EU warns of $6 billion in sanctions against U.S.

Steel tariffs, tax shelters are issues, official says


WASHINGTON - Europe's top trade official said here yesterday that the United States can expect up to $6 billion in trade sanctions if President Bush doesn't lift steel tariffs and Congress doesn't eliminate overseas tax shelters for U.S. exporters.

Two months after global trade talks fell apart in Cancun, Mexico, and with Democrats attacking free-trade agreements in the presidential campaign, Pascal Lamy, the European Union's trade commissioner, said Europe has shown enough patience with the United States over those issues.

"There is a simple way to get rid of the sanctions, and that is to do what is required under international trade rules," Lamy said in an interview.

Three years ago, Europe won its case against the United States regarding the tax case and has waited for Congress to change the law. The House and the Senate are considering competing pieces of legislation.

The World Trade Organization is to decide Monday whether to uphold its earlier ruling against the United States on the year-old steel tariffs.

In two days of talks here, senior lawmakers and administration officials indicated that free trade was taking a battering in Congress. Even so, Lamy did not blink about Europe's intentions.

"This is not a trade war," he said. "This is upholding the disciplines of an international trading system that has worked for everyone's benefit."

With an eye toward next year's presidential election, President Bush is expected to try to appease the steel industry, which asked for the tariffs, and the steel-consuming industries, which oppose them. He might be able to do that by continuing the tariffs but expanding the number of exceptions to them.

If the steel tariffs are not lifted, Lamy said, Europe will begin imposing $2.2 billion in trade sanctions in mid-December.

The far larger $4 billion in sanctions on U.S. exports would begin in March and be phased in gradually if Congress failed to repeal the overseas tax shelter by the end of this year.

Two years ago, Robert B. Zoellick, the U.S. trade representative, likened the use of $4 billion in European sanctions against the United States to a nuclear bomb exploding.

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