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Last Updated: Monday, 25 October, 2004, 13:15 GMT 14:15 UK
EU suspends US export sanctions
US container port
Tariffs on US imports to Europe are being lifted
The European Union is to suspend sanctions on US imports worth $4bn after President Bush signed a bill removing illegal export subsidies.

The move could end a dispute which began in 2003 when the Word Trade Organisation ruled that the US subsidies breached trade laws.

The EU retaliated in March this year with tariffs on a range of US goods.

Brussels said it would ask the WTO to review the situation, and would not rule out reimposing sanctions.

Options open

EU trade commissioner Pascal Lamy welcomed the US bill repealing export subsidies, which was signed into law by President Bush last week.

As a result, some $5bn in financial assistance for US exporters will be phased out between 1 January 2005 and 31 December 2006.

However, Mr Lamy expressed concerns about a clause in the bill which he said could potentially permit tax breaks for export contracts which last beyond the 2006 deadline.

"Legally speaking we will suspend the sanctions and we will keep our options open," Mr Lamy said.

"There is a possibility of (renewed) sanctions. We will see what the WTO says."

The WTO said the subsidies - passed by the US Congress in 2000 - were illegal in January 2003.

Under WTO rules, the decision gave the EU the right to slap 100% import tariffs on a range of US goods.

The tariff levels, originally set at 5%, rose 1% for every month in which the US subsidies remained in place.

Strained relations

EU trade ministers must approve the Commission's decision, although this is expected to be a formality.

The row over export subsidies is just one of a number of disputes weighing on transatlantic trade relations.

The most high profile of these is a row over the support that both sides provide to their aircraft industries.

The US claims that the financial support European governments provide to aircraft maker Airbus is in breach of world trade rules, while the EU says the same is true of Washington's subsidies for Boeing.




SEE ALSO:
Lamy tidies before his departure
25 Oct 04  |  Business
US takes Airbus dispute to WTO
06 Oct 04  |  Business
US Congress agrees new tax breaks
06 Oct 04  |  Business
WTO rules for EU in US trade row
31 Aug 04  |  Business
EU opens new front in trade war
01 Mar 04  |  Business


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