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Brussels set for clash with US on tax breaks WTO
ft.com ^
| December 7 2003
| Tobias Buck
Posted on 12/08/2003 6:35:46 AM PST by MrFreedom
Brussels set for clash with US on tax breaks
Only days after Brussels and Washington narrowly averted a costly transatlantic trade war, European Union foreign ministers are on Monday set to agree a law that will threaten the US with sanctions in another long-running dispute.
Brussels will give the US Congress until March next year to repeal special tax breaks for US exporters - or face punitive tariffs worth hundreds of millions of dollars on US goods shipped to Europe.
The tax breaks, enshrined in the so-called Foreign Sales Corporations (FSC) provision, benefit large US exporters such as Microsoft, Boeing and Caterpillar.
The law, which would introduce sanctions from March next year, is likely to increase pressure on Washington lawmakers to comply with a World Trade Organisation decision that ruled the tax breaks illegal last year.
At the time, the WTO also granted Brussels the right to levy punitive tariffs on US goods worth $4bn (3.3bn, £2.3bn) - the biggest sanctions package ever awarded - though the EU has said its sanctions will only amount to 290m ($352m, £204m) in the first year.
But some trade experts fear that even the threat of sanctions might not prevent the transatlantic war of words from turning into an economic conflict. Although the EU has twice pushed back the deadline for the introduction of sanctions, the Senate and the House of Representatives have left themselves little time to pass a new bill, a process that has already proved controversial and complex.
In addition, the bills aimed at repealing FSC that are currently making their way through the two chambers differ sharply, raising the prospect of a drawn-out conciliation procedure. Both versions, however, include generous transition periods for phasing out the tax breaks, an outcome the EU has said it will not accept.
While there are some voices among EU member states that advocate a more cautious approach, the European Commission's tough line was vindicated last week in another case. Faced with the threat of sanctions from the EU and others, the US decided to repeal steel tariffs that had been ruled illegal by the WTO earlier this year.
Trade officials and experts agree that the conflict over FSC is more complex and potentially more dangerous. They point out that taxation is a particularly sensitive issue, and that the beneficiaries of FSC are more numerous and spread more evenly across the US, a notable difference from the steel conflict.
And some observers argue that even the lifting of the FSC provision could have dangerous consequences. Nick Clegg, a Liberal Democrat member of the European parliament and trade specialist, said: "To let the US eat humble pie twice in just a few months is not the best way of fostering its love for the multilateral trade system
TOPICS: Business/Economy; Crime/Corruption; Foreign Affairs; Front Page News; Government; Miscellaneous; News/Current Events
KEYWORDS: tariffs; trade; wto
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1
posted on
12/08/2003 6:35:46 AM PST
by
MrFreedom
To: MrFreedom
Bush should have never buckled under the first time. Expect more from the POS EU because of this.
To: MrFreedom
Has the WTO ever sided with the United States in a major trade dispute?
3
posted on
12/08/2003 6:41:20 AM PST
by
Tai_Chung
To: JustAnAmerican
EU clears sanctions over US tax breaks
08 December 2003
The European Union gave the green light Monday to multi-million-dollar trade sanctions against the United States unless illegal tax breaks for US exporters are repealed.
Fresh from declaring peace on one front of a transatlantic trade war over US steel tariffs, the EU pledged to press ahead with retaliation unless Congress repeals the Foreign Sales Corporation (FSC) law.
Tariffs starting from 200 million dollars (164 million euros) will be imposed on March 1 until the FSC tax breaks are scrapped, after EU foreign ministers nodded through the duties recommended by the European Commission.
The duties, on goods from meat and paper to nuclear power parts and semi-precious stones, will rise by 40 million dollars a month after March until the FSC regime is ended.
The World Trade Organisation (WTO) ruled in January last year that the FSC law flouted its rules by allowing thousands of US firms, operating through subsidiaries in offshore tax havens, to benefit from reduced export taxes.
The WTO had ruled that the EU could impose four billion dollars in sanctions if the FSC system was not dismantled by the end of 2003.
But the European Commission -- the EU's executive arm -- last month stopped short of imposing such an unprecedented penalty, which would have sent shockwaves through strained US-EU trade relations.
Congress is working on repealing the FSC law but with the US legislature now in recess, any decision is unlikely before next month at the earliest.
