European Union, U.S. officials avoid trade war, extend tax benefits deadline

European Union and U.S. officials hammered out a last-minute agreement to postpone a deadline to reverse the tax benefits given to U.S. exporters, narrowly averting a multi-billion dollar trade war. \nThe deadline, imposed by the World Trade Organization, was extended because legislation to reverse the tax scheme is hung up in Congress as Republicans and Democrats continue to battle about what changes should be made. \nCongress has until Nov. 1 to pass the legislation. Trade officials have put pressure on Congress to pass the legislation early, according to Dow Jones Newswires. Stuart Eizenstat, deputy treasury secretary, said, "We can\'t emphasize enough how critical it is that Congress complete action on the (tax exemption) repeal and replacement legislation as expeditiously as possible."\nThe EU was ready to slap tariffs totaling an estimated $4 billion on U.S. exports had this eleventh hour extension not been negotiated. The $4 billion equals the estimated benefit received by U.S. corporations because of the loophole. This combined with the more than $300 million in tariffs the United States has imposed on EU imports would have sparked a trade war with devastating effects.\nThe battle started over sanctions on U.S. beef and bananas. Many EU countries refuse to accept American beef, and levy heavy tariffs on bananas not coming from Northern Africa. In response to tariffs imposed by the United States, the EU went to the World Trade Organization arguing the U.S. Foreign Sales Corporation tax scheme was illegal. \nAccording to the Wall Street Journal, this allows companies such as Boeing and Microsoft to use off shore subsidiaries to save billions a year. They use off shore subsidiaries in countries like Barbados and the Virgin Islands to avoiding paying export taxes.\nThe consumer would be most affected, in the form of higher prices, by the trade war. A disparate list of companies would also feel the pinch caused by the current sanctions; they include: U.S. cattle raisers, German chocolate producers and Danish farmers.\nBoth sides agree the settlement should be reached without imposing any more sanctions. In a press release announcing Sunday agreement, Pascal Lamy, EU Trade Commissioner, said, "The agreement reached today reflects our common desire to handle trade disputes in a pragmatic and nonconfrontational manner."\nWhat makes this so unique is that in the past confrontations over trade usually lead to tariffs and fines. In this instance, the EU is asking for concessions, instead of pecuniary damages. With this new goal in mind, Lamy said, "Our priority is to resolve disputes, not exacerbate them."\nIt is clear the EU\'s desire is to use this dispute to lower trading barriers, rather than erect new ones. The people usually hardest hit by such actions are consumers and small business owners. If trade officials can negotiate new terms reducing tariffs, the result would be lower prices on various goods, thus benefiting consumers and many business owners. \nThe final decision has been postponed for at least another six months. Either George W. Bush Jr. or Al Gore will give the U.S.' response to the EU's demand for concessions. \nThe final decision has been postponed for at least another six months. Either George W. Bush Jr. or Al Gore will give the U.S.'s response to the EU's demand for concessions. It will be one of their first major decision in office and, considering what is at stake, it could prove to be one of their most important ones, as well.