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Tuesday, March 23, 1999 Published at 15:14 GMT

Business: The Economy

Beefing up the trade war

The US is not taking kindly to the EU ban on its beef

The row over hormone-treated beef is only the latest shot in an escalating trade war between the US and the EU - and anybody from cashmere producers to Concorde passengers are caught in the cross-fire.

As the furore over the trade war rages on, the US it hitting the EU where it hurts by targeting an eclectic bunch of products including flowers, truffles and chewing gum.

The US is threatening to slap $1bn (£625m) worth of sanctions on these goods because the EU will not allow the import of US beef treated with growth hormones.

However, these sanctions are just the tip of the iceberg. Trading relations between the EU and the US are becoming very frosty indeed.

Hush money

For a start the two sides are embroiled in a long-running dispute over aircraft engine noise, or "hush kits".

The ban threatens to hit nearly £1bn of American aircraft and equipment, according to Washington. It was due to be endorsed at EU talks in Brussels and introduced from 1 April.

[ image: Concorde: In the line of fire]
Concorde: In the line of fire
The threat still looms - but Brussels has bowed to intense US pressure and is trying to thrash out a compromise with senior US commerce and transport officials.

If Brussels does not back down the US has threatened to fight back by banning all Concorde flights to New York - a move that would have serious repercussions for Air France and British Airways.

US Secretary of State Madeleine Albright has become involved in the dispute - which is still a long way from being solved.

Going round the bend

Then, of course, there is the humble banana. The US has accused the EU of giving former European colonies in the Caribbean preferential treatment in the banana trade.

It complains that this penalises American companies growing the fruit in Latin America.

The dispute is now before the World Trade Organisation which has recently delayed a ruling on the matter.

The US has proposed sanctions on another wide ranging list of EU goods.

Cashmere is one product that has been targeted - a move that promises to have a devastating effect on the Scottish cashmere industry.

Delicate relations

The outcome of the war is vital because the US and Europe are the two biggest world trade players.

And there are wider issues at stake. Because of its booming economy, the US now feels it is the importer of last resort, helping out other countries in recession by trading with them.

As such it has sometimes decided to act outside the World Trade Organisation (WTO) and has established its own trade legislation. Section 301 of the US Trade Act can be used to unilaterally block imports from countries, if it considers their trading practices to be unfair.

This provision has been reactivated as a potential weapon against Europe in the banana crisis. In turn, the EU has asked the WTO to rule this section illegal.

Britain mediates

[ image: Blair and Clinton: Valued relationship]
Blair and Clinton: Valued relationship
But Britain is keen for the situation not to damage relations with the US, its biggest trading partner.

US exports to Britain reached £25bn ($40bn) in 1997, while British exports to the US reached $21.6bn in 1998.

Prime Minister Tony Blair and US President Bill Clinton have a good working relationship.

Britain has already underlined its role as the United States' most dependable European ally, in particular for its support for bombing Iraq.

Both Mr Blair and Mr Clinton have pledged to resolve the dispute as soon as possible.

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