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Washington to miss sanction deadline


A US senator has revealed that Washington will fail to pass crucial legislation by March 1, bringing the EU a step closer to imposing sanctions of €290 million.

Senator Chuck Grassley, who heads the Senate Finance Committee, claimed that the upper house would miss the deadline imposed by the EU to scrap so-called Foreign Sales Corporations (FSCs) - tax breaks ruled illegal by the World Trade Organisation four years ago.

US officials restated their intent to get things moving by March 1, but Grassley’s statement, reported by Reuters, seems to have put into words what many have feared for some time.

Brussels has tread carefully with imposing the sanctions, opting for a softly-softly approach rather than hitting €4 billion of US goods straight off, as the WTO permits.

Starting with sanctions of €290m, Brussels would only apply five per cent of its entitlement, but then ratchet this up by one per cent a month until it sees movement from Washington.

The EU has always maintained that March 1 was a non-negotiable deadline, but recent calls from European businesses to allow the US a three-year phase-out period may have persuaded Brussels to exercise more caution.

In addition to meetings between EU trade chief Pascal Lamy and his US opposite number Robert Zoellick in Kenya and Paris this week, Lamy will be meeting Grassley and others in Washington next week for eleventh hour talks.

The FSC legislation has to go through both the Senate and Congress before it can be officially scrapped.

Both sides are keen to avoid all-out trade war, particular in view of a recent dispute over steel and further rows brewing over anti-dumping and intellectual property rights.

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