EU ASKS WTO TO IMPOSE $4-BILLION SANCTIONS ON U.S.

EU ASKS WTO TO IMPOSE $4-BILLION SANCTIONS ON U.S.    The European Union has requested the World Trade Organization to authorize trade sanctions on the U.S. up to $4 billion to retaliate against alleged export subsidies under the U.S. Foreign Sales Corporation legislation.
   On Thursday, President Clinton signed a replacement legislation for the Foreign Sales Corporation tax law, following a ruling by the WTO that the previous legislation grants U.S. businesses illegal export subsidies.
   However, the European Commission now says that the new law “not only maintains the violations found by the WTO in the FSC case, but may even aggravate them.”
   “Therefore, the EU has today requested a WTO compliance panel on the FSC replacement legislation,” a spokesman for the EC said.
   The EC said that the proposed trade sanctions on the U.S., up to a maximum amount of $4.043 billion, would be based on the value of the subsidy granted by the U.S. under the FSC scheme.
   EU Trade Commissioner Pascal Lamy said: “This request is designed to protect our rights in the WTO, fully in line with the procedural agreement reached with the U.S. in September.”
   The EC said that it submitted to the WTO “an indicative list of those products that would be eligible for sanctions.” Products in the list range from agricultural products and paper products to aircraft and toys.
   The U.S. Foreign Sales Corporation tax law was voted by the U.S. Congress sixteen years ago to offset a European Union tax rebate for its exporters. The program permitted U.S. companies to reduce income taxes by 15 percent through export subsidiaries set up in offshore jurisdictions such as Barbados and the Virgin Islands.
   The WTO’s appellate body ruled that the FSC law constituted an illegal export subsidy in February.
   The latest legislation cleared by Congress maintains the 15 percent tax cut will cost the government roughly the same amount each year and was expected to meet the requirements of the WTO.