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To: sciAticA errAticA who wrote (33314)	5/8/2003 12:54:05 PM
From: sciAticA errAticA	Read Replies (2) \| Respond to of 74559

Brussels sets ultimatum in US trade dispute By Tobias Buck in Brussels and Edward Alden in Washington Published: May 7 2003 16:19 \| Last Updated: May 8 2003 0:51 The European Union on Wednesday raised the stakes in the biggest dispute to hit the World Trade Organisation, giving an ultimatum to the US over a long-running battle about corporate tax breaks. Brussels gave the US Congress until the end of September to repeal the Foreign Sales Corporations provision, which benefits big exporters such as Microsoft and Boeing, or face sanctions worth $4bn - the biggest retaliatory package in WTO history. The European Commission announced the deadline hours before the WTO gave its final approval to the list of 1,800 US products targeted by the EU, which means Brussels now only needs the approval of EU member states to impose sanctions. In the past week, Washington and Brussels had signalled their determination to boost co-operation on the trade front in an effort to smooth over relations damaged by the war in Iraq. But the ultimatum could damage that effort and lead the US to adopt a more aggressive stance. US anger also mounted on Wednesday over the controversial decision by Airbus to choose a European consortium in a $2.8bn contract to supply engines for its new military transport aircraft, rejecting what had been a lower bid by United Technologies (UTC) of the US after pressure from EU governments. Senator Joseph Lieberman, the Democratic presidential candidate from UTC's home state of Connecticut, called the decision "blatant protectionism [that] threatens the confidence necessary for free trade to flourish and invites similar tactics". Fellow Democratic senator John D. Rockefeller said he would press the US administration to retaliate by barring EU aerospace companies from winning US defence contracts. US aerospace and engine makers have long complained that European rivals receive unfair subsidies. On the FSC issue, the EU won the right to retaliate two years ago after a WTO panel found the FSC provision - a tax scheme that amounts to a rebate on exports - represented an illegal export subsidy. Washington has vowed to comply with the ruling but Congress has yet to start debating two proposals for revising the law. Pascal Lamy, EU trade commissioner, said: "The Commission will review the situation in the autumn and, if there is no sign that compliance is on the way at that time, it would start the legislative procedure for the adoption of counter-measures by January 1 2004." EU trade officials said they wanted to see significant progress in Congress by September 30, though they left open the prospect of a climbdown by saying that revised legislation would not necessarily have to be in place by then. "If all they have to do is finalise the last details [of the new law] we are not going to impose the counter- measures," one of Mr Lamy's aides said. The US responded coolly to the EU deadline, warning that trade sanctions would backfire by hurting European consumers. But it pledged to "comply with our international obligations". One EU official acknowledged the recent improvement in transatlantic trade ties but said "we have cases at the WTO and we have to push them". news.ft.com