LexisNexis(TM) Academic - Document

LexisNexis(TM) Academic - DocumentCopyright 2005 The Financial Times Limited
Financial Times (London, England)

January 22, 2005 Saturday
London Edition 1

SECTION: EUROPE; Pg. 5

LENGTH: 427 words

HEADLINE: EU clears way to lift sanctions against US TRADE:

BYLINE: By EDWARD ALDEN and RAPHAEL MINDER

DATELINE: BRUSSELS and WASHINGTON

BODY:


The European Union yester-day cleared the way for the lifting of trade sanctions imposed against the US in a dispute over a US corporate tax subsidy deemed illegal by the World Trade Organisation.

And in a co-operative gesture, the European Commission said it would not automatically reimpose sanctions if the WTO ruled later this year that the US had failed to comply fully with the organisation's ruling.

The move, which follows last week's agreement to negotiate on a dispute over subsidies to Boeing and Airbus, is the latest sign of a thawing in transatlantic relations in advance of President George W. Bush's visit to Europe next month.

Anthony Gooch, Commission spokesman in Washington, said that Peter Mandelson, EU trade commissioner, was seeking to "avoid escalating confrontation."

But the gesture drew a sharp response from the US, which is angry that the EU is continuing to pursue the dispute in the WTO even after Congress passed an overhaul of US tax rules last October in response to the original WTO ruling.

"It is harmful for the EU to needlessly prolong this matter in the face of Congress's good faith action," said Richard Mills, spokesman for the US trade representative's office.

The punitive tariffs, currently 14 per cent on Dollars 4bn (Euros 3bn, Pounds 2.1bn) worth of US imports annually, were originally due to be eliminated on January 1, but the decision was delayed when several EU member states objected to a Commission proposal last month granting it the authority automatically to reimpose sanctions at a later stage.

EU trade officials representing the 25 member states yesterday decided that the sanctions should be lifted retroactively to January 1, a move that will be formally endorsed at EU ministerial level later this month.

Importers will receive rebates on any products on which they paid duties in January. In addition, the Commission promised to consult member states and negotiate with the US before reimposing any sanctions.

"We have now found a consensus and that is good news because it was important to give a signal of goodwill to the US at this stage," said an EU diplomat.

The tariffs were imposed in 2003 in an effort to force the US to repeal the tax subsidy. Despite the repeal, the EU argues the US has failed to comply fully with the WTO ruling because Boeing and some other US companies will continue to receive tax benefits worth more than Dollars 150m annually.

Congress agreed to a two-year transition period to phase out the subsidy and maintained benefits for contracts signed before the scheme was repealed.

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