The Militant (logo)  
   Vol. 67/No. 45           December 22, 2003  
European Union threatens to
retaliate against U.S. trade subsidies
The White House decision December 4 to rescind tariffs on steel imported into the United States did nothing to relax trade tensions between Washington and its imperialist rivals in Europe and Japan. The following day, European Union (EU) trade commissioner Pascal Lamy reaffirmed a March 1, 2004, deadline for the U.S. government to cancel tax breaks for U.S. companies with offshore operations.

U.S. president George Bush withdrew the steel tariffs more than a year ahead of schedule in the face of an EU threat to impose sanctions on $2.2 billion worth of U.S. goods. In dropping the tariffs, Bush stated they had already accomplished their purpose in boosting the profits of U.S. steel companies and their competitiveness against their rivals. At the same time, he announced a plan to monitor the growth of steel imports into the United States.

The EU trade commissioner told the New York Times that Bush’s decision to back down demonstrated that Europe “punches its weight.” Capitalists in the United Kingdom, who tout their “special relationship” with Washington, did not hesitate in joining in the victory lap. “We in Europe, by standing together, by using the World Trade Organization,” said UK trade minister Patricia Hewitt, “played our hand very, very effectively.”

EU members would impose sanctions on $4 billion in U.S. goods, said Lamy, if Washington does not drop the Foreign Sales Corporations (FSC) program. The FSC, adopted by Congress in 1984, grants tax breaks of up to 30 percent to companies that set up offices in other countries. Following EU complaints, the World Trade Organization ruled in 1999 that the FSC is an illegal export subsidy. Some European companies with U.S. subsidiaries, such as DaimlerChrysler and Siemens AG, also benefit from the current law.

The EU sanctions, originally announced in early November, target U.S.-manufactured jewelry, paper and pulp products, toys, and electrical machinery and parts. These tariffs would start at 5 percent in March 2004 and increase by 1 percent each month up to a limit of 17 percent by March 2005. The EU trade representative said he is following the same course adopted during the steel tariff dispute. “It’s a basic lesson,” said Lamy. “Union equals might and strength. It’s why we are building Europe.”  
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