U.S. firms hit hard by EU sanctions

The European market has lost its luster for Bill Feldman.

The president of Hord Crystal has seen his company’s jewelry exports fade since March, when the European Union began punishing the United States for illegal export subsidies.

“Having an additional duty on any shipment, it has put our business at a standstill. We’ve lost it,” said Mr. Feldman, whose Pawtucket, R.I., firm manufactures rhinestone chains and other products studded with the sparkly ornaments.

EU sanctions began at 5 percent March 1. They have risen a percentage point each month, to 10 percent tomorrow and probably 11 percent Sept. 1 — a projected $36.5 million tax on U.S. exporters.

Europe in 2002 threatened as much as $4 billion in sanctions, after the World Trade Organization made a final ruling against the export subsidies. Instead of crushing U.S. exporters with the full amount, which would have hurt European consumers and many European companies that rely on American manufactures, the bloc targeted hundreds of products that make up a relatively small percent of its imports.

Initially, the House and Senate proposed measures that would roll back the subsidy, worth about $50 billion over 10 years, and replace it with across-the-board corporate-tax cuts.

But to pass the measures, the two houses of Congress created separate bills worth as much as $170 billion in tax cuts and incentives. Energy provisions, a tobacco buyout and breaks for dog-racing tracks, NASCAR, Oldsmobile dealers and other narrow interests were folded in.

Lawmakers left Washington in July without reconciling the measures and are not expected to return until Sept. 7, the soonest they are likely to pick up the contentious measures.

In the meantime, companies that relied on exports to Europe continue to suffer.

“I’m a little optimistic that this will be resolved in November or December, but I don’t even know. And at that point, that leaves nothing for me for this year. No sales to Europe,” Mr. Feldman said.

The EU sanctions list includes a variety of products, including hams, milk powder, tomatoes, pineapples, suits, pants, bed linen, hand tools, boilers, steam engines, refrigerators, paper products, steel and other metals.

Companies in those sectors have lost some or all of their European business.

“The EU’s retaliatory tariffs have already done substantial damage to a number of our companies who are seeing significant losses to their European market share,” W. Henson Moore, president and chief executive officer of the American Forest & Paper Association, said last month as sanctions increased.

But the jewelry industry was hit with by far the most far-reaching sanctions.

Mr. Feldman’s company has lost about 25 percent of its business and cut five jobs, with wage rates ranging from $10 an hour to $50,000 a year, because of lost European sales. The company normally employs 60 to 100 workers, Mr. Feldman said. He did not want to specify a dollar figure for lost sales.

The business could be lost for good as European customers find new suppliers within Europe or from manufacturers in Asia that, even before the tariffs, were increasingly competitive and intent on grabbing more market share.

“This is not coming at a great time,” Mr. Feldman said.