Brussels / Geneva, 24/07/2001 (Agence Europe) - The World Trade Organisation should mid-August make official the illegality of tax exemptions that the United States provides for its export companies instead of the Foreign Sales Corporations system already condemned by the multilateral body. The new panel, responsible for deciding in this dispute, that has lasted since the end of the 70s, communicated its final verdict to Brussels and Washington Monday evening. The report, that will remain confidential until 13 August, confirms that the American legislation, although reviewed and corrected for the second time, still does not comply with WTO agreements on subsidies and on agriculture, nor with the national treatment clause contained in the 1994 GATT. An assessment that corroborates that that the special group already provisionally put forward (see EUROPE of 25 and 26 June, p.9), and which opens the way to possible European sanctions unprecedented in the history of trade disputes. The amicable path, however, remains the favourite on the other side of the Atlantic, given the explosive potential of the affair, with colossal sums that it involves and the impact of a possible escalation in euro-American trade and on the trading system as a whole.
Following an initial reaction, rather turned inwards, stressing the priority granted to "America's economic interests, while respecting WTO obligations", the Bush Administration told the European Commission on Tuesday that it intended making its tax legislation comply with the Geneva verdict. The Chair of the "Ways and Means Committee" of the House of representative, Bill Thomas, expressed himself as follows in a statement: "We must accept the message contained in the WTO verdict, roll up our sleeves and get to work immediately to fashion a tax system that will make American competitive both within and in trade abroad".
Clearly more circumspect and reserved, while awaiting the official recognition of this report, the European Commission nevertheless underlined that the implementation of the recommendations from the panel remains the solution and that an encouraging attitude is seen across the Atlantic in this "sensitive" case. The contacts formed between the United States and us seem to indicate that the United States are working on various options. Our point of view is very simple: the core is to align ourselves over the WTO rules, to respect the provisions in the cases of dispute settlement whether the hurts is felt on the American, European and other countries side and that information we have received from Washington seems to move in the right direction, stated the spokesperson while adding: if the solution sought aims to bringing into line, our reaction (next month) will no doubt be constructive, but if this is not the case, it will require examining other options, including sanctions. Let us recall that the size of the prejudice invoked by the EU (USD 4.043 billion) is being arbitrated.
EUROPE has reason to belive that the special group will in turn take on board most of the arguments put forward by the Union to convince it that the United States has kept itself to modifying the margin of the FSC, the system that had taken on the torch from the DISC legislation adopted under the Nixon era and itself condemned by the GATT in 1981. Thus it recognises that this Act, which abrogates the FSC and excludes extra-territorial revenue as its name suggests, is in contradiction with: - several provisions in the agreement on subsidies and compensatory measures; - with the agreement on agriculture, the United States having thus deployed export subsidies, even for the categories of products submitted to restrictive undertakings recorded by the WTO, which could, in the end be, ridiculed by this system; - with the national treatment clause in GATT, taking into account the more restrictive provisions foreseen for foreign products than for those "made in America". Washington failed, in the eyes of the panel, to eliminate the outlawed subsidies.