The European Union (EU) imposed its first multi-million dollar trade sanctions against the United States on Monday in response to Washington's failure to repeal tax breaks on a wide range of exports.  

Because of the US failure to act "we are left with no choice but to impose counter-measures," said EU Trade Commissioner Pascal Lamy in a statement. "The name of the game is not retaliation but compliance," he said.

The US tax breaks, known as the Foreign Sales Corporation (FSC), have come under EU attack ever since they were introduced in 1984.Following a complaint from the EU in 1998, the World Trade Organization (WTO) in 2000 ruled the FSC an illegal trade subsidy.

Under the sanctions, from March 1, 2004 the EU began imposing tariffs on the exports of US firms including Boeing and Microsoft starting at five percent and increasing monthly up to 17 percent unless a new law is enacted before that rate is reached.

Last May, the WTO authorized the EU to levy as much as US$4 billion in punitive tariffs on the US but the 15-nation EU bloc decided last December to start at a lower level and raise the penalties each month the US fails to change its ways.

The US companies are facing an estimated US$16.6 million bill in March, rising to US$46.4 million in December. In total, unless the FSC is repealed, they are expected to pay US$315 million of additional duties by the end of the year.

The EU penalties, the first levied on the US in a WTO case, will affect 1,600 products ranging from jewelry to nuclear reactor parts.

According to US Treasury Secretary John Snow, the US administration is urging Congress to end the tax breaks "as quickly as possible."

"The day the (new) legislation is passed, the EU will terminate the counter-measures immediately," said Arancha Gonzalez, spokeswoman for EU trade affairs.

(Xinhua News Agency March 2, 2004)