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U.S. – EUROPE COMMERCE NEWS

A weekly service provided to the American Chambers of Commerce in Europe

US & EU ECONOMIC STATS

U.S. FEDERAL RESERVE VOTES TO KEEP INTEREST RATES UNCHANGED

The Federal Reserve’s Federal Open Market Committee (FOMC) voted 10-2 to keep its target for the federal funds rate unchanged at 1 ¾ percent, the lowest rate in 41 years. According to the FOMC, the easier money-supply policy adopted in 2001 combined with increased productivity should sustain the current moderate economic expansion. However, the FOMC also stated that, “considerable uncertainty persists about the extent and timing of the expected pickup in production and employment owing in part to the emergence of heightened geopolitical risks.” Two members of the FOMC voted in favor of a cut in interest rates.

U.S. CONSUMER CONFIDENCE INDEX FALLS FOR FOURTH CONSECUTIVE MONTH

The Conference Board, a New York based research firm, reported that its consumer confidence index fell to 93.3 this month from 94.5 in August. The index, based on a survey of approximately 5,000 U.S. households, has been falling since a peak of 110 in May. Lynn Franco, Director of the Conference Board’s Consumer Research Center, cited current weak labor market conditions as a significant factor in falling consumer confidence. However, Alan Greenspan, Chairman of the Federal Reserve, suggests that continued heavy spending on cars and homes indicates that consumers remain optimistic about their own jobs and incomes.

U.S. GDP INCREASES IN THE SECOND QUARTER, CORPORATE PROFITS FALL

According to revised estimates released by the U.S. Department of Commerce on Friday, real gross domestic product (the output of goods and services produced by labor and property located in the United States) increased at an annual rate of 1.3 percent in the second quarter of 2002, slightly higher than the preliminary estimate of 1.1 percent. In the first quarter, real GDP increased 5.0 percent. The major contributors to the increase in real GDP in the second quarter were private inventory investment, exports, personal consumption expenditures, and federal government spending. Also in the second quarter, corporate profits from current production decreased by $12.6 billion, after decreasing by $13.8 billion in the first quarter.

U.S. CHAMBER PRESIDENT AND CEO VISITS EUROPE

On invitations from leading European business organizations, U.S. Chamber President and CEO Thomas Donohue visited London, Berlin and Milan on September 25-27 to meet with key business and government leaders and diplomats. In London, Donohue released a U.S. Chamber-commissioned report identifying the implications of the new Sarbanes-Oxley accounting and corporate governance law and briefed business executives, government officials, and the media on the findings. The report is entitled: "The Sarbanes-Oxley Act of 2002 and its Impact on European Companies" and it can be viewed by going to: http://www.uschamber.com/Press+Room/default.htm. The law covers all companies that have securities publicly traded in the U.S. on domestic exchanges or markets such as the NASDAQ stock market, as well as companies required to file reports with the U.S. Securities and Exchange Commission (SEC). The report emphasizes that some of the law's requirements are quite clear while others are not, and that the line between bad judgment and criminal liability has become increasingly blurred. Many of the new legal requirements are enforceable through criminal sanction, and penalties for non-compliance have become "significantly more severe." Mr. Donohue also discussed current economic, political and national security challenges facing the U.S., European and world economies while in Europe and underscored the importance of trans-Atlantic commerce.

WHITE HOUSE SAYS U.S. WILL OPPOSE EU SAVINGS DIRECTIVE

Glenn Hubbard, Chairman of the White House Council of Economic Advisors, said that the U.S. would not agree to cooperate with the EU savings directive, which would require the broad sharing of information on savings accounts held in the U.S. by foreigners. EU governments agreed in December to a system of automatically exchanging information on the interest paid to non-resident holders of savings accounts in order to allow each government to tax the savings of its own citizens. However, the EU states claimed that they would not approve the plan unless the European Commission could persuade a number of non-member countries, such as Switzerland and the United States, to adopt similar measures. While the U.S. Treasury Department has not made a final decision and claims that discussions with the EU are at an early, technical stage, a Treasury representative said that the U.S. would favor “appropriately tailored information exchange relationships” that would help enforce tax laws, rather than automatic information-sharing requirements.

EUROPEAN COMMISSION PUTS THREATS OF STEEL TARIFF RETALIATION ON HOLD

The European Commission (EC) backed away from its threat to impose trade sanctions worth up to €379 million against U.S. exports in retaliation for U.S. import duties on steel of up to 30 percent. Officials said the recent announcement of the exemption of more than half of the EU’s products targeted by the duties has persuaded the EC to put a hold on retaliation for the moment, pending the outcome of a World Trade Organization (WTO) dispute settlement panel created earlier this year on the issue. The WTO panel is expected to deliver a verdict in the spring, although appeals could delay a final ruling until late 2003. The U.S. is pursuing its own case within the WTO against safeguard measures that the EU introduced to prevent steel barred in the U.S. from flooding the European market.

U.S. WHEAT INDUSTRY URGES REJECTION OF PROPOSED EU GRAIN TARIFF CHANGES

The U.S. Wheat Associates, the wheat industry’s export market development organization, issued an open letter to European wheat industry leaders urging them to reject the European Commission’s proposal to impose fixed tariff rate quotas (TRQs) on all imported wheat. Earlier this summer, the EU decided to withdraw from the GATT Agreement on Margin of Preference (MOP) variable import levy system, and instead impose fixed TRQs on all imported wheat. The EC’s proposal is to restrict wheat imports to “first come – first served” worldwide soft wheat and durum quotas with fixed tariff rates. “Out-of-quota” imports above the set limits would then be assed highly punitive additional tariff rates of €95.00 and €148.00, respectively. U.S. negotiators have been urging the EC to allow U.S. high quality and specialty durum wheats continued tariff-free access to the EU market, arguing that these high quality wheats do not compete directly with EU wheat production.

STATE DEPARTMENT ATTEMPTS TO FIX VISA DELAYS

Under the U.S. State Department’s new “Visas Condor” program, consular posts abroad submit names of visa applicants subject to further analysis by appropriate U.S. government agencies. Last week, the State Department sent authorization to consular posts to issue visas to more than 10,000 backlogged visa applications from 35-40 countries following the new reviews. As a result of improved interagency and automated procedures, the State Department estimates that from now on visa applications subject to the Visas Condor procedure will take a clearance time of approximately one month. Applicants will be informed when their applications are subject to delay.