EU Is Set to End Penalty Sanctions on U.S. Goods

The European Union announced Friday that it was prepared to end penalty sanctions on $4-billion worth of American exports to Europe.

However, EU officials warned they could reimpose some of the tariffs if a dispute was not resolved over a U.S. law that showers $136 billion in new tax breaks on companies.

Anthony Gooch, spokesman for the EU in Washington, said a key panel of the Council of the European Union had approved a measure to withdraw the sanctions.

The panel recommended ending collection of the sanctions Feb. 1 and approved returning any penalty fees collected this month in the form of rebates.

The penalty tariffs, which began at 5% in March, had been rising by 1 percentage point each month -- a way for Europe to increase pressure on Congress to repeal a $5-billion annual tax break provided to U.S. exporters that had been ruled illegal by the World Trade Organization.

A wide range of U.S. exports, including jewelry, textiles, steel and various farm goods, had been hit by the sanctions.

Congress passed the repeal of the illegal tax break and President Bush signed it into law in October. However, the EU complained that the legislation still did not fully conform to the WTO ruling because it allowed too long a transition period for U.S. companies to switch from the old tax break to a package of $136 billion in new tax breaks.