EU Launches Tariffs Against U.S.

Seattle, WA, Mar. 2--U.S. exporters began paying the price for a trade fight between the United States and European Union yesterday when the EU slapped duties on select U.S. exports in a mild hit that threatens to get worse. A story in the Seattle Post-Intelligencer Reporter said that in the latest move in a long-running dispute, the European Union imposed an additional 5 percent customs duty on a number of goods, from ham to a couple of Weyerhaeuser Co. products. "The name of the game is not retaliation but compliance," EU Trade Commissioner Pascal Lamy said in a statement. "Despite waiting for more than two years, the U.S. has not brought its legislation in line with WTO rules." The European Union hopes to ratchet up the pressure over the course of the year, increasing the customs duty by 1 percentage point every month until it reaches 17 percent next March. In fact, the duties could reach some $300 million this year and double that in 2005. For now, the European Union is using a small stick, only targeting a select list of products and exempting some big players, such as The Boeing Co. The duties, though, hit Weyerhaeuser Co., Revlon Inc., Tiffany & Co. and others. Weyerhaeuser doesn't expect to suffer much under the first round because less than 10 percent of its European exports are subject to the tariffs -- fine printing paper and a flooring product. Last year, the Federal Way-based company sold $665 million of its goods to European concerns, a fraction of its $19.9 billion in total sales, according to Weyerhaeuser spokesman Bruce Amundson. EU sanctions will remain in place until President Bush signs legislation that complies with WTO rules, said Arancha Gonzalez, Lamy's spokeswoman. Robert Hormats, vice chairman of Goldman Sachs International in New York, told financial news network CNBC that the weaker dollar against the euro will help offset some of the burden in the trade dispute. The United States and European Union have been arguing about the tax law since the 1970s, when the European Union challenged an early version of the tax break. Essentially, U.S. proponents maintained the law is needed to level the playing field with European competitors. Europeans, however, argued the law gave U.S. exporters an edge, worth roughly $4 billion a year. Over the years, the World Trade Organization repeatedly sided with the Europeans, ruling the U.S. tax law violated global trade rules. When lawmakers offered a substitute, that version was rejected as well. After the rulings, lawmakers and lobbyists have been unable to agree on how to rewrite the law, with proposals helping some corporate interests while hurting other corporate giants.