WTO Sides With European Union In Tax Break Dispute

by Jason Gorringe, Tax-News.com, London

25 July 2001

The World Trade Organisation announced on Monday that it has ruled in favour of the European Union in a potentially explosive trade dispute between Europe and the United States. The organisation stated that in its opinion, the US business tax break in question was in fact an illegal export subsidy, a ruling which supported the interim report released last month, in which the WTO said that the American Foreign Sales Corporation tax law was in contravention of international agreements on subsidies and agriculture.

The EU took aim at the US law which allegedly grants billions of dollars in tax breaks to the country's major exporters, which it says is inconsistent with the international agreement on the subject, which involves subsidies 'contingent on export performance'.

While they refused to comment in detail on the outcome, US trade officials are said to have acknowledged the EU's victory. 'This is obviously a sensitive issue, ' said a spokesman for Robert Zoellick, the US Trade Representative. 'Therefore, we are reviewing our options with affected US interests and the Congress.' The details of the WTO panel's final report, which were sent to Brussels and Washington shortly after the ruling was made, are to be kept confidential until August 13th, and the United States will have until September to lodge an appeal. The EU recently promised to impose sanctions of up to 4 billion if it was ultimately triumphant in the affair.

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