EU And US Head Inexorably Towards Trans-Atlantic Trade War

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

27 January 2004

Officials from the French and German embassies in Washington have urged US lawmakers to speed up the process of replacing the Extra Territorial Income Exclusion Act, maintaining that the EU will not baulk at imposing retaliatory tariffs in March.

According to Reuters, Jean Francois Boittin, economic and commercial minister at the French Embassy, and Bernd Fischer, economic minister at the German Embassy, have revealed that the EU is unlikely to extend the deadline should Congress fail to enact new tax legislation aimed at replacing the WTO-banned subsidies given to US exporting firms.

However, whilst Fischer acknowledged that US procrastination has tested EU patience to the limit, he was keen to stress that his government would rather avoid a costly trans-Atlantic trade war. "It's in the interest of the German government and the German economy that trade wars are avoided," he observed.

M. Boittin, meanwhile, seemed less conciliatory, and indicated that EU-imposed sanctions on US imports are now virtually an inevitability. He described the process leading to the imposition of sanctions in March as being more or less on “automatic pilot," according to Reuters.

Under the EU plan of action, tariffs will be placed on some $4 billion worth of US goods intially at a rate of 5%. The levy will then be increased incrementally on a monthly basis until Congress repeals the offending legislation.

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