Brussels, 17/11/2000 (Agence Europe) - As predicted (see EUROPE of 16 November, page 11), the European Commission made a dual approach on Friday in Geneva concerning the US tax regime that replaces the former Foreign Sales Corporation, and against the maintaining of FSC until 2002. It:
a) calls on the WTO for authorisation to introduce trade sanctions against the United States, for a maximum of $4.043 billion. These sanctions would be justified if the WTO notes that the new US regime does not do away with the illegal aspects which have already been condemned by a panel at the WTO (see point b). The assessment of injury was described by Mr Lamy's spokesperson as "reasonable if not very reasonable" (some calculations came to figures that were considerably higher). The request was accompanied by an indicative list of sectors to which European sanctions could relate. The Commission was forced to present its request without waiting for the new regime to be evaluated, for timetable reasons: the EU would lose the right to call for application of retaliatory measures, if its request is not introduced in Geneva before 20 November.
b) called on the WTO panel that had examined the FSC before to examine the new US regime to see if it is conform to the initial conclusions. The European Commission is convinced this is not the case and that the unlawful elements, harmful for European enterprise, remain. If the panel takes a decision along the same lines, the EU could be authorised to introduce retaliatory measures.
It is, however, obvious that the possible sanctions would not be introduced rapidly. First of all, the panel must give its decision. And, at any rate, the United States will no doubt challenge the assessment of injury made by the EU, which will make it necessary to have arbitration on figures. The European Commission hopes that, in the meantime, the quarrel will be settled with the abolition, on the part of the United States, of the unlawful regime, which is translated into substantial export aid. If this were not the case, one would be confronted by the largest "trade war" since GATT and then the WTO came into existence. The figure of $4 billion is to be compared to that of 300 million in US sanctions in the banana and hormoned meat affairs, which already caused quite a stir.