EU/US Trade Negotiations Remain Deadlocked

by Leroy Baker, Tax-News.com, New York

05 March 2003

Trade talks between The European Union and the United States this week failed to ease friction over a multitude of trade and tariff issues, and the two camps still appear to be at loggerheads.

A three hour meeting between E.U Trade Commissioner Pascal Lamy and U.S Trade representative Robert Zoellick failed to resolve the deadlock on a number of stumbling blocks between the two powers which could see the EU imposing a broad range of tariffs on US goods in the near future. The EU has been arguing for some time that many US firms, such as Boeing, Microsoft and Caterpillar benefit unfairly from tax breaks to the tune of $4bn collectively in an export subsidy program banned by the WTO. The EU previously drew up a list of some 50,000 companies across many industry sectors that will be targeted by retaliatory tariffs, though according to a report obtained by a French press agency, this has recently been shortened somewhat. However, the implications of such a move are bound to have a serious effect on the companies involved.

So far, there has been little progress made in the US congress to change the current tax framework that has allowed this situation to develop, and in a joint press conference arranged after yesterday's meeting, Lamy complained "we have a compliance problem with the US", adding "we are worried that not much has happened on this (issue)". Lamy elaborated on this view in a Wall Street Journal article on Monday, intimating that EU retaliatory action could not be far off. In it, he urged the US to "play by the rules" writing, "thus far Europe has held off retaliation (unlike the US, which imposed sanctions on hormones and bananas at lightning speed)". Lamy went on to warn the US: "without concrete steps toward compliance, that is not a situation that can be maintained for much longer".

Zoellick, on the other hand, sounded a more conciliatory note to proceedings. However, he asserted that the U.S had issues with certain EU policies. "We both recognize that this is a time of international tensions and uncertainty and I think we both recognize the importance of the international economy given this context." Referring to the EU's four year ban on US GM imports, Zoellick was more adamant, saying "we are at a point where we believe that the moratorium needs to be lifted, adding "we are in the process of trying to work with others around the world to try to have that happen most expeditiously and we are eager to see what progress the commission makes as well".

Lamy justified the EU position further citing America's poor track record of compliance with WTO rulings (the US apparently has five cases pending against it for failing to implement WTO rules), set a bad example to developing nations, and "set a poor backdrop to the negotiations on a new round of trade talks, the Doha Development Agenda" he said. "If they see either of the two big players disregarding common obligations, we will find it even harder to persuade them to move forward," concluded Lamy.

Recommended