European Union Initiates Sanctions on U.S. Goods
The EU began enforcing sanctions against U.S. goods pursuant to a WTO decision which ruled that U.S. tax breaks on exports were illegal under the Agreement on Subsidies and Countervailing Measures (SCM Agreement). The tax laws subject to the ruling are the Foreign Sales Corporation (FSC) and its successor, the Extraterritorial Income (ETI) Act.
The ruling allows the EU to implement a total of US$4 billion in sanctions on US goods. The EU will phase the tariffs in gradually in an attempt to encourage the US to amend its tax laws to comply with the WTO decision. It is targeting US goods that compete directly with EU products, which presents a shift in policy from the steel tariff disputes, where the EU threatened to impose tariffs on goods from key political states in the 2004 election.
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