Kantor gives EC deadline on contracts

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MICKEY KANTOR, the new US trade representative, yesterday gave the European Community seven weeks to end discrimination against the US in the award of public sector procurement contracts, or face relatiatory action.

The threat covers unspecified federal government contracts for goods and services, excluding military equipment and some healthcare goods. Mr Kantor said he expected an answer from the EC by 5 March. If that was not satisfactory, the punitive measures would be introduced on 22 March.

Sir Leon Brittan, the EC commissioner responsible for external economic affairs, condemned the US move as 'unilateral bullying'. He said he would raise the issue when he met Mr Kantor on 11 February.

'I cannot believe it is in anybody's interest, European or American, to attempt to deal with trade issues in this way,' he said.

The US warning is the latest move in a 12-month campaign by Washington to force the EC to rescind a directive that discriminates against contracts with more than 50 per cent foreign content, mainly in telecommunications, transport and power generating.

Under the directive, EC utilities have to offer a 3 per cent price preference to European suppliers, and can reject non-European bids even if they are cheaper. The rule had already fallen foul of Mr Kantor's predecessor, Mrs Carla Hills, who had given the EC until the end of January to comply.

The meeting in Washington between Mr Kantor and Sir Leon offers an early chance to resolve the dispute. But the threat does nothing to lessen concern that, on trade matters, the Democratic White House may be tougher than the Bush administration.

The EC is particularly angry because negotiations on telecoms and other procurement issues are already part of the Gatt talks. It says its offer of an interim agreement was turned down and the US has yet to respond to the solution it has tabled.

Sir Leon has estimated that the US action will cost the EC telecoms sector alone some 22bn ecu ( pounds 17.6bn).