- The Observer,
- Sunday February 22 2004
European Trade Commissioner Pascal Lamy will this week fly to Washington in a last-ditch attempt to avoid an escalating trade war with the United States.
Lamy flies to the US capital against a backdrop of mounting protectionist sentiment, especially from Democratic candidates for this year's presidential elections.
The dispute concerns Europe's plan to implement $200 million of retaliatory trade sanctions against US products next week as punishment for illegal US export subsidies.
In 2002 the World Trade Organisation ruled that the European Union could impose a record $4 billion of trade sanctions on US exports, compensating for the US Foreign Sales Corporation scheme, which the WTO deems an illegal subsidy for US multinationals such as Boeing and Microsoft.
Attempts to deal with the offending law have been mired in discussions in the US Congress, and look likely to miss a 1 March deadline. The European Council of Ministers has already voted for the automatic introduction of a 5 per cent tariff on a selection of US products if the deadline is missed.
Christopher Roberts, an adviser to law firm Covington & Burling and former government trading adviser, says: 'It's difficult to see what could be done to back off, because the tariffs will be imposed unless the Council of Ministers reverses it.'
The level of the tariff will rise by one percentage point a month to increase the pressure on US legislators.
Lamy will not meet his US counterpart Richard Zoellick - who has warned that using the retaliatory sanctions is the 'nuclear option' - but will meet Congressional leaders who are steering WTO-compliant legislation through the House of Representatives and the Senate.
The likely imposition of sanctions will represent a first for Europe. The US has used WTO rulings against Europe twice before.
