EU May Postpone Threatened Trade Sanctions Against U.S.
Feb 19, 2004
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The European Union Commission has said it may now hold off from imposing multimillion-dollar sanctions on U.S. goods next month because of concerns about negative consequences for European industry.

"We are in a reflection period," a spokeswoman for the Commission said, adding that a decision would come within days.

The EU won authorization in 2003 to impose sanctions on up to U.S. $4 billion worth of U.S. goods, after the World Trade Organization (WTO) in 2002 declared illegal a U.S. law allowing thousands of firms to benefit from reduced export taxes.

U.S. President George W. Bush's administration has promised an overhaul but so far U.S. Congress has failed to pass a new law.

To emphasize its growing impatience, the EU decided in December to impose the tariffs from March 1, starting small and increasing each month so that they would amount to 290 million euros this year and more than twice that in 2005.

But last week, the leading European business lobby, UNICE, sent a letter to EU Trade Commissioner Pascal Lamy recommending Washington, D.C., U.S. be given more time, citing "good progress" in the U.S. legislative process.

"European business does not like sanctions because they hurt interests which have nothing to do with the disputes," UNICE President Juergen Strube wrote.

The commission spokeswoman said Mr. Lamy agreed progress was being made in Washington, D.C., U.S. but had not yet decided whether to agree to UNICE's request.

Sanctions hurt U.S. producers by making it more expensive for them to sell their products in Europe. But they can also backfire by pushing up prices in Europe or disrupting production if other suppliers are not able to be found.

U.S. Trade Representative Robert Zoellick has warned the levying of $4 billion in sanctions would be like a "nuclear bomb" on trade relations. (Dow Jones)

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