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The EU Strikes Back

Will proposed EU import sanctions hit U.S. small businesses where it hurts?

The European Union and United States generally enjoy an amicable relationship. But in recent months, trade disputes have erupted-battles that may damage small businesses.

The fury began last March, when President Bush imposed tariffs on imported steel. In response, the EU suggested it would enforce World Trade Organization charges that the U.S. provides illegal tax subsidies for its exporters, and threatened to impose $4 billion in trade sanctions if the subsidies and tariffs were not removed. At press time, these sanctions were pending.

Small firms stand to lose more from sanctions, which would entail higher tariffs on goods going into EU countries. Europe has targeted its proposed sanctions at a wide range of industries to maximize the number of congresspeople who might hear from angry constituents. Likely targets include small citrus and soybean growers and tool-and-die makers.

Firms that use steel could be put in double jeopardy by the sanctions. "Already, Bush's tariffs have complicated our business," says Patricia Torres, co-owner of Computed Tool and Engineering Inc., an Anaheim, California, company that designs and manufactures stamping dies. "The price of the steel we use has gone up, and sometimes suppliers cancel deliveries." EU sanctions could make it even harder for Torres and her peers to survive.

But even doomsayers aren't convinced the EU will follow through on its threats. Says Robert E. Scott, international economist at the Economic Policy Institute think tank, "European and American leaders realize that with the global economy so weak, they don't want to make it even weaker."

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This article was originally published in the March 2003 print edition of Entrepreneur with the headline: The EU Strikes Back.

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