News

News

U.S. – EUROPE COMMERCE NEWS

A weekly service provided to the American Chambers of Commerce in Europe
September 2, 2002

US & EU ECONOMIC STATS

U.S. TO ANTICIPATE DECLINE IN BUDGET SURPLUS AMID MODEST GROWTH

According to the Congressional Budget Office (CBO), the anticipated budget surpluses for the coming decade have diminished, due to a large decline in tax revenues combined with double - digit growth in spending. The CBO projects a deficit of about $157 billion in fiscal year 2002 and does not anticipate a further recession in the near term. Real ( inflation-adjusted ) GDP is forecast to grow by 2.3 percent in calendar year 2002 and by 3.0 percent in 2003. The U.S. Chamber’s Chief Economist, Martin Regalia, has revised downward his forecast for U.S. economic growth. For more information, please watch the U.S. Chamber’s Labor Day briefing on-line at www.uschamber.com.

U.S. TRADE DEFICIT WITH EU DECREASES BY OVER $1 BILLION IN JUNE

The U.S. Department of Commerce reports that, after reaching a record-high deficit of $37.8 billion in May, the U.S. trade deficit in goods and services decreased to $37.2 billion in June. Overall, the deficit in goods was $40.8 billion in June, down from $41.7 billion in May, and the surplus in services was $3.6 billion in June, down from $3.9 billion in May. The U.S. goods deficit with the European Union decreased from $7.7 billion in May to $6.5 billion in June. Exports remained the same at $11.9 billion, while imports decreased from $19.7 billion in May to $18.4 billion in June.

EU EMPLOYMENT RATE UP FROM 63.2% IN 2000 TO 63.9% IN 2001

In spring 2001, 161.3 million people had a job in the EU, 2.3 million more than in Spring 2000. Among the Candidate countries (Malta and Turkey not included), the employment rate varied in 2001 from 50.7% in Bulgaria and 53.8% in Poland to 67.9% in Cyprus and 65.0% in the Czech Republic. In 2001, the highest employment rates were observed in Denmark (75.9%) and the Netherlands (74.1%), and the lowest in Italy (54.5%) and Greece (55.6%). The employment rate rose in all EU countries, except Belgium, Greece, Denmark and Austria. The employment rate also rose in seven of the eleven Candidate countries, only falling in Bulgaria, Lithuania, Poland and Romania.

WTO ISSUES DECISION ON FSC AWARD IN ARBITRATION BETWEEN THE US AND EU

The World Trade Organization (WTO) ruled on August 30 that the European Union can impose $4.043 billion in trade sanctions on U.S. goods to compensate for the U.S. subsidy. The sanctions are 20 times the amount levied in any previous WTO dispute. At issue was the U.S. program known as “Foreign Sales Corporations” (FSC), whereby U.S. companies with a foreign presence are allowed to exempt between 15 and 30 percent of their export income from U.S. taxes. The United States accepted that it was violating WTO rules, but argued that the penalty should be below $1 billion. The decision does not require the retaliatory tariffs, but it does give the European Union the option to impose them. On July 11, Ways and Means Committee Chairman Bill Thomas introduced proposed tax legislation intended to settle the dispute. It would repeal the existing program of tax breaks and put in place a new international tax system.

PRESIDENT OF U.S. CHAMBER WILL VISIT EU IN SEPTEMBER

In the wake of recent U.S. corporate investigations and new corporate governance legislation, the President and CEO of the U.S. Chamber of Commerce, Thomas J. Donohue, will travel to three major EU business centers for three days in September. During his brief visit to London, Berlin, and Milan, Mr. Donohue hopes to answer European concerns about U.S. regulations and confidence in U.S. business practices. The U.S. Chamber is commissioning a special study of the Sarbanes-Oxley bill, which will be shared with the American Chambers of Commerce.

CONGRESSMEN WARN OF EU ENLARGEMENT COSTS TO THE U.S.

Senate Minority Leader Trent Lott (R-MS) and Senate Finance Committee Chairman Max Baucus (D-MT) called on the Administration to make sure U.S. agricultural interests are protected when the European Union completes the next enlargement wave. A letter singed by 11 senators suggests that the U.S. should increase the level of U.S. retaliation for the EU's ban on imports of beef from animals treated with growth hormones in order to account for the trade that will be lost when new countries join the EU. The same message was conveyed in a House letter signed by House Majority Whip Tom DeLay (R-TX), and Reps. Rob Portman (R-OH) and John Boehner (R-OH). In June 2002, various U.S. agriculture trade groups complained to the U.S. Trade Representative that enlargement will limit access to the Central European market for American fruits and vegetables, increase overproduction in key agricultural sectors (e.g., beef, pork, poultry, dairy, grains, sugar, fresh and processed fruits and vegetables, and planting seeds), raise sanitary and phytosanitary barriers to trade, and impose de facto bans on GMO-containing products. Separately, the U.S. Department of Agriculture confirmed in its August 2002 study that U.S. chicken and turkey meat exports to Central Europe will be lost upon accession unless the current dispute with the EU is resolved.

U.S. INTERNATIONAL TRADE COMMISSION REJECTS NEW STEEL TARIFF

On August 27, the International Trade Commission, an independent U.S. government agency, rejected requests by the U.S. steel industry to impose new tariffs on imports of cold-rolled steel from Sweden and four other non-European countries. The bipartisan panel ruled 4 to 1 that American steel mills were not being materially harmed by imports of cold-rolled steel, and thus there was no need to impose the proposed tariffs. The U.S. consumes around 40 million tons of cold-rolled steel a year, mostly from domestic producers. As recently as two years ago, foreign companies exported about 205,000 tons to the U.S., but these imports have drastically decreased in light of recent anti-dumping action pursued by American steel companies. The panel will not issue a detailed explanation of its decision for several weeks.