CORRECTED: U.S., EU eye possible fix to long-standing beef war

Mon Mar 16, 2009 9:44am EDT

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(Corrects lead which erroneously described the EU as a country.)

By Roberta Rampton

WASHINGTON (Reuters) - The United States will hold off on applying new retaliatory duties to European products during discussions about a possible fix to a long-standing dispute over beef trade, the U.S. Trade Representative's office said on Thursday.

The duties, set to take effect on March 23, will be held back for a month while discussions on a "possible interim solution" take place, USTR spokeswoman Nefeterius McPherson said in a statement.

"The settlement will provide benefits for U.S. beef producers, but it would not be appropriate for me to get into any more details about an ongoing negotiation," McPherson told Reuters.

Several issues remain to be resolved in the discussions, she said. "USTR has decided to delay the trade action in order to give this process every possibility of success," she said.

European Trade Commissioner Catherine Ashton welcomed the USTR decision to postpone sanctions.

"The EU and U.S. are engaged in negotiations to find a way forward on this issue, and I am confident we will find a solution very soon," Ashton said in a statement. An EU spokesman said Ashton was heading to Washington on Monday for talks with Obama administration officials and key members of Congress.

A spokesman for the National Cattlemen's Beef Association declined to comment on Thursday.

The beef ban is one of the oldest and most famous sources of trade friction between the farm trade superpowers. The EU also bans U.S. chicken treated with a bacteria-killing chlorine rinse, and genetically modified crops like corn and rice.

On Thursday, the EU slapped tariffs on U.S. biodiesel exports which it says are dumped and subsidized, hurting European producers.

The European Union banned U.S. and Canadian beef in 1988 because of fears growth hormones fed to cattle by U.S. and Canadian farmers could cause cancer.

The United States and Canada complained to the World Trade Organization, which agreed the ban was not supported by scientific studies. The WTO battle has continued.

The United States was allowed to impose sanctions worth $116.8 million per year on EU goods starting in July 1999.

The Bush administration changed the list of products facing duties just before leaving office in January, adding meat, chewing gum, chocolate, certain jams, and some fruit.

Mineral water and chestnuts from France were added, and the duties on Roquefort cheese were to be hiked to 300 percent.

That prompted outrage from French producers and U.S. consumers with a taste for the already-pricey imports.

The new action was slated to take effect March 23. The EU had threatened to challenge the move at the WTO.

But the USTR's office said it would delay the new tariffs until April 23 to allow for renewed negotiations.

More than a dozen goods were slated to be dropped from the list, including tomatoes, onions and yarn. Those items will proceed to be dropped as of March 23 to respect sales made since January 15, the USTR's office said.

In written replies to questions from the U.S. Senate Finance Committee on Thursday, USTR-designee Ron Kirk said officials were in discussions with the EU "that could result in at least an interim solution" to the beef dispute.

"I support these efforts, and will take whatever steps are necessary to achieve a prompt resolution of this dispute," Kirk said.

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