Talks to avert US trade threat

Date: 26/10/1995

By Tim Jones

THE United States and the European Union are set to clinch a deal within the next two weeks on how to compensate Americans for rising trade tariffs since Austria, Finland and Sweden joined the EU.

This will lift the threat of retaliatory sanctions on EU products ranging from buses to nuts which the Office of US Trade Representative (USTR) threatened to impose this week unless an agreement was struck by the end of the year.

Trade Commissioner Sir Leon Brittan heads to Washington on 1 November to meet USTR Mickey Kantor to try to resolve the dispute which could otherwise lead to the imposition of tariffs on 720-million-ecu worth of EU exports to the US.

An agreement would replace the interim accord - excluding agriculture - signed last December just days before Austria, Finland and Sweden joined the Union and adopted the common external tariff.

Without this six-month accord, which was extended for another six months in June, the US estimates that tariffs would have increased by 300 million ecu.

If this is not extended again, US as well as Japanese companies will see a marked increase in tariffs on electronic components, such as semi-conductors, which enter Finland and Sweden at zero duties.

Under the common external tariff, duties could be raised on these imports to between 7&percent; and 14&percent;. Other products, including cars, chemicals, rice, sugar and citrus fruit, would also be affected, but it is the duties on electronics products which the US wants eliminated.

If no settlement is reached by January, 100&percent; tariffs will be imposed on cheese, nuts, chocolate products, cement, plywood and paperboard, cotton fabric, carpets, glassware and buses.

The Commission took the move for what it was. Peter Guilford, Brittan's spokesman, called it a “procedural step” which should not be taken seriously.

Under WTO rules, the USTR must give notice by 1 December that it would suspend tariffs from the beginning of 1996. To do this, the office needed to invite comments from industry and hold a public hearing.

“We wanted to explain what we were doing”, said a USTR official. “You have to do this ahead of time to follow the law”.