WASHINGTON (AP) - Europe's top trade official warned the Bush administration on Thursday that the European Union would not hesitate to impose billions of dollars of sanctions on American products if the United States does not scrap a $4-billion tax break for exporters and remove penalty tariffs on imported steel.
EU Trade Commissioner Pascal Lamy said the United States must understand that the 15-country EU does not plan to delay the penalties in the two biggest cases the United States has lost before the World Trade Organization.
Lamy's tough talk to an audience of U.S. business executives came a day after he and other EU officials participated in a White House meeting with President George W. Bush. Both sides sought to emphasize points of agreement in foreign policy and trade matters as a way of moving on from the dispute over the U.S.-led Iraq war.
Lamy said that he and U.S. Trade Representative Robert Zoellick want to prevent the trade disputes from affecting the overall economic relations between Europe and the United States. But he indicated that Europe will not hesitate to move toward sanctions in both the export tax and steel disputes.
In the export subsidy case, the EU has published a list of $4-billion US worth of American products that will be penalized if Congress has not scrapped by year's end a part of U.S. tax law said by the WTO to violate global trade rules.
The other case involves a WTO ruling that Bush violated trade rules in 2002 when he imposed penalty tariffs of up to 30 per cent on various steel imports to provide temporary relief to the U.S. steel industry against a surge of imports.
The administration has said it would appeal the ruling. Lamy said the best outcome would be for the administration to voluntarily remove the sanctions. If the tariffs remain in place and the United States loses the WTO appeal, the EU will move immediately to impose retaliatory tariffs against U.S. products, Lamy said.
"These safeguards have cost us a lot of (steel) exports and a lot of money and (they) should disappear as soon as possible," Lamy said.
In the tax case, Congress has struggled to come up with a replacement for the export subsidy that provided $4 billion annually in tax breaks for hundreds of U.S. exporters.
Lamy said he had spent the last two days discussing various options with members of Congress.
One plan would create new tax incentives aimed at the same group of companies that now benefit from the export subsidy. A competing proposal would set up a new, lower tax rate for all domestic manufacturers.
Lamy said he understood that a third proposal was about to be introduced. He refused to take sides over which approach the EU sees as preferable, saying his opinion would not help resolve the dispute in Congress.
On other trade matters, Lamy said it had not been helpful for the United States to push forward with a WTO case challenging the EU's ban on genetically modified food at the very time that the EU was in the process of coming up with scientific guidelines on this issue.
Lamy also said it was "dishonest and cynical" for Bush and other U.S. officials to contend that the EU's current ban on genetically modified food is contributing to starvation in Africa.
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