Time Running Out For US To Prevent EU Trade Sanctions

by Ulrika Lomas, Tax-News.com, Brussels

30 September 2003

The European Commission reminded the United States government last Friday that time is running out for Congress to repeal the Extra Territorial Income Exclusion Act (ruled illegal by the World Trade Organisation) before the EU imposes retaliatory tariffs on US imports.

According to Reuters, Arancha Gonzalez, spokeswoman for EU Trade Commissioner Pascal Lamy, commented that the "Congressional process has to be completed" to avert a potential trans-Atlantic trade war.

Earlier in the year the European Union gave Congress until the autumn to make progress in replacing the offending piece of legislation, which gives subsidies to US export-oriented firms such as Microsoft and Boeing. Should the EU deem that insufficient progress is being made in the US legislature, then it has warned that it could impose up to $4 billion worth of punitive tariffs on a range of US goods from January 1 next year.

A number of bills are currently being debated by US lawmakers which will replace the present system, the most popular of which will use the revenue saved from repealing the Foreign Sales Corporation tax law to fund a cut in corporation tax for US manufacturing firms.

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