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EU to Impose Trade Sanctions on US

The European Union says it will impose sanctions as of May 1 on several U.S. products to punish Washington for failing to repeal an anti-dumping law that has been ruled illegal by the World Trade Organization, WTO.

The EU wants to impose extra duties of 15 percent on U.S. products ranging from paper to textiles and machinery. A statement issued Thursday in Brussels says the 25-nation bloc is acting because the United States has failed to repeal a controversial law called the Byrd Amendment, which allows U.S. companies to receive proceeds from anti-dumping duties the U.S. government levels on their foreign rivals.

The World Trade Organization ruled three years ago that the Byrd Amendment is illegal under international trading rules. It gave Washington until the end of 2003 to repeal the law. When the United States failed to do so, the WTO authorized U.S. trading partners to impose sanctions.

Canada has announced that it will join the EU action, and other major countries like Japan are expected to follow suit.

Dan Ikenson, a trade policy analyst at the Cato Institute, a research organization in Washington, says the United States should repeal the Byrd Amendment, but he does not expect Congress to do so anytime soon because the measure is politically popular and the sanctions to be imposed by the EU and other U.S. trading partners, expected to reach about $120 million, are limited. Still, he says the EU's latest retaliatory measure does not augur well for the completion of trade liberalization talks known as the Doha Round that will bring together world trade ministers later this year in Hong Kong.

"Certainly, they are in their right to retaliate, but the fact is that we have a lot of trans-Atlantic disputes going on right now, and I just get the impression that there is this drive to keep adding up chits on each side of the Atlantic as we head into the Hong Kong ministerial at the end of the year," he said. "Because, if the Doha Round fails, I think Europe and the United States are going to be pointing the figure at each other as to who the big villains are."

The U.S. expressed disappointment with the EU decision, a trade official saying the U.S. is working to comply with the WTO ruling on the Byrd Amendment.

The biggest EU-U.S. trade dispute involves accusations on both sides that aircraft makers Airbus and Boeing are receiving illegal government subsidies. Just before President Bush embarked on a trip last month that was aimed at soothing post-Iraq War trans-Atlantic tensions, Washington and Brussels decided to negotiate the matter bilaterally instead of taking the dispute to the WTO. But the negotiations are not going well, and the contentious case, involving billions of dollars, could end up before the world trade body.