EU Begins $4 Billion in Sanctions Against U.S.

Pascal Lamy, the European Union's trade commissioner, last week put U.S. lawmakers on notice that they can expect $4 billion in sanctions to go into effect today due to the failure of Congress to act to get rid of overseas tax shelters for American exporters declared illegal by the World Trade Organization.

Those who will feel the pinch most acutely are American farmers and manufacturers since the Europeans will begin charging tariffs on agricultural goods, leather products, paper, steel, nuclear reactors, machinery, carpets, clothing and other goods that are directly competitive with their own products, the New York Times reported.

The U.S. received a similar warning from the EU last November over steel imports and a month later President Bush lifted the tariffs in question. This time, however, Congress won’t be able to act in time to avoid the sanctions that go into effect today. There are competing bills winding their way through Congress right now, but lawmakers told Lamy that they were unsure if either bill would be acted upon before the spring recess.

What had begun as a tax issue is now seen by both sides of the aisle as a jobs issue and neither party wants to be seen as taking action that has a negative impact on job growth in an election year, the Times reported.

"The name of this game is repeal, not retaliate and not sanction," Lamy said during an address to the European-American Business Council. He said the sanctions would be lifted the minute Congress acts to eliminate the tariffs.

A senior EU official urged the U.S. last week to take the sanctions seriously and move quickly to resolve the issue, the Times reported.

"It is a huge issue of credibility of the WTO dispute settlement system," he said.

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