European Trade Retaliation: The FSC-ETI Case Page: 4 of 6
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include New York, Massachusetts, Rhode Island, and to a lesser extent California,
Florida, Texas, New Mexico, and New Jersey.
The next four sectors impacted most heavily - machinery and mechanical
appliances, wood and paper articles, leather and leather articles, and toys and sports
equipment - account for 35% of the total targeted trade. Products listed from these
sectors also could be made in many different states and regions of the United States. For
example, in the machinery and mechanical appliances sector, products such as piston
engines, hydraulic turbines, refrigerators, household scales, cranes, fork-lift trucks, and
machine tools are included. The wood and paper products sector includes products such
as particle board, building materials, plywood, wood panels, paper and paperboard,
wallpaper, toilet paper, note books, and unused postage stamps. The leather sector
comprises products such as raw hides and skins, and articles of leather such as handbags,
briefcases, and gloves. And the toys and sports equipment sector includes such items as
doll carriages, dolls, electric trains, billiard tables, cross country and downhill skis, tennis
racquets and balls, ice skates, and fish-hooks.
As shown in Table 3, Major U.S. Sectors Excluded From FSC/ETI Retaliation
List, sectors totally left off the retaliation list account for close to 40% of U.S. exports to
the EU. In addition, exports from the two largest U.S. export sectors (machinery and
electrical machinery) were targeted minimally (less than $1 billion of the $49 billion in
exports from these sectors). As these latter two sectors account for 34% of U.S. exports
to the EU, it can be seen that close to 75% of U.S. exports to the EU were basically non-
targeted.
The non-targeted sectors are characterized by massive amounts of cross-investment
and intra-industry trade that integrates markets tightly. Trade data, for example, show that
the seven largest categories of U.S. exports to the EU (machinery, electrical machinery,
optical equipment, aircraft, vehicles, organic chemicals, and pharmaceuticals) are also
among the top nine categories of imports from the EU. These seven sectors accounted for
70% of U.S. exports to the EU and 61% of imports from the EU in 2002.5 Many of the
products in these key sectors, such as aircraft parts, auto parts, and chemicals, are
components in products that EU companies export back to the U.S. or components in
products that European subsidiaries of U.S. companies use in their production process.
Other items such as optical devices and medical equipment may not necessarily be
produced in the EU. Most of the exports from the machinery and mechanical appliances
and electrical machinery sectors were left off the list as well, due perhaps to similar
concerns about hurting or disrupting EU producer interests.
Possible Consequences
The economic consequences of the EU tariffs are likely to be relatively mild during
the first year. Political repercussions could be more significant.
Given that Brussels was permitted to impose 100% tariffs on $4 billion of U.S.
exports, the EU decision instead to impose the escalating tariff beginning at 5% and
s Data from the World Trade Atlas, a subscription trade statistics database, was compiled by J.
Michael Donnelly, Information Research Specialist, CRS.
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Aheam, Raymond J. European Trade Retaliation: The FSC-ETI Case, report, February 11, 2005; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc816083/m1/4/: accessed April 24, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.