US-EU Export Subsidy Dispute Rears Head Again

by Mike Godfrey, Tax-News.com, Washington

12 April 2002

Buried for weeks by the international furore over America's decision to impose import tariffs on steel, a long-running dispute between the US and the European Union over the former's tax breaks for domestic exporters looks set to rear its ugly head again.

Speaking before a House of Representatives tax policy panel on Wednesday, Treasury International Tax Counsel, Barbara Angus, warned that the EU could impose trade sanctions worth billions of dollars on US goods as early as next month, if serious steps are not taken to modify the corporate tax code.

The European Union's objections to the United States' preferential tax treatment of exporters date back to 1997, during the Clinton administration. Although US lawmakers have attempted to make changes in order to appease the 15 nation bloc, the World Trade Organisation has ruled four times that the tax breaks for domestic exporters represent an illegal subsidy, and announced earlier this year that it will reach a decision on the amount of sanctions which the EU can impose on American goods by April 29.

The possibility of the imposition of sanctions on around $4.04 billion of US goods (in addition to the $2.4 billion limit requested by the european body in the more recent dispute), has alarmed lawmakers.

'With the possibility that the European Union could move to impose trade sanctions against exports from the United States as early as May, the urgency of the situation is clear,' Barbara Angus observed, although she offered no ideas as to how the corporate tax system should be changed.

According to reports, the US Treasury has also given no indication as to whether any proposals on the issue will be forthcoming before the WTO ruling at the end of this month.

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