US faces EU sanctions

WASHINGTON – European Union trade chief Pascal Lamy said that time had run out for the United States to change its tax law and Europe would today begin imposing up to US$4 billion in trade sanctions authorised two years ago by the World Trade Organisation.

“We’ve been extremely patient, but there is no way now we can avoid sanctions,” Lamy said at the European Union’s office in Washington after two days of talks with senior Bush administration officials and key lawmakers on Capitol Hill. Still, the EU is reluctant to start a trade war with its largest trading partner and has taken a baby step approach to the sanctions.The WTO has authorised up to US$4b in sanctions, but the EU would begin on Monday with US$16,6m in sanctions and escalate incrementally until a total of US$474,1m in sanctions had been imposed by March 1, 2005.Lamy said the EU would reassess its options if the tax breaks remain in place after a year.The US breaks, known as the foreign sales corporation and the extra-territorial income exclusion, or ETI, are given to large US based multinational exporters.Those include Dow Jones Industrial Average components Boeing, Microsoft and General Electric.”The name of the game remains compliance.It’s not about sanctions, it’s not about retaliation, it’s about focusing minds that this needs to be done,” Lamy said, referring to congressional passage of a new tax law to bring the US into compliance with the rules of the Geneva-based trade body.- Nampa-AFPStill, the EU is reluctant to start a trade war with its largest trading partner and has taken a baby step approach to the sanctions. The WTO has authorised up to US$4b in sanctions, but the EU would begin on Monday with US$16,6m in sanctions and escalate incrementally until a total of US$474,1m in sanctions had been imposed by March 1, 2005. Lamy said the EU would reassess its options if the tax breaks remain in place after a year. The US breaks, known as the foreign sales corporation and the extra-territorial income exclusion, or ETI, are given to large US based multinational exporters. Those include Dow Jones Industrial Average components Boeing, Microsoft and General Electric. “The name of the game remains compliance. It’s not about sanctions, it’s not about retaliation, it’s about focusing minds that this needs to be done,” Lamy said, referring to congressional passage of a new tax law to bring the US into compliance with the rules of the Geneva-based trade body. – Nampa-AFP

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