Thursday January 24, 3:04 pm Eastern Time EU trade official plunges into US trade disputes By Doug Palmer
WASHINGTON, Jan 24 (Reuters) - The European Union's top trade official was expected to plunge into billion-dollar trade disputes with the United States over tax breaks and steel on a two-day visit starting on Thursday, U.S. government aides said. EU Trade Commissioner Pascal Lamy was to meet U.S. Trade Representative Robert Zoellick as the world's top trading areas seek to avert EU sanctions of up to $4 billion on U.S. exports after a ruling this month allowed retaliation for illegal U.S. tax breaks to exporters. Lamy's first visit to the United States since June also comes as the Bush administration mulls restricting steel imports to help the U.S. industry, a move the Europeans have threatened to seek to overturn at the the World Trade Organization. Despite the rows, the sides also hope the trip will help build momentum for a new round of world trade talks. Lamy was scheduled to talk on Thursday with key members of the House of Representatives Ways and Means Committee and the Senate Finance Committee. Both panels share jurisdiction over tax and trade issues at the forefront of the dispute over the tax breaks for exporters, which involve granting concessions to firms using offshore branches. In a case of huge importance to top U.S. companies ranging from Boeing (NYSE:BA - news) to Microsoft (NasdaqNM:MSFT - news), the WTO ruled this month for the fourth time the U.S. tax breaks amounted to an illegal export subsidy. That sets the stage for the EU to retaliate on up to $4 billion worth of U.S. goods later this year unless Zoellick and Lamy reach some agreement on how Washington will comply with the ruling. It is the highest amount ever sought in a WTO row. Lamy will meet on Friday with Zoellick and White House chief economic adviser Lawrence Lindsey. U.S. business groups and some lawmakers, such as Senate Finance Committee Chairman Max Baucus, a Montana Democrat, complain the WTO ruling unfairly discriminated against the U.S. tax system. They would like the EU to agree to negotiate on the issue as part of a three-year round of world trade talks launched in November last year in Doha, Qatar. EU officials have shown little appetite for that. While Lamy stressed Brussels faces no deadline for applying sanctions, he has urged the Unites States to come forward quickly with a proposal for complying with the WTO ruling. LOOMING STEEL SHOWDOWN Lamy was also scheduled to meet on Thursday with Rep. Phil English, a Pennsylvania Republican who chairs the House Steel Caucus and a driving force behind the ``section 201'' steel investigation launched last year by President George W. Bush. With that proceeding now drawing to a close, Bush faces a decision by early March on whether to restrict steel imports to give the financially struggling U.S. industry some breathing room to get back on its feet. The EU has threatened to take the United States to the WTO if import restrictions are imposed and would most likely be joined by other trading partners -- such as Brazil, South Korea and Japan -- that could see their market access curbed. Steel and the export tax break dispute are expected to be high on the agenda when Lamy meets with Zoellick on Friday. The two trade officials also are expected to discuss how to best advance the new round of world trade talks, known officially as the Doha Development Agenda. Those negotiations begin formally on Monday with a meeting in Geneva of the WTO Trade Negotiating Committee, which will oversee the talks
