The European Union says the United States is facing billions of dollars of trade sanctions if Congress does not eliminate overseas tax shelters for American exporters. The Bush administration says it is working with lawmakers to avoid those sanctions.
The trade dispute centers on a ruling three years ago that found the United States violating World Trade Organization rules by allowing overseas tax shelters.
European leaders say they have waited long enough for American legislators to change the law, and they are threatening a series of sanctions if Congress does not act quickly.
Sanctions that could ultimately total $4 billion may gradually be imposed on American exports beginning next March.
White House spokesman Scott McClellan says President Bush is working with Congress to repeal those provisions and avoid what could be crippling trade sanctions at the start of an election year.
"We are continuing to work with Congress to address that issue and to avoid triggering sanctions and to insure that we are in compliance with the WTO decision," he said.
Mr. McClellan says the president is strongly urging both the House and Senate to pass legislation this year complying with the WTO decision.
But it is not just Congress that must act to avoid penalties. More than $2 billion worth of European-trade sanctions could begin in December if President Bush does not lift U.S. steel tariffs.
He imposed those tariffs to win support from steel-producing states that were losing jobs to cheaper imports, but those tariffs have also resulted in higher costs for American manufacturers that use steel.