WASHINGTON — European Trade Commissioner Pascal Lamy said Tuesday he won’t back off an end-of-year deadline for Europe to start levying up to $4 billion in punitive duties on U.S. imports should the U.S. Congress fail to repeal an export subsidy deemed illegal by the World Trade Organization.

This story first appeared in the November 5, 2003 issue of WWD. Subscribe Today.

Lamy, speaking to the European Institute in Washington, said “no one can say we have been rash” in moving to retaliate under WTO rules. The export subsidy dispute has been churning since 1997.

Meanwhile, the European Commission is slated to decide today how to phase in the punitive duties equal to the value of $4 billion in U.S. exports to the region, including textiles and apparel. At the onset, Lamy said at a later news conference, if the end-of-year deadline isn’t met he recommends an across-the-board 5 percent tariff to be levied until March 1, which would increase until the export subsidy is repealed.

American products affected would include $100 million in apparel, $103 million worth of leather handbags and luggage, $16 million in cosmetics, $19 million of footwear and $500,000 in manmade filaments and cotton.

Repeal of the offending export subsidy remains tied in knots, as lawmakers bicker over competing House and Senate versions of legislation, which has yet to be voted on by either chamber and has gotten caught up in the debate over whether U.S. tax breaks benefit multinational corporations at the expense of the flagging domestic manufacturing base. At issue is whether revenues from the $57 billion export subsidy should be channeled to U.S. manufacturers as a tax break, or shared and enhanced with American companies operating abroad.

Lamy’s comments came after two days of meetings with Bush administration officials and Capitol Hill lawmakers. Topics of their talks included the status of the export subsidy’s repeal, as well as a host of other European Union-U.S. trade tiffs and the broader issue of how to revive WTO trade-liberalizing talks that collapsed in September in Mexico.

Another looming U.S.-EU trade dispute involves the American imposition two years ago of protective steel tariffs. The EU successfully fought the tariffs at the WTO and next week it is slated to rule on a U.S. appeal. Should the original ruling stand, the EU could press for another list of products for retaliatory tariffs and “retaliation is a racing certainty in mid-December,” Lamy said in his speech.

The specter of continued finger-pointing over trade between the U.S. and EU has been widening over the last decade. The U.S. already has $116 million in punitive tariffs on EU imports over a WTO dispute about Europeans disallowing sales of U.S. beef from cattle treated with hormones. The tariffs cover $25 million worth of EU rayon shipments.

However, Lamy bristled at the idea of an American-European trade war unfolding.

“There is nothing like a trade war,” Lamy said at the news conference, earlier noting that two-way trade amounts to $1 billion a day. However, he said, “We are talking about compliance. We are not talking about negotiating some kind of deal.”

In response, the top Democrat on the House Ways and Means trade subcommittee, Rep. Sander Levin (Mich.), called Lamy’s comments as counterproductive “saber-rattling” considering the “fragility of the WTO system and of transatlantic relationships.”

“The United States should not buckle under threats by the EU” regarding the export subsidy or steel cases, Levin said in a statement.

As for the WTO, Lamy in his speech acknowledged the continued struggle to find unity between developed and developing countries on how to be equitable in lowering global tariffs and trade barriers. He also noted the global concerns regarding competition from China.

“Sometimes it seems as if the U.S…is the only country concerned about China,” Lamy said. “Clearly, no one likes to say it, but many developing countries in particular are concerned about China’s seemingly limitless capacity to produce and seemingly bottomless comparative advantage.”

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