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EU Draws Up Hit List for Sanctions on US Products

In a long-running dispute over a US corporate tax break, the European Union published a list on Friday of US products it is threatening to target with 4 billion euro in sanctions.

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EU Trade Commissioner Pascal Lamy, mediator in the simmering transatlantic trade dispute

The European Union has published a list of American goods on Friday which could become targets for sanctions in the largest transatlantic trade dispute in history.

The list, which was published in the EU’s organ of record, the "Official Journal" on the Internet, contained hundreds of products ranging from agricultural products such as wheat, gluten and nuts to parts of nuclear reactors, cosmetics and ceramics.

The Commission plans to consult with European industry for 60 days before finalising the list. “If anyone’s not happy that a product is on the list, they have two months to let the Commission know”, an official said.

Biggest transatlantic trade dispute

The EU was authorised to impose sanctions worth 4.043 billion euro ($4 billion) by the World Trade Organisation (WTO) two weeks ago.

The WTO approved the sanctions after the EU claimed the tax break was costing the European economy billions of dollars in lost trade.

By publishing the sanctions list, the EU hopes to put maximum pressure on the US to change its offending legislation.

But EU Trade Commissioner Pascal Lamy will face a delicate balancing act over the coming months over what is regarded as the biggest transatlantic trade dispute in history.

"A nuclear bomb in trade relations"

Transatlantic trade relations are already overshadowed by the US's threats to place protective tariffs on European imported steel.

In addition, heavy EU duties on specific products made in America would harm European importers and, as a result, European customers, something that concerns the continent's trade groups.

The EU is keen to maintain the pressure but still hopes to avoid heavy sanctions – a step Robert Zoellick, the US trade representative, has said would be like detonating a “nuclear bomb” in the world trading system.

It has therefore made it clear that is will not rush into sanctions, saying it would only apply sanctions if Washington did not make sufficient progress in scrapping the illegal tax scheme in the coming months.

Hopes for US reform

But so far, Washington has failed to fulfill the WTO’s demands for reform.

The WTO first ruled the US tax breaks as illegal in 2000. The original US corporate tax law allowed some of the foreign profits of American exporters to be tax exempt. The EU declared these breaks as unfair as they favoured sales to foreign customers over domestic ones.

After the first ruling, the law was rewritten by Congress. But in 2001, the WTO renewed its warning, saying the revision did not go far enough.

Two weeks ago, the World Trade Organisation finally gave the EU the right to impose sanctions on US products worth some 4 billion euro.

U.S. President George W. Bush has repeatedly promised reform. But Congress, under pressure from U.S. corporations, is still reluctant to give way. Various attempts at introducing bills have been blocked by both Democrats and Republicans, who have been lobbied by big exporters in their various districts.

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