- The Washington Times - Friday, January 21, 2005

The European Union yesterday moved to end tariffs imposed in March to punish the United States for an illegal export subsidy.

The sanctions had damaged hundreds of U.S. companies that had to lower prices to stay competitive or bow out of the European market, though the trade barriers’ impact was mitigated by a weakening dollar. Companies that had been barred from the European market welcomed the news, but said they still face a difficult fight to regain lost clients.

The 25-nation European Union is expected to formally withdraw the tariffs Feb. 1, and reimburse any duties retroactively to Jan. 1, said Anthony Gooch, EU spokesman in Washington. An EU panel formally recommended the step yesterday.

Europe may reimpose some sanctions later this year if the WTO determines that the United States still is not in compliance with international trade law.

Europe maintains that the United States has not fully complied, though Mr. Gooch said the bloc would rather not reimpose tariffs. U.S.-EU trade relations have been warming, with the two sides recently agreeing to negotiate a solution to aircraft subsidies rather than file dueling WTO cases.

Europe’s sanctions affected 1,600 U.S. products, including jewelry, apparel, paper and lumber, machine tools, food, steel, and hand tools. Companies that were hurt by the sanctions remain angry that it took Congress so long to act and are concerned that they may have permanently lost business.

“We went one full year … with no action [by Congress]. For companies like ours, it’s very difficult to overcome this,” said Bill Feldman, president of Hord Crystal, a Pawtucket, R.I., company that manufactures rhinestone chains and other jewelry.

The company last year lost its European sales and Mr. Feldman said it would be challenging to reclaim a share of the market.

Rob Cumbia, international sales manager for Northland Forest Products, said his business last year lost lumber sales that reached $100,000 a month because of the tariffs. Orders already have started to resume.

“But it’s not back to the levels it was before the tariffs went on. We remain hopeful it will return,” Mr. Cumbia said from the company’s Ivy, Va., sales office.

The European Union in March began escalating tariffs against U.S. products, more than two years after the World Trade Organization ruled against an illegal American export subsidy. The ruling allowed the European bloc to impose $4 billion a year in sanctions on the United States, a measure the Bush administration said would be like using a “nuclear weapon” on the world trading system.

Instead of hitting the United States with the full amount, Europe started penalties at 5 percent and increased them one percentage point a month. U.S. companies faced an estimated $315 million in additional customs duties last year.

In October, Congress approved and the president signed a law ending the export subsidy effective Jan. 1.

The subsidy, worth about $50 billion over 10 years, was replaced with $76.5 billion in cuts for companies with U.S.-based “production,” $42 billion to reduce taxes on overseas operations of American firms and many narrowly focused provisions, such as tax breaks for NASCAR track owners and bow and arrow manufacturers.

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