US Government Sends In Top Official To Appeal Against WTO Ruling

by Mike Godfrey, Tax-News.com, Washington

29 November 2001

The US government has dispatched this week one of its highest-ranking officials to appeal against a World Trade Organisation ruling against its Foreign Sales Corporation legislation that allows exporters to claim tax savings worth $6bn a year.

Deputy Treasury Secretary, Kenneth Dam, will represent the government in its fourth attempt to defend the tax breaks for American companies as this latest step in a long-running saga follows issuance of the ruling in August by the WTO's compliance panel that the FSC Replacement Act, enacted by the US on 15 November 2000 in order to comply with a previous WTO ruling that describes the tax breaks as a prohibited export subsidy, violates the Agriculture Agreement and discriminates in favour of US goods in breach of WTO rules.

Mr Dam, a former law professor, stated: 'The necessary implications of the panel's analysis is that the WTO may second-guess the reasonableness of a member's decision regarding the most basic elements of its tax system.'

'It is not,' he added, 'the role of the WTO to substitute its judgment for the judgment of a member's own lawmakers.'

The US decision to appeal will please US corporations: in August executives from 74 of the largest companies in the US wrote to President Bush asking the administration to appeal. Top executives who signed the letter included Philip Condit of Boeing, Allen Andreas of Archer Daniels Midland, Lee Raymond of Exxon Mobil, G.R. Wagoner, Jr., of General Motors and Michael Eisner of the Walt Disney Co. 'This dispute could be enormously destabilizing,' the executives said, 'a move toward retaliation, or a continuing threat of retaliation, could undermine the US-EU relationship, which is our most important strategic, diplomatic and economic alliance.'

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