Russia » Economics
Author`s name Michael Simpson

European Union Stands Up to American Corporations

Europe may punish the USA for its swindling in international trade
It seems that Old Europe's intention to play a more independent role in the world is not a momentary caprice or an intensification of a suppressed inferiority complex. The USA has managed to threaten France and Germany with a boycott and some economic punishment, while the European Union found an opportunity to crack down on the superpower with the help of subtlety in the field of international trade, which brings incredible profits to American companies. Everything is legal about it.

It became known today that the WTO allowed the European Union to introduce trade sanctions against the United States. Such a decision looks astounding against the background of the situation, when the whole world is waiting for the USA to overcome its crisis with the help of Iraqi oil. Yet, the Old Word is famous for its pragmatism and craftiness, so it gave a reminder that one should not ignore its outdated ambitions.

What was the reason for EU officials to make such an amazing decision? American export laws stipulate considerable benefits for large USA-based exporters. American companies, such as Microsoft, Walt Disney or Boeing, obtain extra-large profits with the help of those benefits. This seems to be totally illegal for Europe. American administrative bodies do not pay attention to the fact that American companies conduct their business operations through their own divisions in offshore zones, paying decreased export duties. Analysts at the European committee believe that American companies have unfair advantages over their European competitors. It goes without saying that this cannot but raise indignation.

The Europeans made up a list of 95 categories of American goods which would have additional duties of up to 100 percent imposed on them. The BBC reported that the list includes practically all the goods that the USA delivers on the world market: from oranges to nuclear reactors. Afterward, EU spokespeople addressed the World Trade Organization; one could say that they gave it an ultimatum. The WTO completely acknowledged the correctness of the indignant Europeans. Later on, the European Committee gave a trade ultimatum to the USA, which could be called a Euro-Atlantic knockdown. Analysts acknowledge that, if sanctions come into effect, it would be the most massive pressure on the American economy in the WTO's history.

Nevertheless, Europe gave the USA some time to reconcile with its transoceanic allies and partners. At the end of the day, a poor peace is always better than a good quarrel. EU Trade Commissioner Pascal Lamy told reporters that the European Committee would hold a review of the actual trade issue in the fall of the current year. If the situation does not change in accordance with European recommendations, the sanctions will be put into effect. In this case, the USA is at risk of losing up to four billion dollars every year.

European media report that the American administration is ready to make some concessions about it now. It is possible to understand President Bush: The American president, the victor, would be brought down by the WTO's and EU's ultimatum. It goes without saying that such a thing is out of the question: George W. Bush is going to remain US president for another term.

Apparently, the correction of American laws on the base of the WTO's decision does not bring any honor to American lawmakers. In addition to that, the positions of American corporations on the world market will worsen. On the other hand, if the USA ignores Old Europe's requirements, American exports might face a very serious threat. The USA has problems in exports and in the economy on the whole, so 100 percent duties on American goods will become a disaster that might lead to a considerable devaluation of the dollar. Furthermore, American lawmakers fear that the Europeans might go even further and ask for a cancellation of all duties on all kinds of European steel. The WTO has already taken a pro-European position on this question: In March of the current year, the USA was forced to withdraw increased duties on 178 kinds of steel production from Europe.

The argument between the USA and the EU regarding the benefits of American companies that have divisions abroad has been going on since 1971. Such benefits allow USA-based companies to deduct up to 30 percent from taxable export sales profits. However, a protest about it was filed at the WTO only last fall, when it became known that Europe and America cannot find a common language regarding the new organization of the world.

Until recently, the USA has tried to adjust its laws to WTO norms by means of various amendments. Yet, the lobbying pressure of America's largest corporations never allowed for a resolution of the problem.

The EU's determination is not really surprising after the war in Iraq.

Pascal Lamy believes that the American law still provides exporters an opportunity to obtain illegal state grants. It seems that Old Europe is not going to stand for that any longer.