EU Will Not Rush To Re-Impose Tariffs On US Despite Concerns Over New Tax Law

by Ulrika Lomas, Tax-News.com, Brussels

14 February 2005

In a bid to defuse transatlantic trade tensions, the European Union’s chief trade negotiator, Peter Mandelson has told the United States government that the EU will not rush to re-impose import tariffs on US goods, despite concerns over tax subsidies which continue to benefit certain American firms.

The World Trade Organisation is currently examining, at the EU’s request, recently enacted US tax legislation that has phased out tax subsidies given to exporting manufacturers under the old FSC-ETI regime.

The EU remains concerned that certain firms with long contract cycles, such as Boeing, will continue to benefit from the tax subsidies to the detriment of their European competitors, as a result of grandfathering provisions contained in the American Jobs Creation Act, which repealed the old legislation.

However, even if the WTO decides that the new legislation is still in breach of global trade rules, Mandelson indicated that the EU would not automatically seek to re-impose tariffs, which were until January 2005 in place on around $4 billion worth of US goods at a rate of 15%.

"We've already lifted sanctions, which we didn't need to do. I would think carefully before imposing them, and I hope that they won't be necessary if we can find a negotiated solution to this issue,” he stated during his first official visit to Washington since taking over from Pascal Lamy as EU Trade Commissioner.

The WTO is expected to make a ruling on the issue later in the year, after which the EU will give itself sixty days to decide its response to the decision.

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