subject: (Fwd) Re: EU vs US and the WTO posted: Sat, 23 Sep 2000 05:58:34 +0100
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Date sent: Thu, 7 Sep 2000 18:29:12 -0700
From: Heather <[email protected]>
To: [email protected]
Subject: Re: EU vs US and the WTO
Send reply to: [email protected]
BRUSSELS (Reuters) - The European Union and the United States
moved
closer to an explosive trade row on Friday when the EU said U.S.
proposals to overhaul a multi-billion- dollar tax break scheme for
exporters broke global trade rules. The EU's rejection of proposals
going through the U.S. Congress raises the prospect Brussels
could
seek World Trade Organization (WTO) permission later this year to
impose sanctions on U.S. exports that could run to billions of
dollars.
EU Trade Commissioner Pascal Lamy told Deputy U.S. Treasury
Secretary
Stuart Eizenstat in a letter on Thursday the proposed changes to
the
Foreign Sales Corporation (FSC) scheme ``fail to render it
compatible
with international trade rules.''
The WTO ruled earlier this year, on a case filed by the Europeans,
that the FSC scheme was an illegal export subsidy. It gave the
United
States until October 1 to change it.
The existing scheme covers hundreds of billions of dollars of
exports
and provides U.S. companies, including many leading
multinationals
such as Boeing and Microsoft, with up to $4 billion a year in tax
breaks.
The EU said Lamy had given Eizenstat guidelines on how to solve the
dispute and stressed it wanted to keep the door open for a ``mutually
agreed solution compatible with the WTO.''
If the United States presses ahead with the current proposals, EU
sources said the EU could return to the WTO after October 1 to seek a
ruling against the reformed scheme.
If the WTO agreed with Brussels, the EU could then seek permission to
impose trade sanctions on U.S. goods potentially totaling billions of
dollars.
That could spark a damaging confrontation between the world's leading
trade powers around the time that Americans go to the polls to elect a
new president in November.
TRADE WAR WARNING
The sanctions that could potentially be imposed dwarf the $308 million
in sanctions on EU goods imposed by Washington last year after winning
WTO cases against the EU's banana import policies and its ban on the
import of hormone-treated beef.
Eizenstat said in July that the U.S. reform plan, which would exempt
some corporate income generated abroad from U.S. taxation, was
consistent with WTO rules. He urged the EU then to accept Washington's
approach, warning that a ``major trade war'' could break out if the
stalemate persisted.
The EU said the main difference between the new U.S. proposals and the
scheme slammed by the WTO in February was the removal of a requirement
to create a ``paper'' company in a tax haven in order to benefit from
the tax break.
``However, the proposed FSC regime continues to be export contingent,
in clear violation of WTO rules,'' the EU's executive Commission said
in a statement.
``The only way for a U.S.-based manufacturer to benefit from the new
regime is by exporting. In addition, the new proposals maintain the
obligation to use more than 50 percent of U.S. inputs in order to
benefit from the tax break,'' it added.
The U.S. proposal also included some ``transitional'' provisions that
extended the application of the FSC well beyond the WTO's October 1
deadline for it to be withdrawn, the Commission said, adding that this
was ``a clear violation of the U.S. international obligations.''
``As long as the U.S. continues to provide a preferential treatment to
their exports, any FSC replacement system would remain incompatible
with the WTO,'' it added.
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