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EU-US Trade Dispute Heats Up - 2002-09-13

The European Union has taken another step in a trade dispute that could ultimately cost the United States $4 billion in duties on American goods. But EU officials say they hope the U.S. Congress will act to avoid sanctions.

The EU has issued a preliminary list of U.S. goods ranging from chewing gum to nuts and even parts for nuclear reactors that that could be hit with trade duties.

European industry has expressed mixed feelings about the sanctions, because necessary U.S. imports will be more expensive if the EU imposes duties. European industry has 60 days to review the goods targeted, and recommend deletions, before the EU issues its definitive sanctions list.

The World Trade Organization last month gave the EU the right to impose $4 billion in sanctions after earlier ruling against a U.S. tax break scheme known as the Foreign Sales Corporations.

Despite the heavy legal and diplomatic action, EU officials say they would prefer that Washington change the law that set up the tax breaks. There is legislation before the U.S. Congress for an alternative to the tax break system.

European Commission spokeswoman Arancha Gonzalez says the EU will be monitoring that measure. "What is important is... to see working progress," she said. "And if we are satisfied that the work is progressing then we will have patience. And if we see that the work is not progressing, we will not have patience."

Analysts say both Washington and Brussels want to avoid a clash on the sanctions issue. The sides are also involved in a dispute over new U.S. duties on imported steel. Washington has already removed a number of those duties in efforts to ease the dispute.