European Union asks to sanction U.S. exports

Friday, the European Union asked the World Trade Organization for permission to slap $4 billion in sanctions on U.S. exports, making it the largest punitive sum ever requested.\nIn an news brief, Anthony Gooch, spokesman for EU Trade Commissioner Pascal Lamy, said, "In terms of amount, the other (trade sanctions) pale into insignificance compared to this."\nThe EU argues a tax loophole allowing U.S. exporters to save up to 30 percent on taxes by using off-shore subsidiaries -- called Foreign Sales Corporations -- in tax havens has cost European companies billions in terms of lost contracts and business. Gooch said the loop-hole gives U.S. companies an unfair advantage in "fiercely competitive" industries such as: chemicals, machinery, transportation equipment and pharmaceuticals. \nAfter coasting through two deadlines, the U.S. government finally responded to the WTO ruling and passed a bill Friday effectively eliminating the tax breaks given to off-shore subsidiaries. Opponents argue the new bill actually gives far greater tax breaks directly rather than using off-shore tax havens, causing further dissent between the two governments.\nIn a statement released as a response to the new bill, the European Commission said it believes the new bill, "not only maintains the violations found by the WTO in the (off-shore tax haven) case but may even aggravate them."\nThe bill also received strong criticism at home. Rep. Lloyd Doggett (D-Texas), a member of the Ways and Means Committee, was outspoken and said the bill is a, "corporate-welfare Cadillac."\nThe battle has been escalating since last year, when the U.S. first bypassed the WTO and immediately imposed sanctions on EU products because of what it called unfair trade restrictions on American-grown bananas and hormone-treated beef and dairy products.\nThe escalation has not yet led to implementation of punitive fines because both sides want to resolve the conflict as peacefully as possible. "We plan to continue working with the EU to manage this difference of views responsibly and to avoid any harm to our strong bilateral relationship," President Bill Clinton said. \nWhen questioned at a press conference about why the EU is continuing to use the WTO as a go between and not impose immediate tariffs as the U.S. did, he said, "two wrongs do not make a right. We want to de-escalate this dispute, so we are following the proper measures."\nThe deadline has been pushed back from Oct. 1 of this year to June 2001. The EUs patience has held out so far, but if it loses patience, the shadow of a trade war might turn out to be real.