EC Blocks U.S. Tariffs as Trade War Brews : Commerce: One report says Washington will move today to impose punitive taxes on some luxury European imports.

The European Community and several other nations Wednesday blocked efforts by the United States to impose punitive tariffs on EC goods in what is developing into a full-scale trade war that will likely prolong international negotiations to liberalize the world’s trading system.

The Uruguay Round of the General Agreement on Tariffs and Trade is now entering its seventh year and has been stalled for the last two by a U.S.-EC deadlock over agricultural trade.

The United States sought $1 billion worth of punitive tariffs against EC goods one day after the breakdown in Chicago of negotiations aimed at resolving a separate, long-simmering dispute between the United States and the EC over European subsidies for growers of soybeans and other oil-bearing crops.

“We have tried over and over again” to settle the row over oil seeds, Rufus Yerxa, a senior U.S. trade official, said in Geneva. He said the United States “has gone the extra mile” to avoid imposing punitive tariffs on European goods.

The New York Times reported in today’s editions that the United States plans to announce punitive taxes on European imports this morning. Quoting unnamed American officials, the newspaper said that Trade Representative Carla Anderson Hills will announce taxes of 100% or more on up to $350 million of luxury European exports, mainly wines from France.

The EC and other nations stopped the United States from imposing the tariffs legally through GATT and warned of retaliation if the United States attempted to act unilaterally.

Frans Andriessen, the EC commissioner responsible for trade policy, responded by threatening “proportional and not disproportional retaliation” to any U.S. trade sanctions. Speaking at EC offices in Brussels, he insisted that EC negotiators had “tried very seriously to meet the reasonable requirements of our American friends.”

With the breakdown of negotiations in Chicago, the battlefield shifted to the Geneva headquarters of GATT, the organization that enforces the rules governing international trade.

Yerxa, the U.S. representative to GATT, asked the organization’s governing council to allow $1 billion in tariffs on $1 billion worth of European goods sold in the United States.

By doubling the cost of these items, which range from Dutch tulips to French wine, the tariffs would effectively price some European goods out of the U.S. market.

The United States, which raised the possibility of the punitive tariffs last June, charged that the EC was subsidizing the production of soybeans and other oil-bearing crops in violation of GATT rules.

U.S. officials said the subsidies, by giving European farmers an unfair advantage in price competition, cost U.S. exporters an annual $1 billion worth of sales in Europe. Two GATT panels had found that the EC’s subsidies violated GATT rules.

But it is GATT’s council, made up of all of the organization’s 105 members, that has final authority to approve punitive tariffs. It acts by consensus; any one member can block action.

In Wednesday’s council meeting, which was closed to the public, the United States won the support of such agricultural exporting nations as Australia, New Zealand and Brazil, according to a GATT spokesman.

But the EC insisted that the soybean dispute should be settled by further negotiations, not punitive tariffs. EC officials said they still hoped for more talks with the United States, although they acknowledged that no talks had been scheduled.