US threatens trade war with EU applicants

Date: 11/11/1999

By Chris Johnstone

THE US is threatening a trade war with countries lining up to join the European Union unless they abandon national regimes governing import duties on non-European goods and sign up to the EU's harmonised framework.

Washington has warned that it could impose trade sanctions on all the leading candidates for Union membership in central and eastern Europe except Estonia if they do not take rapid action to iron out some of the current disadvantages faced by American exporters.

US trade officials say extending the EU's framework for duties on goods coming into the trade bloc to the applicant countries would be a big step in this direction.

The dispute is expected to come to a head after the Seattle trade talks at the end of this month. If rapid progress is not made, Washington may withdraw the favourable trade terms it grants thousands of goods exported from the candidate countries under the General System of Preference (GSP).

The US senate is leading the call for retaliatory action as the Clinton administration continues its efforts to settle the dispute through negotiation.

The row centres on American complaints that EU companies can already sell many industrial goods in the candidate countries without paying import duties as a result of bilateral Europe Agreements between the applicants and the Union, while US firms still face high import duties.

In the Czech Republic, this imbalance is starkly illustrated by the case of large civil aircraft produced by the world's two manufacturers, Boeing of the US and European consortium Airbus. While Airbus can offer its aircraft to Czech airline CSA free of import duties, rival Boeing must pay a levy of around 4&percent;. “This adds up to a lot of money when you look at the price tag on these aircraft,” added one US official, who added that duties of 17.1&percent; are imposed on some types of Daimler-Chrysler cars, which have a high level of American components.

The US had been prepared to accept this 'discrimination' for a transitional period before applicant countries join the EU, but is now losing patience.

The European Commission says the dispute is a bilateral issue between the candidate countries and the US, although officials acknowledge that the Europe Agreements do demand some preferential trade treatment for goods flowing between the Union and the applicant states.

However, they point out that American companies which have invested in the Czech Republic and other candidate countries already benefit from free access to EU markets. “Our arrangements with the candidate countries are similar to the US' with Mexico or Canada,” said one, referring to the rules of the North American Free Trade Area. “It looks here as if the US wants to have its cake and eat it.”