The EU has imposed serious sanctions on the US.
The economic global model which has dominated in the world for the last 40-50 years, is collapsing. The crisis of the global economy in 1997-98 was the first sign that the resources of the existing economic model have been exhausted. The fact that the G-8 contries Ministers of Finance were unable to elaborate the common position at their last meeting, demonstrated: every country has to fight alone in this “war of all against all”.
The trade war between the EU and the USA has broken out. The EU has imposed trade sanctions on the US. This unprecedented action has been approved by WTO. The sanctions resulted from the US refusal to abolish its Anti-Dumping Act of 1916. This Act puts US exporters in a better position than European companies exporting their products to the USA.
The US legislation on export gives significant advantages to big US exporters and allows US companies such as Microsoft, Walt Disney and Boeing earn huge profits. Europeans believe that this is unfair. US controlling institutions pay no attention that American companies conduct their business operations in their off-shore subsidiaries and pay reduced export duties. The experts of the European Commission believe that in this way American companies gain unfair advantage over their EU competitors.
The Anti-Dumping Act of 1916 was designated for protecting US producers from foreign competitors after the World War I. This document was considered outdated until American company Wheeling-Pittsburgh Steel Corp. initiated legal proceedings against Russian and Japanese steel manufacturers. In addition, in December 2003 US Federal Court issued a verdict in favor of US company Goss International. This company brought charges against Japanese enterprises of dumping in the US market of printing machines and requested $31.5 million in compensation. Since that time, the USA started using this outdated Act to pursue its economic policy.
The Anti-Dumping Act allows US companies prevent some European competitors from penetrating in the US domestic market by imposing additional custom duties on them. During business disputes US courts always decide in favor of American companies. The latest example of preventing foreign producers from the US market is introducing bigger customs duties for the steel imported in the US. WTO was able to make the USA terminate these duties.
The European Commission tried many times to persuade the USA to adjust their legislation to the law of the EU and WTO. However, lobbyists of the US companies did not allow to do this. As a result, the EU imposed sanctions to the US companies.
The EU composed a list of 95 US goods subjected to additional custom duties (they are increased up to 100 percent). BBC reported that there are almost all the goods exported by the US on the list, from oranges to nuclear reactors. The EU representatives submitted this list to WTO and finally made WTO support them. After this the European Commission issued trade ultimatum to the USA. WTO agreed with the European Commission appeal and recognized the increased duties for the companies exporting their products to the USA illegal. On February 24, 2004 WTO arbiters legitimated the EU imposing sanctions on the USA for the sum equivalent to the fines imposed to the European companies by the US according to is Anti-Dumping Act. This sum may be $ 4 billion per year. Meanwhile, WTO arbiters refused to pass the equivalent anti-dumping laws allowing to impose fines to the US companies.
The EU sanctions include increasing after March 1 custom duties for a number of US goods. These duties will be increased by one more percent every month until the US lifts export duties benefits for the US companies. Remarkably, the EU will stop increasing its customs duties only when the USA have $666 million dollar in losses per year from these custom duties. The EU leaders believe this will make the US Congress replace export custom duties benefits for Boeing, Microsoft and some other big companies with the standard WTO regulations.
According to analysts, the sanctions may become the biggest tool of pressure applied to the US economy for the entire WTO history. In the current situation of global economic recession, this means a real economic war.
The USA is not too nervous to the sanctions. American economy is much more powerful than the EU countries economies. Americans will always find an adequate answer to the EU bureaucrats and businessmen. Everybody agrees that the USA is the only world superpower. Many US companies dominate in the global markets, and these world leaders have no need of the EU companies’ services.
One of the response measures may be United Parcel Service (UPS) refusal to purchase a part of European aircrafts – 20 Airbus planes previously ordered in 1998 and 2001.
Dow Jones Business News reported that UPS had notified aircraft engine producer Pratt & Whitney about the intention to change the terms of the contract. The negotiations are very difficult, the contract did not stipulate changing its terms. UPS may be required to pay forfeit.
This is a big damage for Airbus – major EU aircraft producer. It took much efforts from Airbus to win the tender for supplying aircrafts to UPS. During this competition Airbus surpassed Boeing, and now Airbus is greatly disappointed.