U.S. retaliates against Europe with high tariffs Move could start major trade war

November 06, 1992|By Mark Matthews | Mark Matthews,Washington Bureau The New York Times contributed to this article.

WASHINGTON -- The United States lobbed the first salvo yesterday in what some analysts fear could turn into a major trade war, slapping high tariffs on $300 million worth of European exports and threatening another $1.7 billion worth if that doesn't produce European concessions.

The dispute that has been going on for years centers on European subsidies for various oil seeds which the United States says has resulted in a loss of more than $1 billion in sales to Europe. The latest round of talks to settle the dispute broke down in Chicago on Election Day.

Yesterday's moves were aimed directly at the French with a 200 percent tariff on still white wines. The new tariffs, due to take effect Dec. 5, would triple the wholesale price of white wine from France, Germany and Italy.

France has been the most steadfast opponent of compromise in the subsidies dispute because its farmers are a potent political force and general elections are scheduled for the spring.

France is the European Community's leading shipper of white wine to the United States, with sales of $125 million last year, according to the National Association of Beverage Importers, a Washington-based trade group.

In addition to $270 million in wine, about $30 million worth of cooking oil and pet food ingredients will also be taxed. Sparkling wines, including Champagne, are not affected.

Trade Representative Carla A. Hills also released a list of $1.7 billion worth of manufactured goods, including perfume and construction materials, on which the United States may also impose taxes.

The European Community challenged the legality of the U.S. imposing import taxes without permission from the General Agreement on Tariffs and Trade association (GATT) even though GATT panels have found twice that Europe was acting unfairly and should alter its policies.

"In effect, this constitutes an illegal position according to GATT rules," Frans Andriessen, the European Community's external relations commissioner, said yesterday.

French Agriculture Minister Jean-Pierre Soisson yesterday called for the European Community to raise taxes on an equal amount of American goods.

The foreign ministers of the community's 12 members will meet Monday in Brussels and may decide then what retaliatory measure to take.

The U.S. announcement, threatened for some time, sparked fears of a trade war that could derail talks, called the Uruguay Round, aimed at cutting worldwide trade barriers. It comes at a time of internal political tension in Europe, also hit by recession, and transition to a new American administration.

The battle set off by the U.S. moves yesterday could still be under way when President-elect Bill Clinton is inaugurated January 20, but Mr. Clinton said yesterday he has not been engaged in the U.S. strategy.

"I don't want to comment on it. I'll review it," Mr. Clinton said yesterday in Little Rock, Ark. "We've got one president. He has to make those decisions. I don't want to get in the way."

The Associated Press quoted an aide as saying earlier that Mr. Clinton generally believes that the United States "must get tough" when foreign countries refuse to open their markets.

Mrs. Hill, at a press conference, said she had not notified Mr. Clinton beforehand. "However, I stand ready, willing and able to brief the governor or any of his designees on any trade issue," she said.

Some experts said the move could have far-reaching implications for an incoming president whose stated priority is to jump-start an anemic American economic recovery and improve American competitiveness in world markets.

"It's unfair to saddle an administration with a possible trade war at the beginning," said William Spriggs, an economist at the Economic Policy Institute, which favors "managed trade" and is generally viewed as protectionist.

Mr. Spriggs also questioned why the U.S. had to take such a forceful step against Europe, with whom it has a substantial trade surplus, when its serious "structural" trade problems are .. with China, Taiwan and Japan.

"It seems to me it is not wise to engage in this sort of activity with someone with whom we have good trade relations otherwise," he said.

The move could prevent the new administration from taking certain steps to bolster American trade competitiveness that would be viewed by Europe as subsidies, he added.

However, Mr. Clinton's silence suggested he had no problem with the lame-duck Bush administration being the one to take on the controversy.

President Bush told reporters the action would not lead to a trade war.

"No, we're not going to engage in a trade war just because we've got some tough fighters over here on our side," he said. "No trade war. Just looking after the interest of world trade."

Mrs. Hills said the United States had made every effort to solve the dispute through negotiation as called for under the General Agreement on Tariffs and Trade, "and the European Community could not find it within itself to negotiate."

"We've taken a moderate first step. We have addressed less than a third of the overall damage," Mrs. Hills said.

Jeffrey Schott of the Institute for International Economics, which favors open trade, said Mrs. Hills had "little recourse but to proceed along this path." The gap between the U.S. and Europe on oilseeds was wider than recently portrayed in the press, he said.

Rep. Kika de la Garza, D-Texas , chairman of the House Agriculture Committee, agreed, saying that "retaliation in the form of higher duties is a serious step to take. However, I feel the United States is left with no alternative."

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