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Last Updated: Wednesday, 5 November, 2003, 12:46 GMT
EU slaps $200m tariff on US imports
The EC is taking retaliatory measures against the US
The EU has said US imports are to face duties of $200m (120m) from March 2004.

The European Commission decided to impose the duties in retaliation against US tax breaks for exporters, which have been criticised by the World Trade Organisation.

Initially, the tariffs will be applied at a rate of 5% on up to $4bn of goods.

Trade Commissioner Pascal Lamy said: "The Commission hopes to pass a very clear message to the United States that their continued failure to implement three years after the expiry of the original WTO deadline is unacceptable."

The World Trade Organisation (WTO) gave the EU the right to impose 100% tariffs on more than $4bn of US exports after ruling that the US tax breaks were illegal.

Rising penalties

Sanctions should focus the mind of US legislators
Arancha Gozalez, EU
During a visit to Washington on Tuesday, Mr Lamy urged the US Congress to repeal the measure, known as the Foreign Sales Corporation scheme, to avoid sanctions.

The Commission also warned that the penalty would rise from the introductory rate by one percentage point a month for a year - by which time it hopes Washington will have repealed the measures.

Arancha Gonzalez, spokeswoman for the EU Trade Commissioner added: "The faster the US acts, the less the measures will bite.

"This should focus the minds of US legislators."

She added the union had adopted "measured but responsible" approach which would give the US a "last chance to comply".

Sanctions damage US producers by making it difficult for them to sell their goods in Europe.

However, they can also backfire by pushing up prices in Europe or disrupting production if other suppliers cannot be found.

Steel row

Meanwhile, the EU has also warned it is considering sanctions on another $2.2bn of US goods in a separate dispute over steel imports.

The dispute arose after President Bush imposed tariffs of up to 30% in March 2002 in an effort to protect US steel producers from foreign competition.

The EU has vowed to impose punitive tariffs on the US industry in December if the WTO rules that the US steel tariffs breach international trade rules.

A decision in the case is expected on Monday.

The EU has already drawn up a hit list of US imports worth about $2.2bn a year which will targeted with retaliatory sanctions.

The list, which includes Harley Davidson motorcycles, citrus fruit, and textile products, is said to have been calculated so as to hit hardest regions which support President Bush's Republican party.

EU to hit back in US steel row
04 Nov 03  |  Business
Steel trade war backfires for Bush
28 Oct 03  |  Business
US steel tariffs 'break WTO rules'
11 Jul 03  |  Business
Europe and US in new trade row
13 Jun 03  |  Business

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