By Lewis Crofts - 29th April 2004
Europe will take another bite out of American business in May as trade sanctions ratchet up against Washington over the weekend for running illegal tax breaks.
Brussels imposed sanctions worth €290 million in March, but is cranking them up each month as Washington continues to stall over repealing the laws.
As April draws to a close, Europe will turn the screw on US business taking the sanctions from the initial five percent of a €4 billion maximum to seven per cent.
Europe is irate because Washington will not budge on its so-called Foreign Sales Corporations – a complex tax kick-back system which effectively gives exporters an unfair advantage.
The World Trade Organisation gave Brussels the go-ahead to hit the US with the full level of sanctions, but the EU chose a softly-softly approach, starting at five per cent but increasing the pressure by one per cent each month.
This seems to be having little effect as the US legal chambers seem unbothered by the sanctions, more concerned with protecting domestic firms in the election year.
A Brussels spokesman confirmed the increase saying it was “automatic”.
A US trade diplomat stressed that the US was doing its best to repeal the laws, saying there was “a possibility that the Senate might be voting on legislation next week”.
“There seems to be a tentative agreement on the number of amendments to be considered,” he added, stressing the legislative complexity behind scrapping the laws.
“But this agreement is still a bit fragile.”
In reality, there is still a long way to go and with Washington focussed on elections movement will be slow.
If the US fails to move, the sanctions could bag €300m for the EU in 2004 and a further €600m in 2005.
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