Retaliation Remains Option In FSC Case, EU's Lamy Says

By John S. McClenahen With a string of European Union (EU) victories in the World Trade Organization against the U.S. in the matter of Foreign Sales Corp. (FSC) tax-based export subsidies, there's been some suggestion that the EU is satisfied and won't actually retaliate. Don't bet on it, says Pascal Lamy, the EU's trade commissioner. "Our strong preference would be for a peaceful solution, but one based on compliance," he emphasizes. "But if anyone out there wants to gamble on compliance on the basis that they don't think retaliation is a likely outcome, all I can say is that that would be very dangerous indeed." On Jan. 14 the U.S. lost the most recent WTO review of FSCs, which allow U.S. companies to defer taxation on some of their export-related income. An arbitrator is now in the process of determining the amount of countermeasures to which the EU is entitled.

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