Brussels, 25/06/2001 (Agence Europe) - The World Trade Organisation (WTO) is moving towards a further condemnation of the United States for its tax exemption system in favour of exporter companies, a system that has already been reviewed and corrected twice under constraint from Geneva. The WTO panel established at the request of the Union has drawn up interim conclusions along these lines which were forwarded on Friday evening to the two protagonists under the seal of confidentiality. No official comment has since emerged from Brussels or Washington on this arbitration report, discretion that confirms the determination on both sides to avoid escalation of tension in this affair, that could take on unprecedented importance because of the amounts involved and the eventual repercussions on transatlantic trade, as well as on the whole of the trading system. Convergent "leaks", mainly industrial, have however disclosed the content of the document and the indications that follow were confirmed by reliable EUROPE sources.
According to the panel, the new US legislation making fringe amendments to the Foreign Sales Corporations (FSC) regime - which took over from the DISC legislation (whose condemnation in GATT dates back to 1981) - is effectively like an illegal subsidy in favour of US exports, as the Union maintains. The legislative act, which carries repeal of FSC and exclusion of the extra-territorial revenue as its name indicates, is out of phase with the WTO Agreement on Compensatory Subsidies and Measures in that it implies subordinating the support to export performances; - the Agreement on Agriculture, due to its creating new export subsidies in this closely framed sector; - certain provisions from the General Agreement on Tariffs and Trade (GATT).
The observations from the parties over this interim report will be gathered in Geneva during the coming weeks in view of drawing final conclusions (of which the protagonists will be confidentially informed at the end of July) and to finalise the arbitrage next 13 August. The Union has already gained the "green light" from the WTO to "self-compensate" itself for the trade losses due to the FSC, which it estimates at USD 4.043 billion, but will no doubt not exercise its right before many months, in the worst case scenario. In fact, it is probable that the United States appeal against the Geneva ruling, a move that would extend the procedure by around two months as of the filing of the appeal.
Let us also recall that another arbitrage had been launched, on request from Washington, over the size of the prejudice suffered by the Union (the USD 4 billion in question) and that it had been suspended until the result of the arbitrage is known on the conformity of the new American system. Thus, this assessment will continue at the end of the summer, to finish two months later, with an October deadline. It is only at that time that the threat of unprecedented sanctions in the history of trade disputes could be implemented by the Union, if the United States persist and signs, instead of renouncing or substantially modifying their system. All this a few moments from the meeting in Qatar, where the transatlantic couple hope to see the beginning of a new round of negotiations on world trade liberalisation and while the Americans warn that European sanctions against them would have the effect "of a nuclear weapon on the trade system" - said Trade Representative Robert Zoellick. An even less attractive perspective in that transatlantic trade as a whole - European and not only American - would suffer "terribly", says the European-American Business Council and that a counter-attack by Washington could take the form of a complaint in Geneva against the preferential tax system for European groups.