Brussels, 13/02/2006 (Agence Europe) - The EU won an important victory in Geneva on 13 February, where the appeals body of the World Trade Organisation confirmed that the United States have not taken the measures necessary to come into line with a previous judgment on the Foreign Sales Corporation (FSC). The FSC, a system of tax subsidies to export, was ruled illegal by the WTO in 2000. At the time, the WTO authorised the EU to take sanctions against the United States for an overall sum of potentially up to 4 billion dollars. These sanctions, in the form of additional customs duties, were applied between 1 March 2004 and 1 January 2005. In May 2004, the United States adopted a new law called the "American Jobs Creation Act", which was supposed to replace the FSC and bring American legislation into line with the WTO ruling of 2000. By the end of 2004, after the new law had been signed by President Bush, the EU reacted in two ways: -firstly, by suspending its trade sanctions with effect from 1 January 2005; -and secondly, by asking the WTO to rule on the conformity of various provisions of the American Jobs Creation Act it was not sure about. In particular, the EU contested two elements: -the transition period of two years set up for the phasing-out of aid to exporters, which means that the benefits of the FSC will, in some measure, be maintained until 31 December 2006; -the so-called grandfathering clause, which allows certain advantages to be kept in place beyond the end of the transition period for contracts concluded before a certain date (a practice which, in the view of the European Commission, would have netted Boeing 1.6 billion dollars in "illegal subsidies" between 1995 and 2005).
In 2005, a WTO panel confirmed that the American Jobs Creation Act was not in line with the 2000 judgment. Washington appealed this decision, but on 13 February 2006, the appeals body definitively ruled in favour of the EU. The regulation of the Council (171/2005), on the basis of which the EU suspended the sanctions on 1 January 2005, provides for the sanctions to be reintroduced automatically 60 days after the official publication of the definitive decision against the American practices (this publication must take place within the next 30 days). The sanctions will, therefore, enter into force at some point between 24 April at the earliest and 14 May at the latest- unless Washington makes a last-minute decision to withdraw the legal aspects of its law. The Commissioner for Trade, Peter Mandelson, explained that he is, in any case, disposed to seek a solution with the Americans.