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Wto agrees 6b us sanctions { May 8 2003 } Original Source Link: (May no longer be active)
http://www.news.com.au/common/story_page/0,4057,6400416%255E1702,00.htmlhttp://www.news.com.au/common/story_page/0,4057,6400416%255E1702,00.html
WTO agrees $6bn US sanctions
By Kate Millar in Geneva
May 8, 2003
THE European Union has obtained the World Trade Organisation's go-ahead for a record $US4 billion ($6.24 bn) in trade sanctions against the United States in a dispute over tax breaks for US companies.
Brussels had presented a list of US goods against which it might impose punitive duties, complaining that Washington had failed to comply with a WTO ruling against the tax breaks.
"Yes, the DSB (the WTO's dispute settlement body) granted authorisation," a trade source told reporters after the closed-door meeting at the WTO's Geneva headquarters.
The level of retaliation is the highest-ever authorised by the WTO in its eight-year history, but authorisation does not mean the measures automatically take effect.
The EU announced earlier in Brussels that it would give Washington until the (northern) autumn to change its so-called foreign sales corporations tax system (FSC).
EU Trade Commissioner Pascal Lamy said he was "encouraged" by US action to repeal the law but warned that if Washington made no progress, the EU would seek to adopt the sanctions by January 1, 2004.
US companies such as Boeing and Microsoft have benefited from the FSC system, which allows US firms carrying out business through subsidiaries in offshore tax havens to benefit from reduced export taxes.
The United States still intends to comply with the WTO's rulings in the case, Steven Fabry, the US representative, told delegates, according to a source.
He also reportedly criticised the "flawed reasoning" of the FSC arbitration process.
The EU listed 95 categories of US products on which it could impose additional duties of up to 100 per cent, ranging range from dairy, cereal, meat and vegetables to wood, leather, fur and textiles.
It also included glass and ceramic products, iron and steel, cutlery, nuclear reactors, boilers and machinery, copper and aluminium, toys and games and sound recorders.
No products other than those on the submitted list would be targeted, the EU's ambassador to the WTO, Carlo Trojan, told the meeting.
"Although the United States has sent some encouraging signs of their will to comply, they have failed, however, so far to implement the DSB recommendations and rulings," he said.
He stressed that Brussels had not made the sanctions request "hastily", underlining the history of the dispute.
The EU first challenged the US tax breaks in 1997 on the grounds that they provided a de facto subsidy that gave US companies an unfair advantage over European rivals.
In 2000, the US Congress passed legislation overhauling the law after the WTO ruled against Washington, but the EU complained to the WTO that the changes were inadequate.
The WTO confirmed in January 2002 that the FSC system flouted global trade rules, and arbitrators later agreed with the EU that just over $US4 billion a year would constitute "appropriate countermeasures" based on the trade impact of the US policy.
Washington contested the level, arguing sanctions should be not more than about $US1 billion ($1.56bn).
The two leading economic powers are also battling over US tariffs on steel and an EU moratorium on imports of genetically modified foods.
Agence France-Presse
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