Bell Tolls For US On EU Sanctions As Lamy Talks Tough In Washington

by Mike Godfrey, Tax-News.com, Washington

02 March 2004

The failure by the US Congress to repeal the Extra Territorial Income Exclusion Act by the March 1 deadline has give the European Union no choice but to impose punitive tariffs on US exports, the EU’s Trade Commissioner Pascal Lamy said last Friday.

"At the end of the day, it's about compliance," Lamy told reporters following a two-day briefing with officials from the US Treasury Department and Trade Representative’s Office.

He continued: "It is not about being (not) nice; it's not about being abrasive. It is about making sure the tools we have - which Brazil has, which Canada has, which Sri Lanka has in this system - are used to foster the notion (that) we trade more if we have a level playing field, and that is to the benefit of us all."

Lamy sidestepped questions as to whether he thought the Bush administration was applying sufficient pressure on Congress to repeal the ETI Act. However, the Trade Commissioner was said to have received assurances from Treasury Secretary John Snow that fresh legislation was being advanced by Senate Finance Committee Chairman Charles Grassley, who is aiming to introduce his proposals in the coming days.

Grassley’s bill, known as the Jumpstart Our Business Strength (JOBS) Act, would repeal the current extraterritorial income tax regime and replace it with a tax cut for all manufacturers, including family-held S corporations and partnerships that produce goods within the United States.

Grassley claims that his measures will be completely revenue-neutral, the costs of which are to be offset with a series of good government measures he has long advanced, including a crackdown on tax shelters.

In theory, the EU-imposed tariffs will now be applied on a wide range of US exports beginning at a rate of 5%, rising by increments of 1% monthly until reaching a maximum of 17% next year.

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