NCPA - National Center for Policy Analysis

A New Way Of Handling Trade Tiffs

October 6, 2000

A crucial trade dispute between Europe and America may erupt by the end of this year. But experts report this might be the best thing to happen to trade in years.

That's because the European Commission might handle it by extracting market-opening concessions from the U.S. -- rather than following the old strategy of imposing punitive tariffs on American goods.

  • The dispute concerns tax advantages given to America's Foreign Sales Corporations, which Europeans claim is an unfair trade practice favoring American exporters.
  • The World Trade Organization has sided with the Europeans -- and if the U.S. fails to make changes satisfactory to the WTO, an arbitrator could allow Europe to go ahead with sanctions that could cost American exporters as much as $4 billion a year.
  • But rather than taking such an action, the Europeans intend to ask the U.S. to lower its customs duties on European exports.

If successful, such a strategy would benefit not only those exporters -- but American consumers as well.

Source: "From Boom to Boon," Economist, September 30, 2000.


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