EU says WTO rules in its favour on US sanctions
By Guy de Jonquières in London and Francesco Guerrera
news.ft.com
The European Union said the World Trade Organisation had cleared it to impose sanctions of $4.034bn on US exports when it delivered its long-awaited decision on the scale of European Union retaliation in a dispute over a US corporate tax break on Friday.
Pascal Lamy, EU trade commissioner, making the annoucement, said "We are satisfied by today's decision that makes the cost of non-compliance with the WTO chrystal clear. The arbitrators have endorsed the EU's request, ie they have given us an amount of potential counter measures which will create a major incentive for the US to illiminate this illegal exports subsidy."
Mr Lamy said he would consult with industry and the member states on a detailed product list of possible counter measures to be notified ot the WTO. He added "Before any counter measures are taken, we will carefully evaluate the progress made on US implementatio".
Washington had said the figure should be no more than $1bn. Even the lower amount would be the biggest yet approved by the WTO in a US-EU dispute.
Brussels requested the right to retaliate after the US failed to comply with a WTO ruling last year that its foreign sales corporations scheme, which allows companies to shelter foreign income from tax, was an illegal export subsidy.
Although the EU has not yet decided whether to retaliate, it believes the threat of doing so is necessary to put pressure on the US Congress to repeal the scheme.
The Bush administration has said the US intends to comply with the WTO ruling. However, it has given no indication when it will do so.
Bill Thomas, chairman of the House of Representatives ways and means committee, has introduced a bill to reform US corporate tax law but congressional approval is far from assured. It would bring US law into line with WTO rules, but at the cost of removing tax benefits from some large US companies.
The EU could have difficulty retaliating on a large scale, since that could disrupt transatlantic trade and penalise US imports on which European businesses depend.
Few European companies supported the original WTO complaint against the US law, which was prompted by Brussels' frustration at Washington's aggressive tactics in disputes over the EU's banana regime and ban on hormone-treated beef.
Both sides have been reluctant to step up the dispute because they were engaged in another conflict over US steel tariffs. They also feared jeopardising congressional passage of the fast track legislation Washington needed to conclude trade agreements. |
