WASHINGTON-The European Union began imposing tariffs on various American products in retaliation for the U.S.’ failure to close an export trade tax loophole deemed illegal by the World Trade Organization that benefits Motorola Inc., Microsoft Corp. and other American companies.
“Despite waiting for more than two years, the U.S. has not brought its legislation in line with WTO rules,” said EU Trade Commissioner Pascal Lamy. “We are therefore left with no choice but to impose countermeasures. The name of the game is not retaliation but compliance: Countermeasures will be lifted the day the FSC [Foreign Sales Corporation] is repealed. We now need to turn our attention to the post-March 1 period. In my recent trip to Washington, I have discussed this issue with the U.S. administration and congressional leaders, and I am encouraged that progress can be rapidly achieved to adopt legislation repealing the FSC.”
EU trade sanctions kicked in March 1.
The EU said countermeasures are well below the $4 billion level authorized by the WTO last year. However, the tariff level will increase 5 percent if the FCS is still in place this time next year.
Congress is struggling to fashion legislation that would eliminate the FSC regime while offering more than $100 million in tax breaks for U.S. firms.
Last Thursday, the Senate began debate on new corporate tax legislation.
“This legislation was more than one year in the making. It’s carefully crafted to bring us into compliance with our obligations at the WTO,” said Sen. Charles Grassley (R-Iowa), key sponsor of the measure. “At the same time, it brings tax relief to all U.S. manufacturers. It’s good legislation, and it enjoys broad bipartisan support.”
In the House, Rep. Bill Thomas (R-Calif.), chairman of the Ways and Means Committee, is working to win House passage of a similar bill.
