US trade compensation deal close

Date: 09/11/1995

By Tim Jones and Michael Mann

TRADE negotiators from the United States were due to leave Brussels today (9 November) after two days of talks with the European Commission close to an agreement on how to compensate Washington for increased tariffs in Austria, Finland and Sweden.

The willingness of the European Commission to provide product-by-product compensation in the farm sector and reduce tariffs on finished electronic components brought a deal within sight as talks ended last night.

However, officials from both sides were reluctant to trumpet an accord particularly since the agricultural part of the negotiations was proving to be sticky. “The closer you get to the final fence, the higher the fence becomes,” said a Commission official.

The US team, under acting Assistant Trade Representative Tim Richards, and the Commission group, led by Roderick Abbott of DGI, the Directorate-General for external relations, have been working to sew up an overall agreement to replace the interim accord signed last year just before Austria, Finland and Sweden joined the Union and adopted the common external tariff.

Without the interim deal, the US estimates that tariffs would have increased by 300 million ecu, with electronic components hardest hit. The Commission claims this is the wrong way to look at the accession of the three countries, arguing that its trading partners would gain a net 237 million ecu from the tariff changes. While less than a third of all imports into new member states are subject to duty increases, both Austria and Finland will see revenues from duties fall by more than 140 million ecu each, it says.

Without the interim accord, US companies would have experienced a substantial increase in tariffs on electronic products, particularly computer memory components. Under the common external tariff, duties could be raised to up to 14&percent; on these imports.

Industry sources said that, as a compromise, the Commission proposed a cut in the EU's 12-14&percent; semi-conductor import tariff from January 1996 to bring it into line with the duty on uncut wafers, the basic material for making chips, which is around 8&percent;.

The agricultural talks progressed less smoothly, breaking off temporarily to allow officials to meet rice industry representatives today. The Commission will then confirm whether it can offer Washington compensation on farm products in return for the US dropping its threatened WTO panel against the EU's cereals and rice import regime.

Officials suggested that the Commission would probably tinker with the regime to make it acceptable to US exporters and offer a 'half-way house' on the compensation claimed by the US on products including rice, fruit and nuts.

US officials were extremely frustrated that the overall deal could be held up over what is “a very insignificant part of the whole package”, particularly as “we're owed about twice as much as we'll actually get”. But the Commission is stressing how significant it is that it is prepared to offer any compensation on individual agricultural products at all, since it believes the US is a net gainer from enlargement.

An agreement would remove the threat of US sanctions, which would have placed 100&percent; tariffs on a variety of products from January.