Fresh transatlantic trade dispute looms

02.10.03 @ 09:33

  1. By Andrew Beatty

US draft legislation which urges the Pentagon to buy defence parts from American manufacturers has turned heads in Brussels, with some warning of yet another trade dispute at the WTO.

According to the Financial Times, a leaked EU letter voices "serious concerns" over provisions which encourage the defence department to buy American.

"[S]hould the final bill retain WTO-incompatible provisions, the European Commission will consider the most appropriate action to take", says the letter.

Brussels also calls upon the US President, George W. Bush to veto the bill.

The EU argues that asking for machine tools to be bought from US firms breaks WTO trade rules on government procurement.

However, WTO rules do exempt some government procurement related to defence so it is unclear if any action by the EU would hold water.

But coming after the failure of world trade leaders to reach a deal at Cancún and with the multilateral trading system - and so the WTO - looking increasingly shaky, the EU will be loath to exacerbate another politically damaging disagreement.

The US administration is said to be considering another revision of the plan after one draft was rejected for not sufficiently watering down protectionist language.

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