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EU boosts tariffs on U.S. products in tax-break fight

By James G. Neuger
By James G. Neuger Bloomberg News

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GENEVA — The European Union boosted tariffs on $4 billion of U.S. products to pressure the Congress to repeal an export-tax credit that benefits companies such as General Electric and Boeing.

Tariffs rose to 6 percent from 5 percent, the European Commission said, making good on a threat to lift the levies by 1 percentage point a month to force the U.S. to bow to a World Trade Organization ruling that the tax breaks are an illegal subsidy.

"We hope that by this time next month, rather than announcing a further increase from 6 percent to 7 percent, we will be able to announce that the sanctions have been lifted," commission spokeswoman Arancha Gonzalez said in Brussels, Belgium.

A rewrite of the U.S. tax legislation stalled in the Senate last month after Democrats sought to add an amendment to prohibit the Bush administration from scaling back federal overtime rules.

The existing legislation allows U.S. companies to exclude from federal income tax 15 percent of net income from the export sale of U.S.-made goods.

House Ways and Means Committee Chairman Bill Thomas said last month that the U.S. legislation was being blocked by a lobbying effort by the largest beneficiaries of the current export subsidy, such as Microsoft and Boeing.

Thomas' bill has been stalled in the House.

Boeing and General Electric top a list of 15 companies that claimed $6.2 billion or 78 percent of the total benefit offered to U.S. exporters between 1997 and 2002. Other top beneficiaries include Honeywell, Motorola and Cisco Systems.

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