EU threatens trade retaliation against US in tax row

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Last updated at: (Beijing Time) Tuesday, December 09, 2003

EU threatens trade retaliation against US in tax row

European Union (EU) foreign ministers voted unanimously Monday to apply 200 million US dollars in tariffs, starting in March 2004 against U.S. goods ranging from steel to cosmetics.

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European Union (EU) foreign ministers voted unanimously Monday to apply 200 million US dollars in tariffs, starting in March 2004 against U.S. goods ranging from steel to cosmetics.

The World Trade Organization (WTO) last year authorized 100 percent tariffs on up to 4 billion dollars of goods in retaliation for a US tax break called Foreign Sales Corporation (FSC) that benefited US exporters such as Boeing and Microsoft.

The EU, however, has been reluctant to impose the sanction, in a bid to avoid a trade war with one of its most important allies.

Earlier last month, EU's executive European Commission (EC) made a proposal asking for a gradual imposition of tariffs as from March 2004 at the level of 5 percent, followed by automatic, monthly increases of 1 percent up to a ceiling of 17 percent to be reached in March 2005.

Targeted US products range from orange juice to turbines manufactured in states key to US President George W. Bush's re-election bid next year.

The sanctions would be removed as long as the US congress repeals the FSC, the EU said.

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