are working with the business community and Congress, and hopefully we will work with European experts to try to resolve a long-standing problem,” said Zoellick.

However, he pointed out how complex the problem is because it would require Congress to change the tax code.

For his part, Lamy did not rule out the EU’s right to levy sanctions on U.S. products in retaliation if a settlement is not reached.

“I’m glad now that compliance is the name of the game,” Lamy said. “It’s another question of maintaining our rights in the WTO to leverage on this process [with sanctions], and my view is that we will retain the ability of leveraging this process in the right direction.”

A World Trade Organization panel ruled earlier this month that a U.S. law giving tax breaks to businesses operating overseas amounted to an illegal subsidy.

The next step in the case is an arbitration process that will decide on the amount of sanctions the EU would be entitled to impose on the U.S. The report is expected by the end of March, and the EU could start imposing sanctions of up to $4 billion as early as April on a whole range of products, including apparel and accessories, both knitted and woven, as well as footwear, cosmetics and fine jewelry.

In addition to meeting with Zoellick, Lamy also met with Congressional members, including Rep. Bill Thomas (R., Calif.), chairman of the House Ways and Means Committee, on Thursday to discuss trade issues.

“There are different voices in the EU and some call for retaliation, while others call for solving the problem and avoiding the trade conflict,” said Zoellick. “I have a sense that Pascal’s interest is in the latter of those.”