On Friday, the World Trade Organisation awarded the EU the right to impose up to $4bn worth of legitimate sanctions against the US, as a result of protectionist tax policies aimed at US exporters.
“The World Trade Organisation (WTO) has ruled that the European Union (EU) can impose $4bn (£2.6bn) worth of sanctions against the US in a dispute over tax breaks for its exporters.
The WTO has given the thumbs up for sanctions
The WTO has backed the EU’s claim that the tax scheme amounts to a massive illegal subsidy which costs European companies billions a year in lost trade.
This is the biggest transatlantic trade dispute in history.
The damages are the highest awarded by the Geneva-based WTO, since its creation in 1995.
Defeat
WTO panels have repeatedly ruled that the US tax breaks for exporters contravene international trade rules.
Washington has tinkered with the system, but – faced with massive opposition from US corporations – it has failed to satisfy the WTO’s demands for reform.
The huge damages awarded were in line with the EU’s calculations.
They represent a spectacular defeat for the US.
It had argued the financial benefit to US companies was in the region of $1bn.
“I am disappointed that the arbitrator did not accept the lower figure put forward by the United States,” said US trade representative Robert Zoellick.
Holding fire
The EU’s external affairs commissioner, Chris Patten, welcomed the ruling.
“We never had any doubt that the position we have taken was going to find that it was in line with the international rule book on trade,” he said.
However, the European Union has already said it will hold fire on imposing the sanctions in the hope that the threat alone will force Washington to make the necessary changes.
“[The WTO] has given us an amount of potential countermeasures which will create a major incentive for the US to eliminate this huge, illegal export subsidy,” said the EU’s trade commissioner, Pascal Lamy.
It also fears that such hefty sanctions could provoke a political backlash in America which could severely damage transatlantic trade relations.
The WTO’s director-general, Mike Moore, said the EU and the US should get together to resolve the dispute “in an amicable and constructive fashion”.
“The European Union and the United States are among the most important members of this organisation and both hold a special responsibility to ensure the continued health and soundness of the WTO and global trading system,” he said.
“I believe that today’s findings will ultimately be rendered moot by US compliance with the WTO’s recommendations and rulings in this dispute,” Mr Zoellick said”
Source: http://news.bbc.co.uk/1/hi/business/2225972.stm
Comments?
By: mongu - 2nd September 2002 at 20:10
RE: Trade War
Let’s hope so. The WTO has a good mission and their DG, Mike Moore, is the right guy to get things moving. He’s about the only beurocrat I actually respect!
By: plawolf - 2nd September 2002 at 19:56
RE: Trade War
i say its abt time. now that america-the worlds only superpower, has been penalised for breaking the rules, maybe everyone else will start to follow the rules set out by the WTO for once.
By: mongu - 1st September 2002 at 15:50
RE: Trade War
I don’t like to attribute blame really Geforce. Yes, the US were quite wrong in this instance and were rightfully found against. But the EU does similar things, does it not? CAP is the biggest marxist policy I’ve ever encountered! Both sides are ludicrously protectionist in general. It’s almost like handbags at dawn – very silly.
By: Geforce - 1st September 2002 at 09:20
RE: Trade War
You can probably imagine on which side I am :7. No, I really think the EU in this case did what was necessairy, not only to protect its own economy (after all the EU can survive), but especially to defend the rights of the developping countries which can’t survive if the US gov’t continues to brak the rules made by the WTO.
Anyway, Brussels is really pissed off and this will not only harm the economical, but also political relations with Washington. The EU is also backed by Japan and South Korea, though for them America is a much more important trading partner than Europe will ever be.
Unless the US gov’t wants to create a marxist state-ruled economy, I really don’t know why they don’t respect the rules of free trading, but on the other hand, its their main policy, one on which they are so proud.
This ‘war’ is not good for economy, for both our economies, but they will survive, don’t worry. I’m glad it was Brussels who had for once the balls, instead of getting on their knees.
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September 1, 2002 at 12:54 am