The EU says it has waited long enough after the WTO first ruled against the FSC scheme in 2000.
The tax row is one of a range of trade disputes causing anger on both sides of the Atlantic.
The EU last week lifted the threat of 2.2 billion dollars in trade sanctions against the United States after US President George W. Bush scrapped the tariffs on steel imports.
Washington, for its part, is unhappy over EU bans on genetically modified food and growth hormones in cattle. A committee of EU scientists voted Monday against approval for a type of GM sweetcorn, ensuring that that row will stay on the political agenda for some time yet.
4
posted on
12/08/2003 6:49:56 AM PST
by
MrFreedom
To: JustAnAmerican
Bush should have never buckled under the first time. Expect more from the POS EU because of this. Yep, that what you get when you negotiate with terrorists.
To: Tai_Chung
EU decision on biotech sweetcorn set to fuel US anger
07 December 2003
The European Union will Monday vote on whether to lift a ban on bio-engineered crops, with all the signs pointing to a "no" decision that is sure to anger the United States.
The EU's standing committee for the food chain, which gathers scientific representatives from the 15 member states, is due to decide whether to allow the import of a form of genetically modified (GM) sweetcorn, Bt-11.
If the experts agree to allow Bt-11, that would effectively lift a de-facto moratorium in place since 1999 against the import and cultivation of GM products in the EU.
But sources say the committee is deeply split on the issue, against a backdrop of public disquiet in Europe on the issue of "Frankenfoods".
The bloc's decision is being closely watched by its trade partners, notably by the United States, which has the world's biggest biotech industry.
Along with Argentina and Canada, the United States has appealed to the World Trade Organisation to overturn the EU ban.
The European Commission, the EU's executive arm, has proposed approving Swiss firm Syngenta's application to import Bt-11 as part of a campaign to encourage the GM industry in Europe.
Syngenta's hopes were raised on Thursday when the EU's Food Safety Authority (EFSA) said another type of GM maize made by US giant Monsanto, NK 603, was entirely safe for human consumption.
A panel of EFSA scientists said NK 603 was "as safe as conventional maize and... unlikely to have an adverse effect on human or animal health, or in this context, on the environment".
EU Health Commissioner David Byrne last week appealed to the member states and Europe's public to base their perception of food safety on science rather than fear.
"If we fail to make progress, there is a very real danger that an anti-science agenda may take root in European society leading to a society hampered and restricted by a collective neurosis," he said Thursday.
But opponents of GM crops say much more research needs to be done to gauge their impact on health and the environment.
On Wednesday the anti-GM lobby gained comfort from the French food safety authority, which expressed serious reservations about Bt-11, an insect- and herbicide-resistant strain of corn that is already sold in the United States.
At least 62 out of the 87 votes on the committee, under the EU's system of qualified-majority voting which shares out votes according to the size of national populations, are needed to give Bt-11 authorisation on Monday.
A majority "yes" vote would make authorisation for the sweetcorn automatic. A "no" decision would pass the question back to EU ministers.
Germany has indicated that it intends to abstain while Austria, Denmark, France and Italy are all likely to vote against, according to EU sources, meaning that approval will be rejected.
The EU's moratorium was imposed in 1999 at the initiative of five countries -- Denmark, France, Greece, Italy and Luxembourg, which were later joined by Austria and Belgium.
The bloc has made some progress on the issue, enacting two directives in October on labelling and tracing of GM directives that the Commission said would open the way to lifting the ban.
But Washington has attacked the directives as protectionism in disguise, and a "no" vote on Monday will only keep one transatlantic trade row rumbling on just as the two sides bury a bitter dispute on US steel tariffs.
6
posted on
12/08/2003 6:52:01 AM PST
by
MrFreedom
To: JustAnAmerican
Tax, tax, tax - it's all the eurocrats think about. The good news (I hear from the grapevine) is that the euro is in considerable crisis due to France and Germany's breaking of deficit rules. It's as if they have raided the accounts and got away with it. Time to do away with this wretched currency.
7
posted on
12/08/2003 6:53:19 AM PST
by
Colosis
To: Colosis
that the euro is in considerable crisis The euro has never been as high as today. It broke 1.22 for the first time in history today.
I am not sure that's what one can call being in "considerable crisis". The weak dollar could be.
