Brussels / Washington, 22/11/2000 (Agence Europe) - The United States has announced it will challenge, when the time comes in Geneva, the assessment of damage made by the Union in the so-called Foreign Sales Corporations (FSC) affair (see EUROPE of 18 November, page 9). The Europeans, for their part, have adjusted the fire: the new US legislation would be even "worse" than the one before, decreed unlawful by the World Trade Organisation (WTO). We give the details of these two assessments below:
"We do not believe European companies have been disadvantaged" by the FSC, affirmed Charlene Barshefsky and Stuart Eizenstat, US Trade Representative and Treasury Deputy Secretary respectively, in a joint statement. The two top US officials pointed out that WTO arbitration would be called for on the level of European sanctions, if the Appelate Panel responsible for verifying the legality of the new tax provisions envisaged for exporter companies deemed the Union was right. Such an approach, added to the verification procedure called for by Brussels, would postpone until at least next year the possibility for Europeans to implement their threat of retaliatory measures. Washington nonetheless remains convinced that confrontation with its partner, in what is the most important trade relationship in the world, can and must be avoided. Ms Barshefshky and Mr Eizenstat stressed the importance of continuing negotiations with the EU to avoid any "escalation of tensions", and called on the Union to review its position on the lawfulness of the new system. They, for their part, said they "continue to strongly believe" that the legislation, ratified by Congress and by President Clinton last week, "neither constitutes a subsidy nor is it export-contingent".
European Commissioner Pascal Lamy reaffirmed the contrary, speaking in a press conference in Geneva, and raising the tone. "The new FSC, in a way, is even worse than the previous one in terms of export subsidies", he declared, on Tuesday, after an in camera debate with Mike Moore, WTO Director General. The US system, in his view, is "clearly export-dependent to get a rebate on your corporate taxation". He rejected US comparisons to the European value-added tax (VAT) system, an indirect tax that hits the consumer.