EU Ending Punitive Tariffs on U.S.

The European Union decided Monday to lift heavy punitive tariffs on U.S. goods but said it might renew them if the World Trade Organization confirmed suspected loopholes in Washington’s new law repealing illegal corporate tax breaks.

The decision to end the sanctions came after President Bush signed a bill into law Friday repealing the tax breaks that the WTO had ruled illegal. But the two-decade transatlantic fight will drag on because of EU concerns about loopholes in the new law allowing big exporters like Boeing Co. to benefit from the breaks beyond a two-year transition period agreed to by the EU.

EU Trade Commissioner Pascal Lamy said he would ask the WTO for another ruling on whether the new U.S. law fully complied with global trade rules, a process that normally takes 90 days. “Legally speaking, we will suspend the sanctions and we will keep our options open,” Lamy said. “There is the possibility of [renewed] sanctions. We’ll see what WTO says.”

The EU sanctions, which total more than $300 million in 2004, will be lifted Jan. 1, the date the new U.S. law takes effect. But they could return next year if the WTO confirmed the U.S. law did not comply with the WTO ruling -- as happened to the first reform passed by the U.S. Congress in 2000.

“There are certain provisions on which we have our doubts,” Lamy said.

EU ministers have to approve Lamy’s proposal to suspend the sanctions, a formality expected in the coming weeks.

Richard Mills, spokesman for the U.S. trade representative’s office in Washington, welcomed the lifting of the sanctions and said the United States was now following WTO rules “as the EU sought.”