EU Seeks Sanctions Against U.S. In Export-Tax Dispute

By John S. McClenahen Claiming that "replacement" legislation signed into law by President Clinton yesterday doesn't pass muster, the European Union is asking the World Trade Organization (WTO) for permission to impose US$4.04 billion in trade sanctions on the U.S. in a long-running dispute over export tax incentives. The sanctions, if imposed, would cover a wide range of products, including food, apparel, aircraft, spacecraft, electrical machinery, steel, glass, and paper. Like the so-called Foreign Sales Corp. (FSC) tax benefits it replaces, the new legislation "continues to provide a significant illegal export subsidy to more than half of U.S. exports, to the direct detriment of European countries," the EU charges. However, Pascal Lamy, the EU's trade commissioner, will not have the final word on whether the FSC replacement legislation complies with international trade rules. That will be up to the WTO. And depending upon its finding, the sanctions may -- or may not -- go forward in mid-2001.