EU threatens trade war over anti-Cuba laws

European Union foreign ministers yesterday prepared for a full-scale trade war against Washington, including the possibility of blocking free travel from the US to Europe. The move towards sanctions forms part of an escalating dispute sparked by America's anti-Cuba legislation.

Among the measures discussed in Brussels yesterday were retaliatory trade measures against the US, freezing of US assets, and the imposition of visas for US businessmen visiting Europe. The EU has also discussed an appeal to the World Trade Organisation.

However, foreign ministers last night appeared unwilling to detail the weapons they will deploy before a decision from President Bill Clinton, expected late today, on whether to suspend the most controversial part of the legislation, known as the Helms-Burton Act.

In a rare show of unity yesterday all EU countries rounded on the Act, which aims to squeeze Cuba by penalising foreign companies who trade with it. Under the law, Cuban exiles who have American citizenship, would be able to sue foreign companies in the US courts if they possess evidence that those companies have had certain business dealings with the Castro regime.

In particular, Helms-Burton gives Cuban-Americans the right to sue foreign firms which deal in property expropriated after the 1959 revolution which brought Fidel Castro to power.

The measure is the latest effort by the US to isolate Cuba economically. However, it has caused outrage in Europe and among Cuba's other trading partners, such as Canada and Mexico.

Yesterday, Jacques Santer, President of the European Commission, promised a swift response."We must react and must react today," he said. Mr Clinton has the power to use a waiver to suspend the part of the act which is most offensive to America's trading partners. However, Mr Santer predicted yesterday that "it was more than likely the US will confirm full implementation".

Malcolm Rifkind, the Foreign Secretary, said: "There is no doubt we are united in opposition to this." Herve de Charette, his French counterpart, told journalists: "It is clear that this law is directly contrary to the rules which govern international trade."

Although the EU looks certain to decide on joint sanctions if the waiver is not exercised, such joint action could take some time to take effect. An appeal to the WTO to arbitrate in the dispute could take months. In the meantime, individual countries made clear yesterday that they would impose unilateral counter-measures against the US.

A decision to withhold visas from visiting US businessmen would be taken by individual countries, immediately hitting US interests and causing chaos for transatlantic trade. Mr Rifkind and Mr de Charette are already considering enforcing national legislation under which US businesses and assets could be penalised.

Britain may enforce the 1980 Protection of Trading Interests Act, which was specifically designed to block attempts by other countries to damage UK trading interests abroad. Under the Act, the British government could direct British citizens not to cooperate with demands from US courts over the anti-Cuba legislation, should those demands prejudice UK sovereignty.