U.S. Law On Cuba Challenged European Union Brings U.S. Before World Trade Organization

The European Union posted a formal challenge Thursday to a U.S. law that would penalize European companies that do business in Cuba, intensifying pressure on the United States to negotiate a settlement of the dispute.

At the EU’s request, the Genevabased World Trade Organization appointed a three-member panel to adjudicate the case, overriding U.S. protests that the law was intended to protect U.S. security interests and was not a matter for the trade body.

The Clinton administration expressed “disappointment” over the European action but stopped short of trying to block establishment of the panel - providing leeway for the two sides to continue their own negotiations, albeit under more intense pressure.

In an unusual joint statement, the Commerce Department and the U.S. trade representative’s office challenged the jurisdiction of the trade group to pass judgment on the sanctions law and said that Washington would not cooperate if the panel calls a hearing.

Even so, both sides expressed confidence that negotiations would be resumed promptly. Washington already has made some concessions but the Europeans say they want broader assurances that their companies will not be penalized.

The administration acted hours after the WTO’s director-general, former Italian Trade Minister Renato Ruggiero, formally acceded to an EU request that the organization begin formal consideration of the Europeans’ complaint by appointing a panel to hear the case.

The Europeans pressed the case Thursday because that was the last day Ruggiero could have acted under WTO rules. The panel has six months to reach a decision on the issue. If the EU wins, the Europeans will be able to retaliate.

The U.S.-European dispute centers on the 1996 Helms-Burton Act, which allows U.S. citizens to sue foreign companies found to be using buildings or equipment seized by the government of Cuban Premier Fidel Castro. It also denies U.S. visas to executives of the companies.

Although the law has proven mainly symbolic - President Clinton has used a loophole that permits him to waive the sanctions provision for six months at a time - the Europeans have complained that the United States is imposing its foreign policies on Europe.

The Clinton administration has several times sent Stuart E. Eizenstat, undersecretary of commerce for trade, to Europe to explain the U.S. position. But the Europeans have objected to the law on principle and have continued to press their case.

Clinton has pledged to continue to waive the sanctions provision as long as the Europeans keep a promise to maintain pressure on Cuba to “promote democracy.”

In Geneva, Leon Brittan, the EU’s top trade official, insisted that the appointment of a WTO panel Thursday was “a purely procedural step” that “does not signify a change of gear” in the Europeans’ strategy. He said that the EU would continue to negotiate with the United States.

Nevertheless, U.S. officials warned privately Thursday that unless the U.S.-EU talks produce results soon, they may file a formal protest challenging the jurisdiction of the WTO panel.

Trade experts have warned that a formal challenge by the United States also could threaten the future of the 130-country WTO, formed in 1995 to oversee the global trading system. The Europeans’ complaint is the first major case the world body has tackled.

The United States has been a major supporter of the WTO, whose duties include arbitrating trade disputes between countries. Refusing to recognize a decision by a special panel could put the U.S. government in the position of flouting an organization it has defended as essential.