US Business Urges Legislative Action To End EU Tariffs

by Mike Godfrey, Tax-News.com, Washington

09 September 2004

A coalition of more than 300 American businesses and trade groups on Tuesday urged lawmakers to pass long-awaited tax legislation aimed at terminating tariffs on US goods imported into Europe.

In a letter seen by Dow Jones Newswires, signed by representatives of 318 organisations including Johnson & Johnson Inc., The Dow Chemical Company and the US Chamber of Commerce, Congress was warned that "these retaliatory tariffs continue to hurt US exports to Europe and negatively impact jobs of American workers."

The letter urged Congress to complete work on the crucial tax bill so as to minimize "the economically devastating trade sanctions on US products and their impact on the American workers who produce them" - an act the groups said “is essential to both our businesses' bottom line and our workers' jobs."

After running out of patience with America’s lack of legislative response to the WTO’s ruling that its ‘Foreign Service Corporation’ legislation constitutes an unfair subsidy to US firms and therefore must be repealed, the European Union began imposing tariffs at a rate of 5% in March 2004. The tariffs have been increasing in 1% increments every month and now stand at 11%. They will continue rising until a ceiling of 16% is reached.

In the meantime, both the House and Senate have passed bills facilitating, among festoons of other tax benefits, a 3% corporate tax cut to certain domestic firms to offset the loss of the FSC subsidies. However, the chambers have yet to begin negotiations on a final draft of the bill and with an election just around the corner and a legislative log-jam forming, (Congress has also to thrash out a compromise to Bush’s tax cut extensions and consider a response to the 9/11 Commission's recommendations), the prospects that the bill will pass before the end of the year look dim.

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