U.S. Weighs Response To FSC Ruling By WTO

Officially, the Clinton Administration "is considering next steps," says the office of Charlene Barshefsky, the U.S. Trade Representative. In practical terms, that means the White House is deciding whether or not to appeal a World Trade Organization (WTO) ruling that so-called Foreign Sales Corporations (FSC) run afoul of WTO antisubsidy agreements. "The panel appears to have systematically disregarded the history of this issue, the applicable WTO legal rules concerning income-tax measures, and the facts of record before it," says Barshefsky. Designed to spur U.S. exports, FSC for nearly 20 years have provided companies with a federal income-tax exemption for a portion of the income they generate outside the U.S.--so long as specific foreign-presence, management, economic, and domestic-content requirements are met. The European Union (EU) complained to the WTO, contending the U.S. tax law exemption is an illegal subsidy. In a preliminary ruling, the WTO has agreed with the EU's claim. The FSC matter is just the latest in a series of U.S.-EU trade disputes, which this year have included the EU's refusal to import U.S. bananas and hormone-treated beef.