U.S. bars European firms from bidding on contracts Administration cites 'intolerable' EC rules

February 02, 1993|By Los Angeles Times

WASHINGTON -- The Clinton administration intensified growing trade tensions with Europe yesterday by barring European companies from bidding on millions of dollars worth of U.S. government contracts in retaliation for "intolerable" European procurement rules.

U.S. Trade Representative Mickey Kantor, in a tough-worded statement, said the United States would consider further retaliatory steps if the 12-nation European Community does not drop its discriminatory rules governing purchases of telecommunications and other utilities equipment.

The administration's action would take effect March 22, but Mr. Kantor and EC trade commissioner Leon Brittan noted that they would meet in Washington Feb. 11 and hinted that a negotiated deal could be reached to avoid the U.S. response.

The action followed a U.S. decision last week to impose stiff tariffs on steel from seven EC countries and came against the backdrop of U.S.-Europe friction over trade in agricultural goods, services and entertainment products.

For the new administration, which is clearly trying to sound tough on trade in its early days, the harsh language and actions are in part negotiating tools intended to achieve progress on a number of bitter disputes with major trading partners -- particularly the European Community and Japan.

On the domestic front, the approach sent signals to important constituencies, such as labor and its allies in Congress, that the new administration is not unalterably wedded to the free trade ideology of the Republican administrations.

Mr. Kantor's strike against the Europeans came after negotiations, begun under the Bush administration, failed last month to resolve an impasse over government purchasing. U.S. officials said yesterday's response was tougher than any planned by the previous administration and indicated that Clinton officials would rather see lengthy talks on a range of trade matters collapse than agree to flawed deals.

EC officials, making no effort at conciliation, rejected the U.S. action as continuation of a pattern of protectionism.

"I cannot believe it is in anybody's interest, European or American, to attempt to deal with trade issues in this way," Mr. Brittan said. "We do not accept this form of unilateral bullying -- especially since there are ongoing EC-U.S. bilateral negotiations on telecommunication procurement and other issues."

He and other EC officials said the community's procurement rules were more liberal than numerous "Buy American" laws applied to federal and local government projects.

The dispute centers on an EC rule known as the Utilities Directive, which took effect Jan. 1. It gives preference to European suppliers in bidding for work on state-owned telecommunications and power-generation projects. The rule requires EC utilities to discount the bids received from EC companies and allows them to reject non-European bids for virtually any reason.

Major U.S. companies such as American Telephone & Telegraph Co. and General Electric Co., which provide the hardware for thousands of telephone and utility systems worldwide, complained that they were being unfairly shut out of the European market and petitioned the U.S. government to try to break down the barrier.

The potential market for U.S. goods in the European utilities market is perhaps $1 billion, but the value of European goods and services that would be barred from the United States is no more than $50 million, according to a government trade official.

Only a handful of government bodies, such as the Tennessee Valley Authority, and some federal airport and waterways projects are covered by yesterday's order.

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