Taxes: A Quarrel That Endangers Trade

A year ago, in the happy afterglow of the Kennedy Round of tariff reductions, a trade war between the U.S.

and Europe would have seemed like a wholly improbable nightmare. Not any more. A tax scheme, originated by France and rapidly spreading throughout the Common Market and Scandinavia, has started an increasingly bitter skirmish between the U.S. and its Euro pean trading partners. Officials have ex changed threats of reprisals and counterreprisals, and no solution is anywhere in sight.

At issue are Europe's so-called value-added taxes, or VAT, a complex substitute for sales and excise taxes. Washington contends that...

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