USTR - U.S. Continues Challenge to EU's FSC Trade Sanctions Claim by Offering Alternative Amount
Office of the United States Trade Representative

 

U.S. Continues Challenge to EU's FSC Trade Sanctions Claim by Offering Alternative Amount
Contact: Richard Mills (202) 395-3230 02/14/2002

WASHINGTON – In a submission filed today with the World Trade Organization (WTO) the United States continued its strong challenge to the amount of trade sanctions claimed by the European Union in the Foreign Sales Corporation ("FSC") dispute. Disputing the EU's claimed amount of $4.043 billion, the United States asserted that the proper amount of sanctions was no more than $956 million.

"The amount we have suggested is linked to the purported impact of the FSC on the EU's actual trade interests," said United States Trade Representative Robert B. Zoellick. "Our figure is supported by the facts of this case, WTO rules and common sense."

Today's submission was made in a WTO proceeding in which the United States has challenged the EU's claim that trade sanctions against U.S. exports to the EU may be set at $4.043 billion. In a submission to the WTO last week, the United States provided preliminary comments on the EU's calculations.

In today's additional submission, the United States laid out in greater detail its views regarding the proper method for calculating sanctions in the FSC dispute, including the following key points:

• The amount of sanctions to which the EU is entitled must be based on the purported impact of the FSC on EU trade interests.

• An appropriate method of calculating the alleged trade impact on the EU in this case is to allocate to the EU a portion of the total amount of the FSC subsidy based on the EU's share of total non-U.S. global goods production.

• Applying this method, and after making appropriate adjustments to the total amount of the FSC subsidy estimated by the EU, the appropriate amount of sanctions is no more than $956 million.

The U.S. submission will be available on USTR's website. The EU also made a submission today, but has not made it public. Both the United States and the EU will file rebuttal submissions on February 26.

BACKGROUND

On March 20, 2000, the WTO adopted rulings by a dispute settlement panel and the WTO Appellate Body which found the FSC provisions of U.S. tax law to be a WTO-inconsistent export subsidy. To comply with these rulings, on November 15, 2000, the FSC Repeal and Extraterritorial Income Exclusion Act of 2000 ("ETI Act") was signed into law. On November 17, 2000, the EU commenced a WTO dispute, alleging that the ETI Act failed to eliminate the problems that the WTO had found with the FSC provisions. On the same day, the EU also requested authority from the WTO to impose trade sanctions on $4.043 billion worth of U.S. exports, $4.043 billion being the EU's estimate as to the amount of the export subsidy. On November 27, 2000, the United States initiated a WTO arbitration proceeding, alleging that the amount of sanctions requested by the EU was excessive under WTO standards. This arbitration was suspended pending the outcome of the EU's challenge to the WTO-consistency of the ETI Act.

On January 29, 2002, the WTO adopted rulings by a dispute settlement panel and the Appellate Body which found the ETI Act to be WTO-inconsistent. As a result of this action, the arbitration automatically resumed. The arbitrator is expected to issue its decision in late April.

In accordance with the procedures established for the arbitration, on February 8, the United States presented preliminary comments on the EU's calculation methodology – specifically, the United States noted that sanctions must be based on the alleged trade impact on the EU, and questioned the technical accuracy of the EU calculations. In today's submissions, the United States and the EU presented more detailed arguments as to how sanctions should be calculated in this case. Both sides are scheduled to file rebuttal submissions on February 26.

 
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