U.S. Threatens 100% Tariffs in EU Fight

If you were wavering about buying that expensive cashmere sweater or fancy French handbag for Christmas, consider this: A nasty trade fight between the United States and Europe could make those and other European imports scarce on store shelves next year.

The Clinton administration threatened Monday to slap punitive tariffs of 100% early next year on hundreds of millions of dollars in European imports, effectively doubling their price. It’s the latest action in a six-year battle over Europe’s banana import rules.

The dispute could still be resolved short of the tariffs going into effect. But both sides appear to be digging in their heels for a bitter trade war between the world’s two biggest trading partners. If no settlement is reached, the sanctions probably will take effect March 3.

An official of the 15-nation European Union immediately denounced the U.S. threat of sanctions and said Europe will file a case before the World Trade Organization challenging the validity of the U.S. law under which the punitive tariffs are imposed, known as Section 301.

The United States argued that the real issue was whether Europe will abide by the WTO’s rulings. The Geneva-based trade group was created in 1995 to serve as a final arbiter in such disputes.

The items subject to the tariffs range from expensive cashmere sweaters and French and Italian handbags to sheep’s milk cheese, British biscuits and German coffee makers. Other targeted items include candles, felt paper, folding cartons, greeting cards, lithographs, cotton bed linens and chandeliers.

Because their price in American stores would essentially double overnight, stores would be less likely to carry them, assuming shoppers would prefer similar products not subject to the tariffs.

Wine, which was on a preliminary sanction list, was left off the final list at the request of American winemakers who expressed concerns that the sanctions could, in turn, harm their sales in Europe.

At issue is a WTO ruling in September 1997 that the European import rules covering bananas unfairly discriminate against Latin American-grown bananas in favor of those grown in former British and French colonies in the Caribbean, Africa and Pacific islands.

That ruling, upheld on appeal by the EU, required the EU to end the discrimination against Latin American bananas. While the EU has modified its banana rules, the United States contends those changes are merely cosmetic and don’t meet the WTO objections.

The Clinton administration is pushing the case because American companies, including Chiquita Brands International Inc. and Dole Food Co., grow their bananas mostly in Latin America.

“We have made repeated attempts to resolve this matter with the EU through negotiations. The European Union, however, has rebuffed those attempts,” U.S. Trade Representative Charlene Barshefksy said.

Chiquita has said its market share has fallen from 50% in Europe to 20% because of the European import restrictions, costing it more than $1 billion annually in lost sales.

With America’s trade deficit running at a record level, U.S. trade experts argue that the United States had little choice but to act against the EU for failing to abide by the trade group’s ruling.

“There are increasing voices in the United States questioning the wisdom of international trade and globalization,” said Greg Mastel of the Economic Strategy Institute, a Washington think tank. “If the WTO proves that it can’t arbitrate these disputes, then the case for the WTO is harder to prove.”

The Clinton administration said it will not reveal the dollar amount of imports affected until it formally notifies the WTO that it is implementing the sanctions.

The United States is specifically exempting products from Denmark and the Netherlands because they were the only nations that voted against the banana rules.