U.S. Says It Will Comply With WTO Ruling

By Agence France-Presse The United States said May 7 it intends to comply with a World Trade Organization ruling on a law that gives tax breaks to U.S. exporters. The Office of the U.S. Trade Representative (USTR) said it is working with Congress on the Foreign Sales Corporation (FSC) law. The statement came after the European Union said it would impose $4 billion in sanctions on U.S. products if Washington failed to act this year. The European Commission issued a warning after the World Trade Organization (WTO) approved a list of products on which the EU could impose punitive levies. "This is part of the process, and the [European Commission] is acting within their rights," USTR spokesman Richard Mills said in a statement. "As we've made clear, the United States intends to comply with our international obligations. We are continuing to consult with the EC, and the executive branch is working with Congress to comply with these obligations." Mills added that Congress is "increasingly focused" on the matter, while arguing for an amicable resolution of the matter. "The EC has indicated that they would prefer compliance over retaliation. We prefer this, as well, because U.S. exporters, including European firms with operations in the U.S., and European consumers will bear the brunt of any retaliation," he said. The U.S. Congress in 2000 passed legislation overhauling the law after the WTO ruled against Washington, but the EU complained to the WTO that the changes were inadequate. The WTO confirmed in January 2002 that the FSC system flouted global trade rules, and arbitrators later agreed with the EU that just over $4 billion would constitute "appropriate countermeasures" based on the trade impact of the U.S. policy. The FSC system allows U.S. firms carrying out business through subsidiaries in offshore tax havens to benefit from reduced export taxes. Copyright Agence France-Presse, 2003