EU may sanction US over trade row

The European Commission said it would impose billion-dollar trade sanctions on the US by the end of this year if Washington does not scrap i...

The European Commission said it would impose billion-dollar trade sanctions on the US by the end of this year if Washington does not scrap its tax system breaks for exports.

‘‘We would impose sanctions if and when the illegal FSC (Foreign Sales Corporation) is not replaced by the end of the year,’’ Arancha Gonzales, spokeswoman for European Union Trade Commissioner Pascal Lamy said.

WTO to probe EU food name rules
GENEVA: THE World Trade Organisation (WTO) on Thursday agreed to investigate a complaint from the United States and Australia that the European Union (EU) was failing to protect some food and drink brand names from places outside the 15-nation bloc. The EU is one of the most fervent supporters of tightening international protection for products with names echoing their area of origin, such as Parma ham or Champagne. For Brussels, better and wider protection for so-called geographical indications is a key demand at global talks on lifting barriers to trade in farm goods. But the United States and Australia, which are cool about increasing such measures, accuse the EU of not practising what it preaches when it comes to registering non-EU products for protection inside the bloc. Reuters Story continues below this ad

Trade Commissioner Pascal Lamy had said last May he would give the US until autumn to change its tax laws or face $4.0 billion of sanctions in the form of punitive duties from January 1. But Gonzales also said the EU executive was encouraged by action in the US Congress to change the law.

The FSC system, which grants tax breaks for giants such as Boeing and Microsoft, was judged illegal by the World Trade Organisation (WTO), allowing the EU to impose sanctions when it sees fit.

US President George W. Bush proposed repealing the law in his budget for 2004, but Congress has come under pressure from industry not to hastily scrap the scheme. Boeing said last year such a move could put 10,000 jobs at risk.

Gonzalez said EU patience was running out. The WTO declared the FSC illegal in 2000, she said, and in May this year the trade body gave Brussels permission to impose sanctions.

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‘‘We have already waited for three years to get the legislation repealed and therefore an extra three year period could not be acceptable,’’ she said. ‘‘We would hope President Bush can sign that into law by the end of 2003,’’ she added.

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