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| European Trade Frictions | ||
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Published 20030821 |
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In March 2001 the USA imposed a special steel tariff
on products classified in chapters 72 & 73 of the Harmonized
Tariff Schedule. This tariff applies to several countries,
including most European countries. The World Trade Organization (WTO)
has ruled that this tariff violates international trade
rules. If the USA loses in its appeal (which it is likely to
do), Europe can retaliate with punitive duties of 100 percent on
several US products. The majority of the products targeted:
agricultural products, footwear, glassware, toys, games and
nuclear reactors.
The chances of Europe sticking US products with higher duties might not be an idle threat. Not only do the Europeans dislike the steel tariffs, but they also point out that the USA has yet to repeal the "Foreign Sales Corp.-Extraterritorial Income Act." This Act provides tax incentives to exporters in the USA. Europe claims such tax breaks are a form of government subsidy giving a competitive advantage to US products exported to Europe. The European restriction on genetically modified (GM) agricultural products from the USA is another trade sore spot. The distance to an agreement between the two giant trading partners on GM foods is exemplified by an American Farm Bureau Federation official comment that the position of Europe is "scientifically unjustified and commercially impossible." If retaliatory tariffs were threatened by Europe, when would they become a reality? Next year? Perhaps, but even then, some trade experts don't think they are likely. Many feel that the USA and Europe are so economically interconnected that if the Europeans imposed punitive tariffs, they would only be shooting themselves in the foot. |
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