THREAT OF EC SANCTIONS ON U.S. GOODS BUILDS

Byline: Kristi Ellis

WASHINGTON — The European Commission is expected to discuss with officials from 15 European Union states today whether it will speed up imposing retaliatory trade sanctions against the U.S. because of punitive tariffs the U.S. placed on global steel imports last month.
European Union officials said this week that the EC is preparing a shorter list of possible targets to be hit by sanctions, possibly in the next two months, according to news reports. The immediate sanctions might only be aimed at U.S. steel, though EU officials would not disclose which products are under consideration.
European Trade Commissioner Pascal Lamy previously said he was considering imposing sanctions on $2 billion worth of U.S. products, including apparel and textiles. That list will be submitted to the World Trade Organization by May 20. But the WTO, the final arbiter on whether the U.S. violated rules governing global trade, is not expected to rule on the dispute until summer 2003.
In the interim, the EU is taking a three-pronged approach, including consultations with the U.S., a request for compensation for the U.S. tariffs and implementing its own safeguard measures, according to a spokeswoman from the EU delegation in Washington.
“We are within our rights under the WTO safeguard agreement to put into place safeguard procedures, but we have to substantiate that there is a potential threat of a diversion of trade,” the EU spokeswoman said.
The EU adopted safeguard measures for steel March 27, which will last for a maximum of six months. She said an investigation is under way to determine whether trade was diverted toward the EU market as a result of the U.S. measure.
The Bush administration has argued that the tariffs are permitted because steel imports are being sold at below the cost of production. Other countries, including China and Brazil, are expected to pursue their own complaints.
Meanwhile, in an unrelated trade dispute concerning tax breaks for U.S. exporters, a WTO arbitration panel has pushed back a date for a decision on the amount of sanctions the EU would be entitled to impose on the U.S. Arbitrators were originally expected to hand down a decision on April 29.
A WTO panel ruled that law giving tax breaks to businesses operating overseas amounted to an illegal subsidy. In the worst-case scenario, the EU has sought WTO permission to retaliate on more than $4 billion worth of U.S. goods. The U.S. has challenged the EU’s sanction claim in a filing to the WTO, asserting the proper amount of sanctions is no more than $956 million.

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