Trade: Battle of the bath salts

By Robin Oakley
CNN.com European Political Editor

LONDON, England (CNN) -- There has been a series of spats between Europe and the United States over trade issues, occasionally escalating to the threat -- though not yet the reality -- of a full-blown trade war.

There were bitter tussles through the 1990s over the tariff-reducing General Agreement on Tariffs and Trade (GATT), with Washington and the European Union accusing each other of protectionism.

Europe then flexed its muscles over the choice of a new chief for the World Trade Organisation, the world trade watchdog that succeeded GATT.

And American anger at European rule-dodging to help its former colonies with banana exports has led to a long series of still unresolved rows. "The bananas business has been going on for bloody ever," said one exasperated American economist.

The WTO has pronounced Europe's arrangements for the import of bananas and hormone-treated beef to be illegal. America has retaliated against the arrangements by imposing tariffs on everyday goods such as handbags, bath salts, bed linen and even electric tea-makers.

Meanwhile, the United States has been found in violation by the WTO for its foreign sales corporation tax breaks for American exporters, and Europe has been given permission to push into motion its own retaliatory duties. Europe's Trade Commissioner Pascal Lamy has, however, given the Americans a little more time before beginning the Battle of the Bath Salts.

Another row is looming over European plans to subsidise Airbus production.

Despite these controversial trade issues, neither side wants a new U.S. president and Congress facing a trade war.