| Eu sanctions deadline us tax dispute { May 8 2003 } Original Source Link: (May no longer be active) http://www.globeandmail.com/servlet/ArticleNews/TPStory/LAC/20030508/IBTAXX/TPBusiness/Internationalhttp://www.globeandmail.com/servlet/ArticleNews/TPStory/LAC/20030508/IBTAXX/TPBusiness/International
EU sets sanctions deadline in U.S. tax dispute Reuters News Agency Thursday, May 8, 2003 - Page B9
BRUSSELS -- The European Union yesterday gave the United States an autumn deadline to change disputed tax break laws for major corporations or face the threat of up to $4-billion (U.S.) in sanctions.
The long-running dispute over the tax benefits for major U.S. exporting companies such as Boeing and Microsoft is one of a series of EU-U.S. trade spats. It re-emerged days after the two pledged to work together to boost stalled global trade talks.
"The Commission will review the situation in the autumn," said European Trade Commissioner Pascal Lamy after the Geneva-based World Trade Organization gave the EU the final green light to impose the sanctions. "If there is no sign that compliance is on the way at that time, it [the Commission] would then start the legislative procedure for the adoption of countermeasures by January 1, 2004."
The United States has been discussing ways it can comply with the WTO rulings against the system of tax breaks, known as the foreign sales corporation program. The WTO has ruled four times that the tax breaks are illegal export subsidies.
Mr. Lamy said the EU was encouraged by the determination of Congress and the U.S. administration to change the law and hoped that any solution would be fully in line with WTO rules. But he has also said in the past that EU patience is not infinite.
Richard Mills, a spokesman for the U.S. Trade Representative's office, said he could not comment on whether the United States would meet the EU's autumn deadline for action.
But Mr. Mills said, "as we've made clear, the United States intends to comply with our international obligations."
Mr. Mills also said retaliation was a "double-edged sword" that could hurt EU consumers and European firms with operations in the United States as much as it would U.S. companies.
The dispute goes back to 1998 and the level of the punitive duties was set according to the annual loss in earnings claimed by EU companies. The sum of $4.04-billion set by the WTO was a record for retaliation allowed by the trade body. The ruling means the EU can set duties up to 100 per cent on hundreds of U.S. imports, including live animals, aluminum and copper goods, cereals and nuclear reactor parts.
The tax dispute is one of a number involving the United States and the European economic bloc. Brussels and Washington are anxious not to aggravate tensions, particularly because WTO talks to free up global commerce have run into trouble.
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