EU To Lift Trade Tariffs On US

by Ulrika Lomas, Tax-News.com, Brussels

25 January 2005

The European Union announced on Friday that it will lift punitive tariffs which remain in place on around $4 billion worth of US goods despite the enactment of new legislation repealing tax subsidies for American producers.

The tariffs, which have been rising at 1% per month since last March and presently stand at 14%, were due to be phased out in the New Year after the US Congress passed new legislation phasing out the FSC-ETI tax breaks last October.

However, the EU Commission delayed lifting the sanctions, citing grandfather clauses in the American Jobs Creation Act designed to enable firms with long production contracts, such as aircraft maker Boeing, to continue benefiting from the tax breaks for a further two years.

The EU has asked the WTO to examine the new legislation to decide whether it is compliant with international trade rules, but in a conciliatory gesture designed to defuse transatlantic trade tension, has now taken the decision to lift the tariffs pending the WTO’s verdict, expected in the next three to four months.

"The council confirmed its unanimous approval to lift the FSC sanctions retroactive to Jan. 1," EU Commission spokesman, Anthony Gooch confirmed in Washington last week.

Should the WTO find in the EU’s favour, there will be a sixty-day period in which an “amicable solution” with the US will be sought, Gooch explained.

“That is our preferred course," he stated.

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