>>WTO Clears Way For EU to Seek Billions in Tariffs Against the U.S.
Elizabeth Olson International Herald Tribune
Tuesday, January 15, 2002
GENEVA Setting the scene for a major trans-Atlantic trade battle, the World Trade Organization
on Monday ruled against a U.S. tax break for exporters and cleared the way for the European
Union to seek up to $4 billion in retaliatory duties.
The decision by a WTO appeals panel upheld the EU's complaint that the latest version of the
U.S. tax break for American companies with offshore subsidiaries contravened international trade
rules.
The U.S. trade representative, Robert Zoellick, said he was "disappointed" with the ruling. "This is
an especially sensitive dispute that, at its core, raises questions of a level playing field with regard
to tax policy," he said, alluding to American complaints that Europeans also benefit from tax
subsidies in violation of international trading rules. The U.S. administration has yet to file such a
case.
"We will be consulting closely with Congress and affected U.S. interests regarding next steps,"
Mr. Zoellick said.
Any retaliation by the EU, which would affect business giants such as Microsoft, General Electric
and Boeing, could thoroughly disrupt trade between the world's two trading giants. Mr. Zoellick
said last year that retaliation could set off "a nuclear weapon" on the trading system.
Analysts do not expect the outcome to be quite so dire, but the three-person panel's judgment
comes as Europeans are increasingly restive over what they see as unfair American protectionist
policies for the flagging U.S. steel industry. Also unsettled are U.S. complaints about European
restrictions on genetically modified foods.
Brussels is expected to press ahead with the WTO arbitration process that sets the amount of
retaliatory measures on U.S. goods.
Under WTO arbitration, the amount of retaliatory measures should correspond with the value of
the tax breaks to U.S. companies. The level could be set by the end of March, increasing pressure
on President George W. Bush's administration to make a deal to avoid trade strife, or to insist that
Congress overhaul the law. Businesses are likely to resist changing the law, which allows their
offshore units partial exemptions on taxes on profits from certain goods and services. <<
iht.com |
