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To: Lane Hall-Witt who wrote (485)7/29/1998 1:39:00 PM
From: allen v.w.  Read Replies (1) of 40688
 
MORE INFO ON EXPORT:

July 1, 1998

EU REQUESTS WTO PANEL ON US EXPORT SUBSIDIES
The European Commission today announced its formal request for a World Trade Organisation (WTO) Panel investigation into US export subsidies. Tax exemptions worth an annual USD 2 billion are currently extended to American companies exporting through Foreign Sales Corporations (FSCs). The Commission's decision follows several rounds of failed consultations with the US.
The proliferation of FSCs over the past decade is one of the EU's major trade concerns. Commission Vice President Sir Leon Brittan said today: "The FSC scheme is a clear subsidy from the US taxpayer to industry. The sums involved lead to a significant distortion of international trade by granting an unfair advantage to US products in highly competitive markets. This is a violation of fundamental WTO rules."

FSCs are usually subsidiaries of US corporations, and are located in tax havens such as the Virgin Islands, Barbados or Guam. American firms exporting through such FSCs currently qualify for income tax relief on condition that a large proportion of their product is manufactured in the US. In addition, payments by FSCs to their US parent companies are not subject to US taxation.

The Commission consider the FSC scheme to be a clear violation of the WTO Agreement on Subsidies and Countervailing Measures, which prohibits tax regimes which favour exports in comparison with like products sold for domestic consumption.

FSCs account for an estimated annual turnover of USD 152 billion and gross profits of around USD 10 billion, which are exempt from normal US taxation. The scheme was extended to the US software industry last September, which will bring estimated savings to US firms of USD 700 million over the next five years.

The EU launched formal consultations on FSCs last November after bilateral discussions failed to reach a settlement. Three rounds of consultations have failed to produce any US commitment either to abolish the FSC scheme or to make it WTO-compatible.
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