EU Turns Up The Heat On US As Tariffs Rise To 6%

by Ulrika Lomas, Tax-News.com, Brussels

05 April 2004

The European Union is maintaining pressure on the United States to drop tax breaks banned by the WTO, sticking to its promise to raise import duties on selected US products by 1% per month.

Accordingly, tariffs on US imports increased last Thursday from 5% to 6%, a move confirmed by EU Commission trade spokeswoman Arancha Gonzalez.

"Tariffs are being raised by one percent today as planned and this is not an April fools joke," she announced, continuing: "We hope that by this time next month we can announce that trade sanctions are lifted."

Should the United States fail to remove the offending legislation, the Extra Territorial Income Exclusion Act, the extra duties will reach $315 million by the end of the year, rising to $666 million if a solution is not found by the end of 2005.

Whilst the World Trade Organisation has given the EU the right to impose $4 billion worth of sanctions upon the United States, the European Commission has chosen a less draconian approach, no doubt aware that such punitive sanctions would also adversely affect European firms by increasing prices and costs.

It had been hoped by many US lawmakers that alternative legislation sponsored by the Senate Finance Committee Chairman Charles Grassley, known as the JOBS Bill, would be ready for passage into law before the EU sanctions began to bite.

However, the bill recently stalled on the Senate floor after Democrats tried to attach an unrelated amendment concerning overtime rules, leaving its future somewhat uncertain.

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