EU Planning Gradual Introduction Of Sanctions Against US

by Ulrika Lomas, for LawAndTax-News.com, Brussels

22 October 2003

It emerged on Monday that the European Union is preparing to impose $4 billion of trade sanctions on the United States on a gradual basis, in an effort to avoid an all-out trade war between the two economic blocs.

Although there have been moves recently in the direction of repealing a controversial tax break for exporters, observers have suggested that the US Congress is unlikely to finish discussing a replacement for the disputed Foreign Sales Corporation (FSC) regime by the end of the year, despite the fact that the deadline (approved by the World Trade Organization) for ending the tax break is March.

Speaking to Dow Jones Newswires this week, an unnamed EU diplomat announced that:

"A moderate approach is the right way - it's not appropriate to apply the entire sanctions."

The EU is said to be considering beginning to apply tariffs on targeted US products in March 2004, at a level of 5%. The levies would then be increased by one percentage point each month, until they reach 16%. However, this proposal has yet to secure formal approval from European governments.

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