Uncertainty Over Boeing Tax Break May Hold Up EC Sanctions Removal

by Ulrika Lomas, for LawAndTax-News.com, Brussels

20 October 2004

Speaking on Monday following a meeting between European Trade Commissioner Pascal Lamy and US Trade Representative Robert Zoellick, spokeswoman for Mr Lamy, Arancha Gonzalez hinted that the EU may refuse to completely lift sanctions imposed in response to the (now repealed) US Foreign Sales Corporation scheme.

Earlier this month, lawmakers in the United States finally approved legislation repealing the disputed regime, which the EC argued provided unfair aid to US exporters, and which the WTO ruled illegal under world trade rules.

However, according to reports, Boeing, which is already the subject of a separate transatlantic trade row over subsidies, is likely to continue to receive a tax rebate under the FSC scheme for the sale of aircraft that have already been ordered.

This possible grandfathering of the firm's tax break in relation to future sales is said to be holding up the removal of EC sanctions on various US goods, despite Mr Zoellick's recent warning that the two disputes over subsidies should not be linked.

"The EU likes to stress the importance of following the multilateral system, and the WTO is pretty explicit about not trying to link issues," he was quoted recently as observing.

However, Ms Sanchez has denied that the two disputes are being linked, arguing that despite appearances: "The fact that Boeing is the main beneficiary of the FSC (tax incentives) is a coincidence."

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