EU begins imposing tariffs on U.S. exports over tax aid

Bush asks Congress to end subsidy WTO ruled illegal

March 02, 2004|By William Neikirk | William Neikirk,CHICAGO TRIBUNE

WASHINGTON - With trade becoming an increasingly contentious political issue, the European Union imposed tariffs yesterday on a wide range of U.S. products because Congress has failed to repeal an illegal export subsidy for American firms.

The new tariffs - essentially taxes charged at the border - apply to a long list of American goods sold in Europe, including jewelry, hams, pineapples, clothing and shoes. They are expected to cost U.S. companies $315 million this year and $666 million in 2005.

The European Union carefully calibrated its decision to try to ensure that it does not blow up into a trade war with the United States. The Europeans began with a 5 percent tariff that would be increased 1 percentage point each month until Congress does away with the export tax subsidy that the World Trade Organization declared illegal two years ago. The maximum tariff would be 17 percent.

Yet, the European action treads on delicate political ground and could inflame trade passions already aroused in this election year because of the outsourcing of American jobs overseas.

Though most of these jobs have been lost to Asia, the United States and Europe have had a long and sometimes bitter history of trade tensions that this latest dispute may exacerbate.

The tariffs could affect jobs at U.S. companies that rely on exports. Henson Moore, president of the American Forest and Paper Association, said his member companies were concerned that the tariffs could hurt exports of wood and paper products.

The export tax breaks that prompted yesterday's action add up to $5 billion annually and benefit many large U.S. firms that do business overseas, including Boeing Co., Microsoft Corp. and Archer Daniels Midland Co.

President Bush issued a statement yesterday calling on Congress to end the export subsidy in the tax code, saying the European tariffs "will, over the next year, impose an increasing burden on American exporters, their workers and the overall economy."

The Chicago Tribune is a Tribune Publishing newspaper.

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