8
posted on
12/08/2003 6:57:19 AM PST
by
DanDan
To: Colosis
that the euro is in considerable crisis The euro has never been as high as today. It broke 1.22 for the first time in history today.
I am not sure that's what one can call being in "considerable crisis". The weak dollar could be.
9
posted on
12/08/2003 6:57:26 AM PST
by
DanDan
To: Tai_Chung
Has the WTO ever sided with the United States in a major trade dispute?
No, we should leave the WTO now.
10
posted on
12/08/2003 6:58:45 AM PST
by
RiflemanSharpe
(An American for a more socially and fiscally conservation America!)
To: MrFreedom
So are we a sovreign nation or what? Can't we enact tax breaks when, where, and how we want? This sets a dangerous precedent and a huge step towards the "global-socialist" community. The WTO is trying to enact legislation on our nation from foreign soil. Haven't wars been fought over less?
11
posted on
12/08/2003 7:05:32 AM PST
by
AD from SpringBay
(We have the government we allow and deserve.)
To: DanDan
Strong euro is bad for exports and the weak dollar could fuel inflation. The euro project is a bit like a joint account with many depositors. There are strict rules and massive fines for abusing this account.
Germany and France for years reprimanded other smaller countries for overspending the allowed 3% of GDP. Now they are massively overspending to try to get their economies back to growth, with no effect. Last week they escaped any reprimand by courting votes from other commissioners. A (pro) euro MEP who just returned from that crisis meeting in Brussels said that the sense of crisis is massive among commissioners and says that this is not at all reflected in the press.
12
posted on
12/08/2003 7:11:15 AM PST
by
Colosis
To: MrFreedom
Okay. So the EU can set tariffs because they claim America offers incentives for companies to sell abroad. Yet America is condemned for our tariffs on steel being flooded into the U.S. by European encouraged producers. This is clearly a tactic to beat the U.S. into submission to the E.U.
Euro-peons are such two-faced, kniving, double-dealers.
13
posted on
12/08/2003 7:36:11 AM PST
by
azhenfud
("He who is always looking up seldom finds others' lost change...")
To: Colosis
Spot on. The finmins are so worried about the temporarily macho Euro that they've begun floating the idea of currency controls (again, viz. the 1970s and 1946-1955). From a long-term currency standpoint, they've got one foot in the trickbag and the other on a banana skin. The next Euro crash will be a monster, but its a ways off.
14
posted on
12/08/2003 7:51:13 AM PST
by
SAJ
To: MrFreedom; clamper1797; sarcasm; BrooklynGOP; A. Pole; Zorrito; GiovannaNicoletta; Caipirabob; ...
Ping On or off let me know
15
posted on
12/08/2003 8:15:11 AM PST
by
harpseal
(stay well - Stay safe - Stay armed - Yorktown)
To: RiflemanSharpe
Ah the contradictions the Free Traitors face. In order to defend their precious WTO and teh myth of Free Trade they will now have to explain why raising taxes is good for America.
16
posted on
12/08/2003 8:17:42 AM PST
by
harpseal
(stay well - Stay safe - Stay armed - Yorktown)
To: MrFreedom; harpseal; maui_hawaii
Note how the article stresses the US DOMESTIC POLITICAL SENSITIVITY of these orchestrators of the attacks on U.S. trade:
Trade officials and experts agree that the conflict over FSC is more complex and potentially more dangerous. They point out that taxation is a particularly sensitive issue, and that the beneficiaries of FSC are more numerous and spread more evenly across the US, a notable difference from the steel conflict. And some observers argue that even the lifting of the FSC provision could have dangerous consequences. Nick Clegg, a Liberal Democrat member of the European parliament and trade specialist, said: "To let the US eat humble pie twice in just a few months is not the best way of fostering its love for the multilateral trade system
17
posted on
12/08/2003 8:27:11 AM PST
by
Paul Ross
(Reform Islam Now! -- Nuke Mecca!)
To: RiflemanSharpe
18
posted on
12/08/2003 8:31:29 AM PST
by
Paul Ross
(Reform Islam Now! -- Nuke Mecca!)
To: MrFreedom
Okay so let me see if I have this straight...The Euros want our government to put as big a ball and chain around our buisnesses so theirs won't look so pathetic...is that about right?
To: Live free or die
Do a google search on
the OECD if you really want to blow your mind.
20
posted on
12/08/2003 8:46:15 AM PST
by
kaylar
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